CHRIS HARMAN/IIH > of A Peoples History of t h e W o r l d i

W A S H E

; i; I. 1. '_VJ lAthr^ii

< .I OBAL CRISIS AND m i RFLEVANCE OF MARX

Faced with the financial crisis that began in 2007 some economic commentators began to talk of 'zombie banks', financial institutions that were in an 'undead' state incapable of fulfilling any positive function but representing a threat to everything else. However 21st century capitalism as a whole is a zombie system dead to achieving human goals and responding to human feelings but capable of sudden spurts of activity that cause chaos all around. Chris Harman shows how Marx's understanding of capitalism is essential for any explanation of how this world emerged and developed over the last century and a half. He shows that the roots of the crisis today lie not in financial speculation but much deeper in a crisis of profitability which 30 years of the neoliberal offensive have failed to reverse. The future of the system will not be a return to steady growth but repeated instability and upheaval, together with a rising ecological crisis. Finally he looks the force in society capable of ending the rule of capital the global working class.

"A powerful, comprehensive and accessible critique of capitalism from one of the world's pre-eminent Marxist economists. This book needs to be read far and wide. It is a clear, incisive warning of the massive dangers posed by a 'runaway system' and the threat it poses for the future of humanity."Graham Turner, author of Credit Crunch: Housing Globalisation and the Worldwide Economic Crisis Bubbles,

"Both essential reading for anyone who wants to understand the present crisis and its place in the history of < ipiijlif.m and an important cont'lbution to Marxist politic .si w onomy. "Alex Callinicoi, I ' r o f n t t o r of F.uropoan Studies. King'* College London

Z o m b i e Capitalism: Global crisis and the relcvance of M a r x

Chris HarmattFirst published in July 2009 by Bookmarks Publications Copyright O Bookmarks Publications ISBN 9781905192533 Cover design by Noel Douglas Typeset bv Bookmarks Publications Printed by Information Press

Contents

Introduction Part O n e : U n d e r s t a n d i n g the system: M a r x a n d B e y o n d 1 2 3 4 5 Marx's Concepts M a r x a n d his Critics T h e D y n a m i c s o f the System B e y o n d M a r x : M o n o p o l y , W a r a n d the State State S p e n d i n g a n d the System P a n T w o : C a p i t a l i s m in the 2 0 t h C e n t u r y 6 8 The Great Slump The Long B o o m T h e end o f the g o l d e n age Part Three: T h e N e w A g e o f G l o b a l Instability 9 10 11 T h e Years o f D e l u s i o n G l o b a l C a p i t a l in the N e w Age F i n a n c i a l i s a t i o n a n d the Bubbles that Burst Part F o u r : T h e R u n a w a y System 12 13 14 The N e w Limits o f Capital T h e R u n a w a y System a n d the Future for H u m a n i t y W h o Can Overcome? Notes Glossary Index 307 325 329 353 393 403 229 255 277 143 161 191 21 41 55 87 121

A b o u t the A u t h o r C h r i s H a r m a n is a leading m e m b e r o f the Socialist W o r k e r s Party ( w w w . s w p . o r g . u k ) . H e is the a u t h o r o f n u m e r o u s h o o k s i n c l u d i n g A Peoples Fire Last Revolution: History Time: of the and World After (Bookmarks 1999 a n d Verso Lost 2 0 0 S ) , Revolution in the list 1968 Century ( B o o k m a r k s 2 0 0 7 ) , The

( B o o k m a r k s 1 9 8 8 ) , The

Germany

1918 to 1923 ( B o o k m a r k s 1982). H e is the Socialism, a quarterly journal o f M a r x i s t

e d i t o r o f International

theory ( w w w . i s j . o r g . u k ) . The Socialist W o r k e r s Party is linked t o a n i n t e r n a t i o n a l n e t w o r k o f o r g a n i s a t i o n s , for further i n f o r m a t i o n g o t o w v w . s w p . o r g . u k / international, p h p

Introduction

An unstable world . W e live in a n unstable w o r l d , a n d the instability is g o i n g to increase. It is a w o r l d w h e r e a billion people feel h u n g r y every day, a n d the hunger is g o i n g t o increase. It is a w o r l d w h i c h is destroying its o w n e n v i r o n m e n t , a n d the destruction is g o i n g t o increase. It is a violent w o r l d , a n d the violence is g o i n g to increase. It is a w o r l d w h e r e people are less h a p p y , even in the industrially a d v a n c e d countries, t h a n they used t o be,1 a n d the u n h a p p i n e s s is g o i n g t o increase. Even the m o s t craven a p o l o g i s t s for c a p i t a l i s m find it h a r d t o deny this reality a n y longer, as the w o r s t e c o n o m i c crisis since the Second W o r l d W a r c o n t i n u e s t o deepen as 1 write. T h e world's best k n o w n b a n k s have o n l y been saved f r o m g o i n g bust by vast g o v e r n m e n t bail-outs. T h o u s a n d s o f factories, stores and offices are c l o s i n g across Europe and North America. Chinese Unemployment is s h o o t i n g u p w a r d s . T w e n t y m i l l i o n

workers have been t o l d they have to return t o the villages because there are n o jobs for t h e m in the cities. A n I n d i a n employers' t h i n k t a n k w a r n s t h a t ten m i l l i o n o f their employees face the sack. A h u n d r e d m i l l i o n o f the w o r l d ' s people in the G l o b a l S o u t h are still threatened w i t h h u n g e r because o f last year's d o u b l i n g o f grain prices, w h i l e in the richest c o u n t r y i n the w o r l d , the U n i t e d States, three m i l l i o n families have been dispossessed f r o m their h o m e s in 18 m o n t h s . Yet just t w o years a g o , w h e n I began this b o o k , the message was very different: " R e c e n t high levels o f g r o w t h will c o n t i n u e , g l o b a l inflation w i l l stay q u i t e s u b d u e d , a n d g l o b a l current a c c o u n t imbalances will g r a d u a l l y m o d e r a t e , " w a s the " c o n s e n s u s " a m o n g mainstream economists, reported the Bank ot International a n d comSettlements. T h e p o l i t i c i a n s , industrialists, financiers

m e n t a t o r s all agreed. T h e y toasted the w o n d e r s o f free m a r k e t s7

a n d rejoiced that " e n t r e p r e n e u r i a l g e n i u s " h a d been

liberated

f r o m r e g u l a t i o n . It w a s w o n d e r f u l , they told us, that the rich were getting richer because that p r o v i d e d the incentives w h i c h m a d e the system so b o u n t i f u l . Trade w a s g o i n g to obliterate h u n g e r in A f r i c a . Economic put g r o w t h w a s d r a i n i n g the vast p o o l s ol poverty in Asia. T h e crises o f the 1970s, SOs, 90s a n d 2001-2 were m e m o r i e s w e c o u l d b e h i n d us. There m i g h t be horrors in the w o r l d , w a r s in the M i d d l e East, civil w a r s in Africa, b u t these were to be b l a m e d on the shortsightedness o f essentially honest p o l i t i c i a n s in W a s h i n g t o n4

and

L o n d o n w h o m a v have m a d e mistakes but whose h u m a n i t a r i a n intervention was still needed to deal w i t h psychopathic maniacs. The w o r d s of those w h o saw things differently were i g n o r e d , as the media p o u r e d o u t candyfloss layers o f celebrity culture, u p p e r m i d d l e class self-congratulation a n d senseless nationalist e u p h o r i a over sporting events. T h e n in m i d - A u g u s t 2 0 0 7 s o m e t h i n g h a p p e n e d w h i c h began to sweep the candyfloss a w a y t o p r o v i d e a glimpse o f the u n d e r l y i n g reality. A n u m b e r o f b a n k s suddenly discovered thev c o u l d n o t bal 4 4

ance their b o o k s a n d s t o p p e d l e n d i n g t o each other. T h e w o r l d ' s financial turned system began g r i n d i n g to a halt w i t h a credit c r u n c h t h a t i n t o a crash o f the w h o l e system in O c t o b e r 2008.

Capitalist c o m p l a c e n c y t u r n e d to capitalist p a n i c , e u p h o r i a to desperation. Yesterday's heroes became t o d a y s swindlers. F r o m those w h o h a d assured us of the w o n d e r s o f the system there n o w c a m e one message: " W e d o n ' t k n o w w h a t has g o n e w r o n g a n d we d o n ' t k n o w w h a t t o d o . " The m a n w h o n o t l o n g before been treated as the s u p r e m e genius overseeing the US e c o n o m i c system, A l a n G r e e n s p a n , o f the Federal Reserve, a d m i t t e d to the US C o n g r e s s t h a t h e still d i d " n o t fully u n d e r s t a n d w h a t w e n t w r o n g in w h a t he t h o u g h t were self-governing m a r k e t s V G o v e r n m e n t s have been t h r o w i n g h u n d r e d s o f billions t o those w h o r u n the b a n k s a n d tens o f b i l l i o n s t o those w h o run the m u l t i n a t i o n a l car firmsin the h o p e that this w i l l s o m e h o w stop the crisis. But they c a n n o t agree a m o n g themselves h o w t o d o this a n d even w h e t h e r it will w o r k or n o t . Yet o n e t h i n g is certain. T h e m o m e n t a n y part o f the g l o b a l e c o n o m y begins to stabilise they will forget the h u n d r e d s o f millions of lives that have been shattered by the crisis. A f e w m o n t h s w h e n b a n k s are n o t c o l l a p s i n g a n d profits are n o t falling t h r o u g h the floor a n d the apologists w i l l be p u m p i n g o u t candyfloss o n c e 7Introduction

a g a i n . T h e i r futures will seern better a n d rhey will generalise this to the w o r l d at large w i t h renewed talk a b o u t the w o n d e r s o f capitalism a n d the i m p o s s i b i l i t y o f a n y a l t e r n a t i v e u n t i l crisis hits a g a i n a n d t h r o w s them i n t o a n o t h e r p a n i c . Bur crises are n o t s o m e n e w feature o f the system. They have occurred at longer or shorter intervals ever since the fully at the b e g i n n i n g o f the 19th century. industrial r e v o l u t i o n established the m o d e r n f o r m o f c a p i t a l i s m in Britain

T h e poverty o f e c o n o m i c s The m a i n s t r e a m e c o n o m i c s t h a t is t a u g h t in schools a n d universities has proved c o m p l e t e l y u n a b l e t o c o m e t o terms w i t h such things. T h e Bank o f I n t e r n a t i o n a l Settlements recognises that: V i r t u a l l y n o o n e foresaw the G r e a t Depression o t the 1930s, or t h e crises w h i c h affected J a p a n a n d S o u t h Hast Asia in rhe early a n d late 1990s, respectively. In fact, each d o w n t u r n w a s preceded by a period of non-inflationary growth exuberant e n o u g h t o lead m a n y c o m m e n t a t o r s to suggest t h a t a " n e w e r a " had arrived.' N o t h i n g s u m s u p the i n c o m p r e h e n s i o n o f those w h o defend capitalism as m u c h as their i n a b i l i t y t o e x p l a i n the m o s t significant e c o n o m i c episode in the 2 0 t h c e n t u r y t h e s l u m p of the 1930s. Ben Bernanke, the present head o f the US Federal Reserve a n d supposedly o n e o f m a i n s t r e a m e c o n o m i c s ' m o s t respected experts o n e c o n o m i c crises, a d m i t s that " u n d e r s t a n d i n g the Great Depression is the H o l v G r a i l o f m a c r o e c o n o m i c s ' " 4 i n other w o r d s , he c a n find n o e x p l a n a t i o n for it. N o b e l e c o n o m i c laureate F d w a r d C Frescort describes it as " a . . . p a t h o l o g i c a l episode a n d it defies exp l a n a t i o n by s t a n d a r d e c o n o m i c s " . 5 For R o b e r t Lucas, a n o t h e r N o b e l L a u r e a t e " i t takes a real effort o f will t o a d m i t you d o n ' r k n o w w h a t the hell is g o i n g o n in s o m e areas"." These are n o t accidental failings. They are built i n t o the very ass u m p t i o n s o f the " n e o c l a s s i c a l " or " m a r g i n a l i s t " school t h a t has d o m i n a t e d m a i n s t r e a m e c o n o m i c s for a century a n d a quarter. Its founders set themselves rhe task of showing how markets " c l e a r " t h a t is, h o w all the g o o d s in them will find buyers. But that assumes in a d v a n c e t h a t crises are n o t possible.9 Introduction

T h e implausibility o f the neoclassical m o d e l in the face o f some o f the most o b v i o u s features o f capitalism has led to recurrent attempts w i t h i n the m a i n s t r e a m t o bolt extra elements o n t o it in an ad hoc way. N o n e o f these a d d i t i o n s , however, alter the basic belief t h a t the system will return to e q u i l i b r i u m p r o v i d i n g prices, a n d especially wages, adjust t o m a r k e t pressures w i t h o u t h i n d r a n c e . Even J o h n M a y n a r d Keynes, w h o w e n t further t h a n a n y o n e else in the m a i n s t r e a m in q u e s t i o n i n g the e q u i l i b r i u m m o d e l , still assumed it c o u l d be m a d e to w o r k w i t h a degree o f g o v e r n m e n t intervention. There were always challenges to such complacency. The A u s t r i a n e c o n o m i s t Schumpeter derided any idea o f e q u i l i b r i u m as i n c o m p a t i b l e w i t h w h a t he s a w as the great positive virtue o f capi t a l i s m , its d y n a m i s m . S o m e o f Keynes's disciples w e n t further t h a n he did in b r e a k i n g w i t h neoclassical much orthodoxy.

C a m b r i d g e e c o n o m i s t s tore a p a r t the theoretical basis o f the neoclassical school. Yet the o r t h o d o x y is as strongly entrenched in the universities a n d schools as ever, p u m p i n g i n t o the heads o f each n e w generation a picture o f the e c o n o m i c system that bears little r e l a t i o n s h i p to reality. T h e pressure o n students t o study the b o o k s p u t t i n g f o r w a r d such views as if they were scientific texts has led to Samuelson's Positive Economics Economics and Lipsey's An Introduction to selling m i l l i o n s o f copies.

It is h a r d l y surprising t h a t the e c o n o m i c s profession has difficulty c o m i n g t o terms w i t h those aspects o f the capitalist system t h a t have the greatest i m p a c t o n the mass o f people w h o live w i t h i n it. T h e o b t u s e t h e o r e m s t h a t fill e c o n o m i c t e x t b o o k s a n d a c a d e m i c j o u r n a l s , w i t h their successive algebraic c a l c u l a t i o n s a n d g e o m e t r i c figures, assume stability a n d e q u i l i b r i u m , a n d so have little t o say t o people w o r r i e d by the system's p r o p e n s i t y t o crisis. O n e o f the f o u n d e r s o f the neoclassical school, M a r s h a l l , observed nearly a century a g o that the e c o n o m i c theory he believed in w a s o f little use in practice a n d t h a t " a m a n is likely t o be a better economist if he trusts his c o m m o n sense a n d practical i n s t i n c t s " . ' Yet w h a t is involved is n o t just abstract a c a d e m i c scholasticism. T h e o r t h o d o x y is a n ideological p r o d u c t in the sense that it operates f r o m the s t a n d p o i n t o f those w h o p r o f i t f r o m the m a r k e t system. It presents their profiteering as the s u p r e m e w a y o f cont r i b u t i n g t o the c o m m o n g o o d , w h i l e a b s o l v i n g them o f a n y t h i n g t h a t goes w r o n g . A n d it rules o u r a n y f u n d a m e n t a l critique o f the present system, in a w a y t h a t suits those w i t h c o m m a n d i n g posit i o n s in e d u c a t i o n a l structures, c o n n e c t e d as they are to all the10 Introduction

other

structures

of

capitalism.

The

radical

Keynesian

Joan

R o b i n s o n s u m m e d u p the situation: T h e radicals h a v e rhe easier case t o m a k e . They h a v e o n l y t o p o i n t t o the discrepancies between the o p e r a t i o n o f the m o d e r n e c o n o m y a n d rhe ideas by w h i c h it is s u p p o s e d t o be j u d g e d , w h i l e the conservatives have the well nigh i m p o s s i b l e task o f d e m o n s t r a t i n g that this is rhe best o f all possible w o r l d s . For the s a m e reason, however, the conservatives are c o m p e n s a t e d by o c c u p y i n g positions o f power, w h i c h they can use to keep criticism in c h e c k . . . T h e conservatives d o n o t feel obliged t o answer radical criticisms o n their merits a n d the a r g u m e n t is never fairly j o i n e d / But even m m t o f the " r a d i c a l s " usually start by t a k i n g the existing system for g r a n t e d . T h e a r g u m e n t s o f the radical Keynesians like J o a n R o b i n s o n h a v e always been in terms o f a m e n d m e n t s t o the system, t h r o u g h greater state intervention t h a n t h a t envisaged by the m a i n s t r e a m . T h e y h a v e n o t seen the system itself as driven by a n inner d y n a m i c w h o s e destructive effects are n o t restricted t o purely e c o n o m i c p h e n o m e n a . In the 21st century it is p r o d u c i n g wars, h u n g e r a n d c l i m a t e c h a n g e as well as e c o n o m i c crises, a n d d o i n g so in w a y s w h i c h threatens the very basis o f h u m a n life. C a p i t a l i s m t r a n s f o r m s society in its entirety as its sucks p e o p l e by rhe billions i n t o l a b o u r i n g for it. It c h a n g e s the w h o l e pattern by w h i c h h u m a n i t y lives, r e m o u l d i n g h u m a n n a t u r e itself. It gives a n e w character ro o l d oppressions a n d t h r o w s u p completely newones. It creates drives t o w a r a n d ecological d e s t r u c t i o n . It seems t o act like a force o f n a t u r e , creating c h a o s a n d d e v a s t a t i o n o n a scale m u c h greater t h a n a n y e a r t h q u a k e , h u r r i c a n e or t s u n a m i . Yet the system is n o t a p r o d u c t o f n a t u r e , b u t o f h u m a n activity, h u m a n activity t h a t has s o m e h o w escaped f r o m h u m a n c o n t r o l a n d t a k e n o n a life o f its o w n . E c o n o m i s t s write t h a t " t h e m a r k e t does t h i s " o r " t h e m a r k e t d e m a n d s t h a t " . But the m a r k e t is o n l y the c o m i n g together o f the p r o d u c t s o f m a n y d i s p a r a t e acts o f h u m a n creative activity, l a b o u r . W h a t the economists* talk disguises is that s o m e h o w these h a v e t u r n e d i n t o a m a c h i n e t h a t d o m i n a t e s the h u m a n s t h a t u n d e r t a k e such activity, h u r l i n g the w o r l d in a d i r e c t i o n t h a t few p e o p l e in their r i g h t m i n d w o u l d w a n t . Faced w i t h the f i n a n c i a l crisis t h a t began in 2 0 0 " , s o m e e c o n o m i c c o m m e n t a t o r s d i d begin t o t a l k o f " z o m b i e b a n k s " 10 Introduction

f i n a n c i a l i n s t i t u t i o n s t h a t were in the " u n d e a d s t a t e " a n d incap a b l e of fulfilling a n y positive f u n c t i o n , but representing a threat t o e v e r y t h i n g else. W h a t they d o n o t recognise is t h a t 21st century c a p i t a l i s m as a w h o l e is a z o m b i e system, seemingly d e a d when it c o m e s t o a c h i e v i n g h u m a n g o a l s a n d r e s p o n d i n g to h u m a n feelings, b u t c a p a b l e o f s u d d e n spurts o f activity t h a t cause c h a o s all a r o u n d .

A w o r l d turned against ourselves There has o n l y been o n e serious t r a d i t i o n o f analysis t o a t t e m p t to p r o v i d e an a c c o u n t o f the system in these terms. It is t h a t w h i c h o r i g i n a t e d in the w r i t i n g s o f K a r l M a r x a n d his long-time colleague Frederick Engels. M a r x c a m e t o a d u l t h o o d in the early 1840s, just as i n d u s t r i a l c a p i t a l i s m began t o m a k e its first, l i m i t e d , i m p a c t o n s o u t h e r n G e r m a n y w h e r e he w a s b o r n . Engels w a s sent by his father t o help m a n a g e a factory in M a n c h e s t e r , where t h e n e w system w a s already f l o u r i s h i n g . T h e y shared w i t h a l m o s t the w h o l e o f their g e n e r a t i o n o f G e r m a n intellectual y o u t h a desire t o o v e r t h r o w the oppressive Prussian feudal system o f class rule presided over by a m o n a r c h w i t h despotic powers. But they soon began to grasp t h a t the i n d u s t r i a l c a p i t a l i s m that w a s s u p p l e m e n t i n g f e u d a l i s m contained oppressive features of its own. Above all it was characterised by an i n h u m a n s u b o r d i n a t i o n o f the mass o f people to the w o r k they d i d . W h a t M a r x was b e g i n n i n g t o discover a b o u t the f u n c t i o n i n g o f this then-new system led h i m to u n d e r t a k e a critical r e a d i n g o f its m o s t e m i n e n t p r o p o n e n t s , p o l i t i c a l economists like A d a m S m i t h a n d D a v i d R i c a r d o . H i s c o n c l u s i o n w a s t h a t , a l t h o u g h the system vastly increased the a m o u n t o f w e a l t h h u m a n s c o u l d p r o d u c e , it also denied the m a j o r i t y o f t h e m the benefits o f this w e a l t h : T h e m o r e the w o r k e r p r o d u c e s , the less he has t o c o n s u m e . T h e m o r e values he creates, the m o r e valueless, the m o r e u n w o r t h y he b e c o m e s . . . [The system] replaces l a b o u r by m a c h i n e s , b u t it t h r o w s o n e section o f w o r k e r s back t o a b a r b a r o u s type o f labour, a n d it t u r n s the other section i n t o a m a c h i n e . . . It produces i n t e l l i g e n c e b u t for the worker, s t u p i d i t y . . . It is true t h a t l a b o u r p r o d u c e s w o n d e r f u l things for the r i c h b u t for the 12Introduction

w o r k e r it p r o d u c e s p r i v a t i o n . It p r o d u c e s p a l a c e s b u t for the worker, hovels. It p r o d u c e s b e a u t y b u t for the worker, deform i t y . . . T h e w o r k e r o n l y feels h i m s e l f outside his w o r k , a n d in/ . '

his w o r k feels outside himself. H e feels at h o m e w h e n he is n o t w o r k i n g ; w h e n he is w o r k i n g he does n o t feel at h o m e . In his early w r i t i n g s M a r x called w h a t w a s h a p p e n i n g "alienation", taking up a philosophical term developed by the p h i l o s o p h e r Hegel. M a r x ' s c o n t e m p o r a r y Feuerbach h a d used the term to describe religion. It w a s , he a r g u e d , a h u m a n creation that people had allowed-to d o m i n a t e their lives. M a r x n o w saw capitalism in the same way. It w a s h u m a n l a b o u r t h a t p r o d u c e d n e w w e a l t h . But u n d e r c a p i t a l i s m that w e a l t h was turned i n t o a monster d o m i n a t i n g t h e m , d e m a n d i n g t o be fed by ever m o r e labour. The object t h a t l a b o u r produces, its p r o d u c t , stands o p p o s e d t o it as s o m e t h i n g alien, as a p o w e r i n d e p e n d e n t of the producer. T h e m o r e the w o r k e r exerts h i m s e l f in his w o r k , the m o r e powerful the alien, objective w o r l d becomes w h i c h he brings i n t o being over a g a i n s t himself, the p o o r e r he a n d his inner w o r l d b e c o m e , a n d the less they b e l o n g to h i m . . . T h e w o r k e r places his life in the object; b u t n o w it n o longer belongs to h i m , b u t t o the object... 1 0 As M a r x p u t it in his n o t e b o o k s for Capital in the early 1860s:

T h e rule o f the capitalist over the w o r k e r is the rule o f the object over the h u m a n , o f d e a d l a b o u r over living, o f the p r o d u c t over the producer, since in fact the c o m m o d i t i e s w h i c h b e c o m e the m e a n s o f d o m i n a t i o n over the w o r k e r are... the p r o d u c t s o f the p r o d u c t i o n process... It is the a l i e n a t i o n process o f his o w n social l a b o u r . " But M a r x d i d n o t s i m p l y record this state o f affairs. O t h e r s h a d d o n e so before h i m , a n d m a n y were to c o n t i n u e t o d o so long after he w a s d e a d . Fie also set o u t , t h r o u g h a q u a r t e r o f a century o f g r i n d i n g intellectual labour, t o try to u n d e r s t a n d h o w the system h a d c o m e i n t o b e i n g a n d h o w it created forces o p p o s e d t o itself. H i s w o r k s were n o t just w o r k s o f economics, but a " c r i t i q u e o f political e c o n o m y " , o f the system w h i c h other schools o f economics t o o k for g r a n t e d . H i s starting p o i n t w a s t h a t c a p i t a l i s m is a13 Introduction

historical p r o d u c t , arriving w h e r e he f o u n d it as a result o f a dyn a m i c w h i c h drove it ever o n w a r d s in a process o f endless c h a n g e w i t h " c o n s t a n t revolutionising o f p r o d u c t i o n , u n i n t e r r u p t e d dist u r b a n c e o f all social c o n d i t i o n s , everlasting uncertainty and a g i t a t i o n " . 1 2 T h e e c o n o m i c studies o f the m a t u r e M a r x a i m e d to grasp the nature o f this d y n a m i c , a n d w i t h it the trends in the develo p m e n t o f the system. They are the indispensable starting p o i n t for a n y o n e w h o w a n t s to try t o grasp where the w o r l d is g o i n g today. H i s m e t h o d w a s t o analyse the system at different levels o f ab 4

straction. In the first v o l u m e o f Capital second v o l u m e

h e set o u t t o delineate the

m o s t general u n d e r l y i n g features o f capitalist p r o d u c t i o n . The deals w i t h the w a y i n w h i c h c a p i t a l , c o m m o d i t i e s a n d m o n e y circulate w i t h i n the system, a n d the third v o l u m e 1 1 integrates the process o f p r o d u c t i o n a n d c i r c u l a t i o n to p r o v i d e m o r e concrete a c c o u n t s o f t h i n g s like profit rates, the crisis, the credit system a n d rent. M a r x s o r i g i n a l i n t e n t i o n h a d been to p r o d u c e further v o l u m e s , d e a l i n g a m o n g other t h i n g s w i t h the state, foreign trade a n d w o r l d markets. H e w a s u n a b l e t o c o m p l e t e these, a l t h o u g h s o m e o f his w o r k t o w a r d s them is c o n t a i n e d in various n o t e b o o k s by h i m . " Capital w a s , t h e n , a n unfinished w o r k in s o m e respects. But it w a s an unfinished w o r k t h a t a c c o m p l i s h e d the goal o f u n v e i l i n g the basic processes o f the system, integrating i n t o its a c c o u n t the very t h i n g s ignored by the static e q u i l i b r i u m analysis o f the neoclassical m a i n s t r e a m : technical a d v a n c e , accum u l a t i o n , recurrent crises a n d the g r o w t h o f poverty a l o n g s i d e the growth of wealth.

Using M a r x today For these reasons, a n y a c c o u n t o f the w o r l d system t o d a y has to begin w i t h basic concepts developed by M a r x . I try t o o u t l i n e these in the first three chapters o f this b o o k . S o m e readers f r o m a M a r x i s t b a c k g r o u n d m i g h t regard the a c c o u n t as r e d u n d a n t . But the concepts have often been m i s u n d e r s t o o d w i t h i n the M a r x i s t c a m p as well as outside it. T h e y have been seen as c o m p e t i n g w i t h the neoclassical to p r o v i d e a n e q u i l i b r i u m a c c o u n t o f price formation a n d then faulted for failing to d o so. ,ft O n e reaction has been t o d r o p key elements in M a r x s own analysis, keeping it o n l y as an a c c o u n t o f e x p l o i t a t i o n a n d o f the a n a r c h y o f c o m p e t i t i o n . A n o t h e r , a p p a r e n t l y o p p o s e d , reaction14 Introduction

has been a n a l m o s t scholastic a p p r o a c h in w h i c h c o m p e t i n g interp r e t a t i o n s p o r e over texts by M a r x a n d Hegel. It is often as if M a r x i s t theory h a d been a m b u s h e d by its o p p o n e n t s a n d retreated i n t o a theoretical b u n k e r o f its o w n , just as detached as they are f r o m the real w o r l d . For this reason I have felt it necessary t o exp o u n d the basic concepts in a w a y w h i c h is (I hope) easy t o follow, s h o w i n g h o w they describe the interaction o f the u n d e r l y i n g forces t h a t determine the direction o f capitalist d e v e l o p m e n t . 1 have left detailed discussion o f other interpretations t o footnores. I have, however, felt it necessary to deal w i t h the m o s t c o m m o n objections t o M a r x s a c c o u n t f r o m m a i n s t r e a m e c o n o m i s t s in C h a p t e r T w o , since a n y o n e w h o studies e c o n o m i c s at school or university w i l l have their viewrs inflicted o n t h e m . Readers w h o have been lucky e n o u g h t o escape t h a t fate arc w e l c o m e to skip this chapter. W h e r e tlfb incomplerencss o f M a r x ' s o w n a c c o u n t does matter is in c o m i n g t o terms w i t h changes in c a p i t a l i s m since his d e a t h . T h i n g s he o n l y refers to in passing in Capitalthe g r o w t h o f mon o p o l i e s , the i n t e r v e n t i o n by states in capitalist p r o d u c t i o n a n d m a r k e t s , the p r o v i s i o n of w e l f a r e services, w a r as a n e c o n o m i c w e a p o n h a v e b e c o m e massively i m p o r t a n t . M a r x i s t s in the Hrst decades o f rhe 2 0 t h c e n t u r y were forced by circumstances to debate s o m e o f these matters, a n d there was a n e w burst o f creative t h i n k i n g in rhe 1960s a n d early 1970s. 1 a t t e m p t t o d r a w from such discussions the concepts needed to " g o b e y o n d Capital" a n d fill in gaps in M a r x s o w n a c c o u n t o f the system ( C h a p t e r s Four a n d Five). T h e rest o f the b o o k then tries to c o m e t o terms w i t h rhe d e v e l o p m e n t o f capitalism over the last 80 years, f r o m the great s l u m p o f rhe inter-war years to the crisis c a u s i n g t u r m o i l across the w o r l d as I w r i t e . T h e a c c o u n t m u s t be n o t s i m p l y one of e c o n o m i c processes, b u t ar every stage o f h o w the i n t e r a c t i o n o f c a p i t a l s a n d states o n a w o r l d scale gives rise t o w a r s a n d civil w a r s , h u n g e r a n d e n v i r o n m e n t a l disaster, as well as b o o m s a n d s l u m p s . N u c l e a r w e a p o n s a n d g r e e n h o u s e gases are as m u c h a p r o d u c t o f alienated l a b o u r as car factories a n d coal mines.

A n o t e o n the b o o k T h e instability o f rhe capitalist e c o n o m y has h a d its i m p a c t o n the w r i t i n g o f this b o o k . I set a b o u t w r i t i n g the first d r a f t w h e n w h a t I call " t h e great d e l u s i o n " t h e belief t h a t the c a p i t a l i s m15 Introduction

had

f o u n d a n e w w a y of e x p a n d i n g w i t h o u t c r i s e s w a s at its height in late 2 0 0 6 . i viewed a n o t h e r e c o n o m i c crisis as i n e v i t a b l e , in m u c h the s a m e w a y t h a t s o m e o n e living in a city b u i l t o n a seism i c f a u l t line k n o w s it is at s o m e p o i n t g o i n g t o suffer an e a r t h q u a k e . Bur I did n o t pretend to be a b l e t o predict w h e n this w o u l d h a p p e n , o r h o w destructive it w o u l d be. M y a i m , rather, w a s t o u p d a t e m y Explaining the Crisis o f 2 5 years a g o , t a k i n g i n t o a c c o u n t changes in the system since, b u t repeating the basic c o n c l u s i o n t h a t its b l i n d rush f o r w a r d w o u l d h a v e d e v a s t a t i n g repercussions for people's lives t h r o u g h the rest o f this century, creating i m m e n s e social a n d p o l i t i c a l crises w i t h p o t e n t i a l l y revolutionary implications. But one o f these blind rushes h a d its effect as I w a s finishing a 1 5 0 , 0 0 0 - w o r d d r a f t . T h e credit c r u n c h o f A u g u s t 2 0 0 7 turned i n t o the great crash o f September-October 2 0 0 8 , leading o n e apologist f o r the system, W i l l e m c a p i t a l i s m as we k n e w i t " . Buiter, t o w r i t e o f " t h e e n d of M a n y details a b o u t the system w h i c h

I treated as part of the present were s u d d e n l y in the past, a n d everywhere there was an urgent d e m a n d for a n e x p l a n a t i o n as to w h a t b r o u g h t this crisis a b o u t . 1 had n o choice b u t to u p d a t e a n d restructure w h a t I h a d w r i t t e n , s h i f t i n g the e m p h a s i s in s o m e o f the chapters t o w a r d s the e n d o f the b o o k f r o m w h a t was g o i n g to h a p p e n over the decades t o c o m e , t o w h a t w a s h a p p e n i n g in the here a n d n o w . In the process I cut a b o u t a third o f the w o r d s o u t o f the d r a f t , r e m o v i n g a g o o d deal o f e m p i r i c a l detail in a n effort t o m a k e rhc w h o l e book m o r e accessible. A n v o n e Socialism interested in greater derail c a n find s o m e in the 15 articles o n e c o n o m i c s I have w r i t t e n for the j o u r n a l International m o r e fully in Explaining the Crisis. over the last t w o decades, w h i l e s o m e o f the theorerical a r g u m e n t s are a r t i c u l a t e d

Acknowledgements 1 o w e t h a n k s for reading a n d m a k i n g c o m m e n t s o n m y excessively long a n d disorganised draft to Tobias B r i n k , J o s e p h C h o o n a r a , Alex C a l l i n i c o s , N e i l D a v i d s o n , J a n e H a r d y , M i k e H a y n e s , Rick K u h n , M a t t Nichrer a n d M a r k T h o m a s . T h a n k s are also d u e for c o m m e n t s o n s o m e o f the preparatory material t h a t a p p e a r e d in International Socialism t o T o m Bramble, S a m F r i e d m a n , M e h m e t U f u k T u t a n , Thomas Weiss a n d others, a n d f o r i n f o r m a t i o n o n16 Introduction

profit rates t o R o b e r t Brenner a n d A n d r e w K l i m a n . 1 also have a huge intellectual debt t o m a n y other people. Pride o f place goes to w h a t I learnt i n m y y o u t h f r o m M i k e K i d r o n a n d T o n y Cliff. A l o n g with that there has been the stimulus over the years f r o m the w o r k sm

o f dozens o f others w h o have m a i n t a i n e d the tradition o f M a r x i s t e c o n o m i c analysis f r o m rhe late 1960s to the p r e s e n t R i c c a r d o Bellofiore, H e n r y Bernstein, D i c k Bryan, Terry Bvers, G u g l i e m o C a r c h c d i , Francois C h e s n a i s , Francois D u m e n i l , A l f r e d o Saad F i l h o , Ben Fine, J o h n Bellamy Foster, A l a n Freeman, D a v i d Harvey, Peter G o w a n , C l a u d i o K a t z , J i m K i n c a i d , Costas Lapavitsas, Istvan Meszaros, Fred Moseley, Geert R e u t c n , A n w a r S h a i k h , a n d manyothers. S o m e I have been able t o listen to a n d discuss w i t h , most I have never met, a n d a few I disagree w i t h strongly. But all in o n e w a y or another have helped shape m y conclusions.

A note o n figures a n d terms A n y o n e a t t e m p t i n g t o e x p l a i n e c o n o m i c changes has little choice b u t t o use the statistical i n f o r m a t i o n p r o v i d e d by g o v e r n m e n t s , business o r g a n i s a t i o n s and international institutions like rhe O F C D , U N C T A D , the W o r l d Trade O r g a n i s a t i o n , rhe World

Bank a n d the I M F . T h i s b o o k is n o exception. But readers s h o u l d be w a r n e d that s o m e o f the m o s t c o m m o n l y used figures can be m i s l e a d i n g in i m p o r t a n t respects. Figures for e c o n o m i c g r o w t h , in particular, are n o t as clear cut as they s o m e t i m e s seem. T h e g r o w t h they usually m e a s u r e is o f m a r k e t e d o u t p u t . But a lot o f the h u m a n l a b o u r t h a t a d d s to people s well-being is n o t m a r k e t e d . T h i s is true of the d o m e s t i c l a b o u r o f w o m e n a n d , t o a considerably lesser extent, m e n . It has also been true historically o f m u c h o f the f a m i l y l a b o u r on peasant l a n d . T h e result is t h a t there is a false impression o f increasing w e a l t h as h o u s e h o l d s begin to pay for things they used t o p r o d u c e outside the m a r k e t w h e n a h o u s e w i f e gets a j o b a n d buys ready t o c o o k meals, or w h e n a peasant f a m i l y pays s o m e o n e else t o b u i l d a shed o n their l a n d w h e r e previously they w o u l d have d o n e the j o b themselves. Such changes lead the usually p r o v i d e d figures to give a n increasingly distorted p i c t u r e w i t h g r o w i n g m a r k e t i s a t i o n a n d the f e m i n i s a t i o n o f p a i d l a b o u r in recent decades. T h e officially provided figures also exaggerate the real rate of g r o w t h o f the things17 Introduction

t h a t satisfy h u m a n need by c o u n t i n g in o u t p u t things like financial services w h i c h merely m o v e w e a l t h f r o m o n e pocket t o a n o t h e r a g a i n a p a r t i c u l a r l y m a r k e d p h e n o m e n o n in recent decades. 1 * Finally m e a s u r e m e n t s o f o u t p u t per h e a d c a n n o t be e q u a t e d , as they are all t o o frequently, w i t h h u m a n welfare, since the o u t p u t is a l w a y s unevenly distributed between classes. Nevertheless, for w a n t of a n y t h i n g better, I h a v e h a d t o use such figures. A brief e x p l a n a t i o n o f s o m e o f the terms I use. G e n e r a l l y " W e s t " a n d " F a s t " are used in the w a y they were in the C o l d W a r decades o f the last century, w i t h " t h e W e s t " i n c l u d i n g J a p a n . " Third W o r l d " a n d " G l o b a l S o u t h " refer to the poorer parts of the w o r l d w h i c h were relatively u n i n d u s t r i a l i s e d for m o s t o f the 2 0 t h century, as d o the phrases " d e v e l o p i n g " or " u n d e r d e v e l o p e d c o u n t r i e s " used w i t h s o m e o f the statistics. T h e "Communist c o u n t r i e s " are those w i t h systems s i m i l a r t o t h a t o f the U S S R before 1 9 9 1 . " P r o d u c t i v e c a p i t a l " is t h a t e m p l o y e d i n i n d u s t r y or agriculture, as o p p o s e d to t h a t in finance a n d c o m m e r c e . Finally, capitalists are a s s u m e d t o be m a l e , since 9 9 . 9 9 percent o f t h e m were until o n l y a c o u p l e o f decades ago, w h i l e the workers they exp l o i t h a v e always been o f b o t h genders. I p r o v i d e a glossary in a n a t t e m p t t o m a k e the material m o r e accessible b o t h t o those fortunate e n o u g h n o t t o have studied m a i n s t r e a m e c o n o m i c s a n d t o those w h o are n o t yet f a m i l i a r w i t h M a r x i s t w r i t i n g s .

18

Introduction

Part O n e

UNDERSTANDING THE SYSTEM: MARX AND BEYOND

CHAPTER ONh

Marx's concepts

A world of commodities T h e m o s t o b v i o u s feature o f the e c o n o m i c system in w h i c h w e live is t h a t it is centred a r o u n d the b u y i n g a n d selling o f g o o d s o f all sorts. W e h a v e t o pay for f o o d , shelter, c l o t h i n g , energy t o light a n d heat o u r homes, transport to m o v e a r o u n d , everything we need t o keep ourselves a n d o u r families alive. A n d in o r d e r t o b u y w e have t o sell, even if all w e h a v e t o sell is o u r c a p a c i t y t o w o r k for others. O u r very lives d e p e n d o n the m o v e m e n t s o f c o m m o d i ties. H e n c e M a r x ' s starting p o i n t in Capital:

T h e w e a l t h o f those societies in w h i c h the c a p i t a l i s t m o d e o f p r o d u c t i o n prevails, presents itself as a n i m m e n s e a c c u m u l a t i o n of commodities. M a r x w a s w r i t i n g at a t i m e w h e n m a r k e t r e l a t i o n s h a d still n o t p e n e t r a t e d large p a r t s o f t h e w o r l d . T h e r e were still societies in w h i c h all p r o d u c t i o n w a s for p e o p l e s i m m e d i a t e needs, w h e t h e r in " p r i m i t i v e c o m m u n i s t " societies based o n h u n t e r - g a t h e r i n g o r light a g r i c u l t u r e , 1 w h e r e p e o p l e agreed freely a m o n g themselves h o w a n d w h a t t o p r o d u c e , o r in p e a s a n t societies w h e r e a local lord o r ruler d i c t a t e d t o t h e m f r o m a b o v e . Even in m o s t o f t h e societies w h e r e the m a r k e t a l r e a d y e x i s t e d , the m a j o r i t y o f t h e p o p u l a t i o n wTere still subsistence f a r m e r s , p r o d u c i n g m o s t o f the i h i n g s they needed t o keep their f a m i l i e s alive, w i t h o n l y a s m a l l p r o p o r t i o n b o u g h t o r sold. T o d a y w e c a n e x t e n d M a r x ' s w o r d s t o say t h a t " t h e w e a l t h o f t h e w h o l e w o r l d , w i t h a f e w e x c e p t i o n s , presents itself as a mass o f c o m m o d i t i e s " . A n d the e x c e p t i o n s t h e p r o v i s i o n , for i n s t a n c e , o f free h e a l t h a n d e d u c a t i o n in a n u m b e r o f a d v a n c e d c o u n t r i e s a r e i n c r e a s i n g l y subject t o forces seeking t o c o m m o d i f y t h e m . T h i s n e a r u n i v e r s a l i t y o f c o m m o d i t y 21

p r o d u c t i o n m a r k s society t o d a y o f f f r o m a n y t h i n g t h a t has ever h a p p e n e d before. T o u n d e r s t a n d w h a t is h a p p e n i n g t o the w o r l d we h a v e t o begin by u n d e r s t a n d i n g the w o r k i n g s o f c o m m o d i t y production. M a r x w a s n o t the first to try to u n d e r s t a n d such w o r k i n g s . H e w a s preceded by the classical political e c o n o m i s t s e a r l y supporters of capitalism w h o tried t o u n d e r s t a n d its basic d y n a m i c s as it struggled t o break through, in a E u r o p e still d o m i n a t e d by l a n d o w n i n g classes. T w o were of special i m p o r t a n c e : A d a m S m i t h , w h o w r o t e in the 1 7 ~ 0 s at the t i m e w h e n the first m o d e r n factory, a s p i n n i n g m i l l , w a s o p e n i n g at C r o m f o r d in Derbyshire; a n d D a v i d R i c a r d o , w h o defended the interests o f the early industrialists against the big l a n d o w n e r s 4 0 years later in the a f t e r m a t h o f the N a p o l e o n i c wars.

Use value a n d e x c h a n g e value S m i t h is often treated as the p a t r o n saint o f present d a y c a p i t a l i s m a n d o f its neoclassical e c o n o m i c theorists. But he m a d e a n important point, developed further by Ricardo, which has been c o m p l e t e l y obliterated by nearly all those m a i n s t r e a m e c o n o m i s t s w h o c l a i m t o f o l l o w in his footsteps. H e noted that once society is based o n p r o d u c t i o n for the m a r k e t , every c o m m o d i t y can be seen f r o m t w o completely different p o i n t s o f view: T h e w o r d v a l u e . . . h a s t w o different m e a n i n g s , a n d s o m e t i m e s expresses the utility o f s o m e p a r t i c u l a r o b j e c t , a n d s o m e t i m e s the p o w e r o f p u r c h a s i n g o t h e r g o o d s w h i c h the possession o f that object conveys. T h e o n e m a y be called " v a l u e in u s e " ; the other, " v a l u e in e x c h a n g e T h e t h i n g s w h i c h h a v e the greatest value in use h a v e frequently little or n o value in exchange; a n d o n the contrary, those w h i c h have the greatest value in exchange have frequently little or n o value in use. N o t h i n g is m o r e useful t h a n water: b u t it will purchase scarce a n y t h i n g ; scarce a n y t h i n g c a n be h a d in exchange for it. A d i a m o n d , o n the contrary, has scarce a n y value in use; b u t a very great q u a n t i t y o f other g o o d s m a y frequently be h a d in exchange for it. 2 M a r x ' s Capital t o o k u p a n d developed this insight, r e m o v i n g cer-

tain a m b i g u i t i e s f o u n d in Smith's w o r k :22 Understanding the System: Marx and Ik-yond

T h e utility o f a t h i n g m a k e s it a use v a l u e . . . Being l i m i t e d by the physical properties o f the c o m m o d i t y , it has n o existence a p a r t f r o m t h a t c o m m o d i t y . A c o m m o d i t y , such as i r o n , c o r n , or a d i a m o n d , is therefore, so far as it is a material t h i n g , a use v a l u e , s o m e t h i n g useful. T h i s property o f a c o m m o d i t y is indep e n d e n t o f the a m o u n t o f l a b o u r required t o a p p r o p r i a t e its useful qualities. But c o m m o d i t i e s are also: the material depositories o f e x c h a n g e v a l u e [which| presents itself as a q u a n t i t a t i v e r e l a t i o n , as the p r o p o r t i o n in w h i c h values i n use o f o n e sort are e x c h a n g e d for those o f a n o t h e r sort, a relation c o n s t a n t l y c h a n g i n g w i t h t i m e a n d place. T h i s distinction is n o t m a d e by t o d a y s m a i n s t r e a m neoclassical

e c o n o m i s t s / T h e o n l y sort o f value they see is " m a r g i n a l u t i l i t y " , based o n people's subjective a p p r e c i a t i o n o f use values. N o r is it m a d e by s o m e o f those dissident economists w h o claim to be in the t r a d i t i o n o f R i c a r d o (the so-called " S r a f f i a n s " ) . Their m o d e l is based o n the inputs a n d o u t p u t s o f physical objects, in other w o r d s , again o n use values. Finally there are s o m e present d a y M a r x i s t s w h o argue the distinction is n o t relevant, since the i m p o r t a n t p o i n t M a r x was m a k i n g was a b o u t e x p l o i t a t i o n , n o t value. 6 In erasing the distinction m a d e by S m i t h , R i c a r d o a n d M a r x , all such theories miss s o m e t h i n g essential t o a system based o n comm o d i t y p r o d u c t i o n : everything that h a p p e n s in it is subject to t w o different sets o f scientific laws. O n the o n e side there are the l a w s o f the physical w o r l d o f physics, chemistry, b i o l o g y , g e o l o g y a n d so o n . It is these w h i c h d e t e r m i n e the w a y s in w h i c h different things have t o be c o m b i n e d to p r o d u c e g o o d s (the different c o m p o n e n t s o f a m a c h i n e , the material structure o f a factory, t h e t e c h n i q u e s used in a surgical o p e r a t i o n a n d so o n ) a n d a l s o the usefulness o f those g o o d s t o those w h o f i n a l l y c o n s u m e t h e m (the n u t r i t i o n a l v a l u e o f f o o d , the w a r m t h p r o v i d e d by fuels a n d electricity, the n u m b e r o f children w h o can be a c c o m m o d a t e d h o s p i t a l , etc). O n the other side, there is the w a y things relate t o each other as exchange values. These often behave in a very different w a y t o use values. T h e e x c h a n g e v a l u e o f s o m e t h i n g c a n fall w h i l e its useMrtrx's Concepts 23

in a school or p a t i e n t s in a

value r e m a i n s unaltered. This has h a p p e n e d t o the price o f computers in recent yearsthe c o m p u t e r I used to w r i t e m y last b o o k w a s twice the price o f the m u c h m o r e p o w e r f u l o n e I a m using n o w . W h a t is m o r e , e x c h a n g e values are infinitely divisible w h i l e use values are usually n o t ; you m i g h t say t h a t a bicycle is w o r t h o n e twentieth o f a car, but if y o u cut a car u p i n t o twenty parts it is o f nil use t o a n y o n e . T h i s matters i m m e n s e l y w h e n it c o m e s tom 0

things w h i c h are i m p o r t a n t for m o d e r n c a p i t a l i s m like factories, oil wells, airliners, schools a n d hospitals. T h e m a r k e t treats these as exchange values t h a t c a n be infinitely d i v i d e d i n t o parts ( w o r t h so m a n y p o u n d s , pence, etc); b u t they have a physical existence t h a t c a n n o t usuallv be d i v i d e d in that wav.

0

The e x c h a n g e values o f c o m m o d i t i e s are also infinitely fluid. In the f o r m o f m o n e y thev can m o v e f r o m o n e part of the e c o n o m y t o another, f r o m o n e part o f the w o r l d t o another, be spent o n o n e item or any other o f the s a m e price. Bur the fluidity o f use values, like their divisibility, is restricted by their physical m a k e u p . Y o u can m o v e 1 0 0 m i l l i o n in cash from Britain to India overnight, b u t you c a n n o t m o v e a factory w o r t h i 100 m i l l i o n at a n y t h i n g like the s a m e speed. Use values a n d exchange values operate a c c o r d i n g to different, often contradictory, logics a n d a failure to see this leads to a failure to u n d e r s t a n d the most basic t h i n g a b o u t a c o m m o d i t y p r o d u c i n g e c o n o m y . It does n o t operate s m o o t h l y , just t h r o u g h the flow o f e x c h a n g e values, b u t is always subject to b u m p s , t o stopp i n g a n d s t a r t i n g , d u e to the e m b o d i m e n t o f e x c h a n g e values in use values w i t h physical properties t h a t limit their fluidity.

Labour and money S m i t h a n d R i c a r d o were n o t c o n t e n t just w i t h seeing the d o u b l e n a t u r e of c o m m o d i t i e s . They w e n t o n to a r g u e t h a t it w a s o n l y possible t o ascribe exchange values to objects w i t h very different physical properties because they have o n e t h i n g in c o m m o n t h e y are all p r o d u c t s o f h u m a n labour. As S m i t h wrote: T h e real price o f every t h i n g , w h a t every t h i n g really costs to the m a n w h o w a n t s to acquire it, is the toil a n d trouble o f a c q u i r i n g it. W h a t every t h i n g is really w o r t h to the m a n w h o has acq u i r e d it, a n d w h o w a n t s t o dispose o f it or e x c h a n g e it for24 Understanding the System: Marx and Ik-yond

s o m e t h i n g else, is the toil a n d t r o u b l e w h i c h it can save t o himself, a n d w h i c h it c a n i m p o s e u p o n o t h e r people. W h a t is b o u g h t w i t h m o n e y o r w i t h g o o d s is p u r c h a s e d b y labour, as m u c h as w h a t w e a c q u i r e by the toil o f o u r o w n b o d y . . . They c o n t a i n the value o f a certain q u a n t i t y o f l a b o u r w h i c h w e exc h a n g e for w h a t is s u p p o s e d at the t i m e t o c o n t a i n the value o f an equal quantity. L a b o u r w a s the first price, the original purchase-money that w a s p a i d for all things. It w a s n o t by g o l d or by silver, b u t by labour, t h a t all the wealth o f the w o r l d w a s originally purchased; a n d its value, to those w h o possess it, a n d w h o w a n t to exchange it for s o m e new p r o d u c t i o n s , is precisely equal to the q u a n t i t y o f l a b o u r w h i c h it can enable them t o purchase or c o m m a n d . " T h i s u n d e r s t a n d i n g M a r x also i n c o r p o r a t e d i n t o his o w n analysis: T h e e x c h a n g e values o f c o m m o d i t i e s m u s t be c a p a b l e o f being expressed in terms o f s o m e t h i n g c o m m o n t o t h e m all, of w h i c h t h i n g they represent a greater o r less q u a n t i t y . T h i s c o m m o n " s o m e t h i n g " c a n n o t be a g e o m e t r i c a l , a c h e m i c a l , or any other n a t u r a l property o f c o m m o d i t i e s . . . If then w e leave our o f consideration the use v a l u e o f c o m m o d i t i e s , they h a v e o n l y o n e c o m m o n property left, t h a t o f being p r o d u c t s o f labour. But M a r x refined the analysis o f S m i t h a n d R i c a r d o in a very imp o r t a n t way. It w a s nor the particular concrete exertions o f l a b o u r as such that d e t e r m i n e d e x c h a n g e value. For different people w i t h different skills take different a m o u n t s o f t i m e a n d use different a m o u n t s o f effort t o p r o d u c e p a r t i c u l a r c o m m o d i t i e s : S o m e people m i g h t t h i n k that if the value o f a c o m m o d i t y is determined by the q u a n t i t y o f l a b o u r spent o n it, the m o r e idle a n d u n s k i l f u l the labourer, the m o r e v a l u a b l e w o u l d his c o m m o d i t y be, because m o r e t i m e w o u l d be required in its p r o d u c t i o n . " R a t h e r the e x c h a n g e v a l u e o f a c o m m o d i t y d e p e n d s o n the "socially necessary l a b o u r t i m e " : t h a t is required to p r o d u c e an article u n d e r the n o r m a l condit i o n s o f p r o d u c t i o n , a n d w i t h the average degree o f skill a n d intensity prevalent at the t i m e . . .Mrtrx's Concepts 25

It is social l a b o u r that has transformed nature to create the means that h u m a n s depend o n for a livelihood. So it is the a m o u n t o f social labour incorporated in it that constitutes the underlying value o f a c o m m o d i t y . T h e concrete l a b o u r o f i n d i v i d u a l s is transformed t h r o u g h exchange in a c o m m o d i t y - p r o d u c i n g society into a proportionate'" part o f " h o m o g e n o u s " , " s o c i a l " l a b o u r o r "abstract l a b o u r " . M a r x calls this abstract l a b o u r the "substance of v a l u e " . It finds expression in exchange value a n d determines the level a r o u n d w h i c h the c o m m o d i t y ' s price will fluctuate o n the market: Every c h i l d k n o w s that a n y n a t i o n that s t o p p e d w o r k i n g , n o t f o r a year, b u t let us say, just for a few weeks, w o u l d perish. A n d every c h i l d k n o w s , t o o , t h a t the a m o u n t s o f p r o d u c t s corres p o n d i n g t o the d i f f e r i n g a m o u n t s o f needs d e m a n d differing a n d q u a n t i t a t i v e l y d e t e r m i n e d a m o u n t s o f society's aggregate l a b o u r . . . A n d the f o r m in w h i c h this p r o p o r t i o n a l d i s t r i b u t i o n o f l a b o u r asserts itself in a state o f society in w h i c h the interconnection o f social l a b o u r expresses itself as the private e x c h a n g e o f the i n d i v i d u a l p r o d u c t s o f l a b o u r , is precisely the e x c h a n g e value o f these products. 1 1 A l l the different k i n d s o f private labour, which arc carried on independently of each o t h e r . . . a r e c o n t i n u a l l y being reduced to the q u a n t i t a t i v e prop o r t i o n s in w h i c h society requires them. 1 2 Neoclassical e c o n o m i s t s tried t o develop a n o t i o n o f value o u r o f people's subjective j u d g e m e n t s , w i t h s o m e even trying to incorporate l a b o u r as " d i s u t i l i t y " . Marx, by c o n t r a s t , s a w v a l u e as s o m e t h i n g objective, as i n d i c a t i n g the p r o p o r t i o n o f total social l a b o u r " e m b o d i e d " n in it. B u t w h a t t h a t value is o n l y c o m e s t o light as a result o f the c o n t i n u a l , b l i n d , interaction o f c o m m o d i t i e s o n the market. 1 4 T h e system as a w h o l e forces its i n d i v i d u a l comp o n e n t s t o w o r r y a b o u t h o w the i n d i v i d u a l l a b o u r they e m p l o y relates to l a b o u r elsewhere.' 5 H e calls this process the o p e r a t i o n o f "the law of value". Values, however, are n o t u n c h a n g i n g . A l l the t i m e there is the i n t r o d u c t i o n o f n e w techniques or n e w m e t h o d s s o m e w h e r e in the system. T h i s results in a c h a n g e in the a m o u n t o f socially necessary l a b o u r needed t o p r o d u c e certain c o m m o d i t i e s a n d t h a t changes their exchange value. T h e use values o f objects r e m a i n fixed until n a t u r a l processes o f wear, tear a n d decay d a m a g e t h e m . But the exchange value o f t h i n g s t h e value t h a t matters for the system as26 Understanding the System: Marx and Ik-yond

a w h o l e d e c l i n e s every t i m e the technical a d v a n c e s o m e w h e r e in the system decreases the a m o u n t o f l a b o u r required t o m a k e t h e m . T h i s leads M a r x t o a " c o u n t e r - i n t u i t i v e " c o n c l u s i o n w h i c h distinguishes his a c c o u n t o f the s y s t e m a n d it is o n e w h i c h even s o m e M a r x i s t s have difficulties c o m i n g t o terms w i t h . A rise in p r o d u c t i v i t y reduces the value at w h i c h things exchange. It seems a b s u r d o n the face o f it. Yet there are n u m e r o u s e x a m p l e s o f increased p r o d u c t i v i t y c a u s i n g s o m e g o o d s t o fall in price c o m p a r e d to others. M a r x p r o v i d e d o n e f r o m his o w n time: T h e i n t r o d u c t i o n o f power-looms i n t o E n g l a n d p r o b a b l y reduced by one-half the l a b o u r required t o weave a given q u a n t i t y o f yarn i n t o c l o t h . T h e h a n d - l o o m weavers, as a m a t t e r o f fact, c o n t i n u e d t o require the s a m e t i m e as before; b u t for all t h a t , the p r o d u c t o f o n e h o u r o f their l a b o u r represented after the c h a n g e o n l y h a l f a n hour's social l a b o u r a n d consequently fell t o one-half its f o r m e r value. " T h o u s a n d s m o r e e x a m p l e s c o u l d be given today. For we are living in a p e r i o d in w h i c h technical a d v a n c e is m u c h faster in s o m e industries (especially those i n v o l v i n g microprocessors) t h a n others, a n d so the prices o f things like D V D s , televisions a n d c o m p u t e r s p r o d u c e d by industries using the m o s t t e c h n o l o g i c a l l y a d v a n c e d e q u i p m e n t are t e n d i n g t o fall w h i l e those in other industries using older techniques r e m a i n fixed or tend t o rise. T h i s is s o m e t h i n g o f central i m p o r t a n c e as w e shall see later w h e n w e discuss the dyn a m i c s o f 21 st c e n t u r y c a p i t a l i s m . O n c e c o m m o d i t y p r o d u c t i o n is generalised across a society, o n e p a r t i c u l a r g o o d c o m e s t o be used t o represent the value o f all othersmoney ( M a r x calls it " t h e universal e q u i v a l e n t " ) . In M a r x ' s d a y it w a s u s u a l l y in the f o r m o f g o l d (or s o m e t i m e s silver), a n d a certain q u a n t i t y o f g o l d (say a n o u n c e ) , p r o d u c e d by a certain a m o u n t o f average l a b o u r rime, c o u l d act as a measure o f the v a l u e for all the other g o o d s t h a t were b o u g h t a n d s o l d . As c a p i t a l i s m d e v e l o p e d as a system, b a n k s a n d t h e n g o v e r n m e n t s f o u n d t h a t they c o u l d use p a p e r notes ro stand in for g o l d in m a n y transactions a n d eventually to dispense w i t h reliance o n it at all, so l o n g as p e o p l e believed others w o u l d ( k n o w n t e c h n i c a l l y as " f i a t m o n e y " ) tinued to trust the b a n k s .Mrtrx's Concepts 27

accept those

notes from

for g o o d s . C r e d i t

b a n k s c o u l d also f u n c t i o n in the s a m e w a y , so l o n g as p e o p l e con-

The development of commodity production had one important effect. It systematically distorted people's u n d e r s t a n d i n g o f reality t h r o u g h w h a t M a r x called the "fetishism o f c o m m o d i t i e s " : T h e . . . r e l a t i o n o f the p r o d u c e r s t o the s u m total o f their o w n l a b o u r is presented to them as a social relarion, existing n o t between themselves, bur between the products o f their l a b o u r . . . A definite social relation between m e n assumes, in their eyes, the fantastic f o r m o f a relation between things. In order to find an a n a l o g y , w e m u s t have recourse t o the mist-enveloped regions o f t h e religious w o r l d . In t h a t w o r l d the p r o d u c t i o n s o f the h u m a n b r a i n a p p e a r as i n d e p e n d e n t beings e n d o w e d w i t h life, a n d entering i n t o relation b o t h w i t h o n e a n o t h e r a n d the h u m a n race. So it is in the w o r l d o f c o m m o d i t i e s w i t h the p r o d u c t s o f men's hands. 1 " People speak o f " t h e p o w e r o f m o n e y " , as if its p o w e r d i d n o t c o m e f r o m the h u m a n l a b o u r for w h i c h it is a t o k e n ; or o f the " n e e d s o f the m a r k e t " , as if the m a r k e t w a s a n y t h i n g m o r e t h a n a n a r r a n g e m e n t for l i n k i n g together the concrete acts o f l a b o u r o f different h u m a n beings. Such mystical attitudes lead people to ascribe social ills t o t h i n g s b e y o n d h u m a n c o n t r o l t h e M a r x i s t s since M a r x have called " r e i f i c a t i o n " . S i m p l y process seeing w h i c h the y o u n g M a r x h a d called " a l i e n a t i o n " a n d w h i c h s o m e t h r o u g h such mysticism does n o t in itself deal w i t h the social ills. As M a r x n o t e d , s i m p l y arriving at a scientific u n d e r s t a n d i n g o f the character o f existing society leaves it intact just as " a f t e r the discovery o f the c o m p o n e n t gases o f air, the a t m o s p h e r e itself r e m a i n e d u n a l t e r e d " . ' " But w i t h o u t seeing t h r o u g h the fetishism, conscious action to transform society c a n n o t take place. H e n c e the i m p o r t a n c e o f g r a s p i n g the d i s t i n c t i o n between use value a n d exc h a n g e v a l u e a n d o f g r o u n d i n g value in socially necessary labour.

E x p l o i t a t i o n a n d surplus v a l u e W e d o n o t only live in a w o r l d o f c o m m o d i t y p r o d u c t i o n . W e live in a w o r l d where control of most o f t h a t p r o d u c t i o n is concentrated in relatively few hands. In 2 0 0 8 the sales o f the world's biggest 2 , 0 0 0 c o m p a n i e s equalled a b o u t half o f total w o r l d output. 1 " If we assume that a r o u n d ten directors sit o n the b o a r d o f each o f the multina28 Understanding the System: Marx and Ik-yond

tionals, then che o u t of a world p o p u l a t i o n o f over six billion, a mere 2 0 , 0 0 0 people exercise decisive control over the creation o f w T ealth; in fact, the figure will be considerably lower than that because most o f the directors will sit o n the b o a r d s o f m o r e t h a n o n e Hrm. Production, o f course, is n o t carried o u t simply by the multinationals. A l o n g s i d e t h e m are a mass o f n a t i o n a l l y based medium-sized firms that have n o t achieved m u l t i n a t i o n a l status, a n d alongside them exist an even larger n u m b e r o f small firms, s o m e little m o r e than family operations e m p l o y i n g perhaps a c o u p l e o f people. But, even t a k i n g all these into consideration, only a small percentage o f the w o r l d s p o p u l a t i o n control the m e a n s o f p r o d u c t i o n responsible for p r o d u c i n g the m a j o r p o r t i o n o f its wealth. Those w h o d o n o t o w n a n d c o n t r o l such m e a n s o f p r o d u c t i o n have n o choice if they are t o m a k e a livelihood, b e y o n d the minim u m p r o v i d e d by welfare p r o g r a m m e s , other t h a n t o try to sell their ability t o w o r k to those t h a t d o . T h e y get p a i d a w a g e , w h i l e their l a b o u r p r o d u c e s g o o d s that are the p r o p e r t y o f those w h o c o n t r o l the m e a n s o f p r o d u c t i o n . S o m e of the value o f these g o o d s is used t o cover the wages o f the w o r k e r s , s o m e to pay for the materials used in p r o d u c t i o n , s o m e t o cover the w e a r a n d rear o f m e a n s o f p r o d u c t i o n . But s o m e f o r m s a n excess w h i c h is the basis o f the profits o f the o w n e r s w h a t M a r x called " s u r p l u s v a l u e " a n d s o m e n o n - M a r x i s t economists s i m p l y call " t h e s u r p l u s " . A d a m S m i t h h a d already suggested w h e r e this s u r p l u s c a m e f r o m ( a l t h o u g h he did n o t stick consistently to this view): In the original stare o f things, w h i c h precedes b o t h the approp r i a t i o n o f l a n d a n d the a c c u m u l a t i o n o f s t o c k , the w h o l e p r o d u c t o f l a b o u r belonged to the l a b o u r e r . . . But as s o o n as the l a n d becomes private property, the l a n d o w n e r d e m a n d s a share o f the p r o d u c e . . . T h e p r o d u c e o f a l m o s t all o t h e r l a b o u r is liable t o the like d e d u c t i o n o f profit. In all arts a n d m a n u f a c tures the greater part o f the w o r k m e n stand in need o f a master t o a d v a n c e t h e m the m a t e r i a l s o f their w o r k , a n d their wages a n d m a i n t e n a n c e till it be c o m p l e t e d . H e shares in the p r o d u c e o f their l a b o u r , or in the value w h i c h it a d d s to the materials u p o n w h i c h it is bestowed; a n d in this share consists his profit.-10 Profit, then, arises w h e n the l a n d , tools a n d materials required for p r o d u c t i o n b e c o m e the private property o f o n e section o f society. T h i s section is then able t o get c o n t r o l o f the l a b o u r o f others.Mrtrx's Concepts 29

R i c a r d o t o o k u p a n d developed Smith's ideas. I n d o i n g so he p o i n t e d to a central a m b i g u i t y in Smith's o w n w r i t i n g s . S m i t h mixes w i t h the view that l a b o u r a l o n e creates value a n o t h e r app r o a c h , in w h i c h profits a n d rent as well as l a b o u r c o n t r i b u t e t o the final value o f goods. R i c a r d o rejected this latter view. Bur soon after his death in the 1820s it became the o r t h o d o x y a m o n g pro-capitalist economists. It w a s m u c h m o r e p a l a t a b l e to defenders o f the existing system t h a n i m p l y i n g that profits were parasitic o n labour. M a r x , however, s a w t h a t the d e v e l o p m e n t o f S m i t h s views by R i c a r d o c o u l d a l o n e p r o v i d e the basis for a scientific a c c o u n t o f h o w c a p i t a l i s m f u n c t i o n e d . Like R i c a r d o , he recognised it w a s a b s u r d t o say that profits s o m e h o w created value w h e n they were part o f value that h a d already been created. But he w e n t m u c h further t h a n R i c a r d o h a d in clarifying the issues a n d w o r k i n g o u t the i m p l i c a t i o n s o f the theory. The first i m p o r t a n t a d v a n c e he m a d e was to differentiate clearly t w o different m e a n i n g s given t o " t h e value o f l a b o u r " by S m i t h . O n the o n e h a n d it m e a n t the a m o u n t o f l a b o u r required t o keep the l a b o u r e r for the t i m e d u r i n g w h i c h he or she w o r k e d . A d a m S m i t h h a d argued: There is...a certain rate b e l o w w h i c h it seems i m p o s s i b l e t o reduce f o r a n y considerable time the o r d i n a r y wages o f even the lower species o f labour. A m a n m u s t a l w a y s live by his w o r k , a n d his wages m u s t at least be sufficient to m a i n t a i n h i m . T h e y m u s t even u p o n m o s t occasions be s o m e w h a t m o r e otherwise it w o u l d be impossible for h i m t o b r i n g u p a family, a n d the race o f such w o r k m e n w o u l d n o t last b e y o n d the first generation/ 1 ' F r o m this p o i n t o f view, the " v a l u e o f l a b o u r " was the v a l u e of the w a g e o f the labourer. But S m i t h also used the term " l a b o u r " to refer to the a m o u n t of l a b o u r actually performed by the worker. A n d , M a r x stressed, the t w o a m o u n t s were by n o means the same. L a b o u r , he pointed o u t , w a s like all other c o m m o d i t i e s in t h a t it was b o u g h t a n d sold. But it differed from them because it h a d the peculiar property that w h e n p u t t o use it performed m o r e l a b o u r t h a n required t o p r o d u c e it. In the 1850s he i n t r o d u c e d a n e w term designed t o m a k e the distinction between the t w o uses of the c o n c e p t o f l a b o u r in S m i t h a n d R i c a r d o ( a n d in his o w n earlier writings) absolutely clear. H e said t h a t w h a t the capitalist p a i d for w h e n he e m p l o y e d s o m e o n e30 Understanding the System: Marx and Ik-yond

was n o t l a b o u r as such but " l a b o u r p o w e r " t h e ability o f someone t o w o r k for a certain period o f time. T h e v a l u e o f l a b o u r power d e p e n d e d , like that o f any other c o m m o d i t y , o n the a m o u n t o f l a b o u r needed t o p r o d u c e it. W o r k e r s c o u l d n o t p r o v i d e l a b o u r p o w e r unless they h a d a d e q u a t e f o o d , c l o t h i n g , h o u s i n g , a certain a m o u n t o f r e l a x a t i o n , etc. These were their r e q u i r e m e n t s if they were to be fit a n d c a p a b l e of w o r k i n g . Their w a g e h a d to cover the cost o f these t h i n g s t h a t is, t o c o r r e s p o n d t o the a m o u n t o f social l a b o u r needed t o p r o d u c e t h e m . T h i s d e t e r m i n e d the v a l u e o f l a b o u r power. It s h o u l d be noted t h a t M a r x did n o t see the m i n i m a l level o f subsistence a l o n e as d e t e r m i n i n g the value o f l a b o u r power. There was also the need to m a k e m i n i m a l provision for the u p b r i n g i n g o f the workers' children, since they w o u l d constitute the next generation o f l a b o u r power. A n d there was a " h i s t o r i c a l a n d moral element*' w h i c h depended o n the " h a b i t s a n d degree o f c o m f o r t " which the workers were accustomed to. W i t h o u t it they w o u l d n o t .ipply their full faculties to their l a b o u r a n d m i g h t even rebel against it. In this w a y the c u m u l a t i v e effect o f workers' struggles c o u l d influence the v a l u e o f l a b o u r power. M a r x w a s n o t , as he is sometimes presented, a believer in an " i r o n l a w o f wages'' whereby only a fixed portion o f n a t i o n a l o u t p u t c o u l d g o to the w o r k e r s . " Be t h a t as it m a y , the l a b o u r people c o u l d p e r f o r m w a s greater t h a n the a m o u n t o f l a b o u r needed to p r o v i d e them w i t h at least a m i n i m a l l i v e l i h o o d t o replenish their l a b o u r power. It m i g h t , for instance, take a n average o f o n l y four h o u r s w o r k a d a y t o p r o v i d e the level o f c o n s u m p t i o n necessary for s o m e o n e t o be able t o perf o r m a day's w o r k . But they c o u l d then p e r f o r m eight, nine or even ten hours w o r k a day. T h e extra l a b o u r w e n t t o the employer, so ih.it the value o f the g o o d s turned o u t by his factory w a s a l w a y s greater t h a n his investment. It w a s this w h i c h e n a b l e d h i m continually to get surplus value, w h i c h he c o u l d keep for himself or pass on to other m e m b e r s o f the capitalist class in the f o r m of interest nnd rent. I he relation between the e m p l o y e r a n d the w o r k e r h a d the appearance o f being between equals. T h e e m p l o y e r agreed t o give the wage a n d the w o r k e r his or her labour. N o coercion w a s involved. < )n the face o f it the s i t u a t i o n w a s very different to that between the slave o w n e r a n d the slave, or between the feudal lord a n d the serf. Ir w a s c o m p a t i b l e w i t h a juridical system based o n " t h e rights ! m a n " , o f e q u a l i t y before the l a w o f all citizens. Even if actuallyMrtrx's Concepts 31

existing bourgeois societies were tardy in g r a n t i n g this, it seemed engraved o n their structure. Yet the surface a p p e a r a n c e o f equality hid a deeper inequality. T h e e m p l o y e r possessed the prerequisites f o r the w o r k e r s e n g a g i n g in social p r o d u c t i o n a n d getting a livelih o o d . T h e workers were " f r e e " in the sense that they d o n o t have t o w o r k for a n y i n d i v i d u a l firm or capitalist. But they c o u l d n o t escape h a v i n g to try t o w o r k for s o m e o n e . As M a r x p u t it: the w o r k e r c a n leave the i n d i v i d u a l capitalist to w h o m he hires himself whenever he likes... But the worker, w h o s e sole source o f l i v e l i h o o d is the sale o f his l a b o u r , c a n n o t leave the w h o l e class o f purchasers, that is the capitalist class, w i t h o u t renouncing his exisrence. H e belongs n o t to this or that bourgeois, but to the bourgeois class.-* T h e difference between the v a l u e o f the w o r k e r ' s l a b o u r p o w e r a n d the value created by the l a b o u r d o n e w a s the source o f the s u r p l u s v a l u e . O n c e the e m p l o y e r h a d g o t this s u r p l u s v a l u e , it c o u l d be kept directly as profit, it c o u l d be used t o pay o f f interest o n a n y m o n e y b o r r o w e d t o b u i l d the factory, or as rent t o the o w n e r of the l a n d o n w h i c h the factorv s t o o d . But h o w e v e r sur0

plus value w a s d i v i d e d u p i n t o profits, interest a n d rent, its source r e m a i n e d the excess w o r k d o n e by the w o r k e r s t h e e x p l o i t a t i o n by those w h o o w n e d the m e a n s o f p r o d u c t i o n o f those w h o d i d n o t . O n c e the o w n e r h a d g o t the p r o f i t , he c o u l d use it t o b u i l d new m e a n s o f p r o d u c t i o n , increasing still further his capacity t o b l a c k m a i l w o r k e r s i n t o l a b o u r i n g for h i m o n his terms if they were to get a l i v e l i h o o d . It w a s this process w h i c h m a d e the e m p l o y e r a capitalist. It also gave a special m e a n i n g t o the w o r d " c a p i t a l " . The w o r d is used by m a i n s t r e a m economists a n d in everyday life s i m p l y to m e a n longterm investment as o p p o s e d to i m m e d i a t e c o n s u m p t i o n . But it has a deeper significance o n c e the m e a n s o f p r o d u c t i o n are in the control o f o n e g r o u p o f society, c o m p e l l i n g others w h o w a n t a l i v e l i h o o d t o w o r k for t h e m . It is n o w a p r o d u c t o f past l a b o u r w h i c h is able to e x p a n d t h r o u g h the e x p l o i t a t i o n o f current labour. It is, as M a r x p u t it, n o t a t h i n g , b u t a relation: Value-creating a n d value-enhancing p o w e r belongs n o t t o the w o r k e r b u t t o the c a p i t a l i s t . . . A l l the d e v e l o p m e n t o f the productive forces o f l a b o u r is d e v e l o p m e n t o f the p r o d u c t i v e forces32 Understanding the System: Marx and Ik-yond

o f c a p i t a l . By i n c o r p o r a t i n g i n t o itself this power, c a p i t a l c o m e s alive a n d begins t o w o r k " a s if its b o d y were by love possessed". Living labour thus becomes a means whereby objectified l a b o u r is preserved a n d increased... 2 4 T h e fetishism o f c o m m o d i t i e s n o w takes the f o r m o f m a k i n g it seem t h a t creativity does n o t lie w i t h living h u m a n beings bur w i t h the p r o d u c t s o f their labour, so t h a t people talk o f capital creating wealth a n d employers " p r o v i d i n g people w i t h w o r k " , whereas in reality it is l a b o u r that a d d s to the v a l u e o f capital a n d the w o r k e r w h o provides l a b o u r to the employer.

A b s o l u t e a n d relative surplus value M a r x distinguished between t w o ways in w h i c h firms c o u l d raise the ratio o f surplus value t o wages. O n e was by the c r u d e m e t h o d of l e n g t h e n i n g the w o r k i n g day. H e called this " a b s o l u t e s u r p l u s v a l u e " . T h i s m e t h o d o f forcing u p profits w a s very widespread in the early days o f industrial c a p i t a l i s m , a n d M a r x in Capital vides m a n y e x a m p l e s o f it. But M a r x also n o t e d in Capital tive for the capitalist: A p o i n t m u s t i n e v i t a b l y be reached, w h e r e extension ot the w o r k i n g day a n d intensity o f the l a b o u r m u t u a l l y exclude one another, in such a w a y t h a t l e n g t h e n i n g o f the w o r k i n g day bec o m e s c o m p a t i b l e o n l y w i t h a l o w e r degree o f intensity." So it w a s t h a t , after p u t t i n g u p massive o p p o s i t i o n to successive attempts t o p r o v i d e a legal l i m i t t o the w o r k i n g d a y for c h i l d r e n , m a j o r capitalist interests gave w a y t o w o r k i n g class p r e s s u r e a n d sometimes f o u n d t h a t p r o d u c t i o n a c t u a l l y increased o n c e h o u r s were shorter. F o r m u c h o f the 2 0 t h c e n t u r y the m e t h o d o f prol o n g i n g the w o r k i n g day seemed to b e l o n g to the past. In t h e ulvanced i n d u s t r i a l c o u n t r i e s , at least, w o r k e r s ' resistance h a d lorced capitalists t o concede a shorter w o r k i n g week a n d h o l i d a y s sMth pay. The 7 2 - h o u r week ot V i c t o r i a n times h a d b e c o m e the IN h o u r week a n d then the 4 4 - h o u r week. But rhere w a s a n o t h e r range o f m e t h o d s for increasing the a m o u n t o f s u r p l u s value to be o b t a i n e d f r o m each worker, w h i c hMrtrx's Concepts 33

prothat

p r o l o n g i n g the w o r k i n g d a y over m u c h c o u l d be c o u n t e r p r o d u c -

M a r x called "relative surplus v a l u e " . It relied o n reducing rhe prop o r t i o n o f the w o r k t i m e that w e n t i n t o c o v e r i n g the cost o f replenishing worker's capacity to w o r k , t h a t is, their l a b o u r power. This t o o k three forms. The first w a s to i n t r o d u c e n e w machinery into the w o r k p l a c e , so as to increase p r o d u c t i v i t y a n d reduce t h e a m o u n t o f t i m e it t o o k for rhe w o r k e r s t o p r o d u c e g o o d s w h o s e sale w o u l d cover their wages. In effect, instead of, say, four h o u r s w o r k covering the cost o f their l a b o u r power, t w o hours w o u l d d o s o w i t h t w o hours extra g o i n g t o p r o d u c e surplus value. M a r x s a w this as the m e t h o d o f increasing e x p l o i t a t i o n capitalists t u r n e d t o as they faced difficulties in e x t e n d i n g the w o r k i n g week a n y further in the m i d - l 9 t h century. T h e p r o d u c t i v i t y o f the w o r k f o r c e per h o u r became central, rather t h a n e x t e n d i n g the n u m b e r o f h o u r s w o r k e d . 2 6 Bur it w a s in itself o n l y a short-term e x p e d i e n t for the capitalist. T h e first capitalist t o i n t r o d u c e n e w m a c h i n e r y w o u l d be a b l e t o p r o d u c e the s a m e a m o u n t o f v a l u e w i t h less h o u r s o f labour. O n c e other capitalists also i n t r o d u c e d n e w m a c h i n e r y , rhe socially necessary t i m e needed for p r o d u c t i o n fell a n d w i t h it rhe v a l u e o f the g o o d s he sold a n d the excess surplus value he o b t a i n e d . I he second f o r m it t o o k was increased productivity in the cons u m e r g o o d s industries a n d agriculture. T h i s w o u l d reduce the a m o u n t o f l a b o u r t i m e needed to p r o d u c e their o u t p u t a n d the prices workers h a d to p a y for their m e a n s o f livelihood. This m e a n t t h a t the cost to the capitalists everywhere o f p r o v i d i n g workers w i t h their a c c u s t o m e d l i v i n g s t a n d a r d (of p a y i n g f o r their l a b o u r p o w e r ) fell, a n d the a m o u n t o f surplus value extracted c o u l d be increased w i t h o u t c u t t i n g real wages or e x t e n d i n g the w o r k i n g day. T h e t h i r d m e t h o d w a s t o intensify the pressure o n workers t o w o r k harder. As M a r x puts it, the o n l y w a y t o " c h a n g e the relative m a g n i t u d e s " of the w o r k i n g d a y g o i n g to the capitalist rather t h a n the w o r k e r w i t h o u t c u t t i n g real wages w a s to " c h a n g e either the p r o d u c t i v i t y o f l a b o u r or its i n t e n s i t y " . T h e r e w a s a drive t o i m p o s e " o n the w o r k m a n increased e x p e n d i t u r e o f l a b o u r in a given t i m e , heightened tension o f labour-power, a n d closer filling u p o f the pores o f rhe w o r k i n g - d a y . " ' " O r a g a i n , " W h a t is lost by s h o r t e n i n g rhe d u r a t i o n is g a i n e d by the increasing tension o f labour p o w e r " / ' T h e drive for increased p r o d u c t i v i t y b e c a m e a n obsession for big business, as w a s s h o w n by the m o v e m e n t for "scientific mana g e m e n t " f o u n d e d by the A m e r i c a n V W Taylor in the 1890s.34 Understanding the System: Marx and Ik-yond

Taylor believed rhar every task d o n e in industry c o u l d be b r o k e n d o w n i n t o i n d i v i d u a l c o m p o n e n t s a n d t i m e d , so as t o d e t e r m i n e the m a x i m u m w h i c h workers c o u l d a c c o m p l i s h . In this way, a n y breaks in the t e m p o o f w o r k c o u l d be e l i m i n a t e d , w i t h Taylor c l a i m i n g he c o u l d increase the a m o u n t o f w o r k d o n e in a d a y bv as m u c h as 2 0 0 percent. " T a y l o r i s m " f o u n d its fullest expression w i t h the i n t r o d u c t i o n o f the assembly line in H e n r y Ford's car plants. T h e speed at w h i c h people w o r k e d n o w d e p e n d e d o n the speed at w h i c h the line m o v e d , rather t h a n their i n d i v i d u a l m o t i v a t i o n . I n other industries the s a m e pressure orr people t o w o r k flat o u t was achieved by increasing surveillance by supervisors, w i t h , for instance, mechanical counters o n m a c h i n e s i n d i c a t i n g the level o f w o r k achieved. A n d today a s i m i l a r a p p r o a c h is being a t t e m p t e d in a variety o f w h i t e collar o c c u p a t i o n s w i t h increased use o f assessment, a t t e m p t s at p a y m e n t by results, the use o f key stroke counters o n c o m p u t e r s , a n d so o n .

Accumulation and competition A w o r l d o f c o m m o d i t y p r o d u c t i o n is a w o r l d o f c o m p e t i t i o n between producers. It is this element of competition which distinguishes a society based o n c o m m o d i t y p r o d u c t i o n a n d exc h a n g e value f r o m o n e w h e r e i n d i v i d u a l s or g r o u p s decide o n w h a t use values t o p r o d u c e f o r their o w n c o n s u m p t i o n . T h r o u g h e x c h a n g e the effort p u t in by those w o r k i n g in o n e u n i t o f production is linked to those o f m i l l i o n s o f o t h e r i n d i v i d u a l s in o t h e r units, but the link o n l y takes place t h r o u g h c o m p e t i t i o n between those t a k i n g the decisions a b o u t p r o d u c t i o n in the i n d i v i d u a l units. In F.ngels' phrase there is " s o c i a l p r o d u c t i o n b u t capitalist appropriation . T h e capitalist firm w h i c h exploits the w o r k e r is therefore, necessarily, in c o m p e t i t i o n w i t h o t h e r c a p i t a l i s t firms. If it c a n n o t o u t - c o m p e t e t h e m , e v e n t u a l l y it w i l l be forced o u t o f business. To o u t - c o m p e t e m e a n s k e e p i n g a h e a d in d e v e l o p i n g new, m o r e p r o d u c t i v e t e c h n i q u e s o n l y in t h a t w a y can it ensure t h a t it is n o t g o i n g t o be d r i v e n o u t o f business by rivals p r o d u c i n g a n d selling g o o d s m o r e c h e a p l y t h a n it c a n . It c a n n o t g u a r a n t e e b e i n g able to a f f o r d n e w e q u i p m e n t u s i n g s u c h t e c h n i q u e s unless its profits are as h i g h as possible. But if it raises its p r o f i t s in o r d e rMrtrx's Concepts 35

ro he able ro reinvest, so m u s t its rivals. T he fact t h a t each f i r m is i n v o l v e d in e x p l o i t i n g w a g e l a b o u r m e a n s t h a t n o n e o f t h e m dare rest o n its laurels. H o w e v e r successful a firm m a y have been in the past, it lives in fear of a rival firm investing profits in newer a n d m o r e m o d e r n plant a n d machinery. N o capitalist dare stand still for a n y length o f t i m e , for that w o u l d m e a n falling b e h i n d the c o m p e t i t o r s . A n d to fall b e h i n d is eventually t o g o bust. It is this w h i c h e x p l a i n s rhe d y n a m i s m ot c a p i t a l i s m . T h e pressure o n each capitalist t o keep a h e a d o f every other leads t o the c o n t i n u a l u p g r a d i n g o f p l a n t a n d machinery./

S o it is t h a t c a p i t a l i s m becomes n o t merely a system o f exploiting "free" wage workers, but also a system Manifestos of compulsive wrote a c c u m u l a t i o n . T h e Communist which M a r x

w i t h Hngels early in 1848, insisted: The bourgeoisie, d u r i n g its rule of scarce one h u n d r e d years, has created m o r e massive a n d m o r e colossal p r o d u c t i v e forces t h a n all the preceding generations put together. It e m p h a s i s e d the c o n t i n u a l t r a n s f o r m a t i o n o f industry capitalism: T h e bourgeoisie c a n n o t exist w i t h o u t constantly revolutionising the m e a n s o f p r o d u c t i o n . . . C o n s t a n t r e v o l u t i o n i s i n g o f product i o n . . . d i s t i n g u i s h e s the bourgeois epoch f r o m all earlier ones. In Capital M a r x sees the c o n t i n u a l drive to b u i l d u p ever bigger inunder

dustry as the characteristic feature o f c a p i t a l i s m : Fanatically bent o n m a k i n g value e x p a n d itself, he [the capitalist] ruthlessly forces the h u m a n race ro p r o d u c e for p r o d u c t i o n s s a k e . . . A c c u m u l a t i o n for rhe sake o f a c c u m u l a t i o n , p r o d u c t i o n for p r o d u c t i o n ' s sake! ; i T h e w o r k ' s first v o l u m e begins w i t h a n a l y s i n g p r o d u c t i o n for the m a r k e t ( " c o m m o d i t y p r o d u c t i o n " ) , then l o o k s w h a t happens w h e n w a g e l a b o u r arises a n d l a b o u r p o w e r becomes a c o m m o d ity, a n d finally c u l m i n a t e s in s h o w i n g h o w p r o d u c t i o n u s i n g w a g e l a b o u r brings a b o u t a process o f c o m p u l s i v e a c c u m u l a t i o n that ignores h u m a n need a n d i n d i v i d u a l desires.36 Understanding the System: Marx and Ik-yond

C a p i t a l is n o t then defined just hv e x p l o i t a t i o n ( w h i c h occurred tn m a n y precapitalist societies), b u t by its necessary drive to selfexpansion. The motivation for production and exchange is increasing the a m o u n t o f value in the h a n d s o f the capitalist confusing) neologism "valorisation". So the system is n o t just a system o f c o m m o d i t y p r o d u c t i o n ; it is also a system o f c o m p e t i t i v e a c c u m u l a t i o n . T h i s creates limits to the a c t i o n possible n o t o n l y for w o r k e r s , b u t also for capitalists. For if they d o n o t c o n t i n u a l l y seek t o e x p l o i t their w o r k e r s as m u c h as is practically possible, they will n o t dispose o f the surplus value necessary to a c c u m u l a t e as q u i c k l y as their rivals. They can choose to e x p l o i t their w o r k e r s in o n e w a y rather t h a n another. But they c a n n o t choose n o t t o exploit their w o r k e r s at all, or even to e x p l o i t them less t h a n other capitalists d o u n l e s s they w a n t t o g o bust. They themselves are subject t o a system w h i c h pursues its relentless course whatever the feelings o f i n d i v i d u a l h u m a n beings. firm

a process for w h i c h s o m e M a r x i s t writers use the (in m y view

Surplus value, a c c u m u l a t i o n a n d the rate o f profit M a c h i n e s a n d r a w materials d o n o t themselves create value. O n l y the exercise o f h u m a n l a b o u r has a d d e d to the n a t u r a l w e a l t h that existed in a state o f n a t u r e a n d o n l v c o n t i n u e d h u m a n l a b o u r c a n0

increase it still further. M a c h i n e s a n d r a w materials exist because h u m a n l a b o u r has been a p p l i e d in the past a n d they c a n n o t substitute for it in the c r e a t i o n o f n e w value. But they are necessary if l a b o u r is to achieve the average level o f p r o d u c t i v i t y prevailing in a p a r t i c u l a r society at a p a r t i c u l a r time. T h e final value o f g o o d s p r o d u c e d has t o i n c l u d e a n element c o v e r i n g the cost o f the machines a n d materials used. W h e n a c o m p a n y p r o d u c e s c l o t h by e m p l o y i n g w o r k e r s t o w o r k o n p o w e r l o o m s t h a t w e a v e w o o l , the price o f the f i n a l p r o d u c t has t o cover n o t o n l y the cost o f p r o v i d i n g the l a b o u r p o w e r o f the w o r k e r s (their wages) a n d the profit o f the c o m p a n y ,