Twilight Capitalism: Karl Marx and the Decay of the Profit System 9781773634197, 9781773634562, 9781773634579, 9781773634586

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TWILIGHT

CAPITALISM

TWILIGHT

CAPITALISM KARL MARX AND THE DECAY OF THE PROFIT SYSTEM

Murray E.G. Smith • Jonah Butovsky • Josh Watterton

FERNWOOD PUBLISHING HALIFAX & WINNIPEG

Copyright © 2021 Murray E.G. Smith, Jonah Butovsky, Josh Watterton All rights reserved. No part of this book may be reproduced or transmitted in any form by any means without permission in writing from the publisher, except by a reviewer, who may quote brief passages in a review. Editing: Jenn Harris Cover design: John van der Woude eBook: tikaebooks.com Printed and bound in Canada Published by Fernwood Publishing 32 Oceanvista Lane, Black Point, Nova Scotia, B0J 1B0 and 748 Broadway Avenue, Winnipeg, Manitoba, R3G 0X3 www.fernwoodpublishing.ca Fernwood Publishing Company Limited gratefully acknowledges the financial support of the Government of Canada, the Canada Council for the Arts, the Manitoba Department of Culture, Heritage and Tourism under the Manitoba Publishers Marketing Assistance Program and the Province of Manitoba, through the Book Publishing Tax Credit, for our publishing program. We are pleased to work in partnership with the Province of Nova Scotia to develop and promote our creative industries for the benefit of all Nova Scotians.

Library and Archives Canada Cataloguing in Publication Title: Twilight capitalism : Karl Marx and the decay of the profit system / Murray E.G. Smith, Jonah Butovsky, Josh Watterton. Names: Smith, Murray E. G., author. | Butovsky, Jonah, author. | Watterton, Josh, author. Description: Includes bibliographical references and index. Identifiers: Canadiana (print) 20210126248 | Canadiana (ebook) 20210126272 | ISBN 9781773634197 | ISBN 9781773634197 (softcover) | ISBN 9781773634562 (EPUB) | ISBN 9781773634579 (Kindle) | ISBN 9781773634586 (PDF) Subjects: LCSH: Marx, Karl, 1818-1883. | LCSH: Capitalism. Classification: LCC HB501 .S647 2021 | DDC 330.12/2—dc23

CONTENTS Acronyms....................................................................................................viii Preface............................................................................................................. 1 Acknowledgements....................................................................................... 4 1 Pandemic, Slump and Uprising in the Twilight of Capitalism......... 5

The Pandemic and the Slump: An Overview.............................................. 10 Explaining the Social Crisis of 2020............................................................. 20 Social Morbidities and Capitalist Production Relations............................ 28 Uprising and the Way Forward..................................................................... 32 Notes................................................................................................................. 35

2 Twilight Capitalism: The Economic Dimension..............................38

Who Done It? A Tale of Plagues and Profits............................................... 39 From the Great Recession to the Catastrophe of 2020............................... 43 Productivity, Value and Capitalist Crisis..................................................... 51 Production, Finance and the Falling Rate of Profit.................................... 57 Marx’s Law of the Tendency of the Rate of Profit to Fall........................... 63 Profitability Crisis and Financialization Revisited..................................... 65 The Role of China........................................................................................... 67 Capitalist Economic Crisis and Marxist-Socialist Politics......................... 71 Notes................................................................................................................. 74

3 Marx’s Theories of Value, Capital and Crisis....................................78

Capitalism and Human Progress.................................................................. 78 Capitalism as a Mode of Production............................................................ 88 Marx’s Theory of Capital and Surplus Value............................................... 94 Marx on Falling Profitability and Capitalist Crisis................................... 103 The Historical-Structural Crisis of Capitalism.......................................... 112 On Marx’s Theories and “Predictions”....................................................... 114 Summing Up.................................................................................................. 126 Notes............................................................................................................... 127

4 Valorization Crisis and the Path to Global Depression.................129

Capitalism and Valorization Crisis............................................................. 129 From the Keynesian “Golden Age” to Neoliberalism............................... 133 Global Turbulence and the Marxian Theory of Crisis: A Critique of Brenner................................................................................... 143 Financialization, the Great Recession and the Making of the Long Depression........................................................... 162 Notes............................................................................................................... 166

5 Marx’s Law of Profitability: Evidence and Controversy................167

The Marxian System, Contemporary Capitalism and National Income Accounts................................................................... 167 The U.S. Postwar Period: Profitability Trends and Crisis......................... 168 Theoretically Specifying and Operationalizing the Marxian Value Categories and Ratios: On the Origins of the Long Depression............. 177 Conclusion..................................................................................................... 195 Notes............................................................................................................... 197

6 Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value..........................................................198

Why Does Marx’s Labour Theory of Value Matter?................................. 198 Mariana Mazzucato on Value and Stephanie Kelton on Money............. 201 The Value Controversy: Why Marx’s LTV Holds..................................... 207 Conclusion..................................................................................................... 220 Notes............................................................................................................... 221

7 Twilight Capitalism or Socialist Revolution?.................................223

Marxist-Socialist versus Capitalist Politics in the Twilight of Capitalism............................................................................ 223 Marxist Socialism and the Crisis of the Radical Left............................... 229 Conclusion..................................................................................................... 252 Notes............................................................................................................... 253

8 Imagining Socialism..........................................................................255

Trotsky on Stalinism and Problems of Socialist Construction............... 256 Imagining Socialism: The “Models” of Albert and Gindin...................... 260 In Defence of Socialist Central Planning................................................... 265 Conclusion..................................................................................................... 273

References...................................................................................................276 Index...........................................................................................................287

To those many millions who have fought under the banner of Marxism for human emancipation and a socialist future since the publication of Karl Marx’s Capital in 1867

ACRONYMS acc afv arp bt cares cdo clo djia dsa fc fire gdp hdi ibt ig ilo ltc ltrpf ltv mmt occ oecd pev pmc rsv snul tcc tssi uhnw vcc vco who wrp

advanced capitalist country anticipated future value average rate of profit Bolshevik Tendency Coronavirus Aid, Relief, and Economic Security [Act] collateralized debt obligation collateralized loan obligation Dow Jones Industrial Average Democratic Socialists of America fictitious capital finance, insurance and real estate gross domestic product Human Development Index International Bolshevik Tendency Internationalist Group International Labour Organization long-term care law of the tendency of the rate of profit to fall labour theory of value modern monetary theory organic composition of capital Organization for Economic Cooperation and Development previously existing value professional-managerial class rate of surplus value socially necessary unproductive labour technical composition of capital temporal single system interpretation ultra-high net worth value composition of capital value composition of output World Health Organization world rate of profit

PREFACE Murray E.G. Smith

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his book is a hybrid of sorts. To an extent, it’s an updated and revised version of my Global Capitalism in Crisis: Karl Marx and the Decay of the Profit System (gcic), published in 2010. Yet it can also be seen as a new book, featuring almost 60 percent entirely original content with important contributions by my co-authors, Jonah Butovsky and Josh Watterton. Like gcic, Twilight Capitalism provides a snapshot of a specific conjunctural crisis of twenty-first-century capitalism — the social upheaval and severe economic slump of 2020 triggered by the coronavirus pandemic — while also treating that crisis as an episode within a larger “historical-structural crisis” of the capitalist profit system. At the same time, it offers a much more in-depth treatment of many of the theoretical issues explored in gcic and a great deal more original empirical analysis of long-term trends in the U.S. economy — findings that support our central argument that twentyfirst-century capitalism has entered irrevocably into a “twilight” stage. The present book also offers what we think is a clear and accessible introduction to Karl Marx’s foundational theoretical contributions to the critical analysis of the capitalist mode of production, while likewise proposing some distinctive insights into important but often neglected or undeveloped areas of Marx’s thought that are a source of disagreement and controversy among Marxist scholars. We anticipate that our interventions into the debates surrounding Marx’s theories of labour value, economic crisis, unproductive labour, fictitious capital and, above all, the tendency of the rate of profit to fall will attract the attention of specialists in Marxist political economy. However, we also hope to persuade those new to these discussions that Marx’s analysis of the laws of motion and historical limits of capitalism is even more relevant in our time than it was 150 years ago. Today, after a long period of accelerating decay, world capitalism is in the midst of a severe breakdown. Moreover, this breakdown is impressing

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2  Twilight Capitalism upon human consciousness the recognition that the “neoliberal” vintage of capitalism has become unsustainable — indeed, that it is now giving way to something that is both much more brutal and far more susceptible to revolutionary Marxist criticism. Capitalism’s fundamental “laws of motion” as identified and analyzed by Marx are not merely operational in the twenty-first century; they have reached a critical denouement. Consequently, this profit-driven and outmoded system appears not only unjust, inequitable, invidious and crisis-prone but increasingly as an existential threat to humanity, ravaging the relationship between human society and the natural world, restraining and perverting the development of human capacities and paving the way for a new world war. The question is posed: how will conscious human beings respond to this breakdown? How will we choose to act as the irrationalities, injustices and perils of capitalism continue to mount? At bottom, these are political questions closely linked to the unfolding of the class struggle between capital and labour, as well as to the historical contest between those striving to preserve the anachronistic and decaying capitalist system and those fighting for a new, egalitarian-socialist world. Capitalism will soon end — either through the conscious efforts of the workers of the world to replace it with a higher and more sustainable order of social and economic organization or through capital’s destruction of humanity. The outcome will depend on a struggle of conflicting social forces and competing programs — a final great theme taken up in Twilight Capitalism just as it was a decade ago in Global Capitalism in Crisis. ***** The itinerary of the book is as follows. Chapter 1, entitled “Pandemic, Slump and Uprising in the Twilight of Capitalism,” focuses on the origins and course of the “combined” social crises of 2020 while also outlining some major themes of the book. Chapter 2, “Twilight Capitalism: The Economic Dimension,” provides an overview of the entire period between the financial crisis and Great Recession of 2007–09 and the 2020 crisis, a period that the authors regard as one of protracted depression. This chapter also introduces the reader to some key elements of Marx’s theory of capitalist crisis and his law of profitability. Chapter 3, entitled “Marx’s Theories of Value, Capital and Crisis,” offers a conspectus of Marx’s views on a wide range of issues as well as a more comprehensive treatment of his “economics.” Chapter 4, “Valorization Crisis and the Path to Global

Preface  3 Depression,” argues that the key element in Marx’s account of capitalist crisis is the problem of insufficient production of surplus value, a problem that has continually mutated and worsened since a new material basis for capital accumulation was established in the aftermath of World War II. In Chapter 5, “Marx’s Law of Profitability: Evidence and Controversy,” we review and appraise the empirical work of several proponents of Marx’s law of the tendency of the rate of profit to fall, together with our own recent contributions. (Please note that many readers new to the literature may find this chapter challenging. While reassuring the uninitiated that it can be safely bypassed without losing sight of the main line of the book’s argument, we nevertheless urge all of our readers to study it, above all with a view to appreciating the numerous charts provided.) Chapter 6, entitled “Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value,” clarifies the difference between Marx’s “production-centred” theory of value and capitalist crisis and some “heterodox” economic theories (including some putatively Marxist ones) that tend to focus on “the market” and state policy. This chapter also provides a general survey and assessment of the controversy surrounding Marx’s labour theory of value over the past century. Chapter 7, “Twilight Capitalism or Socialist Revolution?,” analyzes important trends in contemporary capitalist politics, the chronic crisis of leadership of the working class, the persistent disorientation of the “socialist left” in the post-Soviet era and how the latter might be overcome. Finally, Chapter 8, “Imagining Socialism,” offers a critical historical retrospective on what was sometimes called “actually existing socialism” in the Soviet Union and Eastern Europe, a consideration of some recent “blueprints” for building a socialist society and an argument in support of “proletarian-democratic central planning” as a necessary element in the transition to a global socialist civilization truly worthy of the name. — Murray E.G. Smith, November 1, 2020

ACKNOWLEDGEMENTS

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his book reproduces some lengthy passages from journal articles written by Murray Smith (1991, 1993, 1999), Smith and Taylor (1996) and Smith and Butovsky (2012), previously published in The Canadian Review of Sociology and Anthropology (Wiley-Blackwell), Science & Society (Guilford Press), Studies in Political Economy and Historical Materialism (Koninklijke Brill). The authors would like to thank the following individuals for the assistance, encouragement, inspiration and/or useful criticism they provided in the writing and publication of Twilight Capitalism and/or its precursor, Global Capitalism in Crisis: Ken Campbell, Alana Chalmers, Brenda Conroy, Raju Das, Josh Dumont, Anumeha Gokhale, Jenn Harris, Tim Hayslip, Karen Hofman, Esther Kelly, John McAmmond, David McNally, Antonio Pagliarone, Bryan Palmer, Beverley Rach, Tom Reid, Michael Roberts, Anwar Shaikh, Errol Sharpe, Eric Starrs and Thom Workman.

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Chapter 1

PANDEMIC, SLUMP AND UPRISING IN THE TWILIGHT OF CAPITALISM

T

he third decade of the twenty-first century made its debut in truly extraordinary fashion. In 2020, profound discontent with the status quo, long simmering on a global scale, found explosive expressions heralding a new and potentially revolutionary era. To paraphrase a famous line from Marx and Engels’ Communist Manifesto — all that seemed solid melted into air, all that seemed holy was profaned, and humanity was at last compelled to face with sober senses its real conditions of life. The social upheaval of 2020 may well mark a major turning point in world history. The global Covid-19 public health emergency and the associated economic slump produced hugely disruptive and far-reaching social and political effects. Even before the onset of the pandemic, the world economy had been on the brink of severe recession after a prolonged yet remarkably tepid recovery from the Great Recession of 2008–09 — as well as several decades of slow growth, austerity and persistent profitability problems for productive capital. That said, the anticipated recession was greatly amplified by state-mandated (full or partial) lockdowns of many industries, government services and small businesses — seemingly desperate measures aimed at averting a health crisis on the scale of the Spanish Flu pandemic of 1918–19. The result was a level of global unemployment and economic contraction that almost certainly surpassed that of the Great Depression of the 1930s. The response of Western governments and central banks to these “combined” crises was to inject huge amounts of funds into financial markets and corporate bailouts to protect and expand the fabulous fortunes of the ultra-rich, while providing only meagre or token assistance to masses of working people facing unemployment, hunger, evictions, foreclosures and the interruption or termination of urgently needed health care. The self-isolation protocols and physical distancing rules that were authorized

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6  Twilight Capitalism to contain the sars-CoV-2 pandemic resulted in unprecedented levels of social atomization while inhibiting collective struggle by working people — above all, by impeding protests and strikes demanding pandemic-safe working conditions for those still toiling in what governments deemed to be “essential” industries. Importantly, however, what seemed to be crude but necessary measures for curbing the pandemic just happened to align with the agenda of capitalist governments to suppress any manifestation of protest or rebellion against their nakedly pro-corporate and anti-worker policies. And then … a flashpoint! In the midst of the pandemic, an exceedingly deep economic slump and the biggest wealth transfer to corporate and financial oligarchs in history, an unarmed Black American named George Floyd was wantonly asphyxiated by Minneapolis police on May 25. The release of a video recording of the horrific murder soon led to an eruption of massive, multiracial and largely spontaneous protests in thousands of cities and towns throughout the United States and around the world. This remarkable social-political uprising gave powerful expression to popular revulsion toward police brutality and entrenched, systemic racism, but also to widespread opposition to the powers that be in a world burdened by pervasive injustice, rising authoritarianism and militarism, burgeoning economic inequality, intensifying international conflicts and runaway ecological destruction. Two veteran Canadian socialists framed the rebellious sentiment well: No one yet knows how this story will end. In the era of pandemic, every social issue seems to bare its connective tissue to other social issues. Is it any wonder that young women of colour have emerged as the most articulate voices for change? Or that their mothers, who disproportionately risk their lives working in long-term care (ltc) facilities or hospitals, join their children on demonstrations, demanding personal protective equipment (ppe) and a living wage? Or [that] their fathers, compelled to work in “essential industries,” and who, as the demographics now show, have caught the covid virus at work, march beside them as well? (Doctorow and Kopyto 2020) Similar if more pointed observations were offered by a long-time American Marxist:

Pandemic, Slump and Uprising in the Twilight of Capitalism   7 People are starting to tie together the connected threads in the response to the pandemic, the economic crisis, and the ongoing racist police brutality. Protesters are demanding change to a system that is ruining their lives and assaulting their dignity. But what is that system? …While there is now wide and growing acknowledgement among the protesters that racial oppression is systemic, there are crucial differences in identifying the system. Conservatives and liberals focus on the system of “policing” and “criminal justice”; they propose some cosmetic reforms to restore “police-community relations.” Many other protesters identify the system as race-based white supremacy and focus on the horrific examples of ubiquitous racist culture …. For Marxist revolutionaries, however, the racist system that is at the root of the oppression of black people in the U.S. (and elsewhere) is class-based capitalism that generates and constantly reinforces structural racism and white-supremacist ideology, which both reflects and contributes to that structure. (Brover 2020) Taken together, the events comprising the social crisis of 2020 brought into sharp focus the brittleness — perhaps even the impermanence — of an exploitative, racist and oppressive order from which masses of people, especially the young, were already feeling increasingly alienated. What’s more, for growing numbers, this extraordinary historical moment heightened a dawning class consciousness that the dominant socio-economic system in today’s world — the capitalist profit system — is at the root of their alienation and can only lead humanity into an escalating series of catastrophes. Foremost among those looming catastrophes are the climate emergency and related ecological devastation as well as the drive toward a new world war by the United States — the faltering “sole superpower” of the twentyfirst-century world. The combined character of the 2020 crisis was a sharp reminder (as if one were really needed!) of the growing metabolic rift between the natural world, from which the coronavirus emerged, and the short-sighted, profit-driven capitalist order, whose operations contributed decisively to its introduction and spread in the “human world.” Equally worrisome, the pandemic/slump accentuated a deepening crisis in international relations stemming from the growing hubris, belligerence and declining “soft power” of the U.S. imperialist hegemon — but also, and far more fundamentally, from the glaring disorder of a global capitalist system shot through with intensifying antagonisms.

8  Twilight Capitalism At many levels, the events of 2020 served to confirm the general prognosis for twenty-first-century capitalism recently outlined in Invisible Leviathan: Marx’s Law of Value in the Twilight of Capitalism — a prognosis that informs much of what will follow in the present work and that has particular salience for understanding the social and geopolitical watershed we have now reached: Global capitalism, with humanity in tow, is now facing a triple crisis: 1) a deepening structural contradiction of the capitalist mode of production, one manifested as a multi-dimensional crisis of “valorization” — that is to say, a crisis in the production of “surplus-value,” the very lifeblood of the profit system; 2) an acute crisis in international relations stemming from the fact that the global productive forces are bursting the confines of the nation-state system, whose individual units continue to address their gravest problems in primarily “national” ways; and 3) a growing “metabolic rift” between human civilization and what Marx called the “natural conditions of production” — the ecological foundations of human sustainability. Together, these interrelated crises suggest that we have now entered a “twilight era” of capitalism — one in which humanity will either find the means to create a higher and more rational order of social and economic organization, or in which decaying capitalism will bring about the destruction of human civilization. (Smith 2019: 6–7) Signalled by the inspirational global youth uprising that began in May–June 2020, a further crisis of world capitalism should now be registered: a profound crisis of legitimacy of the political regimes of several of the Western imperialist states. A failure of leadership now afflicts the capitalist ruling class(es) no less than the oppressed and exploited working masses of the world. The ruling oligarchs seem at an impasse, with few tools at their disposal for containing the discontent apart from transparently hollow promises of reform, foul attempts to deflect attention from their own incompetent and criminal actions by vilifying foreign enemies, and savage repression (the latter two being the preferred options of the Trump regime). Although a pronounced shift to the left is apparent among the working masses and youth throughout the advanced capitalist world — and especially in the United States — the capitalist elites have nowhere shown

Pandemic, Slump and Uprising in the Twilight of Capitalism   9 much willingness to stray from the path of an increasingly authoritarian, intolerant and bellicose neoliberalism. More alarmingly, even as some signal virtuous opposition to “systemic racism” in a variety of largely symbolic ways, others display a determination to cultivate, directly or indirectly, the growth of far right and fascistic forces as reserve shock troops for the coming class battles they understand to be on the horizon. This latter trend is particularly advanced in the United States, Germany, France and Italy — all members of the G7 club of rich imperialist countries. Extreme right parties have already come to power in such putative democracies as Israel, India, Turkey, Poland, Ukraine and Hungary as well as in several Latin American nations. The United States could easily be added to this list, albeit with the qualification that America’s Democrat-Republican duopoly has long been a far-right phenomenon by international standards — the reputed “liberalism” of the Democratic wing resting almost entirely on a largely undeserved reputation for opposing racial and gender discrimination, in contrast to the shameless bigotry of the Republican wing. By the summer of 2020, what little remained of the democratic veneer of “advanced capitalism” seemed to be rapidly melting away. As masses of young people mobilized in the streets to demand a more authentically egalitarian and democratic society, a wave of wildcat strikes and job actions demanding safer working conditions gained momentum in hospitals, automobile plants, food-processing facilities and numerous other workplaces. According to Payday Report (Elk 2020), over eight hundred wildcat strikes broke out in the United States between March 1 and midJune — with more than five hundred coinciding with or inspired directly by the Black Lives Matter protests. The country that is home to one of the weakest organized labour movements in the developed world hadn’t seen such an impressive upsurge of working-class militancy in several decades — and perhaps never before an insurgency addressing so wide a range of social issues. A significant new phase of twilight capitalism has opened, one full of promise but also of peril. In such a context, it would be unwise to celebrate unreservedly the fact that the capitalist social and political order is in disarray and that its overlords are increasingly challenged by a new zeitgeist of popular rebellion. What’s more — and here we can paraphrase Marx again — it’s clearly not enough for activists to merely criticize the world in various ways; the point must be to change it. But how to do so?

10  Twilight Capitalism Through which agencies? And with what goals in mind? The inchoate youth and worker uprising of 2020 will dissipate and end up as little more than a target for rightist backlash if its most committed militants fail to recognize the need for a coherent and comprehensive program of change, one informed by a fully emancipatory vision but also by a scientific apprehension of the existential crisis facing all of humanity. Such recognition will require serious and patient assimilation of the scientific socialism of Marx, Engels and their most illustrious followers — a body of theory, revolutionary program and strategy that stands alone in adequately diagnosing the major ills of the contemporary world and in prescribing the way forward to an egalitarian, democratic and sustainable socialist future. In this spirit, this book is offered as a contribution to illuminating not only the relevance of Marxism but also its indispensability to all those seeking to change the world with a view to achieving the goals of human well-being, emancipation … and, above all, survival.

THE PANDEMIC AND THE SLUMP: AN OVERVIEW A central aspect of the social crisis of 2020 concerned the complex relationship between a unique biomedical-ecological phenomenon and the worsening economic malaise of twenty-first-century capitalism. In order to analyze this relationship, we need to recall some of the most significant facts about the origins and early course of the pandemic, as well as the responses it elicited — above all from those purporting to be “in charge.” • Between the beginning of January and the end of June, about 514,000 deaths were attributed to the new disease called Covid-19. This death toll represented about 5 percent of those officially confirmed to have been infected with a virus initially dubbed the novel coronavirus and later sars-CoV-2. The virus had a zoonotic origin, almost certainly involving bats native to the Chinese province of Hubei whose habitats have been subject to growing human incursion. • How the virus passed from bats to humans remains unknown, but it should be noted that assertions have been made, from a variety of quarters (including some scientific ones), that it may have undergone some deliberate modification in a virology laboratory (either in Wuhan, China, or elsewhere), enabling its transmission to humans. Widespread interest in such claims, despite

Pandemic, Slump and Uprising in the Twilight of Capitalism   11 the absence of conclusive supporting evidence, attested to the willingness of large numbers of people (from around the world and across the political spectrum) to believe that authoritative figures in government and in medical science are quite willing to pursue grossly irresponsible and even criminal activities that gravely endanger humanity. The latter notion is by no means a paranoid “conspiracy theory” as it is a well-established fact that “gain of function” research on dangerous viruses of potential use in biological warfare is being pursued by a number of Western countries (above all, the United States) as well as by China and Russia. • Without the extraordinary initial public health measures carried out by governments, the death toll from the pandemic could easily have been much greater than it was. However, a strong case can also be made that if governments and health-care systems worldwide had been better prepared for the pandemic — an event long predicted by epidemiologists and virologists — many more lives could have been saved and some of the most economically damaging measures carried out in response to it avoided. • In the United States, the country with the most deaths, about 80 percent of those who died from (or with) Covid-19 were over age sixty-five. This compares to the 78 percent of deaths from “internal causes” involving those over sixty-five in 2018. Almost from the beginning of the pandemic, it was well established that a great majority of adults below the age of sixty-five, as well as children and adolescents, were at very low risk of developing anything more than relatively mild flu-like symptoms. This fact starkly distinguished the coronavirus pandemic from the H1N1 influenza pandemic of 1918–19, in which most deaths involved people between the ages of twenty and forty. The global death toll from the latter pandemic is estimated to have been between 50 and 100 million people, with considerably more dying during its second wave than its first. • By late February, news about the developing pandemic dominated corporate mass media outlets around the world. As the virus spread globally and as Covid-19 showed an ability to overwhelm hospital capacities in some major metropolitan centres (notably in Tehran, Northern Italy, Madrid and New York City), medical

12  Twilight Capitalism professionals and mainstream journalists led a concerted effort to rally popular support for a number of specific recommendations of the World Health Organization (who) to contain the pandemic. These included a “test and contact trace” strategy to rapidly identify those infected, the quarantining of confirmed cases, a public education campaign to promote hygienic practices like handwashing (and later face masking) and the adoption of policies aimed at encouraging or requiring physical distancing among the general public. • The pandemic’s mounting caseload and death toll (which reached over half a million by June 30) were assiduously reported to the public on a daily basis by the corporate mass media. This contributed to widespread awareness of the seriousness of the health emergency as well as to a climate of fear and compliance to authority. Meanwhile, in the first half of 2020, about six million people died from other communicable diseases, including 243,000 from seasonal influenza, 488,000 from malaria and 838,000 from hiv/aids (as reported by Worldometer.org, June 30, 2020). In addition, about 5,575,000 people died of hunger and 535,000 from suicide. These comparative global statistics, which mainly concern deaths occurring in the Global South, went largely unmentioned by the mass media and undiscussed by politicians and public health officials in the Global North. They no doubt remain largely unknown to most members of the public in the “Western democracies.” • In response to the apparent overloading of health care systems in places hardest hit by the pandemic, many governments throughout the world, including most jurisdictions in the Global North, ordered complete or partial closures of large segments of their economies as well as their borders. Targeted sectors included “non-essential” manufacturing, construction and retail; airlines; personal services; restaurant and hospitality industries; tourism; the arts and entertainment industries; and sporting venues and events. Together these measures had the effect of “flattening the curve” of the pandemic while also severely disrupting the normal operations of businesses, governments and markets worldwide. • The early and quite effective measures taken in the Chinese province of Hubei to restrict travel, enforce physical distancing and

Pandemic, Slump and Uprising in the Twilight of Capitalism   13 Table 1-1 The Impact of the Pandemic: January to July, 2020 Total Confirmed Cases

Confirmed Cases per Million

Total Deaths

Deaths per Million

Excess Deaths

U.S.

3,431,744

9,985

136,699

409

149,200

Brazil

1,921,824

8,773

74,133

354

54,700

U.K.

292,931

4,266

45,138

678

65,700

Germany

200,734

2,375

9,079

110

9,800

Canada

114,000

3,000

9,000

237

n.a.

South Korea

13,551

263

289

5.6

n.a.

China

85,226

59.1

4,642

3.3

n.a.

Cuba

2,432

214

87

7.7

n.a.

381

3.8

0

0

n.a.

1,547

248

22

5

n.a.

Vietnam New Zealand

Figures compiled by Alfredo Saad-Filho , with additions and minor adjustments by the authors. Sources: Johns Hopkins University 2020; (July 13 and July 23, 2020).

lock down much of its economy (measures initially described in the West as draconian and authoritarian) were replicated, albeit only partially and with varying degrees of success, in other parts of East Asia, South Asia, Australasia, continental Europe, Canada, and (more belatedly) the United Kingdom and the United States. • It is significant that countries under the rule of nominally communist governments (often with well-developed central planning capabilities) managed to contain the pandemic far more successfully than the great majority of capitalist countries. By mid-July, Covid-19 related deaths per million stood at 3.3 in China, 7.7 in Cuba, and 0 in both Vietnam and Laos. These figures bear comparison to those for the United Kingdom (678), the United States (409), Canada (237), Germany (110) and Brazil (354). In the capitalist world, only a few countries, notably New Zealand (4.7), South Korea (5.6) and Taiwan (0.3) performed as well as China, Cuba, Vietnam and Laos. (Most figures here are taken from Table 1-1.) Citing no concrete evidence and appealing to long-established anti-communist prejudices, many Western leaders and journalists sought to cast doubt on the veracity of the officially reported figures emanating from China in particular,

14  Twilight Capitalism even as they generally treated the official statistics for their own countries as unimpeachable. • With the exception of several East Asian and Southeast Asian nations, along with Cuba, most countries were slow to implement the who’s cardinal recommendation to establish extensive testing and contact-tracing regimes. Most were also equally remiss in their efforts to identify and protect those segments of the population most vulnerable to Covid-19, particularly elderly and/or disabled people living in long-term care (ltc) facilities and retirement residences. It’s now well known that a great many of those who succumbed to Covid-19 could have avoided infection had they been properly and humanely quarantined in the early stages of the pandemic. Certainly, the cost of such a policy to governments would have been far less than the gargantuan financial donations made to capitalist interests by way of compensation for the lockdowns. • In early June, Chris Hedges (2020) provided the following summary of where such “donations” went in the United States: The [Coronavirus Aid, Relief, and Economic Security] cares Act handed trillions in funds or tax breaks to oil companies, the airline industry, which alone got $50 billion in stimulus money, the cruise ship industry, a $170 billion windfall for the real estate industry, private equity firms, lobbying groups, whose political action committees have given $191 million in campaign contributions to politicians in the last two decades, the meat industry and corporations that have moved offshore to avoid U.S. taxes. The act allowed the largest corporations to gobble up money that was supposed to go to keep small businesses solvent to pay workers. It gave 80 percent of tax breaks under the stimulus package to millionaires and allowed the wealthiest to get stimulus checks that average $1.7 million. The cares Act also authorized $454 billion for the Treasury Department’s Exchange Stabilization Fund, a massive slush fund doled out by Trump cronies to corporations that, when leveraged 10 to 1, can be used to create a staggering $4.5 trillion in assets. The act authorized the [Federal Reserve] to give $1.5 trillion in loans to Wall Street, which no one expects will ever be paid back.

Pandemic, Slump and Uprising in the Twilight of Capitalism   15 • On June 17, Pete Dolack (2020) rounded out the picture of corporate and finance-industry “compensation” as this was happening internationally: The Bank of England has committed £200 billion to quantitative easing (bond buying), £330 billion in loan guarantees for business and an unspecified amount for “short-term liquidity” for the government, among other measures. Separately, Whitehall has committed tens of billions of pounds to three separate loan programs, property tax holidays, direct grants for small firms, grants for “innovation” and other items. For working people? A total of £14.7 billion of additional funding to the National Health Service and £7 billion for increased payments under the Universal Credit scheme and other benefits…. Similar to the United States and United Kingdom, the bulk of money committed by the European Union to shore up the economy during the Covid-19 pandemic is for quantitative easing. The EU has committed to pouring €1.35 trillion into buying private- and public-sector securities by June 2021 under its Pandemic Emergency Purchase Program. The EU will also offer a €540 billion addition to its European Stability Mechanism, an International Monetary Fund-style loan program under which money is loaned to governments under condition that recipients implement severe austerity.… And on top of the above, the EU has thrown in another €200 billion for businesses. For working people, nothing more than relative crumbs: €37 billion “to support public investment for hospitals, [small businesses], labor markets, and stressed regions” and €100 billion to protect workers and jobs…. Canada has announced multiple programs, including quantitative easing. The Bank of Canada has implemented several QE programs for buying corporate bonds, federal and provincial government bonds, mortgage bonds and commercial paper (short-term debt issued by corporations), as well as programs to provide credit and “support the stability of the Canadian financial system.” The Bank of Canada is not forthcoming about the total cost of these programs; it

16  Twilight Capitalism has committed to spending C$5.5 billion per week, with no cutoff date, on just two programs, the purchases of federal government bonds and mortgage bonds. A measure of what has been spent so far is indicated in the central bank’s balance sheet, which reveals that total assets held by it increased from $120 billion on March 11 to $498 billion on June 11. So that’s $378 billion with more to come. What is Canada spending on working people? $116 billion for “direct aid to households and firms” and $4 billion for the health system. So, a lot less, and even some of this much smaller amount will be going to businesses. • Under tremendous pressure from the medical profession, public health authorities and major segments of the corporate mass media, most Western governments moved by late March — often in reluctant, inconsistent and tokenistic ways — to carry out some of the who’s principal directives. However, following the state-mandated transfers of trillions of dollars to banks, financial markets and major corporations, the (partial) lockdowns began to be lifted. Suggesting a conflict between saving lives and saving the economy, U.S. president Donald Trump declared on May 23 that “we cannot let the cure be worse than the problem itself.” Although denounced by many, this outlook was eagerly embraced in the weeks that followed by business owners and influential voices in the “mainstream” media, as well as by many working people who saw themselves facing a no-win choice between possible exposure to the virus or loss of income, housing and employment-based benefits. Despite ongoing warnings from public health officials and epidemiologists that the pandemic was far from over, as well as much apprehension and anger over the risks being imposed on returning workers, reopening proceeded in most of the “developed” economies throughout June. • By late June, a “herd immunity strategy” — openly entertained by Boris Johnson and Donald Trump when the pandemic first hit the United Kingdom and the United States in February and March but opposed by most health authorities — had acquired a respectability and following that had eluded it prior to the mammoth wealth transfer to the rich. This essentially “survival of the fittest” approach amounted to allowing the virus to infect and

Pandemic, Slump and Uprising in the Twilight of Capitalism   17 thereby “immunize” (or kill) over 70 percent of the global population well in advance of the discovery of effective treatments or protective vaccines. Behind closed doors, bean counters in elite policy circles had argued from the outset that such a “strategy” would not only spare the economy undue disruption but would also yield significant fiscal benefits to capitalist states by reducing the size of unproductive “surplus populations” (Roberts 2020a; Scripps 2020). • By mid-year, the full impact of the pandemic on the Global South (particularly South Asia, the Middle East, Africa and Latin America) still remained unclear due to extremely limited testing capacities, data collection problems and lack of access to basic health care for hundreds of millions of people living in often wretched conditions. Nevertheless, according to many experts, a global herd immunity policy could easily have resulted in ten million deaths, most in the Global South. By mid-July, the most developed African country, South Africa, was reporting the fifth largest national caseload in the world (almost 400,000), with Peru, Mexico and Chile following closely behind. • By summer, some Western jurisdictions (especially the United States) were experiencing an alarming resurgence of the pandemic. Brazil became the second country after the United States to report more than one million confirmed cases and fifty thousand Covid-19 deaths. It remained to be seen whether Western governments would change course and fully commit (or in some cases, revert) to the sort of lethal herd immunity policy that the far-right Brazilian president Jair Bolsonaro had embraced. It was clear, however, that to do so would directly contravene the major recommendations of the World Health Organization. • As early as March 9, the who’s director-general, Dr. Tedros Ghebreyesus, had criticized the stated policy of the British government and the implicit policy of the Trump administration and some other Western governments to allow the virus to broadly infect their populations — and thereby generate herd immunity. Referring obliquely to the efforts of those governments to rationalize their circumvention of who directives on the grounds that Covid-19 was life threatening mainly to elderly people, Tedros stated: “If anything is going to hurt the world, it’s a moral decay.

18  Twilight Capitalism And not taking the death of the elderly or the senior citizens as a serious issue is one of the moral decays.… Any individual, whatever age, any human being, matters. And it pains us to see, actually, in some places, when they want to move into mitigation, because the virus kills seniors or older people only” (who 2020). Bending for a short time to mounting pressures to implement who policy, Trump went on to announce in mid-April that the United States would terminate its funding of the who and denounced the organization as a pawn of the Chinese state. • From the earliest stages of the pandemic, it was clear that most Western governments were uninterested in a coordinated international response to the health emergency and the resulting economic devastation. The United States, consistent with Trump’s ultra-nationalist “America First” policy, made several efforts throughout the year to corner the global market for face masks, ventilators, antibody tests, and potential treatments and vaccines. Implicitly at least, “God Bless America and No Place Else” became America’s new watchword.1 • By mid-April, the who was coming under fire from leading politicians in the United States, the United Kingdom and Canada who had delayed the implementation of the international body’s comparatively timely recommendations for containing the pandemic, but who then found it expedient to blame both the who and the Chinese government for the high Covid-19 death tolls in their own countries.2 Donald Trump and other far-right politicians in a number of Western nations accused the “Chinese Communists” of possibly engineering and then releasing the sars-CoV-2 virus from a high-security virology laboratory in Wuhan (either by accident or with malign intent) — a claim roundly dismissed on scientific grounds by most infectious disease experts. Some members of the U.S. Congress went so far as to demand economic “reparations” from the Chinese, while others called for imposing harsh economic sanctions on China — and Russia as well, for good measure! More centrist politicians in the Five Eyes alliance of Western states — typified by the “woke” neoliberal Canadian prime minister, Justin Trudeau — avoided some of the more extreme right-wing rhetoric of U.S. politicians (including Democratic presidential candidate Joe Biden), U.K. Conservatives and Canadian Tories, while nevertheless allowing

Pandemic, Slump and Uprising in the Twilight of Capitalism   19 the (still obscure) etiology of the virus — and the related rise in the West of anti-Chinese xenophobia, racism and anti-communism — to bolster their governments’ none-too-concealed efforts to prepare public opinion for war with China. • As Covid-19 descended on Iran, Yemen, Venezuela and Syria, desperately needed medical supplies were cruelly denied to their peoples in a manner that can only be described as genocidal. None of the major imperialist countries or their junior partners voiced any serious opposition to the continuing determination of the U.S. government to maintain inhumanly onerous trade sanctions and embargoes on countries it had targeted for regime change. • Geopolitical conflicts aside, the competitive race of corporations and national governments to corner the market for reliable Covid-19 tests, treatments and vaccines constituted another huge obstacle to a speedy and effective response to the pandemic on a world scale. Despite the who’s efforts to encourage a coordinated international research effort, and the declaration of China that it would immediately and freely share with the rest of the world any effective treatment or vaccine it developed (note: as early as January 11–12, the Chinese had already made public the full gene sequence of the sars CoV-2 genome), most Western governments focused single-mindedly on the purely national ramifications of the health emergency. Meanwhile, Western pharmaceutical corporations, resistant to any meaningful research cooperation, pursued monopoly patents on what they hoped would be hugely profitable weapons in a global war on Covid-19. Far from facilitating the expeditious discovery of effective tests, treatments and vaccines, the capitalist profit motive greatly impeded that effort, costing countless lives. This compendium of facts and observations about the pandemic and the responses it provoked raises many important questions, not all of which can be explored here. But one thing should be abundantly clear: the sordid story they tell exposes an urgent need to undertake what the young Karl Marx called the “ruthless criticism of all that exists.”

20  Twilight Capitalism

EXPLAINING THE SOCIAL CRISIS OF 2020 How exactly should we view the 2020 crisis? With few exceptions, the answer of the corporate mass media, the professional-managerial class(es), the political elites and most economists is remarkably uniform. For these defenders of the existing order, the crisis represented a kind of natural disaster that governments were obliged to respond to by shutting down much of the world economy and commanding masses of people to practise physical distancing to the greatest extent possible. Once their national or regional pandemic curves were flattened, so the story goes, governments in most jurisdictions then took the sensible step of gradually reopening their economies and public spaces, even though effective treatments and/ or vaccines remained elusive. According to this narrative, mistakes were certainly made by health authorities, politicians and business leaders alike, but most acted in good faith and did their best to contain the pandemic while trying to responsibly balance the competing imperatives of saving lives and saving livelihoods. Right-wing leaders who deviated from this basic script — Trump in the United States and Johnson in the United Kingdom, as well as Bolsonaro in Brazil and Modi in India — were condemned for their failure to pay heed to the advice of leading health authorities like Dr. Anthony Fauci and the who, and more generally for their cavalier dismissal of the weight of scientific opinion concerning what needed to be done. And yet, while descriptively true, this narrative is entirely inadequate as an explanation of the social crisis of 2020 — not to mention slavishly deferential to the powers that be. Consistent with most conventional accounts of humanity’s problems, it highlights what is understood to be a natural phenomenon (the sudden and “mysterious” emergence of an unusually infectious and stealthy virus) along with the conscious decisions and actions of individuals (health professionals, politicians, business leaders and mass media journalists) in reaction to it, while minimizing the decisive role played by powerful social forces in instigating, exploiting and determining both the shape and the magnitude of the crisis. Against this superficial and deliberately simplistic approach, an adequate scientific explanation of the crisis must acknowledge the need for a serious critique of the social conditions that allowed the virus to emerge and the pandemic to develop in the way that it did. For just as the Covid-19 health emergency gave a definite shape and depth to the economic downturn into which the world economy was already heading

Pandemic, Slump and Uprising in the Twilight of Capitalism   21 in 2020, the fundamentally antagonistic and invidious social relations that define capitalism contributed decisively to the origins, course and consequences of the pandemic. There is much to unpack here, but a good place to start is with some well-established ideas as to how social and economic factors can have a decisive bearing on population health.

Social Morbidities Underlying the Pandemic

According to medical authorities and epidemiologists, the significant novel coronavirus death toll (or “excess deaths” relative to average mortality counts in recent years) was abetted by the presence within specific populations of such “comorbidities” or “underlying conditions” as lung disease, impaired immunity, cardiovascular disease, diabetes, hypertension and cancer. This is a perfectly reasonable and important observation, but it is also one that should call forth two questions that are seldom broached in mainstream accounts of the crisis. First, what explains the prevalence of these comorbidities in the “rich” countries that were hardest hit by the pandemic — particularly the United States and the United Kingdom? Second, are individual, medically diagnosable morbidities the only “underlying conditions” that need to be considered as we try to understand the roots of the pandemic, its uneven spread and the global economic contraction that it triggered? To answer these questions adequately, considerable attention needs to be given to the social determinants of illness. For our purposes, the social determinants of illness refer to the socio-economic conditions and contexts in which unhealthy individual behaviours develop and threats to the health and well-being of whole populations can emerge. Factoring in the many determinants of population health enumerated by the who and academic specialists in public health policy,3 the following social issues can be identified as major contributors to the prevalence of human morbidities in general (defined as illnesses or disabilities constituting a departure from some “normal state”) and more specifically to the conditions that propelled the spread of the coronavirus: • persistent poverty in the midst of abundant wealth; rising income and wealth disparities • unequal and inadequate access to appropriate medical care, affordable health insurance and quality long-term care for the elderly and the disabled

22  Twilight Capitalism • systemic racial oppression and racist ideas that serve to divide poor and working people against one another, to justify social distress and to rationalize inequalities as “natural” and “inevitable” phenomena • scarcity of nutritious food and/or the prevalence of unhealthy dietary practices, resulting in obesity • inadequate investment in public health care and education • decaying or inadequate social infrastructures (e.g., hospitals, community clinics, long-term care facilities and intensive care units) • absence or decay of physical infrastructure (above all, clean water and sewage systems) • unhealthy urban environments (including dilapidated and vermin-infested housing, a dearth of fresh food markets and scarcity of green spaces and public recreation areas) • workplaces that impose debilitating physical and mental stresses on workers • commercial interests and cultural forces that encourage harmful drug use and addiction • weak “social connectivity,” which can render individuals vulnerable to isolation and unable to access the social supports needed to maintain physical and mental health • political governance oriented toward maximizing corporate profits rather than promoting the health and well-being of working people (for example, the fateful decisions of the U.S. and U.K. governments in February and March of 2020 to prioritize the continued upward movement of stock markets over the need to act swiftly to curb the spread of the coronavirus through extensive testing and tracing) • nation-state conflicts that impede genuine international cooperation in tackling global problems, which can eventually lead to shooting wars (that most destructive of all contributors to social morbidities) • the ruinous relationship that exists between the relentless process of capital accumulation and the natural ecosystems upon which humanity depends, including, among other things, reckless corporate encroachment on natural habitats that are home to dangerous pathogens like the sars family of coronaviruses (Wallace 2016; Mavroudeas 2020b)

Pandemic, Slump and Uprising in the Twilight of Capitalism   23 • And finally, the profit-oriented and often grotesquely skewed priorities of corporate pharmaceutical research. It should be obvious that these underlying “social morbidities” made the task of defeating the Covid-19 scourge much harder than it needed to be. What is perhaps not so obvious is that, throughout the capitalist era, wealthy ruling elites (despite their much-touted philanthropy) have almost always opposed the allocation of sufficient material resources to “public goods” and social services that is clearly necessary to improve population health — and thereby prevent or contain pandemics. Only when the consequences of poor population health endanger the privileged elites themselves do they feel compelled, on rare occasion, to sacrifice even a small part of what they regard as their “rightful share” of national income to provide for the common good. What’s more, research investments made by large pharmaceutical corporations in new drugs and medicines regularly fail to target some of the worst risks to human health and well-being. Writing during the early days of the 2020 pandemic on “Big Pharma’s abdication of the research and development of new antibiotics and antivirals,” American socialist Mike Davis (2020) observed: Of the 18 largest pharmaceutical companies, 15 have totally abandoned the field. Heart medicines, addictive tranquilizers and treatments for male impotence are profit leaders, not the defenses against hospital infections, emergent diseases and traditional tropical killers. A universal vaccine for influenza — that is to say, a vaccine that targets the immutable parts of the virus’s surface proteins — has been a possibility for decades but never profitable enough to be a priority. In fact, it was only after the outbreak of the sars-CoV-2 pandemic that major pharmaceutical companies began their competitive race to develop a vaccine to combat the sars family of viruses. Tellingly, corporate research on sars-CoV-1 — initiated for a brief period after the successful containment of its outbreak in 2003 — was halted because it was deemed unprofitable (Davis 2020; Wallace 2016). In light of the sars emergency of 2003, as well as outbreaks of other “novel” viruses in recent decades (such as mers and Ebola), scientists and public health officials had long warned that a pandemic of potentially catastrophic proportions was all but inevitable and therefore that it was

24  Twilight Capitalism vitally necessary to develop a range of new prevention and treatment capacities — from anti-viral drugs and vaccines to abundant inventories of personal protective equipment for front-line health workers, to many more hospital beds and well-equipped intensive care units. Under relentless pressure from “the private sector” (read: the capitalist class), most Western governments ignored these warnings and persisted with neoliberal policies that worsened most of the social morbidities cited previously even as the pandemic loomed. To bring out these points more fully, it’s important to distinguish between the novel coronavirus (sars-CoV-2) and the disease (Covid-19) that it produces in some individuals. As is well known, the great majority of those infected (probably at least 90 percent) remain largely asymptomatic or experience only mild symptoms. However, severely debilitating and even life-threatening conditions (such as viral pneumonia, cytokine storms and blood clotting) develop within an especially vulnerable and largely elderly minority. While the medical comorbidities afflicting individuals experiencing the worst cases of Covid-19 can be identified with some precision, what needs to be stressed is that the long-standing, specifically social morbidities that we have identified combine with the coronavirus to maximize its spread and heighten its lethality. Moreover, many of those social morbidities (such as poor diet) contribute significantly to the prevalence of underlying health problems (such as cardiovascular disease and diabetes) that make some populations particularly susceptible to Covid-19. At the same time, the very existence of these morbid social conditions must themselves be explained — and yet this is done altogether inadequately by academic researchers (as well as agencies like the who) who stop short of critiquing the larger socio-economic system responsible for them. We must ask: Why is there a pronounced trend toward greater social inequality? Why is private profit systematically prioritized over the satisfaction of human needs? Why is so much spent on military budgets when so much more needs to be spent by governments on health care? Why is a growing rift, indeed a disastrous disharmony, developing between human society and the natural world? And why, despite the many great advances that have been made by the natural sciences over the past century, has there been such a conspicuous lack of progress in creating a more harmonious, cooperative, prosperous and ecologically sustainable social order for all of humanity?

Pandemic, Slump and Uprising in the Twilight of Capitalism   25 These are among the most important questions that need to be explored in connection with the social crisis of 2020. In our view, they can only be answered adequately through a critical, scientific analysis of contemporary capitalism — a mode of production and social system whose contradictions, crisis tendencies and fundamental irrationality have become increasingly apparent.

Capitalist Profit versus Social Need

There is a plague that every day kills 25,000 people or more — and it has done so for many decades. It’s called “starvation.” There is a condition that every day kills about 25,000 more. It’s called “inability to access care for easily preventable and treatable diseases” (Kruk et al. 2018: 2203–12). There are violent conflicts that every year produce huge numbers of refugees and that claim hundreds of thousands of lives. They are called “wars” — and they are most often instigated by predatory “great powers” that seek to profit from them. These scourges have a common origin, and it is by no means a natural one. They originate in the greed, social inequalities, antagonisms and misery bred by the global capitalist system. Capitalism kills tens of millions of people every year — millions whose lives are cut short by the operations of a system that always has and always will prioritize the wealth, the privileges and the profits of those who own the world’s major economic assets over the most basic needs of those who must labour for a living. The potential loss of tens of millions of human lives due to the Covid19 plague is certainly a grave danger, but such a catastrophic death toll is by no means inevitable. Humanity has the scientific knowledge and the resources to prevent such an outcome. And yet the same can be said for many other, easily preventable deaths resulting from the pathologies of capitalism. Over the past thirty years — since the much-celebrated “triumph of capitalism” over Soviet Communism — more than one billion human lives have been sacrificed on the altar of capitalist profit making. Profit is the holy grail of the global capitalist system. The imperative to maintain the profitability of capitalist-owned industries, financial and commercial enterprises, and transportation and communication utilities overrides all other considerations. This is barbarism! So why aren’t governments, the mass media and the medical profession calling for immediate action to stop the capitalist scourge in its tracks? Why aren’t their members keeping close track of its

26  Twilight Capitalism death toll and enlightening the public about this daily? The simple reason, of course, is that most of them are invested in its continuation — indeed, in its expansion. The capitalist class, establishment politicians, journalistpropagandists, mainstream academics — and, yes, the leading lights of the medical profession as well — have long shown their willingness to sacrifice tens of millions to starvation, disease and war so that the capitalist profit system can flourish on a global scale. In light of all this, an obvious question presents itself: Why did these powerful social forces and actors react to the sars-CoV-2 pandemic in ways that seemed to do so much harm to the machinery of profit making in the developed capitalist countries of the Global North? The answer to this question is by no means simple, but some of its elements can be gleaned from what has already been said about the actual history of the combined crises of 2020. First, the coronavirus pandemic was not confined to the poorest nations of the Global South — that is, to people with black or brown skin who die in such large numbers from malaria and other “tropical” diseases. On the contrary, it seemed clear from the outset that the pandemic’s biggest impact, at least initially, would be on comparatively rich countries with large elderly and white populations. The nationality and race (if not the age) of so many of its chief victims were important considerations in forcing the powers that be to accept that they had a “serious” health emergency on their hands and to commit to fighting it (at least for a time) in extraordinary and economically disruptive ways. Second, even the most reactionary capitalist politicians like Trump and Johnson realized that they would be up against serious opposition if they acted aggressively on their initial Social Darwinist-cum-Malthusian impulse to “let the virus run its course.” They obviously would have faced opposition from the families of elderly residents of nursing homes and disabled residents of other long-term care facilities. More importantly, however, strong resistance would also have emanated from the most revered professions within Western societies: the health care professions. One need only recall how shocked medical professionals were in the early days of the pandemic about the numbers of doctors, nurses and other medics who were falling ill — and sometimes dying — from Covid-19 as seemingly overwhelming numbers of patients flooded ill-equipped hospitals in Milan, Madrid and New York City. The imperative to flatten the curve — by any means necessary — was above all an imperative to

Pandemic, Slump and Uprising in the Twilight of Capitalism   27 save hospital, intensive care unit and ambulance personnel from becoming victims of the pandemic themselves. Third, large segments of the labour force were able to carry on with their work under the social-distancing regime in spite of the lockdown, which in fact was never anything more than a partial lockdown. Relying on the latest internet technologies, many professionals, teachers, civil servants, bank and commercial workers, and some small business owners were able to work quite effectively online from home. Indeed, this turned into a veritable social experiment, confirming in the minds of many employers that this mode of working could even enhance employee productivity, not to mention reduce their operating costs. At the same time, many “essential” firms (such as food processing, drug manufacturers and breweries) were exempted from the lockdown from the outset, as were most food and pharmaceutical retail outlets. Of course, a great many workers contracted the virus and not a few perished. The economic damage was extensive, but it was largely confined to smaller businesses as well as the airline industry, tourism and hospitality sectors. By late spring or early summer, however, virtually all manufacturing and construction activity had been fully restored in the major capitalist economies, although not without controversy and amid fears that a serious “second wave” of the pandemic could return them to lockdown. Fourth, while the mass of profits generated through specifically productive activity in the global economy as a whole fell significantly during the first half of 2020, the windfall resulting from central bank and government bailouts of financial markets and corporations allowed the upper tiers of the capitalist class to see major gains in their portfolios and personal fortunes. On June 18, the Institute for Policy Studies reported that, over the previous three months, the five richest U.S. billionaires (Bezos, Gates, Zuckerberg, Buffett and Ellison) had seen an increase in their combined wealth of over $101.7 billion, or 26 percent, and that this gain represented 17.4 percent of the total wealth growth of America’s 643 billionaires, who by then controlled $3.5 trillion in wealth.4 In the same three-month period, over 45.5 million people filed for unemployment in the United States. To add insult to injury, all of this occurred in the wake of the disappearance of $6 trillion of “household wealth” during the first three months of the year (Collins 2020). What is crucially important to emphasize is that the wave of bankruptcies of less profitable firms opened up opportunities for the bigger

28  Twilight Capitalism players to acquire valuable assets at bargain prices, while the creation of a much-enlarged “reserve army of labour” (pool of the unemployed) made the labour market even more of a “buyer’s market” than it had been before. From the point of view of big capital, workers’ wages and benefits could now be forced down with the disingenuous excuse that “the virus did it!” — a useful supplement to the usual capitalist refrain: “If you’re not happy with your job, there are many willing to take your place.” All of this augured well for restoring profitability in the longer term to Western capitalist economies that had been facing myriad problems at the beginning of 2020. Taken together, these considerations point to the conclusion that, although the pandemic may have initially caught them off guard, capitalist economic and political elites were soon able to turn it to their advantage. Indeed, by sacrificing certain economic sectors and smaller businesses to ruinous lockdowns, while loudly proclaiming “we’re all in this together,” they were able to preserve a semblance of undeserved legitimacy in the eyes of many even as they massively augmented their own wealth and power. In this connection, the following question is worth pondering. Given that a severe financial crisis and economic contraction was already in the making by late 2019, would it have been possible, in the absence of the Covid-19 health emergency, to have sold the public on the need for an enormous infusion of funds from central banks and governments into banks, corporations and stock markets? We think the answer is plainly no. A simple repeat of the highly unpopular bailouts of 2008–09 would have been met with immense popular outrage. From the point of view of certain powerful elite interests, then, the pandemic might well have been a strangely welcome development, even a “blessing in disguise.”

SOCIAL MORBIDITIES AND CAPITALIST PRODUCTION RELATIONS As suggested earlier, the mainstream narrative about the 2020 crisis obscures the fact that prevailing social relations are at the root of many of humanity’s most fundamental problems. These specifically socialrelational “underlying conditions” find expression in entrenched social structures and institutions that are by no means natural but rather sociohistorically constructed — and very often resistant to meeting the most basic needs of multitudes of human beings. Such conditions are many and varied, but in today’s predominantly capitalist world, they clearly include

Pandemic, Slump and Uprising in the Twilight of Capitalism   29 socio-economic relations having to do with inter-capitalist competition and the laws governing market exchange — phenomena that are not only recognized but officially celebrated within capitalist societies. What is never acknowledged in mainstream discourses, however, is capitalist society’s crowning (“corona”) relation: the exploitative relation that exists between capital and wage labour. Far from being a mere aberration in an otherwise fair and rational economic order, exploitation is actually intrinsic to the capitalist mode of production and central to its increasingly irrational developmental logic. The phenomenon of systematic exploitation of wage labour by capital is the indispensable key to unravelling the “saving lives versus saving livelihoods” dilemma posed by the Covid-19 pandemic. Without the presence of this social morbidity — which demands the subordination of human needs to the profit requirements of capital — the novel coronavirus could not have brought about the social and economic crisis of 2020 in the particularly devastating ways that it did. For any society to precipitously discharge major parts of its workforce from the production and delivery of needed goods and services, and from the performance of many other socially necessary tasks, is obviously to invite dire results for masses of people. But in capitalist society, such an event must assume special forms determined by its historically unique features, imperatives and socio-economic laws. Under capitalism, workers (the proletariat) depend upon the sale of their labour power to secure their basic means of subsistence. At the same time, capitalists (the bourgeoisie) depend upon the appropriation of the surplus labour performed by their workers to obtain the profit that enables them to compete with other capitalists, accumulate additional capital and reproduce the conditions of their dominance as a social class. These points were illuminated brilliantly by Marx in writings devoted to defending his labour theory of value and his account of capitalist exploitation. Here are a few relevant passages: Every child knows that a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs require different and quantitatively determined masses of the total labour of society. That this necessity of the distribution of social labour in definite proportions cannot possibly be done away with by a particular form of social production but

30  Twilight Capitalism can only change the mode of its appearance, is self-evident. No natural law can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. (Marx [1865] 1965: 209, emphases in original) The specific economic form in which unpaid surplus labour is pumped out of the direct producers determines the relationship of domination and servitude, as it grows directly out of production itself and reacts back on it in turn as a determinant. On this is based the entire configuration of the economic community arising from the actual relations of production, and hence also its specific political form. (Marx 1981b: 927) In his short work Value, Price and Profit, Marx explained that the working day of the wage earner under capitalism is effectively (though not formally) divided into two components: a period during which the labour needed to “replace” the value represented in the wage is performed and a period during which surplus labour is performed and surplus value is created: By paying the daily or weekly value of the [worker’s] labouring power, the capitalist has acquired the right of using that labouring power during the whole day or week. He will, therefore, make him work daily, say, twelve hours. Over and above the six hours required to replace his wages, or the value of his labouring power, he will, therefore, have to work six other hours, which I shall call hours of surplus-labour, which surplus-labour will realise itself in a surplus-value and a surplus-produce…. The rate of surplusvalue, all other circumstances remaining the same, will depend on the proportion between that part of the working necessary to reproduce the value of the labour-power and the surplus-time or surplus-labour performed for the capitalist. (Marx, in Sayer 1989: 71) All human communities depend upon labour to meet their needs, and all must develop mechanisms for the distribution of social labour to a plethora of economically vital tasks. Furthermore, as societies divide up into distinct social classes, the cooperative distribution of social labour necessarily assumes an antagonistic form, with the direct producers and the appropriators of surplus labour pursuing opposed interests. That said,

Pandemic, Slump and Uprising in the Twilight of Capitalism   31 not every social order devised by humans has been so decisively geared as capitalism toward producing for the purpose of market exchange and the acquisition of money profit. What distinguishes capitalism is that the production of commodities (defined as products of labour destined for sale on a market) becomes a generalized phenomenon. This doesn’t mean that every product, effect or result of human labour is marketed; however, it does mean that the great majority are, that commodities become by far the most economically significant products of human labour, and, most crucially, that labour power itself (the capacity to work) becomes a commodity that is regularly bought and sold in the sphere of market exchange. Only under these conditions can the socio-economic life process come to be dominated by a specifically capitalist “law of value” — a law that requires the measurement, however unconsciously, of all commodities (wealth) destined for the market in terms of “abstract social labour,” the necessary form of appearance of which is money. Under conditions of generalized, capitalist commodity production and exchange, the direct producers are separated from ownership and control of the major means of production, which are the private property of the capitalists. The bourgeoisie’s class monopoly of ownership of factories, mines, mills and land — indeed, of all the major economic assets of society — empowers it to systematically exploit the working class: to extract the surplus labour that generates surplus value and therefore all the major forms of capitalist profit and income. This is not a natural state of affairs, even if it is the normal one under capitalism. What all this suggests, however, is that the phenomena of cooperation and division of labour that are to be found in all human societies — and which spring from a natural law that requires “the distribution of social labour in definite proportions” — assumes an especially antagonistic and anti-egalitarian form in a society geared toward dog-eat-dog competition and the systematic exploitation of a class of direct producers by a class of big property owners. In such a context, it should be obvious that one of the more popular aphorisms of the 2020 crisis — “we’re all in this together” — constitutes a particularly absurd and outrageous falsehood. For the reality is that different social classes, and different class factions, will necessarily experience events like those of 2020 in very different ways. Up to this point, we have only identified some features, principles and laws of the capitalist social order that have existed for centuries. But to take the full measure of the 2020 crisis, we must analyze what is

32  Twilight Capitalism distinctive about twenty-first-century twilight capitalism: the specific manifestations of a systemic crisis that began to take shape in response to the grave profitability crisis of the 1970s and how this has unfolded and intensified over the past forty years. These issues pertain mainly to the crisis of surplus-value production (a crisis of “valorization”) that was referred to earlier in connection with Smith’s book Invisible Leviathan. A full discussion of this crisis, which underlies the present book’s theme of the “decay of the profit system,” begins in Chapter 2, but a brief observation is offered here to tie together some of the strands of what has already been said about the “combined crises” of 2020. The lead-up to the catastrophe of 2020 was already marked by the results of a peculiarly two-pronged strategy of the capitalist class to shore up flagging profitability: on the one hand, to extract as much surplus value as possible from living, productive wage labour through an array of neoliberal mechanisms and measures, including reckless plunder of the “gifts of nature”; and on the other, to manipulate stock markets to sustain unrealistically high equity values while compelling compliant governments and central banks to minimize regulations on business activity, lower corporate taxes and print money as needed to maintain “financial stability.” The result was huge volumes of easy cash for the upper echelons of the capitalist class, but also slow gdp growth, weak capital formation in the productive economy, and the accumulation of mountains of corporate, consumer, government and student debt — in other words, huge claims on value that had yet to be created. A reckoning for this festival of the ultrarich and for their decrepit system was surely inevitable. Little did anyone know that it would involve a party crasher soon to be known as Covid-19 … itself a monstrous by-product of capital’s desperate attempts to overcome its ongoing crisis of valorization.

UPRISING AND THE WAY FORWARD An important question remains: can the ruling-class travesty continue as before, or will the masses at last arise, enter the stage of history and fight for truly transformative change? Hopeful signs of the latter are appearing. The most welcome outcome of the social crisis of 2020 is that it caused a great many working people and youth to question the wisdom of leaving the great decisions affecting the whole of humanity in the hands of the profit-mad capitalists and the increasingly incompetent and criminal political parasites that serve them.

Pandemic, Slump and Uprising in the Twilight of Capitalism   33 The youth uprising of May–June 2020 signalled that the floodgates of consciousness are opening to what once seemed “fringe” ideas. Could the demand to “abolish the police” foreshadow Marxist calls for workers’ defence guards and the “smashing” of the repressive apparatus of the capitalist state through socialist revolution? Could the “eat the rich” slogan taken up by some protesters anticipate the more appetizing transitional socialist demand to “nationalize industry under workers’ control”? And could the toppling of statues of Jefferson Davis, Robert E. Lee and other historic figures of the Confederacy — whose black chattel-slave labour-force was emancipated by Abraham Lincoln’s Union Army in the greatest-ever expropriation of “private property” prior to Russia’s workers’ revolution of 1917 — presage a mass movement to end human exploitation tout court? Perhaps … but only if the common sense of our time comes to involve the conviction that a final reckoning with class exploitation and its myriad oppressions requires the emancipation of wage labour, the expropriation of capitalist private property without compensation and the establishment of workers’ governments. The capitalist system can now scarcely function even on its own terms. It is prone to periodic economic crises that seem deeper and more menacing than ever before, even as it also displays a constitutive incapacity to secure for humanity a world without war and ecological devastation. Despite this, however, most progressive activists in the “advanced” capitalist West continue to doubt the need for the sort of thoroughgoing social revolution that Marx envisioned. Thus, our principal aim in this book is to call attention to the urgent necessity of transcending — and not simply reforming — the decaying capitalist profit system. For those seeking to change the world in fundamental ways, it remains very important to recognize that the brutality of life under capitalism has not extinguished the most admirable human qualities of those who labour for a living: among them, empathy, compassion and instinct for solidarity. During the Covid-19 pandemic, neighbours cheered and banged pots for health care workers, dropped flowers off on porches of those unknown to them, and wept at the deaths of elders in nursing homes. While those at the top cynically declared that “we are all in this together,” most of us wished that we lived in a society where that could really be true. We believe that such a mode of life is achievable. But in a class-antagonistic society still built on exploitation, still reliant on the principle of

34  Twilight Capitalism “divide and rule,” and still heavily dependent on ignorance and the vilest of lies for its “stability,” we also know it will remain a challenging task to convince the masses of working people of that simple idea. The working-class majority hardly needs to be shown that a “humane capitalism” is a pipe dream. At a quite visceral level, they already know this. But what they do need to understand is that the continued existence of capitalism will come at a terrible cost and that another, better world is actually possible. What’s more, they need to learn that the limitations and failures of past attempts to move beyond capitalism are by no means inevitable, even as they also accept that revolutionary social change is not without risk and that only through ongoing struggle, education and democratic debate will answers be found to the great question formulated by Russian Marxist leader V.I. Lenin in 1902: What is to be done? For those who aspire to see revolutionary social change, the vital task must be to spread the word that the alternative to the struggle for world socialism is not merely acquiescence to the barbarism of actually existing capitalism but, almost certainly, the inevitability of human extinction. To those who refuse to look at social reality through the distorting prisms of capitalist self-interest and ideology, upper-middle-class complacency, wilful ignorance or malign prejudice, it will become abundantly obvious in the period ahead that the existing world order — geared above all to the perpetuation of the wealth, power and privilege of the capitalist class — is at once irrational, unsustainable and morally repugnant. Humanity can no longer afford to tolerate a socio-economic system that subordinates our most fundamental interests as a species to the ephemeral interests of a tiny capitalist ruling class that arrogates to itself the right to own and control the world’s major productive assets and to make all the major decisions affecting the lives of nearly eight billion people — almost always for the worse. The world is in urgent need of the kind of transformation that can only be achieved through the revolutionary defeat of capital by the wagelabouring class, a class that the young Marx described as having “radical chains.” This proletarian class, he wrote, represents “the dissolution of all classes, a sphere which has a universal character because of its universal suffering and which lays claims to no particular right because the wrong it suffers is not a particular wrong but wrong in general; a sphere of society which can no longer lay claim to a historical title, but merely to a human one … and finally a sphere which cannot emancipate itself

Pandemic, Slump and Uprising in the Twilight of Capitalism   35 without emancipating itself from — and thereby emancipating — all the other spheres of society.” How will this great emancipation be achieved? Marx’s answer is clear and forthright: “the negation of private property.” What capitalist society “has already made a principle for the proletariat” must be elevated to a “principle for society” (1975: 256). For humanity to survive and move forward, the private property of the capitalist class in the means of production, distribution and exchange must be expropriated and placed under the collective ownership and control of working people in a rationally planned and democratically administered socialist society — a global society committed foundationally to the health, well-being and free development of each and every human individual.5

Notes

1. We owe this satirical gem to the 2003 film comedy Head of State, in which a fictional U.S. presidential candidate invokes this slogan as a centrepiece of his campaign. 2. For a detailed account of the Chinese response to the emergence of the sarsCoV-2 virus and a refutation of Western misrepresentations of that response, see Prashad and Du Xiaojun 2020. So far as we are aware, this careful analysis has received no serious attention from mainstream Western journalists, academics or politicians. 3. See, for example, Wilkinson and Pickett 2010; Panitch and Leys 2009; and Davidson 2019. 4. For an August 20 report that the twelve richest U.S. billionaires had reached a combined wealth of over $1 trillion, see Collins and Ocampo 2020. 5. The authors of this book are hardly unique in advancing this perspective. Many Marxist-socialist groups addressed the social crisis of 2020 in very similar ways. Here are some noteworthy examples: Exhibit 1: The coronavirus pandemic has produced a heightened sense of vulnerability among hundreds of millions of people and popularized the notion that society has a responsibility to provide everyone with equal access to high-quality medical care rather than rationing treatment on the basis of the ability to pay. From this recognition, it is a short step to see that the other essentials of human life and happiness — food, shelter, education and meaningful employment — should be available to everyone. This can only be achieved by reorganizing the economy to make meeting human need, not private profit, the priority. The possibility of utilizing the enormous potential of scientific knowledge and technology to free humanity from scarcity, insecurity and inequality can only be realized through revolutionary struggle to uproot the capitalist dog-eat-dog social system (bt 2020a).

36  Twilight Capitalism

Exhibit 2: “Hazard pay now!” “No Safety, No Work!” “We need a Nationwide Union Health and Safety Walkout at UPS!” A fighting perspective was put forward by our sisters and brothers of Class Struggle Workers–Portland in a March 18 call for workers action in the coronavirus crisis. It raised a series of demands to require protective gear as decided by the workers; for the formation of health and safety committees representing both unionized and unorganized workers; for full pay for all who are unable to work because of the virus; for occupying vacant properties to provide housing for the homeless; for freeing detainees from I.C.E. concentration camps, and concluded: A mass, militant workers movement with a class-struggle leadership would establish workers commissions at workplaces to decide appropriate measures, including shutting down where necessary, with no loss in pay, or continuing production with needed safeguards. Ultimately, it will take a planned economy capable of redirecting production and distribution of medical equipment, safety equipment and basic necessities for a large-scale outbreak, with workplaces organized with the safety of workers as a central priority, in order to effectively fight a pandemic. That means a fight to end this capitalist system of profit-driven chaos, incompetence, racism and exploitation, and establish a workers’ government. With the lives and livelihoods of so many workers and oppressed people in the balance, the only way forward is class struggle (IG 2020). Exhibit 3: A revolutionary response to the current crisis must seek to mobilize working people around a program that not only addresses present needs but does so in a manner that creates a bridge to a workers’ government and the first stages of the transition to socialism. An emergency program of action must include the following demands: • Free, fully accessible quality public healthcare; • Defense of national health services against the drive to privatization; • Expropriation of all private, for-profit hospitals and health care services and their reorganization into existing public systems; • Transformation and massive expansion of those public systems into a workerrun network of free hospitals and clinics coordinated at all levels; • Expropriation of medical equipment supply companies (and similar companies whose operations could be readily converted for this purpose) and their reorganization into a rationally planned system of provision; • Cancellation of all patents on drugs and vaccines and the expropriation of “Big Pharma” pharmaceutical companies. Science-based global effort to contain, treat and eradicate Covid-19 • Free testing for Covid-19, beginning with the most vulnerable and their families/carers; • Elimination of the profit motive in matters of health and the privileging of human solidarity and science-based information campaigns and treatment over

Pandemic, Slump and Uprising in the Twilight of Capitalism   37 perceptions of “cost” or “national interest”; • Transfer decision-making power (e.g., over safety procedures, school and workplace closures, hospital resource allocation) to workers, including doctors and nurses, organized into workplace committees integrated locally, regionally, nationally and internationally; • Emergency construction and/or requisition of facilities to treat Covid-19 patients; • Creation of a globally coordinated effort to produce vaccines and treatments, available at no cost to anyone in the world; • No faith in capitalist governments or imperialist-dominated agencies like the who and UN to adequately or humanely deal with the crisis. Global economic planning to meet human need • No layoffs or job reprisals due to the coronavirus or economic contraction; • No evictions, foreclosures or repossessions, and a rent and mortgage freeze; • Secure housing for the homeless and home support and deliveries for those in isolation; • Unlimited sick/leave days with full pay for those who are not able to work for any reason due to the crisis; • Childcare and other support for essential workers (e.g., in health and social care, sanitation, transportation, manufacture and distribution of essentials); • Reduction of the work week (to 30 hours or less) at no loss in pay and the elimination of unemployment through the mobilization of the jobless and underemployed (and those working in socially unproductive jobs); • Massive wage increases, especially for those at the bottom of the pay scale, ensuring that wage growth outpaces price inflation; • Expropriation of large financial institutions and the cancellation of all debts held by workers, students, poor farmers and small businesses; • Expropriation of industrial corporations, placing production and distribution under workers’ control to ensure that the population receives necessary consumer goods. Fight for workers’ power • Disbanding of the police, military and border guards and the creation of workers’ emergency response units to handle security matters in the interests of the working class and the oppressed; • Political struggle against the parties of capitalism and the reformist organizations committed to preserving the system — building a revolutionary workers’ party to fight for socialism; • Transfer all political power to democratic workers’ councils and the creation of workers’ governments based on those councils at the local, regional, national and global levels (ibt 2020).

Chapter 2

TWILIGHT CAPITALISM: THE ECONOMIC DIMENSION

A

ccording to a well-worn saying, most people find it easier to imagine the end of the world than the end of capitalism. Wildfires, flooding, tropical storms, searing heat waves and droughts are all-too-tangible harbingers of an environmental apocalypse. Young people are forgoing having children because they are profoundly uncertain about the future. We share the deep concern about the continuing habitability of Earth and accept the near consensus that, just as deepening environmental trauma is disproportionately affecting the poor and vulnerable today, the widening metabolic rift between the natural and human worlds is also on course to threaten the very existence of humanity in the near future. We would add that the synergy of economic depression and ecological devastation will almost certainly create conditions in which conflicts between major powers will quite possibly lead to wars involving nuclear and biochemical weapons of mass destruction. In our view, these multiple threats to humanity are rooted neither in a malign “human nature” nor in “original sin.” The looming catastrophes are more correctly understood as having “capitalogenic” than anthropogenic origins, stemming as they do from the contradictions and crisis tendencies of a historically specific socio-economic system that has “passed its shelf life” and reached its twilight. Just as the coronavirus cannot survive the death of its host, capitalism cannot survive the decimation of humanity. For human civilization to survive and to progress, capitalism must be replaced by global socialism. There is no alternative. Humanity faces a clear choice: to allow twilight capitalism to destroy us or to make the leap to a global, egalitarian-socialist civilization, in which the satisfaction of human need is the starting point and the all-round development of each and every individual the goal of the socio-economic life process. In the pages that follow, we make the case that capitalism — once a

38

Twilight Capitalism: The Economic Dimension   39 formidable force for innovation and the development of productivity (not to mention brutal exploitation, violence and suffering) — has lost all its redeeming qualities. In its twilight phase, it runs on deception, dispossession and fumes. The chapter begins with an analysis of the pandemic-triggered crisis of 2020 as well as the financial crisis and global depression that began in 2007–09. We then present some key concepts in the Marxist analysis of capitalism that enable us to see that such crises are not aberrations or misfires but built into the dna of capitalism itself. A system built on the endless accumulation of capital and profitability keeps bumping up against the limits of both, persistently resorting to intensified exploitation of wage labour, environmental despoilation, mountainous debt and fictitious profits to preserve a false semblance of normalcy. Fortunately, there is a way out of this impasse: the socialist transformation of the socioeconomic order — a program we outline toward the end of this chapter and expand on later in the book.

WHO DONE IT? A TALE OF PLAGUES AND PROFITS The speed with which the economies of most Western countries and, above all, that of the United States declined in the first months of the coronavirus pandemic revealed a remarkable fragility. Many asked: how could a microscopic virus of such obscure origin inflict such huge damage on the lives and livelihoods of populations reputed to be living in some of the most affluent countries in the world? Was Mother Nature striking back against the hubris and ecological irresponsibility of twenty-first-century humanity? Was this our “just desserts” for failing to maintain a proper balance between economic progress and our place in the natural world? Or was this just another of those unavoidable microbial epidemics that have tormented humanity periodically throughout our history (and prehistory) and that have sometimes exacted a horrendous toll of human misery? Another line of questions, premised on less anthropomorphic and/or fatalistic views of the humanity-nature relation, tended to focus on the conscious decisions and deliberate actions taken by politicians, governments, scientists and public health authorities in instigating the specifically economic side of the combined social crises of 2020. Were the lockdowns and the physical distancing protocols mandated by “those in charge” really necessary? If the coronavirus had been simply allowed to run its course, would it have caused more or less damage to the economy than

40  Twilight Capitalism those same policies? How many people might have died without their implementation and what would the cost (or benefit) have been to “the economy” — that is to say, to the onward march of gdp growth? Were other, perhaps more effective and less economically disruptive strategies available for minimizing the death toll? For the powers that be in today’s world, these distinct lines of questioning — which seem at first blush to be at odds with each other — possess a common virtue as well as a distinctly useful purpose: each diverts attention from the fundamental part played by capitalist socio-economic relations and imperatives in both paving the way for the crisis and determining its precise form and magnitude. In opposition to this tendentious agenda of distraction, our aim is to explore how the deepening malaise of twilight capitalism played a decisive and indeed dominant role in provoking the current crisis, as well as in mediating those “natural” and “consciousactivity” factors that preoccupy “mainstream” (bourgeois) discourses concerning the events of 2020. Beyond those considerations, the chapter also outlines some of the overarching theoretical and political themes of this book’s critical analysis of twilight capitalism. Let’s begin with two stipulations: 1) Without the outbreak of the coronavirus, 2020 would have been a very different year than it was, and governments would not have taken the steps they did to shut down major parts of the global economy (however briefly). 2) The consensus recommendations of the medical-scientific community and the actions taken by politicians in response to the pandemic were the proximate triggers of the economic contraction. It might then be asked: do these circumstances, taken together, yield the conclusion that “the virus did it” and indeed that, without the pandemic, the global economy would have averted a severe slump? Our answer to this question is an unequivocal no. Far from being the singular or even the main causal factor behind the slump of 2020, the emergence of the novel coronavirus and the specific actions taken by governments in response to it were merely the nudges that displaced the skin-deep visage of a purportedly booming economy. Within weeks of the arrival of the pandemic in North America and Europe in the winter of 2020, the business press was sounding alarms concerning the immanence of a long and deep recession. In early February, the Dow Jones Industrial Average (djia), Donald Trump’s favoured bellwether of economic health, had reached an all-time peak of just over 29,000 — almost five times higher than its lowest point during the Great Recession of 2008–09.

Twilight Capitalism: The Economic Dimension   41 Yet stock markets, particularly in America, had long since ceased to reflect the condition of an economy that had witnessed one of the weakest, albeit longest-lasting, post-recession “recoveries” in history. Indeed, Wall Street’s grossly inflated stock valuations both masked and were symptomatic of a deep rot in the “real economy” of capitalist commodity production — the economy in which the goods and services required to satisfy basic human needs are actually created. In mainstream political and media circles, the stock market crashes that soon followed the peak djia were blamed almost exclusively on the pandemic and subsequent shutdowns. By March 20, Goldman Sachs was predicting a 24 percent decline in U.S. gdp in the second quarter (Paumgarten 2020). As shocking as this number might have seemed at the time, by the end of July it was clear that it had been far too optimistic. In an article aptly titled “Millions Face Economic and Social Disaster as Wall Street Suffers,” Jerry White (2020) reported: The United States economy contracted at a staggering annual rate of 32.9 percent between April and June, the sharpest fall in U.S. history. The actual three-month decline of 9.5 percent dwarfed the worst single quarter since such statistics were first collected more than 70 years ago…. cnbc noted, “Not the Great Depression nor the Great Recession nor any of the more than three dozen economic slumps over the past two centuries have ever caused such a sharp drain over so short a period of time.” The only comparable economic disruptions in modern history are those caused by world war or societal collapse. If one calculates the overall drop in U.S. gross domestic product (gdp) for the first six months of 2020, it comes to 11 percent. Though less steep than America’s, the economic slump in the European Union (EU) during the second quarter of 2020 was also of historically unprecedented proportions. The EU’s Eurostat agency reported on July 31 that the gdp fell by 12.1 percent in the eurozone (the major part of the EU that uses the common “euro” currency) and 11.9 percent in the EU as a whole. In the first quarter, the contraction had been 3.6 percent and 3.2 percent, respectively. It should be noted that even before the arrival of the pandemic, Europe was already entering into recession. In the fourth quarter of 2019, Germany was stagnant, while gdp was falling in both France (by -0.1 percent) and Italy (by -0.4 percent).

42  Twilight Capitalism The extraordinary extent of the economic contraction once the pandemic struck highlights the major role played by the governmentmandated lockdowns in amplifying the crisis but also the truism that capitalism is a system that requires continuous growth (or “expanded reproduction” in Marxist terms). For without “growth” — quantitatively measurable in money yet stubbornly indifferent to any qualitative accounting of its “material” composition — things simply fall apart. In most countries, service industries deemed “non-essential” were hardest hit by the state-mandated lockdowns and physical distancing rules, particularly those dependent on congregating consumers (such as hospitality, travel, tourism, entertainment, education, sports and the arts). Air Canada, to take one example, was reduced to using 5 to 10 percent of its capacity. Consequently, most of its workforce was furloughed, and since its fleet (worth an average of $100 million per plane) had been purchased on credit, massive monthly payments had to be made even as the planes sat idle. In May, Hertz, the car rental agency, filed for bankruptcy. Retailer JCPenney followed in June. By the end of August 2020, forty-five firms with a value of more than U.S. $1 billion each had filed for Chapter 11 bankruptcy, a figure greater than the thirty-eight that had filed over a comparable period in 2009. Immense numbers of smaller businesses faced an uncertain future, with many expecting never to reopen. On March 9, Trump had tweeted: “Nothing is shut down, life and the economy go on,” while also declaring that Covid-19 was no more serious than the annual flu. However, under enormous pressure from a broad if short-lived tide of journalistic and medical-professional opinion in support of the main recommendations of the who, the U.S. president retreated from his indefensible position — but without ever truly abandoning it. While giving lip service to the need for a “war” on Covid-19 and even to prioritizing human life over economic considerations (that is to say, over the short-term profitability of “non-essential” businesses), Western leaders in general eagerly awaited the time when the pandemic “curve” would be flattened and a rationale created to “reopen” their economies, however partially. Grotesquely unequal access to quality, affordable health care in the United States and long-time, systematic underfunding of “free” public health care in counties like the United Kingdom and Canada ensured that the effects of the pandemic were much worse than they needed to be. Deaths varied greatly according to class, race and age. Reflecting

Twilight Capitalism: The Economic Dimension   43 the legacy and contemporary actuality of structural racism as well as class-based inequities with respect to access to emergency care, Black Americans were three times more likely to die from Covid-19 than the U.S. population at large. In Canada, over 80 percent of Covid-19-related deaths were in long-term care facilities for the elderly and the disabled — about twice the average for the thirty-eight, mostly “developed” countries of the Organisation for Economic Co-operation and Development (oecd). In five particularly horrendous nursing homes, the Canadian Armed Forces (caf) were dispatched to provide replacements for regular staff who had either fallen ill or were refusing to report for work. A follow-up caf report described the appalling state of these homes: healthy occupants and staff mixing with the sick; multiple beds in overcrowded rooms; a scarcity of personal protective equipment; inventories packed with expired medications; cockroach infestations; and the piling up of corpses over several days before their removal to morgues.1 Although the report’s details were truly macabre, the generally deplorable state of these mostly private for-profit institutions had been known and well documented for years before the pandemic. Meanwhile, in the United States, uninfected residents of some for-profit long-term care facilities were removed and sent to hostels or other temporary housing so as to make room for more lucrative Covid-19 “clients.” If more brutal examples exist of how at odds human life and the pursuit of profit can be, one would be hard pressed to imagine them.

FROM THE GREAT RECESSION TO THE CATASTROPHE OF 2020 Despite the tireless efforts of politicians and the corporate mass media to suggest otherwise, all was not well with the global economy in the years before the pandemic. Indeed, a deep malaise permeated it at all levels, from the commanding heights to household finances. The deep economic contradictions that formed the backdrop to the financial crisis and contraction of 2007–09 were not so much resolved as camouflaged in the years of ostensible recovery following the Great Recession, as economic (both income and wealth) inequality deepened and environmental destruction (ecocide) accelerated. In the ongoing struggle of capital to counteract the tendency of the rate of profit to fall, capitalists, aided by the state, continued to ratchet up the rate of exploitation through a suite of actions and policies usually referred to as “neoliberalism.” The long-term results of the early-1980s turn toward neoliberalism are reflected in Chart 2-1, which

44  Twilight Capitalism Chart 2-1 Labour Productivity Growth and Income Inequality, U.S. Economy 1960–2018 !#

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Source: Authors, based on bls 2020 and Saez-Piketty (2003/2018).

depicts trends in labour productivity growth and income inequality for the United States from 1960 to 2018. As the average annual rate of growth of labour productivity fell over the long term (largely due to a slowdown in new fixed capital formation), the share of income earned by the top 1 percent increased dramatically, rising almost without interruption from about 12 percent in 1985 to about 22 percent in 2017. On the other hand, wages, particularly for the bottom 80 percent to 90 percent of income earners, either stagnated or declined in real terms between 1970 and 2015. In the crisis of 2008–09, the entire global economy was pummelled and teetered on the edge of total collapse. Exemplars of the principle that “the bigger they are, the harder they fall” were some of the giants of U.S. financial capital. Major banks and investment companies like J.P. Morgan, Citibank, aig and Bear Stearns faced profound liquidity crises, instigated by the bursting of a housing bubble fuelled by reckless lending practices and dodgy financial transactions. Mortgages extended to “unworthy” customers were packaged and sold as legitimate investments. Unsurprisingly, as interest rates rose from initial “sub-prime” levels, a wave of homeowners defaulted on their mortgage payments, rendering the novel financial instruments associated with them — for example, many of the now-notorious “collateralized debt obligations” (cdos) — close to

Twilight Capitalism: The Economic Dimension   45 worthless. It is noteworthy that clos — collateralized loan obligations, a particular type of cdo — retain a place of prominence among financial derivatives to this day. Of course, this was just the trigger. cdos and other dubious financial instruments had been a key element of financial capital’s arsenal to boost profitability, but it was the equivalent to sucking in one’s gut as an alternative to a serious exercise and diet regime. As is now well known, the U.S. financial system was rescued through a massive and hitherto unprecedented injection of liquidity by the Federal Reserve, followed by a program of “quantitative easing” (essentially money printing) that continued for many years. Similar policies were pursued by other Western governments and central banks, contributing to a huge — and artificial — inflation in the value of financial assets and to soaring stock markets globally. The precepts of “free-market capitalism” were unceremoniously discarded as the world’s most powerful corporations and financial institutions insisted that they were “too big to fail” and that the system as a whole would simply collapse if surrendered to the vagaries of free-market forces. Not a few libertarians (true believers in the synonymity of capitalism and the magic of laissez-faire economics) cried foul and denounced the state bailouts of the “private sector” as a form of “socialism” — to which some confused leftists responded that the state rescue operations were really a case of “socialism for the rich, capitalism for the poor.” In reality, however, they were nothing other than a new wrinkle on the old story of the capitalist state acting as the last line of defence of capital — fully determined, as always, to preserve “the system” … and by any means necessary. But government infusions of liquidity into the financial sector were more a palliative than a cure. The years following the Great Recession featured meagre recovery in real profitability for productive capital, growing levels of inequality and mounting environmental terror. The extent of the damage wrought by the pandemic-triggered recession only underlines how fragile that so-called recovery really was. Let’s take a brief walk through this period and examine its effects from the highest level of corporate finance to the lives of ordinary people dependent on the “Main Street” economy. The post–Great Recession era of 2010–19 was one of proliferating debt, in all its forms. By November 2019, U.S. corporations had accumulated $10 trillion in debt (Lynch 2019). A sustained period of record low interest

46  Twilight Capitalism rates made borrowing very affordable for businesses while also making the latter vulnerable to future deleveraging — something that could only magnify the effects of a recession if and when corporate profits failed to cover interest costs. This is precisely what occurred beginning in March 2020, in the very earliest days of the Covid-19 emergency. In the months following the onset of the pandemic, the U.S. Federal Reserve injected unprecedented amounts of liquidity into the financial sector. Over the span of four months, the Fed increased its balance sheet from $4 trillion to $7 trillion, with Fed chair Jerome Powell stating that there would be “no limits” on the funds being placed at the disposal of U.S. capital. This was an astonishing statement, to be sure, but one fully consistent with the mindset of a financial oligarchy fully committed to the idea that “money begets money” — with or without the intermediation of productive activity in the “real economy.” Yet this idea is quite simply false; in reality, “Financial assets — the prices of which are inflated by the Fed and other central banks — do not in and of themselves represent value. In the final analysis, they are a claim on the surplus value that is extracted from the exploitation of the living labour of the working class” (Beams 2020). The continued movement of cash away from the productive economy and into the financial sector during a time of deep economic crisis (as exemplified by the plight of Air Canada, cited earlier) makes a mockery of claims according to which the capitalist economy is supremely “efficient” in allocating resources and ensuring wise investments. Richard Wolff (2020) neatly summarized the specious argument of capital’s apologists: “Capitalism, we are told, is the best system because it drives all those in charge of production (the owners and top executives of enterprises) to maximize profits and thus economic efficiency. Capitalists get profits, and the rest of us benefit from the efficiency of production within a capitalist system.” But here’s the problem: what happens when those profits are more and more based on the accumulation of debt (that is to say, claims on surplus value not yet “extracted”) rather than on any real gains in the “efficiency of production”? Some libertarians might answer by saying that in such cases, we’re no longer talking about capitalism. And we would reply: on the contrary, we’re talking about a breakdown of capitalism resulting not from state intervention but from the inherent laws of capitalist production. We’re talking about the breakdown of a profit-driven and crisis-ridden

Twilight Capitalism: The Economic Dimension   47 system that prioritizes the wealth of the few over the interests of the many and, yes, even over the “free-market ideals and principles” upon which it is supposedly based. Over the same period that the coffers of financial capital overflowed thanks to the largesse of the capitalist state, household debt continued to grow and savings rates declined. Needless to say, this was not the result of wanton or frivolous spending on the part of working-class households but rather of stagnating or declining incomes for the bottom 80 percent to 90 percent of the workforce. The net effects of these long-term trends with respect to income, employment and debt (trends that long preceded the Great Recession of 2008–09) meant that the major disruptions to economic life set in motion by the Covid-19 crisis could only lead to the rapid devastation of household finances. Already in 2019, U.S. household debt had increased by $600 billion, the largest amount since the financial crisis of 2008, bringing its total mass to $14 trillion, about two-thirds of which was mortgage debt (Pound 2020). At the same time, the servicing level of that debt was at its lowest point since 1980. Non-mortgage household debt was overwhelmingly a combination of credit card debt, student loans and car loans. In everyday terms, between half and threequarters of households (depending on the precise calculus) were living paycheque to paycheque. By 2020, at least 40 percent of U.S. households had difficulty finding the cash for an unexpected $400 expense — such as a car repair or an uninsured stay at a hospital in the event of a worsening case of Covid-19. Of course, these trends in household debt flowed into the overall growth in the share of economic activity represented by finance. The deepening “financialization” of the economy was an attempt by capital to restore profitability by generating and “booking” what would ultimately be revealed to be fictitious profits. Much more will be said about the phenomenon of financialization later, but for now, suffice it to say that as early as the recession year of 1991, the share of the “finance, insurance and real estate” (fire) sector had overtaken that of manufacturing as a percentage of gdp in the U.S. economy, the largest and most powerful in the world. Times, of course, were never tough “all over” … or for everyone. The post–Great Recession era was marked by sharp income polarization, with a few (the top 1 percent) doing exceptionally well and some others (the 9 percent or so below them) enjoying modest but nevertheless real gains in their salaries. The central theme of the ill-fated Occupy movement of

48  Twilight Capitalism Chart 2-2 Distribution of Gains in U.S. National Income within the Top 1 Percent, 1970–2012 

 

 




   





















 



 



 











Source: Authors, based on bea (2020) data and Saez-Piketty (2003/2018).

2011 concerned what the insurgents described as an outrageously inequitable distribution of income between the top 1 percent (“them”) and the so-called 99 percent (“the rest of us”). But closer analysis revealed that 
 the most egregious divide was actually between the top 0.1 percent of the population (who made out like bandits) and the bottom 90 percent (most of whom had suffered a decline in their living standards, albeit to varying degrees). Chart 2-2 depicts the development of this divide. During the “recovery” period of 2010 to 2016 (the Obama years), some 85 percent of the gains in net national income in the United States went to the top 1 percent of income earners (especially to the top 0.01 percent), while the remaining 15 percent was shared mainly by those beneath them on the rungs of the top 10 percent — above all, affluent layers of the professional-managerial “middle classes” and the traditional petty bourgeoisie of small business owners, not to mention big-city cops who earned their pay (in part) by breaking up the Occupy protest encampments.2 Meanwhile, the income of the bottom half of income earners (the great majority of whom are members of what Marxists would describe as the working class) fell sharply in real terms, while most of the 40 percent above them experienced stagnant or falling incomes. In their book The Triumph of Injustice, the left-liberal economists Emmanuel Saez and Gabriel Zucman offered the following description of the scale of social inequality in the United States: In 1980, the top 1 percent earned a bit more than 10 percent of

Twilight Capitalism: The Economic Dimension   49 the nation’s income, before government taxes and transfers, while the bottom 50 percent share was around 20 percent. Today, it’s almost the opposite: the top 1 percent captures more than 20 percent of national income and the [bottom 50 percent] barely 12 percent…. And the increase in the share of the pie going to [the] 2.4 million [wealthiest] adults [who make $1.5 million in income a year, on average] has been similar in magnitude to the loss suffered by more than 100 million Americans…. [For] the 122 million adults in the lower half of the income pyramid … the average income is $18,500 before taxes and transfers in 2019. Yes, you are reading this correctly: half of the U.S. adult population lives on an annual [average] income of $18,500. (2019: 12–13) Given all of this, it shouldn’t be surprising that by the time of the 2020 Chart 2-3 Decomposition of the Top Decile U.S. Income Share into Three Groups (1913–2018) 

 

 












 

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50  Twilight Capitalism crisis, only the top 10 percent of households in the United States had recovered from losses stemming from the Great Recession. Chart 2-3 shows the share of total U.S. income going to the top slices of the income distribution. Since the 1980s, there has been a dramatic increase in the share of income received by the top 1 percent of earners, a modest increase in the share of the next 4 percent (the lower rungs of the top 5 percent) and an essentially flat share for those in the bottom half of the top decile of earners. Despite ongoing gains in labour productivity, real wages for most of the U.S. working class have declined or at best remained flat, as working people’s actual cost of living has increased far more than official inflation statistics indicate. The so-called golden age of postwar capitalism — a time when a working-class family in manufacturing could buy a house, take an annual vacation and even send the kids off to university — begat the profitability crisis of the 1970s, the bulging neoliberal “service economy” of the 1980s and 1990s, and a slow decline in real wages and benefits. The years since the financial crisis have been increasingly characterized by precarious work, zero-hours contracts and the gig economy. To be sure, a dwindling number of “good” jobs remain, but they are much harder to come by. Competition among working people for them has become fierce. Labour unions in the United States and Canada have protested the impact of these changes on the labour force. However, these protests have had an essentially rhetorical character, bereft of any programmatic vision and rarely backed by action. Furthermore, the principal goal of the leadership of organized labour has not really been to expand the unionized workforce but to retain dues-paying members in the existing unions while pursuing greater collaboration with management. Union-negotiated collective agreements frequently involve major concessions to capital and the state, including multi-tier wage structures and below-inflation nominal wage gains. Poverty rates in North America rose during the recessions of 2001 and 2008–09. Both post-recessionary periods saw only meagre reductions, with levels of poverty remaining especially high among racialized groups and people who live alone. This survey provides a partial if telling description of the way things were under conditions of “advanced capitalism” prior to the who announcement of a global pandemic on March 11, 2020. So far, we have relied on statistics to tell one part of the story. The following lines by Nick

Twilight Capitalism: The Economic Dimension   51 Paumgarten tell another part, by way of vivid metaphor: This brutal shock is attacking a body that was already vulnerable. In the event of a global depression, a post-mortem might identify Covid-19 as the cause of death, but, as with so many of the virus’s victims, the economy had a pre-existing condition — debt, instead of pulmonary disease. Corporate debt, high-yield debt, distressed debt, student debt, consumer debt, mortgage debt, sovereign debt. “It’s as if the virus is almost beside the point,” a trader I know told me. “This was all set up to happen.” (Paumgarten 2020) The immense and growing global debt is surely a big part of the story. But what explains it? Why has twilight capitalism become so habituated to this highly destabilizing “tonic” for what has become a perennial malaise? And why should we accept Paumgarten’s apparent premise that, prior to the 2020 pandemic, the global economy was not already in the grips of a depression that began as far back as 2008? To answer these questions, we need to explore the nature and origins of the financial crisis/Great Recession of 2007–09 and the stage this set for what British Marxist economist Michael Roberts (2016a) has aptly called the Long Depression of the twenty-first century.

PRODUCTIVITY, VALUE AND CAPITALIST CRISIS On September 15, 2008, the Lehman Brothers investment bank collapsed, accelerating a financial crisis that had begun in 2007 and that had gained momentum with the Bear Stearns bankruptcy, the failure of California’s IndyMac Bank and the U.S. government takeover of mortgage giants Freddie Mac and Fannie Mae. Lehman’s collapse signalled to investors that the multi-trillion-dollar market for securitized loans lacked any substantial foundation. The real worth of mortgage-backed securities and many other exotic debt instruments was simply unknown, and that sudden epiphany sparked a global sell-off. As stock markets went into free fall, Republican presidential candidate John McCain responded with the patently ridiculous assertion that “the fundamentals of our economy are strong.” Later, in response to criticism from his rival, Democratic candidate Barack Obama, an indignant McCain defended his remark by pointing to the high productivity of U.S. workers and declaring “our workers are the most innovative, the hardest working, the best skilled, most productive, most competitive in the world.”

52  Twilight Capitalism Chart 2-4 Rate of Exploitation (s/v+u), U.S. Economy, 1947–2019 
 
 
 
 
 




      

               

 

 



     




Source: Authors, based on bea (2020) data.

As unlikely as it may seem, and as foreign as it undoubtedly was to his intent, McCain’s observation was actually a useful starting point in developing an analysis of the 2007–09 crisis that exposes the advanced decay of 
 twenty-first-century capitalism and the reasons why working people, both in the United States and around the world, have no interest in its preservation. For if one thing was clear then and even more so today, it’s this: the working class can’t be blamed for the recurrent economic downturns of capitalism. On the contrary, worker productivity had grown continuously before 2007–09 and reached all-time highs on the eve of the financial crisis, even as wages had lagged badly behind productivity growth since the mid-1970s. Data furnished by the U.S. Bureau of Labor Statistics show that productivity and real hourly wages in the private, non-farm U.S. economy grew in lockstep from 1947 up to the early 1970s but then diverged significantly after that time. Referring to the growing income gap between wage earners and investors, U.S. billionaire Warren Buffett remarked candidly in 2005: “It’s class warfare, and my class is winning.” Chart 2-4 illustrates how these developments found reflection in the trend of what Marxists call the “rate of exploitation” of the U.S. workforce. The ratio s/v+u displays the income accruing to the capitalist class (s = surplus value) relative to the total after-tax wages of both productive and systemically necessary but unproductive workers. Following the 1970s, labour lost considerable ground in what became a decidedly one-sided class war. Capital had its way, in the United States and

Twilight Capitalism: The Economic Dimension   53 globally. And yet, despite that, capital still found ways to shoot itself in the foot — and rather badly at that. With Soviet-style “communism” out of the way, with unions often decimated and lacking any anti-capitalist vision, with the welfare state receding in size and scope, with China partially reopened to capitalist exploitation and with most of the world’s masses seemingly resigned to the inevitability of free-market economics, the global capitalist order nevertheless descended in the new century into its worst depression since the 1930s. The fact that workers and the oppressed couldn’t be easily scapegoated for the slump of 2008–09 meant that (potentially at least) it might have been possible for masses of working people and youth to perceive more clearly the fundamental irrationality of the capitalist system itself. A deep political and ideological crisis of capitalism was a real possibility, and there were signs of its emergence, but it was mitigated by the extraordinary measures taken by capitalist states to “save the system” as well as by the ongoing “crisis of leadership” of the working class globally. Thus, the system restabilized, despite an ongoing, relentless trend toward mass immiseration in the context of extremely sluggish economic growth. The social crisis of 2020 must be viewed in this historical context. Can capital postpone for much longer its day of reckoning with the profound crises it generates, a reckoning that must entail a still greater offensive against working-class living standards than we’ve already seen? And if not, will that denouement engender a political and ideological crisis of the system great enough to impel masses of working people into a struggle for a new, socialist society? Socialists have a responsibility to say what is: The first two decades of the twenty-first century have confirmed that capitalism has reached its historical limits. This moribund, irrational and inhumane system cannot be reformed in such a way as to promote human well-being and all-round development. On the contrary, it must be superseded, in Karl Marx’s words, by a “higher state of social production” — a rationally planned, collectivized global economy under the democratic rule of those who labour. In support of this claim, it’s instructive to consider why John McCain’s observation about the productivity of U.S. workers is a useful starting point for a Marxist-socialist perspective on what both Michael Roberts and Anwar Shaikh have called the first great depression of the twentyfirst century and the current predicament of world capitalism. At the very heart of Marx’s critique of capitalism is the proposition that an immanent

54  Twilight Capitalism contradiction exists between the drive of capitalist firms to increase productivity through labour-saving technological innovation and the imperative of the capitalist mode of production to measure wealth in terms of labour time (Smith 2019). According to Marx, the sole source of all “new value” is the living labour expended in the capitalist production of commodities, and this new value constitutes a definite magnitude that limits prices, profits and wages on an economy-wide scale. These two ideas are the foundation of the “capitalist law of value.” To be sure, Marx’s formulation of the law of value as part of his labour theory of value has been the subject of a long-standing and often tedious controversy. Huge quantities of ink have been spilled addressing a question that was of only secondary interest to Marx: namely, the contribution of labour inputs to the determination of relative prices. Marx’s primary concern, however, was with exploring the historical significance and longterm implications of the social practice of measuring (valuing) wealth in terms of labour time, especially in a context (that of a mature capitalist economy) where living labour is becoming a less and less vital ingredient in the production of material output. For Marx, this historically specific, institutionally based and largely unconscious social practice is by no means an eternal or inevitable feature of the human condition. Rather, it is bound up with a particular stage in the development of human society, one dominated by the class-antagonistic social relations — and perverse logic — of the capitalist mode of production. Accordingly, for Marx, the measurement of wealth in terms of labour time is by no means inherent in the metabolic exchange between humanity and nature. Instead, it is bound up with the capitalist social imperative to perpetuate the class domination of capitalists over wage labourers. It was precisely this consideration that prompted him to strongly criticize the notion (advanced in the 1875 Gotha Programme of the German Social Democrats) that “labour is the source of all wealth and all culture”: Labour is not the source of all wealth. Nature is just as much the source of use-values (and it is surely of such that material wealth consists!) as labour, which itself is only the manifestation of a force of nature, human labour power…. [A] socialist programme cannot allow such bourgeois phrases to pass over in silence the conditions that alone give them meaning. (1875/1970: 13, emphasis in original)

Twilight Capitalism: The Economic Dimension   55 Marx’s point here is that it is only the social arrangements specific to life under capitalism that render meaningful the identification of “wealth” (a natural category consisting of use values — that is, of useful things and effects) and “value” (a social relation that is created and sustained by a historically specific form of social labour). By way of contrast, Marx suggests that in the future socialist society, “real wealth is the developed productive power of all individuals. The measure of wealth is then not any longer, in any way, labour time, but rather disposable [free] time” (1973: 708).3 In a capitalist society, the material output of the economy-wide division of labour is distributed and consumed in accordance with people’s ability to purchase it with money — which serves not only as a means of exchange but, above all, as a claim on abstract social labour. Marx’s proposition that money is the necessary “form of appearance” of abstract social labour may not seem immediately obvious. But consider this: apart from those who subsist on state-funded social assistance or private charity, people possess money for two basic reasons — they either earn it through the performance of labour or they obtain it by virtue of their ownership of property. The vast majority of the population can immediately see the connection between their labour and the value represented by the money in their possession. At the same time, however, the origin of the money income of those who do not labour and have never laboured for a living seems more obscure. Even so, it’s not difficult to understand that those few who hold significant property assets “earn” their money primarily by getting others to perform labour on their behalf. There can be no money profit, money rents, money dividends or any other form of money income for those who own factories, mines, land, apartment blocks, retail stores or banks unless there are people labouring to create the value that finds expression in corporate profits, ground rent, interest and wages. To put the matter starkly, the class of big capitalist property owners can earn income only by exploiting those who labour for a living — that is to say, by paying workers far less than the total “new value” created through the performance of their labour and then appropriating the difference as “surplus value.”4 If Marx was right about this, then money is indeed the necessary form of appearance of abstract social labour — the “social substance” of economic value under capitalism. Money profit results from the appropriation of workers’ unpaid (surplus) labour and its conversion into

56  Twilight Capitalism surplus value. Furthermore, it follows that the displacement of living labour from production, through increased investments in labour-saving machinery and technology, must undercut the profitability of the system as a whole — its ability to produce new value generally and social surplus value particularly in magnitudes large enough to sustain the average rate of profit. Accordingly, improved labour productivity, insofar as it results from labour-saving innovation, will actually depress the average rate of profit, which is the decisive regulator of investment and growth in a capitalist economy. As Marx succinctly put it: “The progressive tendency for the general rate of profit to fall is … simply the expression, peculiar to the capitalist mode of production, of the progressive development of the social productivity of labour” (1981b: 319). Capitalism is a system geared not toward the maximization of material wealth (or use values in general) but toward the maximization of wealth in the socially antagonistic form of private profit — the profits of capitalists who own and control the major means of production, distribution and exchange. This accounts for the characteristic form of capitalist crisis — overproduction. The capitalist economy enters into periodic crisis not because too few goods are being produced to meet human needs, but because too much is produced in the form of commodities intended for sale at a profit. Too many commodities are produced relative to the effective, money-backed demand that exists for them. Furthermore, the real reason the economy enters into crisis is not because of a decline in productivity growth (although this can certainly affect the relative fortunes of competing capitalist firms and even national economies) but because not enough surplus value is being produced and subsequently realized in money form across an increasingly globalized capitalist economy. So why is it that an insufficient amount of surplus value is being produced? It’s because, due to the introduction of ever more sophisticated technology, the contribution of living labour (as a technical-natural input) to the production process progressively diminishes despite the fact that living, exploitable labour remains the sole source of all new value within the economy as a whole. So where exactly did presidential hopeful McCain go wrong? We can now answer this question with some Marxian scientific precision. McCain seemed to think that in a rationally ordered economic system, a high level of labour productivity should mean that the “economic fundamentals” are sound. The problem, however, is that capitalism is by no means rational

Twilight Capitalism: The Economic Dimension   57 in this sense, and thus improved productivity doesn’t equate to dynamic growth or even to economic stability. On the contrary, capitalism is dominated by historically specific laws — particularly the law of labour value and the law of the tendency of the rate of profit to fall — that involve a deepening structural contradiction between the development of the productive forces and the reproduction of capitalist social relations. These laws inform and give expression to a growing incompatibility between the “technical-natural” and “social” dimensions of capitalist society. Without grasping this, it’s simply impossible to understand how real progress in labour productivity — based on labour-saving technical innovation — can result in the turmoil in which global capitalism recurrently finds itself. In fact, we can go further and say that these laws provide the indispensable key to understanding how and why the application of natural-scientific rationality in capitalist production leads inevitably to the macro or global social irrationality of wasted capacity, wasted labour power and wasted opportunities for human development — as well as to the vast and growing mass of human misery that marks twenty-first-century twilight capitalism.

PRODUCTION, FINANCE AND THE FALLING RATE OF PROFIT So, what exactly does all this talk about capitalist production have to do with the economic malaise that began in 2008, a malaise that many people think originated as a “crisis of financialization” and that intensified greatly in 2020 thanks to the coronavirus? Certainly, the most immediate causes of the crisis of 2007–09 had to do with the frenzied and short-sighted efforts of investment bankers to realize easy profits through speculative transactions in the sphere of exchange — above all, the selling, slicing up, repackaging and reselling of “toxic” mortgages. It’s also true that it was the long-overdue puncturing of financial-market “bubbles” (above all, the housing bubble) — intimately associated with the growth of highly dubious “financial instruments” (forms of what Marx called “fictitious capital”)5 — that sent shock waves through the financial system and contributed, directly or indirectly, to the collapse of asset values in the broader economy. All of this has been explored, dissected and discussed ad nauseam by mainstream journalists, politicians, pundits, economists and even film-makers. All the same, the relentless chatter about hedge funds, derivatives, collateralized debt obligations, credit default swaps, Ponzi schemes and financial mismanagement and malfeasance did little to clarify the most fundamental issues underlying the crisis. If anything,

58  Twilight Capitalism its effect was to deflect attention away from the systemic irrationality of capitalism to the greed, corruption and short-sightedness of particular capitalists — precisely, of course, with a view to “Saving the System” (the cover headline that appeared on the October 11, 2008, issue of the Economist). No doubt, once the shock waves of the Covid-19 pandemic recede, there will be many similar post-mortems about other proximate (non-viral) causes of the financial turbulence of 2020 and a similar effort to rehabilitate, yet again, the good name of “free-market capitalism.” The spectacular rise over the past four decades of financial (especially “fictitious”) capital relative to productive capital was neither an accident nor the result of the ascendancy of “neoliberalism,” understood primarily as an ideological phenomenon.6 What is crucial to understand is that the ground for the financial bubbles and the associated feeding frenzy that were prominent features of the 2008–09 and 2020 crises was prepared by a persistent economic problem that goes back to the 1970s and that originated in the “real economy”: namely, the profitability problem of productive capital. For precisely this reason, an adequate account of the financialization of the economy must focus on the tendency of the rate of profit to fall due to changes in capitalist production processes. Let’s consider a couple of observations from the third volume of Marx’s Capital. Marx states that the corporate capitalism that was emerging in his own time (in the form of the “joint-stock company”) would produce a “new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors; an entire system of swindling and cheating with respect to the promotion of companies, issue of shares and share dealing” (1981b: 569). Furthermore, “The credit system, which has its focal point in the allegedly national banks and the big money-lenders and usurers that surround them, is one enormous centralization and gives this class of parasites a fabulous power not only to decimate the industrial capitalists periodically but also to interfere in actual production in the most dangerous manner — and this crew know nothing of production and have nothing at all to do with it.” (1981b: 678–79) Elsewhere, in the second volume of Capital, Marx made the following observation, followed by an illuminating parenthetical comment from Friedrich Engels: [To the possessor of money capital,] the production process appears simply as an unavoidable middle term, a necessary evil

Twilight Capitalism: The Economic Dimension   59 for the purpose of money-making. (This explains why all nations characterized by the capitalist mode of production are periodically seized by fits of giddiness in which they try to accomplish the money-making without the mediation of the production process.) (1981a: 137) To understand the significance of such “giddy” and unproductive capitalist behaviour, one needs to consider how the preconditions for it develop, which in turn requires a concrete analysis of how the immanent contradictions of capitalism find expression and unfold in particular historical contexts. The financial crisis of 2007–09 was the outcome of a decades-long effort on the part of the capitalist class, in the United States and elsewhere, to arrest and reverse the long-term decline in the average rate of profit that occurred between the 1950s and the 1970s. It is the cumulative and complex result of a series of responses by the capitalist class to an economic malaise that can be traced to the persistent profitability problems of productive capital — the form of capital associated with the “real economy.” Virtually all radical political economists agree that the 2008 debacle had roots in the profitability crisis of the 1970s. In response to that crisis, manifested throughout the advanced capitalist world in falling rates of profit as well as in “stagflation” (high inflation rates combined with slower growth and rising unemployment), the capitalist class abandoned the “capital-labour accord” negotiated in the late 1940s and 1950s. Rendered economically feasible by the high profit rates of the immediate postwar period and prompted by the politico-ideological exigencies of the Cold War (especially the necessity to block the emergence of powerful left-wing forces in Western labour movements), this “class compromise” delivered rising real wages, low unemployment and expanded social-welfare programs for over twenty years. But with the arrival of the profitability crisis of the 1970s, the capitalist class was compelled to undo much of this. The inflation that fuelled high levels of class conflict in the 1970s was defeated through wage controls and/or high interest rate policies under successive post-Keynesian and monetarist regimes. The deep recession of the early 1980s, engineered by the high-interest-rate policies of the U.S. Federal Reserve under Paul Volcker, along with cutbacks in socialwelfare provision by most major Western governments, replenished the “reserve army” of the unemployed and placed downward pressure on real wage growth. Trade liberalization, corporate globalization and

60  Twilight Capitalism the turn toward “lean production” and “flexible labour markets” further weakened nationally based labour movements and removed obstacles to international capital mobility. Taken together, these “neoliberal” measures stemmed the fall in the average rate of profit in the leading capitalist countries but failed to restore the much higher rates enjoyed by capital in the earlier postwar period. For a considerable time, extending into the 1990s, the average profit rate was stabilized, albeit in a comparatively low range. Far more draconian anti-labour measures might have been tried to restore profitability to higher levels, but such measures would have carried considerable political-ideological risks — particularly during the 1980s, when the capitalist West was facing down a weakening but still formidable Soviet adversary. This was the background to the long ascendancy of the rate of profit in the U.S. financial sector relative to that of the productive economy (manufacturing, construction, mining and so forth). In the early 1980s, the financial sector accounted for only about 10 percent of total profits; by 2007, this figure had risen to 40 percent. From the 1950s to the 1970s, the ratio of financial assets to gdp averaged approximately four to one. By 2007 this ratio had risen to roughly ten to one — and by 2014 to fifteen to one. In 1980, the dollar value of world financial assets (bank deposits, securities and shareholdings) stood at 119 percent of the dollar value of global gross output; by 2007 that figure had risen to 356 percent. By the end of 2020, the value of financial assets is projected to be ten times that of global gross output. Following the capitalist offensive against labour in the 1970s and early 1980s, crises of overproduction were avoided or attenuated (as in 1991–92 and 2001–02) through an enormous expansion of credit. Between the fourth quarters of 1981 and 2008, credit market debt in the U.S. mushroomed from 164 percent to 370 percent of gdp, dipping slightly to 350 percent after 2009. While real wages stagnated or declined, American working people were encouraged to maintain “aggregate demand” by plunging ever deeper into debt. Between 1980 and 2007, total household debt mushroomed from about 60 percent of national income to over 120 percent — not surprising given that between 1973 and 2000, the average real income of the bottom 90 percent of American taxpayers declined by more than 7 percent (Chernomas 2009: 21). Ronald Reagan’s massive increase in military spending during the 1980s, which primed the demand pump enormously, ran up government

Twilight Capitalism: The Economic Dimension   61 debt to unprecedented levels. Throughout the 1990s, federal government debt continued to steadily expand before exploding under George W. Bush following the U.S. invasion and occupation of Iraq. By early 2009, it stood at about $11 trillion in a $14 trillion (gdp) economy; by July of 2020, it reached $27 trillion or 136 percent of gdp. Table 2-1 U.S. National Debt as a Share of the gdp Year

1940

1950

1960

1970

1980

1990

2000

2010

2019

% of gdp

51.6

92.2

54.5

36.4

32.6

54.4

55.6

91.2

101.6

Source: Federal Reserve Bank of St. Louis:

What prompted this massive expansion of debt and the associated financialization of the U.S. economy? To answer this question, we need to consider why the traditional, more production-centred investment strategies of the capitalist class began to falter beginning in the 1970s. But for the time being, it’s sufficient to note that over an extended period investment in finance and commerce became a much more secure and lucrative way to earn profits than investment in industrial production, at least for capitalists operating in the “advanced capitalist” world. Many giants of industrial capital acknowledged this new reality by expanding their business operations beyond the production of manufactured goods to the provision of an array of profitable financial services, a notable example being General Motors’ gmac financial services company.

The Malaise of Productive Capital

According to Marx, surplus value must be created by living labour operating in the sphere of capitalist production (manufacturing, construction, transportation, mining and so on) before it can be shared with unproductive financial and commercial capitals operating in the sphere of circulation. Yet what is most striking about the past forty years is the persistent lacklustre performance of productive capital — the only form of capital that can generate new value and thus “real wealth” as this is defined in capitalist terms. Since the 1970s, ruling elites have been highly successful in massively redistributing wealth in their own favour and ratcheting up the rate of exploitation of wage labour; but the rate of growth of the world capitalist economy (global gdp) has been historically low and there have been numerous indications of long-term malaise. Cross-national data compiled by the oecd show that a growing gap

62  Twilight Capitalism Table 2-2 Average Growth Rates of World Capitalist Economy, 1960–2018 1960s

1970s

1980s

1990s

2000–2009

2010–2018

4.90

3.93

2.95

2.70

2.86

3.00

Source: World Bank:

developed between average profit rates and growth rates in all the G7 countries (the United States, Britain, Canada, France, Germany, Italy and Japan) following the deep recession of the early 1980s. Furthermore, the trend for the accumulation rate (that is, average annual percentage growth rates of capital stock) began to decline with the profitability crises of the 1970s and continued to fall even after a partial recovery of profitability in the 1980s. To be sure, economic growth occurred unevenly across the world, and certain regions fared much better than the G7 countries with respect to gdp growth rates, especially after the mid-1990s. In particular, China experienced growth rates that were dramatically higher than the global averages, and this performance was associated with an explosion of productive capitalist enterprise, especially in light manufacturing and construction. Assuming the role of “workshop of the world,” China attracted an increasing share of the productive-capital investments being made by United States and other Western-based transnational corporations. The result was a further decline of industrial production in the advanced capitalist countries and the corresponding rise of the fire and service sectors noted earlier. Trends in global gdp growth rates tell only a part of the story. When global growth rates are calculated on a per-capita basis, and with the erstwhile Soviet-bloc countries included, the declining performance of the world economy as a whole was even more remarkable in the lead-up to the crisis of 2007–09, with average growth rates of 3.5 percent in the 1960s, 2.4 percent in the 1970s, 1.4 percent in the 1980s and only 1.1 percent in the 1990s (Harvey 2005: 154). Apologists for the capitalist system always have a hard time accounting for the bleak picture just sketched. Even so, while leftist critics of capitalism and even many mainstream economists correctly identified the profitability crisis of the 1970s as a vital factor in shaping subsequent economic trends, controversy abounds as to whether Marx’s own theory provides a satisfactory explanation of its origins. The question is starkly

Twilight Capitalism: The Economic Dimension   63 posed: Does the recent history of global capitalism actually confirm Marx’s claim that “the real barrier to capitalist production is capital itself ” (1981b: 358)?

MARX’S LAW OF THE TENDENCY OF THE RATE OF PROFIT TO FALL For many years, the favoured explanation for the profitability crisis of the 1970s among radical political economists was the “wage-push/ profit-squeeze” or “rising strength of labour” account. According to this approach, the profit share of national income declined because real wages (across private and public sectors) rose faster than the rate of productivity growth — a view shared by most mainstream economists as well. The element of truth in this explanation was that, over a considerable period of time, an increasing share of the aggregate wage bill went to wage and salary earners who were not directly involved in the production of commodities, and “total wages and salaries” as a percentage of national income rose relative to the profit share. As workers were displaced from production due to technological innovations in manufacturing, forestry, mining and construction, they found new jobs in commercial and financial sectors as well as in non-profit state or parastatal agencies (public administration, education and so on). While the labour performed by these workers was, to varying degrees, socially useful and even “systemically necessary” from the standpoint of capital, it was by no means directly productive of commodities embodying surplus value — and it therefore constituted “unproductive labour” in Marx’s terms. The activity of some of this labour (both commercial and financial) accelerated the turnover of productive capital by hastening the realization of commodity values in the circulation phase of the circuit of capital, while the activity of the growing army of workers in finance laid the foundation for the subsequent expansion of fictitious capital. This growth of “socially necessary unproductive labour” was a supplementary cause of the postwar fall in the rate of profit in the advanced capitalist countries, but it was by no means the sole or even the primary cause. As noted earlier, there is strong evidence, particularly for the U.S. economy, that the growth of real wages for private-sector workers didn’t outstrip productivity growth in the period leading up to the profitability crisis of the 1970s. Moreover, rigorous empirical studies by Marxist economist Anwar Shaikh established that the fall in the average rate of profit in the U.S. economy was significantly correlated with an increase in

64  Twilight Capitalism Chart 2-5 Average Rate of Profit (s/C), United States, 1947–2019 



 
 
 
 



 

      

               

 

 



     






Source: Authors, based on bea (2020) data.

Chart 2-6 Organic Composition of Capital (C/s+v), United States, 1947–2019 
 
 
 
 

      

               

 

 



     






Source: Authors, based on bea (2020) data.

what Marx called the “organic composition of capital” — the ratio of “dead labour” (accumulated fixed capital, etc.) to living labour in production 
 (Shaikh 1989; see also Shaikh and Tonak 1994). Independent studies by Fred Moseley (1987; 1991) complemented Shaikh’s findings while giving greater weight to the role of a rising ratio of unproductive to productive labour in the overall fall in the average rate of profit. In Charts 2-5 and 2-6, we offer our own empirical measures of these

Twilight Capitalism: The Economic Dimension   65 ratios in the U.S. economy from 1947 to 2019. (For further estimates, see Chapter 5.) Chart 2-5 displays a distinct long-term decline in profitability over the seventy-two-year period, punctuated by sharp conjunctural declines in the lead-ups to every recession since the end of World War II, including the recession of 2020. To be sure, profitability was regularly restored in the aftermath of those recessions (as expected in Marx’s theory), but the dips in the rate of profit have tended to become deeper and more serious and the recoveries weaker over time. Chart 2-6 captures the rise in the organic composition of capital, a trend that is inversely correlated with the fall in the average rate of profit. Over the long term, this ratio of “dead labour to living labour” has risen quite steadily, suggesting strongly that as the role of living labour declines, the rate of profit faces downward pressure. These findings are fully consistent with Marx’s law of the tendency of the rate of profit to fall (ltrpf).

PROFITABILITY CRISIS AND FINANCIALIZATION REVISITED Can this analysis contribute to explaining the long-term financialization of the advanced capitalist economies — the shift from productive capital investment to financial and, increasingly, fictitious capital in the pursuit of profits? It quite clearly can. The response of the social capital7 to the profitability crisis of the 1970s involved a threefold strategy with regard to investment: to restrain new capital formation in industries deemed to be “capital intensive” and burdened by a high-wage labour force; to concentrate investment in technological innovation (such as information technology) in the financial sector with a view to enhancing labour productivity in that sector8; and to direct an increasing share of productive-capital investment to “newly industrializing” regions (Mexico, China, Southeast Asia and India), where a higher profit rate could be achieved based on much lower wage costs and less expensive technologies (lower organic composition of capital). This new investment strategy can be viewed as a determined effort by the dominant fractions of the social capital to mobilize what Marx called the “counteracting tendencies” to the falling rate of profit. The failure of Western labour movements to wage a serious fight against the capitalist offensive not only ensured the success of this effort; it also encouraged the capitalist class to overreach in ways that proved to be problematic in the longer term. Emboldened by the passivity of the bureaucratic labour

66  Twilight Capitalism leaders and exhilarated by the collapse of Soviet Bloc “Communism,” the capitalist class succumbed (nowhere more so than in the United States and the United Kingdom) to the “giddiness” referred to by Engels. An important consequence was the redirection of a great deal of surplus value into the circuit of capitalist revenue (that is, into the bloated executive pay and bonuses that made possible increasingly obscene levels of luxury consumption by the capitalist class) and away from accumulation (that is, new fixed capital formation). But a more important consequence was financialization — significantly increased investment in financial activity, the appearance of new financial instruments like derivatives and hedge funds, frenzied speculation surrounding a growing volume of fictitious capital, a massive overloading of the credit system and a generalized “irrational exuberance,” to borrow Alan Greenspan’s memorable phrase. Ironically, as dominant sections of the capitalist class committed themselves to making money without the “mediation of the production process,” an increasing share of global production was being concentrated in East Asia, where balance of trade surpluses served to accelerate the financialization process in the U.S. as well as the massive growth of public and private debt in the Western world: In his memoir, Age of Turbulence, former U.S. Federal Reserve chairman Alan Greenspan attributed the lowering of interest rates that occurred during his watch (1987–2006) to a “glut of Asian savings.” This explanation suggests that low interest rates were an expression of prevailing market forces rather than central bank and government economic policy. In fact, the “savings glut” that arose in Asia in the 1990s was itself the product of a creditinduced expansion of production and global trade, an effort that was both economic and geo-political in effect and design. The “glut of savings” in such countries as Japan, China, and Korea was the result of the amassing of large trade surpluses with the West, particularly the U.S., surpluses which were then lent back in various ways to the West so that consumers could continue to purchase Asian-made consumables. Consumers in the West, particularly in the U.S., got used to borrowing to feed their consumerist impulses. With easy access to credit, they were all too willing to purchase goods they really didn’t need with money they really didn’t have…. Low interest rates prompt and privilege consumption over savings. There is little immediate incentive

Twilight Capitalism: The Economic Dimension   67 to save when the combined impact of inflation and taxation on savings results in negative real saving, as has been the case in the U.S., Canada and the West generally for the last 20 years. The current crisis is a financial crisis, but not just a crisis in the system of finance and credit. It’s a crisis of the global economy based on credit. It’s a crisis of vast indebtedness, come home to roost.9 (Campbell 2009: 4)

THE ROLE OF CHINA Several factors account for the recovery of profitability in the face of slower overall growth rates in the world economy from the mid-1990s on. One was the higher rate of labour exploitation in the advanced capitalist world, made possible by capital’s victories over labour in the class battles that marked the 1970s and 1980s. A second was the proliferation of fictitious capital and the inflation of the huge “debt bubbles” already discussed. A third, however, was the emergence of significant new sites of capitalist production, surplus value creation and capital accumulation in the “emerging” economies of South and East Asia. In this regard, the contribution of the People’s Republic of China to the stabilization of global capitalism during the heyday of financialization deserves special attention. A near consensus exists among self-styled socialists in the West that capitalism had been fully restored to China long before the Great Recession of 2008–09 (see, for example, Hart-Landsberg and Burkett 2005). To a considerable extent, this assessment echoed the conventional wisdom of the business press that China’s rapid growth rates after the late 1980s were entirely attributable to the “market reforms” introduced by Deng Xiaoping and his successors and the extraordinary growth of capitalist enterprise in China’s “socialist market economy.” This view was also often associated with the assumption that China under Mao Zedong had been fully socialist and that the repudiation of Mao’s economic policy by his successors signified a return to the “capitalist road.” Thus, leftist defenders of Mao’s legacy and pro-capitalist ideologues have often converged in seeing China’s economic “success story” as resulting from the abandonment of socialism and a move toward the full restoration of capitalism by the post-Mao Chinese leadership. While such a characterization of post-Maoist China contains some truth (after all, who would deny the massive proliferation of capitalist

68  Twilight Capitalism enterprise in the Chinese economy?), the thesis that China has become fully capitalist is predicated on equating the presence and expansion of capitalist enterprise with the socio-economic dominance of capital. Such an equation presupposes what needs to be demonstrated: that capitalist rule — and, with it, the tyranny of the capitalist law of value — have been re-established in China. Yet a strong case can be made that China is not, or not yet, dominated by capitalist property relations and that it remains a post-capitalist social formation — or, more precisely, a “workers’ state,” albeit one that was bureaucratically deformed. (This argument draws on the theoretical categories of Leon Trotsky’s analysis of the Soviet Union under Stalin and is defended by some, though not all, contemporary Trotskyist groups.10) From this perspective, China is not now and never has been fully socialist. Rather, it is best understood as a transitional socio-economic formation, one that has combined elements of capitalism and socialism since the victory of the Chinese revolution in 1949. To be sure, the balance of these elements has shifted massively over time, and there is unquestionably a very real possibility that the capitalist elements may yet prevail over the socialist ones. But a convincing case has not yet been made that a “capitalist counter-revolution” has already occurred. The thesis that China has been completely reabsorbed into world capitalism, that the Chinese party-state bureaucracy is now an instrument of capitalist class rule and that the Chinese economy is subordinate to the law of value is simply not credible. What’s more, to credit China’s rapid economic development and modernization to the restoration of capitalism is to give considerable ground to those who reject the Marxist thesis that, by the twentieth century, capitalist social relations had become a brake on the development of the productive forces of humankind.11 What the “capitalist restoration” perspective ignores is the fact that a central feature of China’s (highly contradictory) “economic miracle” has been the survival of many socialist elements within its economy, elements that include state ownership of the core of the industrial economy, government control of the financial system, the significant role of centralized economic planning and the (weakened but still extant) state monopoly on foreign trade. Without those elements, in our view, China would have been reduced to a semi-colonial status within the world capitalist economy: clearly a long-standing goal of the U.S. hegemon and its G7 imperialist allies.

Twilight Capitalism: The Economic Dimension   69 Furthermore, the specific way in which these elements have been combined and articulated with an export-led strategy of economic development — predicated on an “opening” to the world market and the heavily controlled revival of capitalist enterprise (as well as the continuing suppression of the Chinese working class as an independent force) — accounts for the dynamic but also for the deeply anti-egalitarian features of Chinese economic growth over the past four decades. Our fundamental point is that China’s “socialist market economy” has remained within the historical ambit of Stalinism — that is, the social phenomenon of bureaucratic rule on the basis of collectivized property forms and the ideological perspective of building “socialism in one country.” With its opening to the world market, the Chinese Communist Party sought to use its monopoly of political power and the surviving elements of socialist planning to harness market forces and capitalist enterprise to the essentially nationalist project of modernizing China and transforming it into a “great power.” Ironically, in the process, the Chinese Stalinists also contributed greatly to a certain stabilization of the world capitalist economy, especially during the period between the recession of the early 1980s and the Great Recession of 2008–09. For some time, China’s principal contribution to world capitalism was its production of cheap consumer goods for the Western working class. Without the influx of these goods into the advanced capitalist countries over several decades, it’s quite likely that (barring the emergence of serious class struggles) the living standards of Western workers would have declined far more than they did. The “super-exploitation” of Chinese workers by Western-based corporations, indigenous Chinese capital and offshore Chinese capitalists not only allowed for the production and sharing out of an enormous volume of surplus value; it also contributed to a cheapening of “the elements of variable capital” (the commodities purchased by workers’ wages), thereby offsetting increases in the cost of living and attenuating the misery resulting from job loss in traditional industries and a supine Western labour movement. The combined effect of this super-exploitation (paying Chinese workers far less than what would have been paid to their Western counterparts) was to mitigate the stagnancy in world economic growth rates, improve global profitability and subdue the class struggle in the advanced capitalist world. This analysis challenges the conventional understanding of China with respect to its most fundamental premises. In counterpoint to the notion

70  Twilight Capitalism that capitalism somehow “rescued” China from economic stagnation, it suggests that China’s transitional economy played a helpful, even crucial role in rescuing Western capitalism from its deepening profitability crisis, at least for a time. In pursuit of its nationalistic ambitions, the Chinese bureaucracy placed the resources of the workers’ state at the disposal of a badly debilitated world capitalism — which resulted not only in sustained rapid growth for the Chinese economy but also in a partial, if temporary, restabilization of the global capitalist order. Of course, little of this is acknowledged, even among the least Sinophobic elements of the Western bourgeoisies. Instead, the Chinese Stalinist bureaucracy’s service to world capitalism has been repaid by the Western imperialists in recent years with the most flagrant ingratitude: escalating trade tariffs and sanctions; technological embargoes; accusations of currency manipulation and intellectual property theft of Western technology by the Chinese state; incitements to rebellion by affluent pro-Western segments of the Hong Kong population; denunciations of Beijing’s treatment of ethnic minorities; and so on. At bottom, of course, it is the relative success of China’s hybrid economy in the face of the strong headwinds of global depression that has incited Western capital and its political agents to launch a new cold war with China in recent years, one that could quite possibly escalate into a shooting one. Corporate mass media in the West is making every effort to sway public opinion against China using their customary, tried and true techniques of mass deception. If they succeed, and we note that much of the Western “left” is either abetting or doing precious little to oppose the anti-China propaganda campaign, the U.S.-led nato imperialist alliance will be emboldened to take increasingly aggressive — and dangerous — actions against the Chinese workers’ state. In our view, Mao Zedong was wrong to have labelled Deng Xiaoping a “Khrushchevite capitalist-roader,” but he was surely correct (or prescient) to recognize that Deng shared something of Soviet premier Nikita Khrushchev’s vision of “peaceful competition” (and coexistence) with the capitalist world. In the late 1950s, Khrushchev proclaimed that the Soviet planned economy would eventually inundate the West with a flood of low-priced consumer goods, thereby striking a decisive blow against the capitalist profit system — a utopian boast that soon rang hollow as the Soviet growth machine began to falter a few years later. Deng and his successors understood that China would be unable to compete with

Twilight Capitalism: The Economic Dimension   71 the West in overall productivity for many years to come (after all, during the 1990s and early 2000s, American, Japanese and German workers set in motion productive apparatuses that were many times more powerful and efficient than China’s); but it could prosper and progress by attracting productive-capital investment from the West and by mobilizing its low-wage working class to manufacture cheap consumer goods for the capitalist world market. Forty years on, however, Deng’s vision has turned out to be no less utopian than Khrushchev’s, even if the economic model he pioneered has displayed truly remarkable resilience. Thanks to the irrepressible contradictions of the capitalist system, some rather diseased chickens have come home to the Chinese roost in the form of almost $1.1 trillion of U.S. Treasury securities (as of July 2020) — financial assets whose real value is shaky at best. Since the Great Recession, the Chinese leadership has openly questioned the role of the U.S. dollar as the pre-eminent world currency and broached the possibility of an overhaul of the international monetary system (this despite the still-massive economic interdependency of the Chinese and U.S. economies). As the new cold war between China and the West heats up, overwhelmingly at the instigation of the United States, and as the global depression continues to deepen, a breakdown of that U.S.-dominated system of “world money” may well emerge as a further, hugely aggravating factor in the crisis of twilight capitalism. The future of China’s deformed workers’ state and “socialist market economy” remains very much in doubt, and with it, China’s continuing ability to contribute to the stabilization of world capitalism. But one thing is fairly certain: either the Chinese working class will settle accounts with the Stalinist bureaucratic caste and usher in a revolutionary workers’ state committed to socialist democracy and working-class internationalism … or the oligarchy will continue to prepare the ground for a full-scale capitalist counter-revolution. In either case, China will emerge, for better or worse, as the foundry in which the destiny of humankind will be forged for a considerable period to come.

CAPITALIST ECONOMIC CRISIS AND MARXIST-SOCIALIST POLITICS From a Marxist-socialist perspective, the Long Depression lays bare the fundamental irrationality of capitalism in an era marked by unprecedented global economic integration, profound global inequality and the prevalence of advanced, labour-saving technology within the core of the

72  Twilight Capitalism capitalist world economy. It also lends considerable credibility to Marx’s ltrpf as the harbinger of capitalist decline: Beyond a certain point, the development of the powers of production becomes a barrier for capital; hence the capital relation a barrier for the development of the productive powers of labour…. The growing incompatibility between the productive development of society and its hitherto existing relations of production expresses itself in bitter contradictions, crises, spasms. The violent destruction of capital not by relations external to it, but rather as a condition of its self-preservation, is the most striking form in which advice is given to it to be gone and to give room to a higher state of social production. (Marx 1973: 749–50) Yet as Marx knew very well, capital is a social relation, not a thinking entity, and it is therefore unable to take such “advice.” What’s more, those who wish to perpetuate this social relation (above all, the capitalist class) will never accept it. The outcome of the growing contradiction between the “technical-natural” and the “social” imperatives of capitalist production will not depend on the unfolding of immutable historical laws but on the response of conscious human beings to the systemic irrationality manifested by this contradiction. In other words, it will depend on a competition of “programs” and a struggle of social classes. The agents of capital — its main beneficiaries — will do everything possible to “save the system,” regardless of the terrible human costs involved. They will seek to win support for their program from working people and the middle classes — partly through bribery, intimidation and blackmail, partly through the promotion of reformist illusions and partly through the exploitation of irrational and backward prejudices: racism, xenophobia and, above all, nationalism. But the working-class majority is not predestined to swallow the poison offered up by the proponents of “saving the system” — a prescription that could well lead to thermonuclear world war. If enough people who understand the limits (and perils) of capitalism devote their energies to building a serious socialist movement, the social crisis that erupted in 2020 can be turned into an opportunity of historic proportions. Seizing this opportunity will require much more than making a moral critique of the depredations and iniquities of capitalism, and more too than elaborating an abstract case for socialism. What is objectively and urgently necessary at this historical juncture is a revolutionary

Twilight Capitalism: The Economic Dimension   73 organization rooted in the working class — above all, among the most politically advanced layers who recognize that there is nothing inevitable about capitalist rule and who are prepared to fight for the reconstruction of society as a socialist democracy of “the associated producers.” A movement capable of successfully challenging capitalism, it bears emphasizing, can only be built as a “tribune” of the oppressed — as a champion of the special needs and interests of women, racialized and Indigenous peoples, immigrants and all other victims of the social irrationality, bigotry and ecological destruction engendered by decaying global capitalism. The looming catastrophes — environmental, political-economic, thermonuclear and microbial — that threaten the lives of billions of people starkly illuminate the necessity of forging a new class-struggle leadership for the workers of the world. Such leadership would campaign for a massive program of much-needed public works and for workers’ control of production and all other enterprises. It would fight as well for a “sliding scale of wages and hours” (a shorter workweek with no loss in pay) to defend living standards and combat layoffs. A struggle for these demands would help mobilize the masses for the conquest of power and the wholesale expropriation of the means of production, communication and transportation, as well as the banks and other financial institutions. A successful mass struggle against capitalist tyranny and decay would culminate in the creation of a government of workers’ councils to democratically rule an egalitarian, rationally planned, collectivized and ecologically sustainable economy. Opposing this perspective, much of the ostensibly socialist left is devoted to promoting various forms of “step at a time” reformism. This gradualism, often involving support of or collaboration with putatively “enlightened” elements of the capitalist class, flows from a lack of confidence in the revolutionary capacities of working people, as well as from illusions that capitalism can shed its more inhumane features through a “democratization” of the existing capitalist state. Other leftists, in a fashion reminiscent of the utopian socialists of the early nineteenth century, spend much of their time contemplating what the “ideal” society should look like — its gender relations, structures of consumption, ecological footprint and so forth — and how this ideal might be prefigured and exemplified through personal “lifestyle choices” within existing society. It was precisely in the service of his programmatic struggle against such reformism and utopianism that Marx developed his scientific critique

74  Twilight Capitalism of bourgeois political economy as a guide to a revolutionary political practice. The time has come for a revival of Marx’s scientific socialism. The time has come for a class-struggle, socialist program that appeals boldly to working people’s own most fundamental interests. Above all, the time has come for a socialist message that declares loudly and clearly that our species can no longer afford an economic system based on class exploitation — a system whose social relations imperiously necessitate the outmoded measurement of wealth in terms of “abstract social labour” and that must, as a consequence, deny humanity the full benefits of scientific advancements while plunging us recurrently into economic depression, ecological calamities, pandemics and war. The time has come for this great humanity to say: Enough!

Notes

1. Lest too positive a light be shone on the role of the Canadian Armed Forces, it should be noted that while it was garnering favourable media attention for its “heroic” work in nursing homes in April, senior officers were also considering an “information operations” campaign as a central component of the caf’s response to the pandemic. Although finally abandoned on May 1, the plan, according to a caf document leaked to the Ottawa Citizen, aimed at “shaping” and “exploiting information” with a view to deterring civil unrest. It was to involve military personnel broadcasting federal-government-approved propaganda over loudspeakers and through temporary radio stations; undertaking “village assessments” across the country of the potential for civil unrest; and meeting with community and religious leaders to enlist their support in deterring civil disobedience. The planning document identified the suppression of social opposition and the strengthening of trust in government as its principal objectives. See Pugliese 2020. 2. These figures on the distribution of “new income” during the Obama years fuelled the Occupy Wall Street movement as well as the first presidential run by Senator Bernie Sanders in 2016. After losing the party nomination to Hillary Clinton and announcing his continuing fealty to the Democrats, Sanders proclaimed that the 2016 election “is about ending the 40-year decline of our middle class [and the] grotesque level of income and wealth inequality that we currently experience, the worst it has been since 1928. It is not moral, not acceptable and not sustainable that the top one-tenth of 1 percent now own almost as much wealth as the bottom 90 percent, or that the top 1 percent in recent years has earned 85 percent of all new income. That is unacceptable. That must change.” Sanders failed to add, however, that the tremendous wealth transfer from the bottom to the top he deplored had occurred under Obama’s administration and would almost certainly have continued under a Clinton presidency. Obama’s

Twilight Capitalism: The Economic Dimension   75 pro-corporate policies — including the Wall Street bailout of 2009, the Federal Reserve program of “quantitative easing,” the bailouts of General Motors and Chrysler leading to the slashing of auto workers’ wages and the shifting of health insurance costs onto the backs of workers under the Affordable Care Act (a.k.a. Obamacare) — resulted in the greatest transfer of wealth from the bottom to the top of the U.S. class system in history (at least before the events of 2020, that is). 3. In asserting this, Marx was not, of course, denying that labour would remain a “cost of production” in a socialist society. But in such a society, “concrete labour” will take its place as one among many costs that must enter the economic calculus and plans of the “associated producers.” Other costs, which tend to be systematically overlooked within the framework of capitalist social relations, are those associated with the impact of human productive activity on the natural environment (including the biosphere) and the domestic labour associated with the reproduction of human labour power and care of the young and infirm. The contributions of both “nature” and domestic-reproductive labour to social production and reproduction will enter into the economic calculus of a socialist society in ways that are simply impossible in a society dominated by the capitalist law of value. That said, domestic-reproductive labour, long associated with the special oppression of women under capitalism, would be largely replaced in a fully socialist society through massive public investments in quality childcare centres, long-term care facilities and the like. 4. For a fuller summary of Marx’s own argument regarding the origin of surplus value in the exploitation of wage labour, see Chapter 3. 5. For Marx, writes Suzanne de Brunhoff, the “notion of ‘fictitious capital’ derives from that of loaned money-capital. It suggests a principle of evaluation which is opposed to that which is based on labour-value” (1990: 187). Although “fetishized” on financial markets, fictitious capital “has some real roots — the necessity of there being money-capital, credit and the means of financial circulation as an expression of the functioning of the capitalist mode of production” (187). See Chapter 4 for further discussion of this important, if underdeveloped, concept in Marxist political economy. 6. The thesis that neoliberalism is an ideologically driven phenomenon — one designed to displace the purportedly more humane capitalism associated with the postwar “Keynesian welfare state” — was embraced by much of the liberalprogressive and social-democratic left in the twenty years leading up to the Great Recession. On the eve of that crisis, it was championed by the populist journalist Naomi Klein in her best-selling book The Shock Doctrine: The Rise of Disaster Capitalism (2007) and it continues to be championed to one degree or another by much of the “broad left” and even by some purported socialists. As we argue in subsequent chapters, despite its veneer of radical critique, the real effect of the thesis is to conceal the fundamental irrationality of contemporary capitalism, to depict the neoliberal class strategy as simply the product of greed and mean-spiritedness, rather than as a response to the real contradictions of the profit system, and to promote the illusion that “neoliberal capitalism” can be replaced by a capitalism that is both more rational and humane.

76  Twilight Capitalism 7. In Marxist terminology, “the social capital” refers to the totality of capitals, capitalists and capitalist enterprises operating within the economy, as distinct from the “individual capitals” that compete with one another. It is conceptually similar to Marx’s notion of “capital in general” — a theoretical category that abstracts from the competitive interactions of individual capitals in order to highlight the relations of exploitation between capital and the class of wage labourers, the latter conceived as the “collective labourer.” Thus, “the social capital,” as used here, doesn’t refer to government-owned “capital goods” or infrastructure as it usually does in mainstream economic theory. Nor should it be confused with the term “social capital” as used by some sociologists. 8. David Harvey notes: “By 2000, [information technologies] accounted for 45 percent of all investment, while the relative shares of investment in production and infrastructure declined. During the 1990s this was thought to betoken the rise of a new information economy. In fact, it represented an unfortunate bias in the path of technological change away from production and infrastructure formation into lines required by the market-driven financialization that was the hallmark of neoliberalization. Information technology is the privileged technology of neoliberalism. It is far more useful for speculative activity and for maximizing the number of short-term market contracts than for improving production” (2005: 157–58). Harvey’s observations were particularly germane to patterns of investment prior to the 2007–09 crisis. Since then, however, the relatively improved profitability of productive capital has meant that corporate investment has been oriented to “buying back” the stocks of major industrial corporations with a view to sustaining their equity values as well as promoting ongoing efforts to displace living wage labour in production with robots and artificial intelligence. 9. It should be added that Greenspan’s “Asian glut” theory was largely poppycock; savings rates didn’t rise so much as investment rates fell. Hence, the so-called savings glut was actually an investment shortfall. Our thanks to Michael Roberts for pointing this out. 10. See, for example, bt (2020c). The concept of a “deformed workers’ state” is an extension of Trotsky’s theorization of the Soviet Union as a “degenerated workers’ state” in which the working class had been “politically expropriated” by a parasitic state bureaucracy, but in which property forms necessary to socialist development and corresponding to the historical interests of the working class nevertheless survived. Unlike the Soviet Union, none of the deformed workers’ states of Eastern Europe and Asia resulted from an authentic working-class revolution and none had experienced the direct rule of workers’ councils. But all had undergone anti-capitalist social transformations or revolutions (either from above, following Soviet military occupation, or from below, through peasant-based insurgencies led by Communist parties) that had established economic and political structures similar to those issuing from the bureaucratic degeneration of the Soviet workers’ state under Stalin. For further discussion of these issues, see Trotsky [1937] 1970b, [1939–40] 1970c, [1938] 1998; Smith 1996–97, 2011, 2014; ibt 2009; IG 1998; Roberts 2015; bt 2020c; and Chapters 7 and 8 of this volume. 11. Conventional discourse on China almost always overlooks the impressive growth

Twilight Capitalism: The Economic Dimension   77 and economic progress that occurred even before the introduction of the “market reforms” in the late 1970s and early 1980s, that is to say, during the earlier, Maoist period (in spite of disastrous policies like the Great Leap Forward and the major disruptions associated with Mao’s Cultural Revolution). Writing from a liberal, institutionalist perspective, Cornell University economist Kaushik Basu notes that “the main difference in the periods before 1978 and after is, interestingly, not so much in the average growth rates, as in the volatility…. What I am arguing … is that, even with the market reforms, the Chinese economy continues to be vastly more state-controlled than any industrialized nation and any rapidly growing developing country. It is, therefore, a puzzle that China has grown so fast for such a long period; there are no parallels in history” (Basu 2009: 48). But this “puzzle” is more easily understood once the hybrid, transitional character of China’s economy is acknowledged. Even during the current Long Depression, the Chinese economy maintained an impressive level of economic growth (8.5 percent during the 2009 global recession and a projected 2 percent for 2020, a year in which most major economies experienced severe contractions). This performance is undoubtedly due to the capacity of China’s deformed workers’ state to resist domination by the law of value and to insulate itself to some extent from the characteristic crisis tendencies of capitalism, despite its reliance on export-led growth (see also Roberts 2020b). Furthermore, to say that there are “no parallels” in history to China’s long-term growth performance is to forget the rapid growth experienced by the Soviet economy over a period of some four decades, despite major problems of bureaucratic mismanagement and the hugely destructive impact of World War II on that transitional, centrally planned economy.

Chapter 3

MARX’S THEORIES OF VALUE, CAPITAL AND CRISIS At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or — this merely expresses the same thing in legal terms — with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution…. In broad outline, the Asiatic, ancient, feudal and modern bourgeois modes of production may be designated as epochs marking progress in the economic development of society. The bourgeois mode of production is the last antagonistic form of the social process of production — antagonistic not in the sense of individual antagonism but of an antagonism that emanates from the individuals’ social conditions of existence — but the productive forces developing within bourgeois society create also the material conditions for a solution of this antagonism. The prehistory of human society accordingly closes with this social formation. — Karl Marx, Preface to A Contribution to the Critique of Political Economy ([1859] 1970)

CAPITALISM AND HUMAN PROGRESS

M

arx’s vision of the rise and inevitable decline of the capitalist profit system is inseparable from his critical-scientific analysis of labour value, capital and economic crisis in what he considers a historically unique — and impermanent — stage in the “economic development of society.” To understand capitalism and its historical limits, he insists, we must get to the bottom of what makes this type of economy and society fundamentally different from those that preceded it — as well as from

78

Marx’s Theories of Value, Capital and Crisis   79 the one that must succeed it. But this can’t be accomplished unless we focus analytically on the social relations of production that characterize capitalist society, something that is done altogether inadequately by those who regard these relations, either explicitly or implicitly, as “eternal” or as simple expressions of a fixed human nature. What are those social relations of production? They can be described, in broad strokes, under three general headings. The first and most fundamental set of relations pertains to the exploitation of wage labour by capital, a process that makes possible the creation, appropriation and accumulation of a rapidly expanding social surplus product and that also entails and animates definite forms of class cooperation and conflict. Class exploitation is much older than capitalism, but the capitalist form or “mode” of exploitation is historically exceptional in its opaqueness as well as its dynamism. Exploitation is of the essence of capital (which is itself fundamentally a social relation), shaping and delimiting the ways in which all the other social relations of capitalism find expression over time. The second set of relations concerns the competition that occurs among capitalist firms and between other economic actors in capitalist markets. Capitalists compete with one another for larger market shares and profits, while workers compete for jobs. But it is the competition among capitalist firms that impresses itself most forcefully on the development of the economy — for inter-capitalist competition is the driving force of innovation, determining the concrete forms of the social division of labour, the contours of the occupational structure and the evolution of production processes. The third set of relations pertains to the formal social equality that exists between commodity producers and commodity-producing labour in the context of “free markets.” Unlike the social structures of medieval and ancient times, capitalist markets are indifferent to the origin or social status of individual economic actors (for example, their nationality, social standing, gender, race or creed). The sole concern of the market, conceived as an impersonal ensemble of monetary exchange relations, is with the relative quality and price of what these actors are buying or selling. This principle underlies the “free-market” norm of the “exchange of equivalents,” which in turn sponsors the emergence of such historically novel ideological notions as “equal citizenship rights,” the “rule of law” and “equality before the law.”1 By examining the ways in which these three sets of social relations

80  Twilight Capitalism interact with each other as well as with the advancing forces of production (that is, with labour-saving technologies, natural-scientific capacities, technical divisions of labour, etc.), Marx was able to illuminate the long-term dynamics of capitalist society and its mode of production. This landmark achievement, made possible by many years of study in the British Museum, culminated in the 1867 publication of Marx’s great work, Capital (Volume I). This was supplemented after his death with the publication of the second and third volumes of Capital, compiled from Marx’s manuscripts by his collaborator and friend Friedrich Engels. The three volumes of Capital, along with the Grundrisse, Theories of Surplus Value and several other manuscripts concerned with the critique of political economy, comprise over five thousand pages of social and economic analysis, much of it brilliantly written and compelling, but the greater part of it formidably dense and intellectually challenging. Why did Marx — now famous for his aphorism that “the philosophers have only interpreted the world in various ways; the point, however, is to change it” — devote so much time and energy to the writing of so daunting and difficult a body of work, one that only a relatively small number of his would-be followers in the labour and socialist movements have ever bothered to study seriously? The reason is that he was convinced that the socialist cause to which he devoted his life required not only a moral critique of existing society, but a scientific critique of ideas that obscure the historical limits of capitalist society and thereby deflect attention from the need for a social revolution to abolish capitalist private property. Already in The Communist Manifesto of 1848, Marx and Engels had declared their opposition to a variety of competing socialist doctrines (reactionary “feudal” and “petty bourgeois” socialism, “bourgeois socialism,” “criticalutopian socialism,” etc.), insisting that the “theoretical conclusions of the Communists … express, in general terms, actual relations springing from an existing class struggle, from an historical movement going on under our eyes” (Marx and Engels [1848] 1998: 26). In light of this, Marx’s scientific critique of political economy, as elaborated in Capital and his other major economic works, can be seen as a magisterial intellectual antidote to ideas that deny this historical movement and that seek to contain human agency — in particular, the efforts of working-class people to improve their conditions of life — within an essentially capitalist framework. Marx and Engels understood that such ideas are the stock in trade not only of openly pro-capitalist political economists but also of would-be

Marx’s Theories of Value, Capital and Crisis   81 social reformers, labour union leaders, humanitarians and philanthropists, many of whom pose as well-intentioned champions of the downtrodden but most of whom are also wilful defenders of a historically transient and irredeemably unjust social order. Similar ideas, suitably updated and revised, have continued to deceive and disorient the oppressed and exploited in our twenty-first-century world. Consider Bill Gates (one of the world’s richest men), Bono (the wealthy rock musician) and Jeffrey Sachs (the American architect of Russia’s early-1990s “shock therapy” transition to capitalism and author of The End of Poverty) — all prominent figures in the erstwhile “campaign to end global poverty” and to achieve the Millennium Development Goals set by the United Nations in 2000. What brought them together? Above all, it was their commitment to spreading the message that the monumental issues of global poverty reduction, disease control and environmental sustainability could be meaningfully addressed without the abolition of capitalist property. In his 2008 book Common Wealth: Economics for a Crowded Planet, Sachs wrote: Taken together, the Rio treaties [of 1992], the Plan of Action on Population and Development [of 1994] and the Millennium Development Goals [of 2000] can be called our Millennium Promises for sustainable development. They are the promises that our generation made to itself and to future generations at the start of the new Millennium. As a group, these treaties and commitments are broad reaching, inclusive, and inspiring. The scaffolding is impressive. If successfully implemented, the agreements will put the world on a trajectory of sustainable development. (2009: 13) Although Sachs warned that these Millennium Promises might “join history’s cruel dustbin of failed aspirations” due to the “realities of global conflict,” the book made only a few passing mentions of what he called “class division.” The index for this almost four-hundred-page work had no entries for “social class” or “inequality,” and only one for “racism” (a matter discussed in little more than one page). Widening income inequalities in the United States were acknowledged, but the reader was assured that “2 percent of U.S. national income, if devoted to increased social outlays, could address some of the profound inequities of U.S. society, especially the lack of universal health coverage (which would require less than 1

82  Twilight Capitalism percent of national income in added spending to ensure) and the poor quality of public schools for the children of the U.S. poor and workingclass families” (2009, 266). In general, Sachs was eager to emphasize “how little it would take” in terms of material and financial resources to address the gravest problems of poverty and ecological sustainability at both national and global levels — always professing his “optimism” that the lofty goals set out in his book could be achieved without disturbing any of the prevailing social, political and economic structures of the “developed” capitalist world. Over a decade later, few of those goals have been even partially accomplished and many seem more out of reach than ever. Although the Millennium Development Goal to reduce the extent of “absolute poverty” in the world was indeed partially reached prior to the social crisis of 2020, this was overwhelmingly due to the progress made by a single country, the People’s Republic of China, in lifting hundreds of millions out of poverty. It was by no means a vindication of the mainly neoliberal policies implemented elsewhere in the Global South, nor was it due to any serious action in implementing Sachs’s own favoured remedies for problems associated with poverty and unsustainable development — namely “taxing the rich” and “redistributing income.” Those remedies have long been promoted by “progressive” economists like Paul Krugman, Robert Reich, Joseph Stiglitz and Thomas Piketty, and more recently by proponents of the Green New Deal. And yet they remain, for all practical purposes, stubbornly unachievable — both in the United States and on a global scale. A 1998 comment by Ignacio Ramonet, which appeared in Le Monde Diplomatique, posed a similar question about what is achievable by way of “minor” reform and what isn’t: While goods are more abundant than ever before, the number of people without shelter, work or enough to eat is constantly growing. Of the 4 billion people living in developing countries, almost a third have no drinking water. A fifth of all children receive an insufficient intake of calories or protein. And two billion people — a third of the human race — are suffering from anaemia. Is this the way it has to be? The answer is no. The UN calculates that the whole of the world population’s basic needs for food, drinking water, education and medical care could be covered by a levy of less than 4% on the accumulated wealth of the 225

Marx’s Theories of Value, Capital and Crisis   83 largest fortunes. To satisfy all the world’s sanitation and food requirements would cost only $13 billion, hardly as much as the people of the United States and the European Union spend each year on perfume. (Ramonet 1998) The appeal of this observation (as with Sachs’s argument) is that it demolishes the pernicious, Malthusian belief that global poverty exists due to inadequate global resources and therefore that “the poor must always be with us.” Its hugely deceptive aspect, however, is that it sows the illusion that a 4 percent wealth levy on the global super-rich might actually be achievable in a world still ruled by capital. This is utterly false. All historical experience suggests that capitalism is incapable of accommodating even this seemingly modest reform — not just because of the personal greed of the world’s billionaires but mainly because such a reform is fundamentally incompatible with the social logic and priorities of a socio-economic system based on capitalist private property and the social relations of production discussed above. (Some would say that world socialism is a utopian, unrealistic aim; in our view, Ramonet’s proposal is far more so!) Marx’s critique of such ideas, suitably updated of course, remains as relevant today as it ever was. But in the spirit of The Communist Manifesto, it may be particularly instructive to apply some of the elements of that critique to a cultural product and political message that, unlike the musings of Sachs, Ramonet and the United Nations, actually purports to be “anti-capitalist.”

Michael Moore on Capitalism

In his 2009 documentary film, Capitalism: A Love Story, Michael Moore offered an unremittingly sordid portrait of American capitalist society in the midst of the Great Recession. With poignant images and a skilful presentation of numerous damning facts about the prevailing socio-economic order and the financial crisis of 2007–08, the populist filmmaker exposed the pronounced decline in the quality of life of the majority of Americans that began in the 1970s. At the same time, he linked that decline to a striking statistical observation: that the top 1 percent of the U.S. population possessed more financial wealth than the bottom 95 percent combined.2 The story Moore told was of an America in which the so-called “middle class” was rapidly disappearing, along with traditional manufacturing industries and unionized workforces; in which airline pilots, responsible

84  Twilight Capitalism for the lives of hundreds of passengers, were sometimes paid as little as $16,000 per year; in which corporations secretly took out “dead peasant” life-insurance policies on their employees, profiting from their premature deaths while refusing assistance to their bereaved families; and in which Wall Street investment bankers, insurance executives and other members of the capitalist elite were given massive government assistance at the same time that the working people they had deceived and swindled were being evicted from their homes. Yet as powerful as the film’s narrative often is, Moore’s critical portrayal of American capitalism is profoundly flawed. The film’s problems begin with its failure to provide even a minimally satisfactory definition of its subject matter. Throughout the film, “capitalism” is talked about and presented in different and even contradictory ways. At one point, capitalism is described as “a system of giving and taking — mostly taking” and therefore as “evil.” But at another point, the more production-centred capitalism of pre-1980 America — a variety of capitalism that Moore regards as having been tempered by strong labour unions and enlightened tax and regulatory policies — is presented in a much more favourable, even nostalgic light. Moore provides no real analysis of how this better (if not exactly good) capitalism of yesteryear was transformed into the excessively evil capitalism of post-1980 America, except to imply that political leaders (beginning in the Reagan era) somehow lost sight of their sacred responsibility to restrain rather than encourage the avarice of wealthy elites. Adding to the confusion, he also provides no real explanation for his far more positive estimation of Western European capitalism. Moore’s contradictory assessments and reflections nevertheless culminate in a rather startling conclusion: namely, that capitalism ought to be abolished, if only because it brings out the worst in human nature. But what exactly is it about “capitalism” that needs to be abolished? Is it the profit motive? Market competition? Private ownership of the means of production? Collusion between avaricious capitalists and bought-off politicians? Is it only “unregulated” capitalism that needs to be abolished, or is it capitalism root and branch? Although Moore remained studiously equivocal on all these issues, he was nevertheless utterly clear on one point (and even more so in his public statements promoting the film): his critique of capitalism was not about making the case for socialism. Rather, it was about promoting “democracy” as an alternative.

Marx’s Theories of Value, Capital and Crisis   85 Moore’s unwillingness or inability to propose any clear alternative to capitalism beyond the banal nostrum of “democracy” was stunning — and widely and justifiably seen as a major dodge on his part. Even the comedian Bill Maher correctly challenged Moore on this score by observing that democracy is a “political form” and not, in itself, an economic system. We might add that, given the fact that most Americans mistakenly regard democracy as the conjoined twin of capitalism, Moore’s proposed alternative might just as well have been “Mom’s apple pie.” To be fair, Moore did suggest worker-owned co-operatives as an attractive alternative to traditional capitalist businesses. Yet he failed to address the fact that such co-operatives have existed within capitalist societies for hundreds of years and have never posed a serious challenge to the dominance of capitalist enterprises or to the fundamental economic logic of the profit system. Elsewhere in the film, Moore endorsed the idea of a “second bill of rights” for working people, as advocated by President Franklin Roosevelt in 1944. But he gave no consideration to the historical context in which Roosevelt floated the idea — a context marked by a powerful U.S. labour movement, the impending defeat of fascism in Europe and a rising tide of anti-capitalist consciousness and struggle throughout the world. Like his administration’s New Deal of the 1930s, Roosevelt’s proposal was clearly designed to head off the spread of anti-capitalist ideas within the working class — to placate an insurgent domestic labour movement and to discourage socialist or communist influences within it. Moore missed all of this, leaving his audiences with the impression that capitalism could be significantly improved, if not abolished, through a simple constitutional amendment championed by a wise and beneficent leader! Moore’s misplaced nostalgia for Roosevelt was matched by his illusions in the newly formed Obama administration. Here too his message was strangely contradictory. While excoriating the Democratic-led Congress for its bailout of Wall Street and exposing the continuing control of the Treasury Department by Wall Street insiders like Tim Geithner, he deliberately glossed over the fact that Barack Obama supported the bailout and had appointed Geithner as his treasury secretary. Moore even suggested that Obama could become the champion of a twenty-first-century “economic bill of rights” for working people. This was a forlorn hope if ever there was one, as even in 2009 there was no reason to believe that this careerist Democratic president would possibly make so large a concession to populist sentiment. And even if he had done so, it would only

86  Twilight Capitalism have been to mollify an insurgent working class — that is, to legitimize a crisis-ridden capitalist system in the eyes of its victims. For all its withering criticisms of modern American capitalist society, Moore’s film was, at bottom, a case study in confusion. Worse still, the ideas it promoted served the clear purpose of channelling the political consciousness and activity of working people into reforming rather than abolishing the capitalist system. The problem here was not just with Moore’s overt support for Obama’s Democratic Party — America’s main vehicle for tying working people and the oppressed to a purportedly progressive wing of the capitalist class. The more basic problem was that Moore failed to present capitalism as an inherently class-antagonistic system — one in need of a critical scientific analysis and one that can only be abolished through a socialist revolution led by a working-class movement committed to self-emancipation and to unremitting political opposition to all factions of the capitalist class. In the decade following the release of Capitalism: A Love Story, Moore maintained his pro-Democratic Party position, despite the abysmal, corporatist record of the Obama administration and a further shift to the right on the part of congressional Democrats. In 2016, he supported Bernie Sanders’ left-populist campaign to win the Democratic presidential nomination, but, after Sanders’ flagrantly rigged loss to Hillary Clinton at the party’s July convention, Moore followed Sanders’ example in enthusiastically supporting the presidential campaign of this faithful servant of “the billionaire class” and the military-industrial-security complex. What deserves to be stressed is that Moore’s mildly reformist and class-collaborationist political prescriptions are intimately bound up with a non-scientific and ultimately religious worldview. At bottom, his critique of capitalism is moralistic, and his view of social reality is naively idealist — that is to say, one that regards ideas rather than social and material conditions as the foundation of human existence. Contrary to Marx’s thesis that human nature is nothing other than the “ensemble of the social relations,” Moore suggests that selfishness and greed are fixed elements of human nature while also arguing that these tendencies can and should be countered through moral exhortation (of religious inspiration) and institutional safeguards (government regulation, strong unions and unspecified forms of democratic control over the economy). For Moore, then, social reality is the outcome of a fixed human nature (marked, perhaps, by “original sin”), on the one side, and a constantly

Marx’s Theories of Value, Capital and Crisis   87 shifting agglomeration of free-floating ideas, values and beliefs, on the other. Marx’s profound historical-materialist analysis of the interactions and contradictions arising between the material forces and the social relations of production under capitalism finds no place within such a dualistic worldview. Moore’s idealist perspective on history and social reality was most plainly in evidence in Capitalism: A Love Story when he enlisted a Catholic priest in support of his idea that capitalism is “evil.” It apparently never occurred to the filmmaker that the Vatican’s occasional and purely rhetorical “anti-capitalism” is rooted in its dark and reactionary history — in the fact that the Roman Catholic Church was a pillar of European feudalism (the oppressive social order that preceded capitalism) or that the rise of capitalism greatly reduced the Church’s relative share of the economic surplus along with its ideological authority throughout Europe. Nor does Moore choose to question the Vatican’s “morality” — for instance, its failure to relinquish its own immense wealth in order to alleviate human suffering. To the capitalist drive for profit (rooted, it would seem, in sheer human avarice) he simply counterposes Christ’s message of charity, implying that this is the “idea” upon which the Christian churches are actually based. What Moore fails to see — and what sets him apart from Marx quite decisively — is that capitalism is not based on an idea or a particular set of values. Nor is it a way of thinking or acting that has taken the wrong side in an eternal Manichaean war between good and evil. Rather, capitalism is a mode of production that involves definite socio-economic relations (as defined at the beginning of this chapter) and an ever-changing set of human productive capacities. In the early stages of its development, it plays a progressive role in extending those capacities, while in later stages it becomes an obstacle to human progress, transforming the forces of production, all too frequently, into forces of destruction. To be sure, the capitalist mode of production gives rise to and is supported by an array of ideologies (such as possessive individualism, classical liberalism, social-welfare liberalism, libertarianism, neoliberalism and neoconservatism — not to mention the putatively anti-capitalist “social gospel” to which Moore is attracted). Yet it owes its historical emergence to none of them. In this vein, Marx wrote: “The mode of production of material life conditions the social, political and intellectual life process in general. It is not consciousness that determines being, but, on the

88  Twilight Capitalism contrary, social being that determines consciousness.” Marx should have added, however, that consciousness is itself an aspect of social being, and that for a given social reality to change, consciousness must also change. Why else, indeed, would Marx have worked so energetically to challenge the prevailing ideologies of his own time? These observations return us to the question with which we began this chapter: How are we to view capitalism as a definite yet impermanent stage in the economic formation of society? How are we to understand this mode of production in the scientific spirit of Karl Marx?

CAPITALISM AS A MODE OF PRODUCTION Let’s begin with some basic considerations. As a mode of production, capitalism involves a definite set of arrangements for satisfying human needs, in a social context where these needs are perceived in very different ways by the two fundamental classes constituting what Marx calls bourgeois society: the capitalist class (bourgeoisie) and the working class (proletariat). Within such a society, workers need higher wages/salaries, improved benefits, secure employment and reasonably good working conditions, together with various protections and services provided by government. At the same time, capitalists need higher profits, lower labour costs and ongoing improvements in productivity from their workers, as well as laws and government policies conducive to those goals. While capitalists do as much as they can to enlist the cooperation of workers in their employ, these two sets of needs are counterposed and fundamentally irreconcilable. Indeed, they contradict each other and lead inevitably to conflict between capitalists and workers. Accordingly, the capitalist mode of production is properly understood to be class-antagonistic, for its contradictory dynamics impel working-class people into struggle against capital and (potentially at least) into a fight for a new, socialist/communist mode of production and a classless society. Like every other class-antagonistic mode of production (for example, ancient chattel slavery or medieval feudalism), capitalism possesses characteristics that are historically specific to it. Only by grasping the features peculiar to it can we uncover its unique “laws of motion” — the laws governing its emergence and consolidation, its structural dynamics and its eventual historical decline. These laws arise out of the encounter between certain natural imperatives, constraints or laws (which are common to all human societies) and the social imperatives of capitalist relations of

Marx’s Theories of Value, Capital and Crisis   89 production (which are at once exploitative, competitive and formally egalitarian). To put the matter slightly differently, capitalist social relations impart a specific and unique form to the human imperative to develop a division of labour, to devise and employ tools to improve the productive powers of human labour and to subdue nature. What’s more, capitalism involves a historically unique mode of extracting surplus labour from the direct producers and thus of creating a surplus product that sustains a dominant class of wealthy property owners. While in earlier class-antagonistic modes of production, the social surplus product takes the form of “tribute” (labour service, taxes, rent in kind, tithes, etc.), under capitalism it takes the predominant form of privately appropriated surplus value — money income associated with the ownership of capitalist private property.

Labour Power as a Commodity

Capitalism is not just a system of private ownership of the means of production, nor is it simply a market economy in which individual economic actors seek to maximize their “utilities” or wealth. Instead, capitalism is a mode of production in which labour power — the capacity to perform physical or intellectual labour, or some combination of the two — has become, on a generalized and expanding scale, a commodity — something sold on a market. Only the widespread availability of labour power as a commodity permits money and other commodities to function as capital. In pre-capitalist societies, labour power isn’t typically a commodity because those who possess it — the direct producers — have immediate access to means of production — above all, land. Capitalism, however, emerges historically through the separation of the direct producers from their means of production and through the monopolization of these same means of production in the hands of a smaller and smaller segment of society: the capitalist class (or bourgeoisie). As the direct producers lose the ability to secure a livelihood except through the sale of their labour power for a wage or salary, they are transformed into the modern working class (or proletariat). In this way, the system of commodity production becomes generalized. The “primitive accumulation of capital,” which was the historical precondition for this generalization of commodity production, required the widespread application of force: the coercive separation of peasants from their means of subsistence through “enclosures” of what had been common property in land, the plunder of colonial possessions and the

90  Twilight Capitalism super-exploitation of chattel-slave labour, which helped finance the industrial revolution in Europe and America. As Marx evocatively put it, “If money … ‘comes into the world with a congenital blood-stain on one cheek,’ capital comes dripping from head to toe, from every pore, with blood and dirt.” Workers were “tortured by grotesquely terroristic laws into accepting the discipline necessary for the system of wage-labour” ([1867] 1977: 925–26, 899). Yet processes akin to primitive accumulation hardly belong exclusively to the early years of the capitalist era. On the contrary, they are ongoing, with new economic sectors and territories subjected (or resubjected) to capitalist exploitation and plunder over time. Michael Perelman observes: While primitive accumulation was a necessary step in the initial creation of capitalism, it actually continues to this day. For example, at the time of this writing, petroleum and mining companies are displacing indigenous people in Asia, Africa, Latin America and even in the United States. Emphasizing the social relations of advanced capitalist production to the exclusion of the ongoing process of primitive accumulation obscures the fact the struggles of the Ogoni people in Nigeria or the Uwa in Colombia are part of the same struggle as that of exploited workers in Detroit or Manchester. (2003: 125) David Harvey makes a similar point but also goes considerably further than Perelman, advancing his own (somewhat controversial) notion of “accumulation by dispossession” — a process he sees as distinguishable from both Marx’s “primitive accumulation” and the normal processes of accumulation characteristic of a mature capitalist economy: Some of the mechanisms of primitive accumulation that Marx emphasized have been fine-tuned to play an even stronger role now than in the past. The credit system and finance capital became, as Lenin, Hilferding, and Luxemburg all remarked at the beginning of the twentieth century, major levers of predation, fraud and thievery…. Above all we have to look at the speculative raiding carried out by hedge-funds and other major institutions of finance capital as the cutting edge of accumulation by dispossession in recent times. (2003: 147)

Marx’s Theories of Value, Capital and Crisis   91 Most of Marx’s Capital I, however, is devoted to laying bare the mechanisms through which capital is able to expand itself without resorting to theft, fraud and financial chicanery, and the discussion of primitive accumulation is left to the end of the volume. Indeed, at one point, Marx insists that the capitalist doesn’t actually “steal” from waged workers but, rather, exploits them. So, exploitation is by no means synonymous with thievery in Marx’s theory, nor is it meant to be a morally charged concept. Nevertheless, the conditions for “normal” processes of exploitation and capital accumulation could only have been established historically through prior processes of “dispossession”; and even when capitalism is well established, capitalists continue to resort to “predation, fraud and thievery” as supplementary means of accumulating wealth, above all when the normal processes of accumulation are unable to sustain “adequate” levels of profitability. Perelman makes the additional crucially important point that while “capitalist production may seem to reside within the confines of the world of advanced technology, run by advanced electronic controls, this system ultimately depends on access to cheap raw materials — especially petroleum” (2003: 125–26). All the same, obsessing over allegedly new and novel modes of “accumulation by dispossession” (as Harvey and others tend to do) can serve to divert attention from the intrinsic irrationality of the capitalist profit system — to absolving it of responsibility for human suffering and to assigning blame solely to the bad (“immoral”) behaviour of individual capitalists or groups of capitalists. Marx was determined to show that it is above all the “normal” operations of the capitalist system — and not just the pathologies that are the predictable by-products of those operations — that render it an obstacle to continued human progress. To follow Marx in this endeavour requires that we give patient and serious consideration to the operations and consequences of the law of value under capitalism.

The Capitalist Law of Value

The law of value is a regulatory principle of an economy in which the products of labour are typically produced for the purpose of private exchange — that is, as commodities. It is also a specific manifestation of the human imperative to distribute the aggregate labour of society in definite proportions to a multitude of different economic tasks. While it operates to a limited extent in non-capitalist commodity-producing societies, it

92  Twilight Capitalism rules economic life only in societies where capitalist institutions, property forms and social production relations predominate. In its fully capitalist incarnation, the law of value regulates the distribution of social labour in accordance with the capitalist imperatives to measure “wealth” in terms of labour performed in the production of marketed goods, to articulate a division of labour through the interplay of market forces and to subordinate social production to the drive for private profit. Marx’s critics often claim that he argued that commodities exchange in markets in proportion to the amount of labour they embody. For example, Nobel laureate Paul Samuelson, writing in the most widely read economics textbook of the mid-twentieth century, attributed to Marx the view that “the price ratios of goods can be predicted from labour costs alone” (1968: 819). But Marx made no such claim. Here is what he actually said about the connection between market prices and labour time: “Whatever the manner in which the prices of various commodities are first mutually fixed or regulated, their movements are always governed by the law of value. If the labour-time required for their production happens to shrink, prices fall; if it increases, prices rise, provided other conditions remain the same” (Marx 1978: 177). So formulated, it’s hard to see why anyone would dispute the existence of such a law. For Marx, the labour value of an individual commodity is a kind of “centre of gravity” around which its market price oscillates — but it is by no means the sole determinant of the market prices of individual commodities.3 That said, the substantive content of the Marxian law of labour value is actually much more interesting (if also controversial) than the above passage by Marx suggests. Its basic postulate is that “the source of the value added of the mass of commodities produced is the labor expended in producing them” (Foley 1986: 14). If we couple this postulate with the idea that value exists as an “objective, quantitatively determined magnitude” (Hilferding 1975: 159), we arrive at the twin propositions that living labour is the sole source of all new value and that value exists as a definite quantitative magnitude at the level of the capitalist division of labour (or economy) as a whole — a magnitude that limits prices, profits and wages. Value, to use a phrase coined by Ernest Mandel, is a “parametric determinant” of the more visible economic phenomena of the capitalist system.4 Much of Marx’s critical analysis of capitalism’s laws of motion, including

Marx’s Theories of Value, Capital and Crisis   93 his ltrpf, flows from these basic postulates of his theory of value — so, it is with respect to them, rather than to the spurious claims of Samuelson and other defenders of the capitalist order, that his theory needs to be evaluated.5

Commodities and the Value Form of Social Labour

A commodity, in Marx’s definition, is any product of labour that is produced in order to be sold in a market. Every commodity has both a use value (a utility or capacity to satisfy some human need or desire) and an exchange value (the power to command remuneration in exchange — when represented in money, a price). Marx maintains that a commodity’s exchange value is a “form of appearance” of its value, which expresses its relationship to all other commodities as a product of the social division of labour existing between commodity producers. The value of a commodity, therefore, represents a definite fraction of the social labour expended in the production of the total mass of commodities produced. When a commodity is exchanged in the market, it encounters and is compared with other products of a society-wide division of labour. But for just this reason, it isn’t the actual “concrete labour” expended in its production that determines the value of the individual commodity, but rather the labour that the social division of labour has established as “necessary” to its production. Consider this example: If two automobile companies produce vehicles that are virtually identical in terms of their use value to prospective consumers, but one company demands a higher price for its vehicle than the other due to higher costs resulting from a greater expenditure of labour on the assembly line (that is, a less efficient use of concrete labour), then the market will deem the “extra” labour performed by this less-efficient company to be socially wasteful and require the price to be lowered to correspond more closely to its “true value.” This example illustrates Marx’s point that it is not the “concrete labour” (the actual amount of labour) expended in production that determines a commodity’s value, but rather the “abstract labour” necessary for its production. Abstract labour refers to the social labour that is needed —in the here and now — to produce a particular commodity. It constitutes what Marx calls the “social substance” of value. In this sense, the concept of abstract labour is closely related to the “magnitude of value” as determined by “socially necessary labour time” — which is defined by Marx as “the labour-time required to produce any use-value under the conditions

94  Twilight Capitalism of production normal for a given society and with the average degree of skill and intensity of labour prevalent in that society” (Marx 1977: 129). The dialectical interplay of concrete labour and abstract labour comes fully into its own only under conditions of generalized (that is, capitalist) commodity production and exchange. Anwar Shaikh notes that, once goods are produced solely for exchange, the particular labours involved are aimed at producing exchangeable goods, and the valorization of these labours is an intrinsic part of their reproduction. As producers of commodities, these labours create not only bundles of useful properties (use-values), but also amounts of abstract quantitative worth. In the former aspect, they are of course concrete labours; but in the latter, they are value creating activities whose content as social labour is manifest only in-and-through the abstract quantitative worth of their products. (1990: 43, emphasis in original) This abstract quantitative worth finds expression in the money price of the commodity product — and for this reason, Marx calls money “the necessary form of appearance” of the abstract labour represented in commodities.

MARX’S THEORY OF CAPITAL AND SURPLUS VALUE Capitalist commodity production must be distinguished from the simple or independent forms of commodity production that existed within precapitalist social formations for thousands of years and that still survive, in altered form and on a limited scale, in the capitalist era. Marx describes the “economic circuit” of simple commodity production with the schema: C–M–C. Here, a particular commodity (C) — for example, potatoes — is produced by an independent commodity producer, largely through the application of his or her own labour, and is then sold for money (M), which is subsequently used to purchase other commodities — for example, farm implements or clothing. In this economic circuit, the commodity producer is unable to realize a profit as such. Equivalent is exchanged for equivalent, and no exploitation of the labour of others need occur. The money received by the independent commodity producers may increase or decrease in accordance with how vigorously and efficiently they work, but so long as they perform most of the work on their own account, they are unlikely to accumulate much wealth. At best, only a very gradual

Marx’s Theories of Value, Capital and Crisis   95 accretion of wealth is possible; at worst, the producer loses ground and is forced to find a new livelihood. In capitalist commodity production, by contrast, we encounter what Marx calls the circuit of capital: M–C–M΄. Here the economic process begins with an investment of value (the money-capital, M), which is then used to purchase specific commodities (C) that allow for the realization of an enlarged magnitude of money value (M΄). The difference between M΄ and M is surplus value — an accretion of new value that constitutes the “social substance” of profit of enterprise as well as ground rent and interest. On the basis of these considerations, Marx defines capital as both a historically specific type of wealth and as a definite social relation of production — as “the means of production monopolized by a particular section of society” (Marx 1981b: 953–54) and as “value in process, money in process” (Marx 1977: 256). Capital is value seeking to expand itself — money in search of an increment. The different forms of capital (industrial, interest-bearing, commercial) seek expansion through a variety of mechanisms — but, as we shall see, all of these mechanisms ultimately depend on the creation of surplus value through the exploitation of wage labour that is directly involved in the process of producing commodities. Impelled by competition, capital is driven to accumulate — and this process of accumulation necessarily engenders an economic dynamic of “expanded reproduction.” This means that, as an economic system, capitalism is utterly incompatible with any steady state. Indeed, it requires growth for growth’s sake — that anathema of the ecologically responsible! Marx’s suggested motto for capital — “Accumulate, accumulate! That is Moses and the Prophets!” — speaks to this inexorable if unsustainable logic. At first glance, the circuit M–C–M΄ appears to violate the principle of the “exchange of equivalents,” which is the normative rule governing exchange in a free market; but, on closer examination, this turns out not to be the case. To be sure, some economic agents are able to realize a profit by buying cheap and selling dear. But such profits result from equivalent losses elsewhere in the market, so profits and losses tend eventually to cancel each other out. The question is therefore posed: How are profits generated on an economy-wide basis under conditions where total values and total prices are equalized? This question can’t be answered so long as we remain fixated on the

96  Twilight Capitalism “sphere of exchange” — the vaunted marketplace of bourgeois economics. To answer it, we must consider what occurs in the sphere of production. Accordingly, Marx reformulates the circuit of capital as follows. Figure 3-1 Marx’s Formula for the Circuit of Capital /> MP M – C ….. P ….. C^ — M^ \> LP In this expanded formula for the circuit of capital, a capitalist invests a definite amount of money-capital (M) in two distinct kinds of commodities, each of which constitutes an input to a capitalist production process (P). The first is “means of production” (MP), consisting of tools, physical plant, machinery, raw materials and so forth — what might be called the objective elements of the production process. The second kind of commodity is “labour power” (LP) — which is the capacity to labour and is always embodied in living workers. When means of production and living labour power are brought together in production, the result is an output commodity (C΄) — for example, an automobile — that represents a greater amount of value than the original inputs. If and when this output commodity is sold at its value, a magnitude of value (M΄) is realized in money form that is greater than the original money-capital investment. Surplus value, like all value, is created solely by living labour — by that unique commodity known as labour power. No matter how technologically sophisticated they might be, the means of production are unable to create any new value. As the use values of these “objective” elements of the production process are consumed in production, they can only transfer to the new commodity product “previously existing values.” Labour power, on the other hand, can create more value than it “represents.” The value of labour power is determined by its cost of reproduction (simply put, the wage), but the physical activity of labouring — its use value — is variable (or elastic) in its contribution to the creation of new value. So, surplus value is not only the difference between M΄ and M, it is also the difference between what living labour creates in the way of new value and the value represented by the wages of productive workers. The upshot is that surplus value results from exploitation: from the appropriation of surplus (effectively unpaid) labour in production, which

Marx’s Theories of Value, Capital and Crisis   97 is made possible by capitalist ownership of the means of production and by capital’s increasing control over the labour process. As Marx puts it: Capital is dead labour that, vampire-like, only lives by sucking living labour, and lives the more, the more labour it sucks. The time during which the labourer works is the time during which the capitalist consumes the labour-power he has purchased from him. (Marx 1977: 342) It was in order to illuminate this process that Marx advanced his much-misunderstood assumption in the first volume of Capital that commodities exchange at their values. The purpose of this assumption was not to suggest that “prices are determined by labour costs alone” (to quote Samuelson again) but rather to demonstrate that even when labour power is exchanged with capital at its value (that is, even when workers receive what is deemed to be a “fair day’s pay for a fair day’s work”) the exploitation of wage labour still takes place. The exploitation of wage labour is not an anomaly but a necessary norm or feature of capitalist production. Marx’s fundamental point, therefore, is that the creation of surplus value depends not on “unfair” or “unequal” exchanges in the labour market (or any other market), but on the subordination of labour to capital within the sphere of production — that is, on social conditions that make possible the exploitation of wage labour. It depends on paying the productive worker a wage that corresponds to the value of his or her labour power (as determined by its cost of reproduction) while also commanding the worker to perform labour that creates more new value than is represented in the wage. As discussed in Chapter 1, Marx demonstrates this in detail in his famous chapter in Capital I on “the working day,” a well-defined period during which labour is performed and which he sees as effectively divided into two components: the hours during which workers perform “necessary labour” and those during which they perform “surplus labour.” The necessary labour performed produces the value equivalent of the wage (the price of labour power as a commodity) while the surplus labour performed produces the extra value that ends up in the pockets of capitalists — and perhaps, to some limited extent, the capitalist state — in the form of profit, interest, ground rent and new tax revenues. Marx considered the distinction between labour power and labour performed to be one of his proudest scientific achievements, and rightly

98  Twilight Capitalism so. It is crucial to understanding the specific way in which surplus labour is “pumped out” of the direct producers in the capitalist mode of production — the secret of its mode of exploitation. Nevertheless, it should be noted that three important questions are elided (or abstracted) from his discussion of the two components of the working day. The first concerns how precisely the value of labour power is determined. It may be abstractly true to say that it is determined by the labour time required to produce the goods and services needed by workers to sustain themselves (and some dependents), but this requires further elaboration — including some attention to the contribution of unpaid domestic labour to the “reproduction of labour power.” The second question pertains to the contribution of the state to the reproduction of labour power and the extent to which we can speak of workers receiving a “social wage” above and beyond their nominal wage. Marx failed to delve into this question because, in Capital I, he deliberately abstracts from the role of the state in the reproduction of the capitalist mode of production. What’s more, in his day, the state played a much more modest role in the reproduction of labour power than it does in today’s advanced capitalist societies. This leads us directly to a third issue that Marx sidesteps: the question of tax revenues. How are taxes to be understood in value-theoretical terms? Does the value/price of labour power refer to the before-tax wage or to the after-tax wage? These and related questions — which Marx may have intended to address in his planned but never written volumes on wage labour and the state — continue to generate considerable controversy among Marxists.6 (Our own answers to some of them can be found in the next section of this chapter, as well as in Chapter 5.)

Commodity Value and Its Constituents

At the level of both the individual commodity and the gross (economywide) marketed product (gdp), total value can be divided into three fundamental components or categories: constant capital, variable capital and surplus value. Constant capital represents the value of the means of production (tools, equipment, raw materials, fuel and energy, etc.) along with what Marx called the “faux frais” (incidental costs) of capitalist production. As already indicated in Chapter 1, many of the “overhead costs” of capitalist reproduction — including the costs of circulation and the costs of maintaining the capitalist state — should also be subsumed under the category of constant

Marx’s Theories of Value, Capital and Crisis   99 capital (although Marx is far from clear on this issue). Foremost among the incidental and overhead costs of the overall process of capitalist reproduction are the wages of unproductive workers. The wage bill of “socially necessary unproductive labour” (snul) — in industry, commerce, finance and the state — represents a vitally important investment on the part of the social capital as a whole in maintaining the institutional framework of capitalist society. If the physical means of production find a value expression as constant capital, once can argue that so too does the “social machinery” needed to perpetuate the capitalist mode of production (see Mage 1963; Smith 2019; Chapter 5 of this volume). Constant capital has a stock as well as a flow expression. The flow of constant capital refers to the values that are preserved and transferred over a given period through fixed capital depreciation as well as the physical consumption of circulating constant capital: raw materials, fuel and energy, and unproductive labour. The stock of constant capital refers to the total value of the fixed capital as well as the inventories maintained by private capitalist firms over that same period. Variable capital refers to the value represented by the wages of those productive workers who are directly involved in commodity production. Its elements include the nominal after-tax wages and benefits of these workers as well as deductions to the nominal wage that constitute a deferral of the wage — above all, pension contributions.7 Variable capital is usually treated only as a flow, not as a stock. Surplus value is the value created by the unpaid “surplus labour” of productive workers. It encompasses after-tax profits, ground rents, technological rents, interest and augmented revenues accruing to the capitalist state due to real increases in taxes. The mass of tax revenues, however, is best viewed as an element of the flow of constant capital — as previously existing values that are conserved and transferred in the reproduction process and that continuously reappear in the total value of the gross output in much the same way that the values of means of production do.8 Like variable capital, it is measured only as a flow. We thus arrive at c + v + s = P, where the total value of the commodity product or gross marketed product (P) is conceived as the sum of three flows of value. The relationships that exist among these components of the total value of output, along with the value of the stock of constant capital, define the key quantitative ratios of Marx’s theoretical system. The average rate of profit, expressed as s/C, is the ratio of surplus value

100  Twilight Capitalism to the value of the constant capital stock and constitutes the fundamental regulator of capital accumulation, investment and growth.9 The organic composition of capital, represented as C/s+v, is the ratio of the constant capital stock to all newly created value: in other words, the ratio of dead to living labour in production expressed as magnitudes of value. Finally, the rate of surplus value, s/v, is the ratio of surplus value to variable capital (the wage bill of the productive labour force) and expresses the rate of exploitation of productive workers. The movements of these fundamental ratios determine the long-term dynamics and historical trajectory of the capitalist mode of production.

The Equalization of Profit Rates and the Metamorphoses of Value

If living labour is the sole source of all new value, including surplus value, how can we explain that firms relying much more on expensive technology than on living labourers are frequently more profitable than those that are more labour intensive? Marx’s answer is that social surplus value is the result of the exploitation of the working class by “capital in general.” Exploitation occurs on an economy-wide scale, with surplus value entering the market through a multitude of commodities. The surplus value represented within these commodities is realized and distributed as profit through 1) a competitive process that pits individual capitalist firms against one another, and 2) a division of labour that allocates definite shares of surplus value to industrial, commercial and financial capitals. The ability of capital to move from relatively less to relatively more profitable firms and sectors enforces a tendency toward the equalization of profit rates and the formation of a “general rate of profit.” The profitability of a specific firm or sector is therefore not dependent on the degree to which it invests in living labour (v) as opposed to means of production (c). Rather, it is dependent on 1) the mass of its capital investment calculated on the general rate of profit, as modified by 2) the soundness of the investment decisions, business practices and competitive footing of that firm. Firms that invest in state-of-the-art technology are in a better position to lower their costs per unit of output than those that rely on more labour-intensive methods. This enables them to cut prices and increase market share while at the same time maintaining or even increasing their profit margins. Thus, by out-performing and out-competing their less efficient rivals, these “high organic composition” firms are able to capture

Marx’s Theories of Value, Capital and Crisis   101 surplus value that is actually produced elsewhere in the economy (whether nationally or globally). The tendency toward the formation of a general rate of profit underlies a crucial metamorphosis of the value form: the transformation of commodity values (conceived as “direct prices” determined solely by the commodity’s socially necessary labour content) into “prices of production.” The latter are not market prices — so, we are not yet considering the metamorphosis of value into a final money exchange value but instead into an intermediate form. The specific character of this form stems from the influence of a single mechanism on price formation: the redistribution of surplus value that is brought about by the equalization of profit rates through competition. Other things being equal, the individual capitalist firm realizes a profit that is consistent with the magnitude of its invested capital calculated on the general rate of profit — but this profit will not, as a rule, correspond to the amount of surplus value produced by its own workers. Marx explains this as follows in his theoretical formula for the transformation of values into prices of production: “When a capitalist sells his commodities at their prices of production, he recovers money in proportion to the value of the capital consumed in their production and secures profit in proportion to his advanced capital as the aliquot part of the total social capital” (1978: 159).

Labour Value and Price Formation

The individual value of a commodity is determined by the amount of socially necessary labour time required for its production, but its exchange value will generally deviate from this value as a result of other factors bearing on price formation — most importantly, the tendency for rates of profit to equalize, but also a range of factors affecting demand. Even so, as mentioned, the labour value of a commodity is the centre of gravity around which its market price will tend to oscillate. Recent empirical work by a number of Marxist economists has shown that 90 percent or more of the price of a commodity is determined by its value — that is, by the socially necessary labour time that it represents. That said, the main purpose of Marx’s theory of value is by no means the explanation of price ratios, but rather the illumination of the capitalist economy’s macroeconomic laws of motion. At the end of the day, regardless of the degree to which individual commodity values and prices diverge (owing to transfers and

102  Twilight Capitalism redistributions of value resulting from various market processes), total prices must still equal total values. Just as value is the social substance of price, the social substance of profit is surplus value: the increment of value created by living labour beyond the value represented in the wages of productive workers. Therefore, total (“real”) profits should equal total surplus value. Each of these propositions is consistent with what is the key postulate of Marx’s law of value: that living labour alone is the sole source of new value.

Overproduction as the Form of Capitalist Crisis

The law of labour value underlies a peculiar characteristic of capitalism: it is the only mode of production in human history to generate crises of overproduction. In pre-capitalist societies, economic crisis is associated with underproduction — the failure to produce enough use values (material output) to meet social needs. But underproduction of use values is rarely a problem in capitalist societies (although some socially needed use values may not be produced in sufficient quantities owing to the fact that their production is deemed unprofitable). Periodically, however, too many commodities are produced in relation to the “effective demand” that exists for them. Effective demand is demand backed by purchasing power — that is, by money in the hands of the would-be purchaser. The characteristic form of capitalist economic crisis, namely overproduction, is therefore a result of insufficient demand (backed by money, the expression of abstract social labour) for commodities representing a definite amount of value (abstract socially necessary labour). Under conditions of overproduction, commodities cannot be sold (or markets cleared) at prices that permit an adequate profit margin; since profit drives capitalist production, economic growth must slow or even decline, throwing large numbers out of work, bankrupting many firms and rendering much productive plant idle. The phenomenon of overproduction was a prominent feature of the recession that began in the United States in December 2007, contributing significantly to the financial crisis of 2008. Overproduction manifested itself in several sectors of the American economy, but most notably in the crucial housing and automobile sectors. Demand collapsed for “overpriced” homes in many markets as inventories swelled in the wake of a construction boom and a rising wave of mortgage foreclosures. In the automobile market, demand for gas-guzzling vehicles declined sharply

Marx’s Theories of Value, Capital and Crisis   103 as oil prices climbed in 2007 and well into 2008, squeezing the profit margins of many automakers, particularly General Motors and Chrysler. According to Marx, a variety of unique circumstances can trigger crises of overproduction; however, the most important recurrent cause is the tendency of the rate of profit to fall due to an overaccumulation of capital and inadequate production of surplus value. If overproduction involves the social capital’s inability to realize the full value of the total commodity output, this “crisis of realization” is ultimately the surface manifestation of a crisis of valorization — a crisis in the production of sufficient quantities of new value and surplus value.

MARX ON FALLING PROFITABILITY AND CAPITALIST CRISIS Marx’s theory of labour value has profound implications for a scientific assessment of the stability and rationality of the capitalist economy, for it leads to the conclusion that capitalism is not only beset by contradictions but that its laws of motion render it prone to severe crisis. Since the principal goal of capitalist production is the private appropriation of profit, the rate of return on invested capital (the average rate of profit) is the key regulator of capitalist accumulation, investment and economic growth. If the average rate of profit falls and this is accompanied by a significant fall in the mass of profit, a crisis ensues and the economy contracts, resulting in a slump. As McCormack and Workman correctly observe: The general rate of profit is a broad indicator for the stability of capitalism…. As Henryk Grossman reminds us, however, “the capitalist system can survive despite the fall in the rate of profit.” Indeed, “a falling rate of profit is … only an index that reveals the relative fall in the mass of profit.” The rate of profit “falls because the mass of profit declines relatively.” Thus, the mass of profit can continue to grow despite a falling rate of profit. A growing magnitude of profit keeps the engine of capital accumulation churning. Beyond a certain limit, however, there is too little profit for expanded reproduction. (2015: 41; quoted lines from Grossman 1929/1992: 103) Just as a fall in the average rate of profit need not always precipitate a conjunctural crisis of capital accumulation, such a crisis is not always preceded by a particularly sharp fall in the average rate of profit. A fall in the mass of profits combined with other disturbances may suffice.10 The

104  Twilight Capitalism Great Recession of 2008–09 featured multiple causal elements — some certainly related to the declining profits and insolvency of key financial institutions and industrial corporations — but some also related to market saturations, overcapacity, declining consumer confidence and rising wage and energy costs. Furthermore, while the rate of profit certainly fell from 2007 to 2008, this decline wasn’t the immediate precipitant of the financial crisis that gathered momentum over the course of 2008. On the contrary, it was the financial crisis that precipitated the more pronounced conjunctural decline in the average rate of profit and in the mass of profit (reflected in plunging stock markets) in 2008–09. A decade later, an incipient fall in the rate and mass of profit in the United States and other major capitalist economies also preceded the great slump of 2020. But the immediate trigger of the severe economic downturn in this case (sometimes referred to as a “black swan” event) was the coronavirus pandemic and subsequent government-mandated economic lockdowns, which caused major shocks both to supply chains and to aggregate demand. The profitability crisis that was already brewing in 2019 was amplified considerably by huge disruptions in the creation of surplus value in several economic sectors that specialized in consumer goods and services. Underproduction of certain commodities, involving a collapse in capacity utilization and a consequent loss of surplus value that would otherwise have been created, combined with excess inventories of other commodities with no buyers (due to the collapse of waged income and/ or their compromised utility during the pandemic) resulted in a crisis of surplus value production and realization that was historically unique. With all that said, the ltrpf is of central importance to explaining the downturns of both 2008–09 and 2019–20. Marx argues that there is a tendency for the rate of profit to fall in the long-term under capitalism — a tendency rooted in the competitive and class-antagonistic social relations of the capitalist economy. This secular (as distinct from conjunctural) fall in the rate of profit sets the stage for other long-term destabilizing tendencies to come to the fore, including the phenomenon of financialization — which figured prominently in all three of the recessions/slumps of the twenty-first century (2000, 2008–09 and 2020–21) — as well as the neoliberal (“austerian”) social and economic policies that paved the way for the pandemic. What are the main factors behind a long-term decline in the rate of

Marx’s Theories of Value, Capital and Crisis   105 profit? The competitive interaction of individual capitalist firms forces them all to reduce costs of production per unit of output (with a view to preserving or enlarging market share). However, given the antagonism between capital and labour, the favoured strategy for reducing costs is to increase productivity through the introduction of labour-saving and labour-displacing technologies. This is an eminently rational strategy from the point of view of the individual capitalist firm seeking to meet the challenges of competition. But the unintended consequence of this strategy — when pursued by all the competing capitals — is to reduce the total social surplus value produced in relation to the total capital investment. In other words, the consequence is a fall in the average rate of profit. By striving to enlarge their own specific shares of the pie, the competing capitalists unwittingly shrink the pie as a whole! Marx’s argument is thus predicated on the distinction between the micro rationality of the individual capitalist firm and the macro requirements of capital in general. Individual firms are in no way behaving irrationally when they try to lessen their dependence on living labour. Indeed, in the context of inter-capitalist competition, it is entirely rational for a firm to seek higher profit margins through a reduction of unit labour costs. But it is only because an individual capitalist firm can realize (that is, capture) the surplus value produced by workers employed in other firms (through processes of surplus value redistribution) that the displacement of living labour from production can result in a higher rate of return on the firm’s capital investment. (One of the great advantages of labour-saving over so-called “capital-saving” innovation is that it allows the individual capitalist firm to cut unit costs while also reducing its dependency on what Marx called the “limited basis” of capitalist expansion: the working population.) In the end, however, the effect of expelling living labour from production on an economy-wide basis is to reduce the amount of surplus labour performed and therefore the amount of surplus value produced relative to the value invested in the capital stock. The average rate of profit therefore falls, affecting the profitability of all firms, albeit to varying degrees, and preparing conditions in which other, more specifically conjunctural factors can trigger a full-fledged crisis. The upshot is this: the fundamental social production relations that define capital push inexorably toward an enhancement of labour productivity at the level of the individual capitalist firm. But the resulting

106  Twilight Capitalism fall in the average rate of profit prepares the ground for crises that have a negative long-term impact on the global productivity of the capitalist mode of production. In this way, the falling tendency of the rate of profit reveals the historical limits of capital’s ability to develop the forces of production on a global scale.

Absolute and Relative Surplus Value

The essential condition for the production of surplus value is what Marx termed the “formal subsumption” of labour by capital. Formal subsumption involves the separation of the direct producer from ownership of the means of production, the widespread commodification of labour power and the intervention of capital into the production process as its director or manager. In contrast to formal subsumption, Marx defines the “real subsumption” of labour by capital as an ongoing feature of the developed form of the capitalist mode of production. This involves not only a change in the situation of the agents of production but also a revolution in the “actual mode of labour and the real nature of the labour process as a whole” (Marx 1977: 1021). With every improvement in labour productivity comes a change in the parameters of socially necessary labour time and therefore in the social-structural properties of abstract labour and value. To keep pace with these changes — which create competitive challenges for individual capitalist firms as well as a diminishing magnitude of surplus labour for the social capital as a whole — capitalists must repeatedly revolutionize the labour processes under their direction. Marx’s distinction between the formal subsumption and the real subsumption of labour by capital is closely related to the distinction he draws between the production of absolute and relative surplus value. The former corresponds to a form of capitalist exploitation that relies on lengthening the working day in order to reduce the proportion of necessary labour time required for the social reproduction of the labourer in relation to the surplus labour time expended. Accordingly, absolute surplus value may be conceived as an extensive magnitude, the expansion of which depends upon increasing the total quantity of labour time performed. Relative surplus value, on the other hand, is an intensive magnitude, arising from “the curtailment of the necessary labour-time and from the corresponding alteration in the respective lengths of the two components of the working day” (Marx 1977: 432). Since work time cannot be indefinitely extended, absolute surplus value faces a clear limit in the length

Marx’s Theories of Value, Capital and Crisis   107 of the working day and in the maximal intensity of the labour process. Relative surplus value, on the other hand, faces limits set only by the level of development of labour-saving technology. Consequently, relative surplus value techniques become an increasingly important method of raising the rate of surplus value over the course of capitalist development — especially in the face of successful struggles by working people for reduced work hours with no loss in pay. Precisely because relative surplus value techniques allow individual capitalist firms to produce more output with less labour, productivity improvements are sought through increases in the technical composition of capital. The problem is that such increases find a value expression in the diminishing relative role of living labour in the overall process of production. Living labour is displaced by labour-saving machinery (representing a proportionally expanding magnitude of invested constant-capital values) and this signifies a relative diminution in the role of living labour in the process of production. At the level of the social capital as a whole, this displacement must entail a fall in the average rate of profit, since what is involved in the increased value or organic composition of capital is an overaccumulation of constant capital in relation to the volume of surplus value being created by living labour. This argument is based squarely on what is the key postulate of Marx’s theory of value: that living labour alone generates the new value from which surplus value arises. As the ratio of dead to living labour in production (c/s+v) rises, the rate of profit is depressed and, other things remaining equal, this tends to slow the rate of capital accumulation and economic growth. In this way, “the barrier to capitalist production” reveals itself to be “capital itself ” (Marx 1981b: 358). The system shoots itself in the foot, a crisis ensues, and the crisis creates conditions (through what Marx calls the “slaughtering of the values of capitals”) for a recovery of the rate of profit and renewed accumulation and growth. However, the crisis also calls forth new strategies from capital to ratchet up the rate of exploitation of workers without investing in expensive new labour-saving technologies. In this connection, capital may resort to increasingly harsh methods to increase absolute surplus value — such as lengthening the working day (or week) and intensifying the labour process. In response to the deepening profitability crisis, such methods were embraced by many capitalist firms beginning in the 1970s. For example,

108  Twilight Capitalism workers were encouraged or forced to work longer or more shifts during periods of peak production so that the bosses would not have to hire more workers and assume additional costs associated with new benefit plans. Under the rubric of “lean production” (Tony Smith 2000), the labour process was also massively intensified in order to increase absolute surplus value. In Fremont, California, for example, workers in the General Motors plant had historically been fully occupied with work tasks for 45 seconds out of every minute. After the plant’s closure and its reopening with a lean-production system in place, workers were kept busy “57 of every 60 seconds” (Rinehart 2006: 161). Enforced overtime and intensified labour processes are ways of augmenting productivity and the rate of surplus value without resorting to additional investments in new constant capital stock. They constitute instances of what Marx calls counteracting tendencies to the rate of profit to fall.

Tendencies Counteracting the Fall in the Rate of Profit11

The trajectory of the rate of profit can be influenced by a range of factors that serve to counter a rise in the organic composition of capital. Short of a full-blown crisis and a devaluation of capital stocks, the fall in the rate of profit can be attenuated and even arrested by what Marx calls the “counteracting tendencies.” In evaluating these counteracting tendencies, one should distinguish between factors that can have only a short-term (conjunctural) impact and those that have a long-term (secular) positive influence on the average rate of profit. It’s also necessary to distinguish between factors that may contribute to an increase in the rate of surplus value and those affecting the organic composition of capital (occ). Under the former, we can cite increases in the intensity of exploitation, reduction of wages below their value and relative overpopulation; under the latter, the cheapening of the elements of constant capital and foreign trade (Marx 1981b: Ch. 14). An increase in the intensity of exploitation can only counteract the falling tendency of the rate of profit if it involves no rise in the occ. Thus, Marx looks to those methods typically employed by capitalists to increase labour productivity (and therewith the rate of exploitation) without investment in labour-saving, productivity-enhancing technology. These methods include speed-up (which confronts definite physiological limits and may push up the wage rate), prolonging the workday (which likewise faces physiological limits as well as eventual worker resistance), and productivity-enhancing technical innovations as these are applied by

Marx’s Theories of Value, Capital and Crisis   109 individual capitalists “before they are universally applied” and, presumably, before they impact the economy-wide occ. Like the tactics employed to increase the intensity of labour exploitation, the reduction of wages below their value can be seen as an ephemeral factor in countering the fall in the rate of profit because a sustained reduction of wages below their value would amount to a change in the value of the commodity of labour power, albeit one requiring far harsher methods (union busting, suspension of collective bargaining rights, etc.) than are normally employed to depress wages. Nevertheless, such a change is entirely possible if the labour movement is unsuccessful in fending off a major offensive by capital.12 Relative overpopulation can also contribute to an increase in the rate of exploitation by forcing down wages. But this faces a precise limit in the size of the working population. Only where capitalism is in the process of uprooting non-capitalist modes of production and constantly replenishing a massive “reserve army” of the unemployed can this factor have anything more than a relatively short-term effect in counteracting the fall in the profit rate. On a purely conjunctural basis, all three of the aforementioned factors can play a more or less important role in increasing the rate of surplus value without inducing an increase in the occ. Yet Marx’s apparent expectation that the rate of surplus value would display a secular tendency to rise was inseparable from his view that it would increase as a result of a rising technical composition of capital (tcc) — and such an increase in the tcc, Marx assumed, would find a value expression in a falling rate of profit. Only to the extent that a rising tcc can occur without an accompanying increase in the occ would it be possible for a rising rate of surplus value to coincide with a stable (or rising) rate of profit. It is precisely in this connection that the cheapening of the elements of constant capital derives its special importance as a counteracting factor: [The] same development that raises the mass of constant capital in comparison with variable reduces the value of its elements, as a result of the higher productivity of labour, and hence prevents the value of the constant capital, even though this grows steadily, from growing in the same degree as its material volume, i.e. the material volume of the means of production that are set in motion by the same amount of labour-power. (Marx 1981b: 343)

110  Twilight Capitalism This passage suggests that the occ need not rise as impetuously as the tcc, but it does not imply that a rise in the occ will be prevented as a result of the higher productivity of labour. For a rise in the occ to be prevented, Marx continues, the elements of constant capital must “increase [in mass] while their total value remains the same or even falls.” Here he is clearly alluding to a range of possible capital-saving innovations and techniques — for example, fixed capital of greater durability, increased efficiency in fuel and energy consumption or the discovery and application of inexpensive substitutes for specific fuels or raw materials currently in use. As he suggests, however, such capital saving is only possible “in certain cases.” The limitation of constant capital saving as a factor inhibiting the fall in the profit rate is not very well specified by Marx, but it can be assumed that he regarded labour-saving innovation as a greater priority for individual capitalists for reasons rooted in the totality of social production relations in which individual capitals are enmeshed — relations that impel them not only to cut costs but to cut them in ways that simultaneously strengthen their position in relation to labour. Marx’s fifth counteracting tendency is foreign trade and investment. This factor can play a role in elevating the rate of profit only to the degree that either the terms of trade continue to improve and/or the rate of return on capital invested abroad continues to rise from the standpoint of a given (national) social capital. Yet foreign trade and investment must be considered a two-edged sword, capable of depressing as well as raising the rate of profit. This survey of the tendencies counteracting the ltrpf shows, above all, that the law as such and the counteracting tendencies to the law do not enjoy coequal theoretical status. All of the counteracting tendencies cited by Marx, with the possible exception of the cheapening of the elements of constant capital, have clearly defined limits as means to checking the tendency of the rate of profit to fall as a result of a rising occ. The law itself, on the other hand, has no such limits. It is capitalist crisis alone that creates the conditions for conjunctural recoveries of the rate of profit and resumed accumulation. Importantly, however, it is also the historical recurrence of capitalist crises that induces the capitalist class and its state to deploy ever-changing methods to shore up the average rate of profit, to guarantee the conditions of accumulation and to mitigate the destabilizing influences of severe economic dislocations on the class equilibrium of capitalist society.13

Marx’s Theories of Value, Capital and Crisis   111 Underconsumption and Capitalist Crisis

Some critics of the ltrpf have counterposed to it an underconsumption theory of capitalist crisis, supposedly inspired by Marx himself. In this connection, the following passage has been frequently cited: “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses, in the face of the drive of capitalist production to develop the productive forces as if only the absolute consumption capacity of society set a limit to them” (Marx 1981b: 615). What Marx is not saying here is that consumption necessarily lags behind production because of the poverty and exploitation of the working masses under capitalism. Rather, he is saying that the “restricted consumption of the masses” is an immanent barrier to capitalist production — a kind of structural constant, the dimensions of which might exacerbate capitalist crises while not necessarily causing them. Far from contradicting Marx’s theory of a rising occ/falling rate of profit, this passage can be easily reconciled with it. Regardless of the concrete events that may trigger a particular crisis (and, again, these are many and varied), there is no doubt that its manifestations can be contained and its consequences attenuated through an expansion of effective demand, making possible the sale of commodities at prices that might otherwise not be realized. (This is well illustrated by the support given to “effective demand” by the subsidies provided to working people by Western governments during the 2020 pandemic. Without this injection of funds into the households of furloughed or unemployed workers, consumer spending would have fallen off far more than it did.) As Marx suggests, the overproduction of commodities associated with capitalist crises can be mitigated to the extent that their sale is not wholly dependent on the “narrow basis on which the relations of consumption rest.” The massive expansion of consumer credit in the Western world since the 1970s should be viewed, above all, in this light. But the longer-term factor highlighted by Marx is the expansion of the world market. In this connection, he asserts that the “internal contradiction seeks resolution by extending the external field of production” (1981b: 353). The sale of commodities on the world market and the investment of capital in foreign countries have become increasingly important strategies for curbing crisis tendencies as these find expression in national capitalist contexts. The same idea is suggested in Marx’s discussion of foreign trade and investment as influences that may counteract the falling rate

112  Twilight Capitalism of profit. Yet, as noted, all of this is very much a two-edged sword. The social capital of every capitalist country seeks to use such strategies to curb its locally manifested crisis tendencies, even though it is only too obvious that not all of them can succeed in any given conjuncture. The condition for resolving the internal contradiction through an extension of the external field of production (and realization) for the social capital of one country is precisely that the social capitals of other countries fail in this same stratagem. Furthermore, as all capitalist countries become increasingly interdependent, as the weakest of them reach the limits of their capacity to absorb the global effects of these tendencies, and as capital exerts itself more and more as an international social power, unhampered by national loyalties or nation-state regulation, such strategies become progressively less effective and may even become counterproductive.

THE HISTORICAL-STRUCTURAL CRISIS OF CAPITALISM 14 As we’ve suggested, the ltrpf is not only an important element in explaining cyclical interruptions of the capitalist accumulation process, it is also fundamental to a satisfactory account of the growing and irresolvable incompatibility between the social relations and forces of production of capitalism: the chronic “historical-structural crisis” of the capitalist mode of production. This idea is clearly expressed in the following passages from Marx’s Grundrisse: [The declining profit rate] is in every respect the most important law of modern political economy, and the most essential for understanding the most difficult relations. It is the most important law from the historical standpoint…. Beyond a certain point, the development of the powers of production become a barrier for capital; hence the capital relation a barrier for the development of the productive powers of labour. When it has reached this point, capital, i.e. wage labour, enters into the same relation towards the development of the social wealth and of the forces of production as the guild system, serfdom, slavery, and is necessarily stripped off as a fetter. The last form of servitude assumed by human activity, that of wage-labour on one side, capital on the other, is thereby cast off like a skin, and this casting-off itself is the result of the mode of production corresponding to capital; the material and mental conditions of the negation of wage labour and of capital,

Marx’s Theories of Value, Capital and Crisis   113 themselves already the negation of earlier forms of unfree social production, are themselves results of its production process. The growing incompatibility between the productive development of society and its hitherto existing relations of production expresses itself in bitter contradictions, crises, spasms. The violent destruction of capital not by relations external to it, but rather as a condition of its self-preservation, is the most striking form in which advice is given it to be gone and to give room to a higher state of social production. (1857/1973: 748–49, emphasis added) Several points in these passages should be especially noted. First, Marx refers to the “development of the powers of production” as a barrier to capital and to the capital relation as a “barrier for the development of the productive powers of labour.” This suggests a dialectical interaction between the material forces and the social relations of production in which, increasingly, each stand as a barrier to the other. As long as capitalism survives, this destructive interaction must persist. The material forces of production can register real, qualitative progress only in a “higher state of social production.” Second, Marx refers to the “growing incompatibility between the productive development of society and its hitherto existing relations of production.” This point is crucial to the historical significance of the ltrpf. A falling rate of profit resulting from an overaccumulation of capital is a feature of both the period of capitalist ascent and the period of capitalist decline. But if this law is also the harbinger of capitalist decline — the expression of an irremediable contradiction fatal to capital’s continuing ability to systematically promote the development of labour productivity and, with it, human culture — then it must have a somewhat different significance and expression during the era of capitalist decline and decay than it had when capital was still playing a historically progressive role. This seems to be the burden of Marx’s reference to a “growing incompatibility” — and yet the expression of this incompatibility is left unspecified by Marx, except for a reference to “bitter contradictions, crises, spasms” — that is, to phenomena that have been recurrent features of capitalism since its birth. This brings us to a third point. Marx also implies that the growing incompatibility between the forces and relations of production will find expression in the “violent destruction of capital not by relations external to it, but rather as a condition of its self-preservation.” Here Marx proved to be remarkably prescient — for it has been the quite literal physical

114  Twilight Capitalism destruction of capital in world wars (themselves interpretable as products of the growing incompatibility) that led many twentieth-century Marxists to conclude that capitalism had finally entered into historical-structural crisis. In Vladimir Lenin’s terms, capitalism reached its “highest stage” with the advent of imperialism, a phenomenon that expresses, above all, the attempt of the most developed capitalist countries to resolve their internal contradictions not only at the expense of their less-developed colonies and semi-colonies (as they had done throughout the era of colonialism) but at the expense of each other as well. Under conditions of capitalist decay, the profitability crises of the system tend to become more acute and more protracted, eventually requiring far-reaching “solutions.” These may include aggressive attempts to raise the rate of exploitation of living labour by driving down working-class living standards; trade liberalization (or trade wars and colonial adventures) permitting the displacement of the internal contradiction to the external field of production and exchange; fascism, involving the complete destruction of the organized labour movement and the mobilization of “the nation” to solve its problems at the expense of other nation-states; and full-scale war between nations and the physical destruction of capital, eventually permitting a “new start” — a new material and social basis for capital accumulation — such as emerged after World War II. For Marxists, such extreme manifestations of capitalist crisis provide compelling reasons to conclude that the capitalist system has ceased to play any sort of progressive historical role, that its irrational aspects have occluded and triumphed over its rational ones and that it must therefore give way to a more consistently rational as well as cooperative and egalitarian form of social production: socialism.

ON MARX’S THEORIES AND “PREDICTIONS” It would be foolish, even religious, to think that Marx resolved all of the theoretical problems involved in developing a scientific understanding of capitalism. His own original plan for a comprehensive analysis of capitalist society (which was to include not only the three volumes of Capital but specific volumes on wage labour, the state and the world market) was interrupted by a relatively early death in his sixty-fifth year. Moreover, Marx can be faulted, with some justification, for leaving doors open to facile misinterpretations of his ideas. Even so, a century of controversy surrounding his theories has failed to establish that they are either logically

Marx’s Theories of Value, Capital and Crisis   115 inconsistent or empirically wrong. Regardless of what one may think about the “transformation problem” or the various other theoretical problems that have been identified in his oeuvre, the fact remains that Marx’s analysis of capitalism, as informed by his theories of value, capital and crisis, has had an excellent track record in forecasting the actual historical trajectory of the capitalist mode of production. “The proof of the pudding,” as Engels liked to say, “is in the eating.” Or, as Marx put it in Theses on Feuerbach: “The question whether objective truth can be attributed to human thinking is not a question of theory but is a practical question. Man must prove the truth — i.e. the reality and power, the this-sidedness of his thinking in practice.” The point here is that Marx’s theories, notwithstanding their incompleteness, have provided a much sounder foundation for understanding capitalist development than have any of the theories advanced by pro-capitalist economists writing either before or after him. In terms of their predictive power, they have outperformed the theories of Smith, Ricardo, Mill, Menger, Marshall, Hayek, Friedman, Galbraith, Samuelson, Schumpeter — and, yes, even those of John Maynard Keynes. The test of history — of practice — has turned out to be a much more reliable arbiter of the “truth” of Marx’s theories of value, capital and crisis than all the esoteric theoretical disputations that have absorbed the energies of so many Marxist intellectuals over the past century. This is not to say that the “value controversy” was or is pointless (indeed, for those interested in a brief survey, this controversy is considered in Chapter 5). However, to believe that it is possible to win the war for Marx’s ideas within the disciplinary domains of academic economics or “public policy” by solving specific theoretical problems, or that such a victory is in any sense an important condition for building a mass socialist movement, would be foolishly naive. The struggle to bring down capitalism and achieve socialism depends instead on the ability of Marxists to demonstrate the reality and power of Marx’s theories to those social forces (above all, the working class) that have an interest in achieving socialism as well as the capacity to do so. The experience and demise of Soviet Bloc Stalinism (which was falsely linked to Marx’s theories for many decades) poisoned that effort terribly for several generations. Yet the real history and recent troubles of twilight capitalism are now providing a potent antidote. In whatever ways we choose to evaluate Marx’s prediction of proletarian socialist revolution in the core of world capitalism or to judge the “actually

116  Twilight Capitalism existing socialism” constructed in his name in the “Communist world,” we can only be astonished at how well his main predictions concerning the course of capitalist development have held up. Indeed, it is with respect to those predictions that Marx’s theories will need to be popularized to a broad audience of workers, students and intellectuals — most of whom are unlikely to take much interest in the finer points of dispute in the value controversy.

Marx’s Predictions in Light of the Historical Record

Marx forecast that the development and global spread of capitalism would bring about immense transformations in the human condition — for better and for worse. What follows are six of his more important predictions concerning the course of capitalist development and its inevitable decline, together with some commentary and evidence in support of each of them. Marx predicted: 1) Capitalist development would bring about the remorseless separation of the great mass of the population from the ownership or effective possession of the means of production, at first within the pioneering nations of capitalist civilization and ultimately on a world scale, such that humanity will be increasingly divided between a small class of capitalists and a majority class of wage and salary earners compelled to sell their labour power on pain of destitution. Commentary and Evidence In just five hundred years, the capitalist mode of production has spread out from its cradles in northwestern Europe to dominate the entire planet. At times it has swiftly uprooted non-capitalist forms of economy, while at other times it has coexisted with them, all the while pressing them into the service of an expanding capitalist world market. Prior to the industrial revolution, the leading capitalist nations resurrected and massively expanded the ancient institution of chattel slavery as a means to more effectively exploit and pillage the natural resources of the western hemisphere. The profits earned from the slave trade (involving the transport of millions of enslaved Africans to the Americas) and from the ruthless exploitation of slave labour on colonial plantations were of decisive importance to the “industrial take-off ” of Western Europe — Britain in particular. Ernest Mandel has estimated that the total capital

Marx’s Theories of Value, Capital and Crisis   117 accumulated between 1700 and 1800 through the slave trade, the colonial plundering of India and Indonesia, and the exploitation of slave labour in the West Indies amounted to over one billion pounds sterling — a sum exceeding the value of “all the industrial enterprises operated by steam which existed in Europe around 1800!” (1968: 444). Once consolidated, the capitalist mode of production brought about the division of populations everywhere between capitalist property owners, on one side, and a mass of workers dependent on the sale of their labour power, on the other. Peasants, self-employed farmers and other petty commodity producers, who once constituted the vast majority of the world’s population, have been reduced to a dwindling minority. By 2019, the self-employed represented a small and declining percentage of the workforce in all of the developed capitalist countries: 6.2 percent in the United States, 14.7 percent in the eurozone and 10.2 percent in Japan. Even in more “backward,” late-developing capitalist nations (that is, countries burdened with a legacy of colonial or semi-colonial subjugation and underdevelopment), self-employed persons (including peasants) often constitute less than one-third of the population: 31.7 percent in Mexico, 31.5 percent in Turkey and 32.7 percent in Brazil. Globally, self-employment as a percentage of total employment fell from 56 percent in 1991 to 47 percent in 2019. With 46.7 percent of its workforce self-employed, China can be seen as an “average” country in this regard (ilo 2020). In the most developed regions of world capitalism, the dream of many working-class people to start a successful business and become “their own boss” is now almost impossible to realize. All wage and salary earners (whether they work in industry or agriculture, in commerce or in government) are obliged to sell their labour power in order to secure a living. While a relatively small middle class of self-employed professionals, independent commodity producers, tradespeople and contractors, restaurateurs and shopkeepers continues to survive in the interstices of the system, the great majority of the population are now members of the wage-earning “proletariat,” notwithstanding the subjective proclivity of many of them to identify themselves as “middle class” (Smith 2014: Ch. 11). 2) Capitalist development entails an increasing concentration and centralization of capital, such that more and more of the assets and activity of the capitalist economy on a global scale fall into the hands of a shrinking fraction of the capitalist class itself. The

118  Twilight Capitalism upshot: concentrated wealth at one pole of the world economy; extreme poverty and misery at the other. Commentary and Evidence According to the 2019 Wealth-X “The World Ultra Wealth Report,” 265,490 “ultra-high net worth” (uhnw) individuals (with a minimum of $30 million each in wealth) collectively owned $32.3 trillion in 2018. Expressed differently, one-quarter of a million oligarchs (roughly equal in number to the population of Saskatoon, Canada, or Derby, England) owned more than the poorest 80 percent of the world’s population — some 5.6 billion people. In North America, 91,740 uhnw individuals held close to $10.9 trillion; in Europe, the uhnw population of 74,380 boasted nearly $8.7 trillion; and in Asia, 75,570 uhnw individuals possessed a combined wealth of $9.5 trillion. What’s more, in 2017, just 22.3 million people (about 3.3 percent of the global population), each with a net worth of over $1 million, owned a combined $91.7 trillion, almost triple the total wealth of the poorest 90 percent of the world’s population. In 2016, the anti-poverty group Global Justice Now created a list of the top one hundred “economic entities” in the world, based on an analysis of government revenues (reported in the cia’s World Factbook, 2016) and corporate turnover figures (as reported by Fortune Global 500). While the top nine entities were all countries, the Walmart corporation (the world’s largest non-state employer) placed tenth, just behind Canada. Overall, there were seventy corporations on the list and just thirty countries (out of a country total of almost two hundred). This points to the enormous wealth and power that the biggest transnational companies in the world command. Global Justice Now said that, together, the ten biggest corporations — among them, Walmart, Apple and Shell — make more money than most of the countries in the world combined. The Swiss Federal Institute of Technology reported in 2011 that a dominant core of 147 corporations, via interlocking stakes in others, together controls 40 percent of the wealth in the global corporate network, and a total of 737 companies control 80 percent (Mackenzie and Coghlan 2011). The degree of wealth concentration and monopoly-finance control over the world economy exercised by several dozen giant corporations and banks is nothing short of staggering — having reached levels that far surpass what Lenin documented in his famous work Imperialism: The Highest Stage of Capitalism a century earlier. In Capital I, Marx wrote: “Accumulation of wealth at one pole is,

Marx’s Theories of Value, Capital and Crisis   119 therefore, at the same time accumulation of misery, agony of toil slavery, ignorance, brutality, mental degradation, at the opposite pole.” Under capitalism, the wealth of the global super-rich derives from the exploitation of the international working class as a whole. Consider the consequences: • Half the world’s population lacks access to health care and 100 million people are forced into extreme poverty each year due to health care expenses (who 2017). • 1.2 billion people lack access to electricity (Rockefeller Foundation 2017). • Two billion people use a drinking water source that is contaminated with feces (who 2018). • 8.6 million people die each year due to inadequate health care (Kruk et al., 2018). • 750 million adults are illiterate (unesco 2017). • 1.6 billion people lack access to secure and adequate housing (wri 2017). • 50.5 million children under the age of five are “wasting” due to malnutrition (World Bank 2018). • 850 million people suffer from “chronic undernourishment” (UN Food and Agriculture Organization, cited in Hunger Notes 2018). • Four billion people are deprived of internet access (unesdoc 2017). As Eric London (2018) observes: Even in the most advanced countries of Europe and North America, the working class faces increasingly precarious conditions dominated by declining life expectancy, greater incidences of suicide and drug/alcohol abuse, growing student debt, declining wages and cuts to social programs. In the United States, home to roughly one third of the world’s ultra-wealthy individuals, some 69 percent of people have less than $1,000 in total savings. According to a study published by the Institute for Policy Studies, the annual sales earnings of the world’s two hundred largest corporations were only slightly less than half the total earned by the poorest 4.5 billion people on Earth in 1997 (Anderson and Cavanagh 2000). By the end of the twentieth century, two hundred companies accounted for more than

120  Twilight Capitalism 60 percent of all manufacturing assets in the United States. (In 1929, that figure had been 46 percent and in 1959, 55 percent.) By 1988, fewer than 1 percent of all corporations controlled two-thirds of all corporate assets in the United States. Corporate concentration was even more pronounced in Canada. By 1987, the top 1 percent of Canadian companies controlled fully 86 percent of all assets and realized 75 percent of all profits, while the top one-hundredth of 1 percent of all enterprises (about one hundred companies) controlled 56 percent of all assets (Blackwell, Smith and Sorenson 2003: 128). The concentration of assets and profits in the hands of a relatively small number of huge transnational corporations has dire implications for the masses of people worldwide who depend on selling their labour power for a livelihood. While the sales of the top two hundred corporations account for a quarter to a third of the world’s marketed output, these corporations employ less than 0.5 percent of the global labour force. This means that the great majority of the world’s workers must seek employment with small and medium-sized companies, which are often poorly capitalized and not nearly as profitable as the top two hundred. Little wonder, then, that these workers typically endure low wages and meagre benefits, not to mention deplorable working conditions and job insecurity. 3) A strong tendency exists for capitalist industry to displace living labour from the production process through the introduction of increasingly sophisticated labour-saving and labour-displacing technologies — that is, an increase in the technical composition of capital — and a concomitant expansion in the global “surplus population” of chronically unemployed or underemployed people. Marx termed this the “general law of capital accumulation.” Commentary and Evidence The technical composition of capital (tcc) can be designated as the ratio of means of production (in use-value terms) to the total number of production workers or, better still, as the constant-dollar value of capital stock employed per hour worked. Wassily Leontieff (1982), a well-known mainstream economist, furnished data on the long-term trend of this ratio for the U.S. economy from 1949 to 1977. His figures showed that the tcc ratio almost doubled over this twenty-eight-year period, confirming that technological change under capitalism displays a pronounced laboursaving bias. Similar results have been reported by Marxist economists

Marx’s Theories of Value, Capital and Crisis   121 examining trends for the tcc throughout the advanced capitalist world (Mage 1963; Shaikh and Tonak 1994; Webber and Rigby 1996). Setting aside its impact on the organic composition of capital, the rising tcc in manufacturing and other productive sectors of the economy has had a twofold effect: 1) to make available an increasing volume of workers for “socially necessary unproductive labour” in commerce, finance and government services; and 2) to massively augment the global “surplus population” or “reserve army of labour.” The first effect is discussed in Chapters 4 and 5 (as well as in Smith 2019). The second calls for more immediate comment. Even during the mid-to-late 1990s, a period of modest but real economic growth, 20 percent or more of the world’s labour force was either unemployed (meaning ready and willing to work, but unable to find a job) or underemployed (meaning employed on a part-time basis, even while seeking full-time work). Notably, this estimate is based on official, government-released unemployment figures, which, while measured in a variety of ways across the world, tend to exclude “discouraged workers” and people incarcerated in prisons or mental institutions for reasons that are often related to their inability to find decent jobs. The existence of so large a “surplus population” — one that has grown enormously as a result of the 2020 economic slump — is unmistakable evidence of a significant immiseration of much of the world’s population, just as Marx predicted. But it is also compelling evidence for the proposition that capitalism has reached a point in its development where it is now actually restraining the growth of the productive forces. Why should the labour power and talents of well over a billion working-age human beings be squandered in this way? Why should so large a segment of humanity be excluded from making a productive contribution to the satisfaction of human needs — in the first place, their own? Clearly, this can be seen as logical only from the point of view of an economic system that has reached a very advanced stage of decay. 4) Global capitalist expansion will bring about the transformation of capital — understood as “self-expanding value” — into an international social power that seeks to break out of the confines and constraints of the nation-state even as it continues to rely on the latter as the political-institutional form through which its irrepressible contradictions are almost invariably addressed and managed.

122  Twilight Capitalism Commentary and Evidence The facts of “economic globalization” — as practised by major transnational corporations and promoted by the policymakers of the leading capitalist states — are so well known as to scarcely require rehearsal here. Consider, however, an otherwise unconvincing “manifesto” written during the Great Recession of 2008–09 and devoted to the defence of the capitalist economic system as the best possible engine of “wealth creation.” In it, Fareed Zakaria, editor of Newsweek International, makes an important argument that unwittingly echoes Marx’s nineteenth-century predictions about the increasing international reach of capital and the growing contradiction between the development of the capitalist world economy and the continued pre-eminence of the nation-state: [The] fundamental crisis we face is of globalization itself. We have globalized the economies of nations. Trade, travel and tourism are bringing people together. Technology has created worldwide supply chains, companies and customers. But our politics remains resolutely national. This tension is at the heart of the many crashes of this era — a mismatch between interconnected economies that are producing global problems but no matching political process that can effect global solutions. (Zakaria 2009) The depression of the last decade as well as the social crisis of 2020 has brought this tension — this fundamental contradiction of a globalizing capitalism — into sharp relief. The question is: can it be overcome? Marx’s implicit answer is that the only progressive resolution to this intensifying contradiction is global socialism — a democratically planned, collectivized world economy under the control of a socialist world government. Failing that, as we suggested in 2010, the “capitalist alternative will almost certainly involve a retreat (of indefinite duration) into national economic protectionism — something to which most governments are now succumbing in response to the current slump, despite the stern warnings of most mainstream economists. The deeper and longer lasting the slump turns out to be, the greater will be the dangers of rising protectionism, trade wars and, eventually, shooting wars. The history of capitalism is unequivocal on this score” (Smith 2010: 65). This prediction has been borne out by the experience of the last decade all too well. 5) As long as capitalism survives, periodic crises of overproduction

Marx’s Theories of Value, Capital and Crisis   123 rooted in the competitive interactions of capitalist firms and in the antagonistic relations between capital and labour — that is, in the fundamental social production relations of capitalism itself — must persist. Commentary and Evidence Although pro-capitalist ideologues and policymakers (not to mention financial advisers and stockbrokers) perennially predict that the capitalist economy will eventually overcome its tendencies toward severe crisis (with or without the “right mix” of macroeconomic policies), capitalism has repeatedly given the lie to such “optimism.” The history of capitalism has been one of economic cycles involving the recurring sequence of economic recovery — boom/prosperity — overproduction/crisis — slump/ depression. Ernest Mandel (1968: 359) identified seventeen such cycles between 1816 and 1958, each with a boom featuring a particular type of “extension of the basis of production.” Over the past sixty years, since 1960, we have seen seven such cycles. But contrary to the hopeful expectations of mainstream economists writing in the 1950s and 1960s (in the wake of the so-called Keynesian revolution in economics), five of the more recent cycles have been punctuated by rather severe conjunctural downturns: the slump of the mid-1970s (which affected virtually the whole of the capitalist world economy, but which was also of relatively short duration); the deep recession of the early 1980s (which was partly induced by a high-interest-rate, monetarist policy as a means to arrest inflation and expand unemployment); the recession of the early 1990s (which was felt unevenly across the world economy but hit many countries quite severely); the Great Recession of 2008–09 (which signalled the beginning of the Long Depression of the past decade); and the recession that began in 2020, which has already surpassed the previous one as the deepest since the Great Depression of the 1930s). To deflect criticism from an economic system with so impressive a record of fomenting crises, large and small, is no easy task. For this reason, the ideological guardians of capitalism bend every effort to convince the working-class public that capitalist crises are the result, above all, of mistaken government economic policies (such as high taxes, bad trade agreements, excessive government spending, ineffective monetary policy and so on). Failing that, working people are encouraged to see them as something akin to “natural catastrophes” — as episodic “storms” that must be accepted as inevitable, regardless of the many hardships they

124  Twilight Capitalism inflict. Of course, to further discourage any consideration of the inherent irrationality and contradictions of the capitalist system, working people are also encouraged to think that crises result from “too many immigrants,” “too much union power,” “too many people on welfare,” “too many women in the workforce,” the “natural limits to growth” and, of course, the “unfair trading practices” of other countries (such as Japan in the 1980s and China today). Blaming politicians and encouraging finger-pointing among the exploited and the oppressed serves to drown out the few voices prepared to indict the capitalist system itself. Sadly, this gambit is reinforced by many would-be progressives, and even ostensible socialists, who, eager to be heard, put their own spin on the idea that economic dislocations stem from “misguided policy choices,” “bad trade deals,” the “greedy behaviour” of miscreant (usually foreign) capitalists or even “undeserving” (unionized) segments of the workforce who allegedly claim more than their “fair share” of the national income. 6) Under capitalism, there is a long-term tendency for the average rate of profit to fall as a result of a rise in the organic composition of capital — that is, an increase in the ratio of dead to living labour in the sphere of production and in the economy as a whole (the ratio of the value of fixed constant capital stock to the sum of variable capital and surplus-value flows). Commentary As this prediction is a central part of the subject matter of this book, the evidence supporting it can be reviewed elsewhere (see Chapters 2 and 5 in particular). Still, it’s important to consider the implications of this prediction for the future of the profit system. Assuming the reality of Marx’s ltrpf, capitalism is clearly doomed to recurrent crises. To avoid these increasingly destructive crises, the productive forces must be liberated from the capitalist imperative to subordinate production to profit making. The only way this can be accomplished, however, is through the abolition of capitalist property and the establishment of a socialist economy in which production is geared toward meeting human needs rather than private profit. Such a socialist economy would not only be collectively owned and democratically administered by the associated producers (and consumers), it would also be free from the tyranny of the law of value (that is, the measurement of wealth in terms of labour time).

Marx’s Theories of Value, Capital and Crisis   125 The reason that Marx considered the ltrpf to be the most important law of political economy from the “historical standpoint” is that it provides an extremely powerful but also essentially simple argument in support of the proposition that the development of the forces of production under capitalism points with inexorable logic toward socialism. The following “thought experiment” illuminates this point. Imagine a society in which living wage labour is entirely displaced by advanced machinery and automatons endowed with artificial intelligence. No living labour, either manual or intellectual, is any longer needed to produce the material output that sustains the population. The capitalist owners of these advanced machines have guaranteed access to this material output by virtue of their ownership. But those with no ownership share in these machines — the former wage-earning working class — have become an idle surplus population and lack any source of earned income. Now imagine that instead of fighting for a share of the material output of this entirely automated economy, the non-owners simply accept the argument that they have no legal or moral claim on it. Since they no longer have a wage or a salary to purchase their means of subsistence, they have no choice but to depend on the charity and goodwill of the owners. At a certain point, however, the owners decide to withhold their charity, and the non-owners then choose to voluntarily “disappear” — that is, to perish. What kind of society would remain? Assuming that the owners find ways to cooperate with each other and pool their resources to meet their common needs, what would remain would be a collectively owned and cooperatively run economy in which the private pursuit of profit would be replaced by the principle: “From each according to his or her ability, to each according to his or her need.” What we would have, in other words, would be “the higher stage of communism” as Marx described it in his 1875 work Critique of the Gotha Programme. Of course, such a scenario is impossible to imagine outside of science fiction. But its implausibility stems not so much from the futuristic idea of an entirely automated economy as from the truly bizarre notion that the working-class majority of a capitalist society would simply accept its own transformation into an increasingly impoverished surplus population and then just agree to die off. Was Marx wrong to believe — to predict — that the working class would struggle against such a fate, at first defensively, to be sure, but also, in due course, with a conscious plan to reconstruct society on new foundations?

126  Twilight Capitalism That plan — the socialist program — aims to establish a world in which the masses of working people, and not a handful of capitalists, would be the final beneficiaries of the advanced productive forces that workers have laboured so hard to create and that constitute the capitalist system’s most enduring contribution to human progress.

SUMMING UP In the end, Marx’s analysis of capitalism compels us to consider a few simple questions that flow inexorably from his theories of labour value, capital and crisis. How can the capitalist mode of production survive indefinitely when it promotes the displacement of living labour from the production of social wealth even while continuing to demand that this wealth be measured (however unconsciously) in terms of living labour expended? How can the capitalist profit system persist when its relations of production mandate the introduction of labour-displacing technology even while demanding the subordination of economic activity to private profit — that is, the class appropriation of surplus labour? In an era in which manual living labour has become a less and less necessary material input to production and when even the most skilled intellectual labour is being displaced by computer software, robotics and artificial intelligence, these questions are surely more acute than ever. The fact that the working-class majority has yet to become fully aware of them, much less willing to act on them, attests not to the inadequacy of Marx’s theories but to the tremendous power of the capitalist class and its ideological agents to systematically obscure social reality — to obstruct the spread of Marx’s scientific discoveries and thereby impede the development of a socialist working-class consciousness. Marx was certainly aware of the power of the dominant ideology to deform and even poison the consciousness of working people. But he also believed that, in the end, “social being determines consciousness.” For this reason, he was hopeful that, over time, the contradictions highlighted in the prior questions would become ever more obvious and that the working-class movement would discover the rational means to resolving them: the socialist program of transforming the social relations of production in such a way as to serve human need rather than capitalist profit. Historical experience has shown resoundingly that this discovery — this fundamental change in consciousness — will not occur through some sort of automatic or spontaneous process. Rather, it will require

Marx’s Theories of Value, Capital and Crisis   127 an arduous and determined political struggle — at the levels of ideas and action. It’s to that vexing question that we turn our attention in Chapter 7.

Notes

1. Of course, the formal egalitarianism of the free market is decisively overshadowed by the massive substantive inequalities engendered by capitalist production and exchange. Furthermore, the relations of class exploitation and competition that characterize capitalism tend to undercut the principle of “formal equality” by encouraging such anti-egalitarian ideologies and sentiments as racism, xenophobia and male dominance, all vital to perpetuating the rule of the capitalist class. 2. “Financial wealth” here does not include the wealth represented in homeowner equity. 3. It is worth noting, however, that a study by Shaikh suggested that “variations in prices [at least within industries] are dominated by variations in values” and that “almost 92% of the changes in calculated prices of production are explained by changes in calculated values” (Shaikh 1984: 64, 74). 4. Mandel uses the expression “parametric determinism” to indicate “several possibilities within a given set of parameters” (1989: 121). To understand value as a “parametric determinant” is to affirm that the law of value establishes a field of possibilities within which human action is constrained but within which a range of important choices can also be made — choices that, among other things, may affect the degree to which market prices deviate from individual commodity values. 5. For further discussion of Samuelson’s critique of Marx, see Chapter 6. 6. Marx’s original plan for a work on “economics” included specific volumes on: 1) Capital, 2) Landed Property, 3) Wage Labour, 4) The State, 5) International Trade, 6) World Markets and Crises. He was only able to complete the first part of his work on Capital before his death in 1883. 7. See Chapter 5, which elaborates on the following passage from Invisible Leviathan: In empirical studies of the Marxian ratios, it’s necessary to define variable capital as the after-tax wage-bill of productive workers. The latter’s real income is the income used to reproduce “the capacity to work” and to support nonwaged family members, not the “income” deducted from workers’ wages and transferred to the state. Arguably, certain “transfer payments” benefitting working-class households may be seen as elements of variable capital — but these are small relative to the taxes deducted from “gross wages.” (Smith 2019: 233, n. 29) 8. In Invisible Leviathan, Smith wrote: Unlike commercial and financial capital … the capitalist state is not a “private accumulator.” Most of its revenues are obtained through taxation rather through participation in surplus-value redistribution on the basis of the general rate of profit (or interest). Rather than compete with capitals for

128  Twilight Capitalism a share of social surplus-value, the capitalist state is principally concerned with obtaining adequate value (revenue) to allow it to continuously acquit its historically developed tasks. This is not to say that the state never captures a portion of currently produced surplus-value in order to expand its activities; on the contrary, the state has exhibited a strong historical tendency to do precisely this. Yet, while the state regularly appropriates a certain share of newly created surplus-value as a means of further entrenching its role in social reproduction, it is wrong to regard all of its tax revenues as a “deduction from surplus-value,” just as it would be wrong to treat the tax on labour income as a deduction from variable capital. From the standpoint of the social capital, the state is a machine of social reproduction. Like any other machine, it requires maintenance, amortization, new parts, and a continuous supply of fuel and energy. Accordingly, the social capital — in whose historical interests the capitalist state functions — must set aside a considerable portion of the value it realizes in order to continuously finance state activity, just as it must set aside some of the same “realized value” to replenish raw material stocks, depreciated fixed capital, and expended fuel supplies in the mines, mills and factories that are the principal sites of surplus-value production. (2019: 233–34). See also Chapter 5 of the present work. 9. Marx usually refers to the rate of profit as the ratio s/c+v, where c and v are both implicitly flow variables. But he also insists that the denominator of the rate of profit refers to the “capital advanced” — that is, a stock measurement that would include fixed constant capital but exclude the flows of variable capital. See Smith 2019, Mage 1963 and Chapter 5 of this work for further discussion. 10. See Michael Roberts (2019b) on Marx’s “double-edge” law, in which Roberts argues correctly that, while a fall in the rate of profit sets the stage for a crisis, it is the abrupt fall in the mass of profits that preciptitates cyclical crises. 11. This subsection reproduces pages 207–09 from Invisible Leviathan (Smith 2019). 12. While most workers have seen a decline in their real wages in the United States and most other advanced capitalist countries over the past thirty years, we think the decline may not yet have been so great as to constitute a clear reduction in the value of labour power. For a different opinion, particularly regarding the United States, see Chesnais 2016 and Sotelo Valencia 2016. 13. Several arguments have been associated with the attempt to refute Marx’s theory of a rising occ/falling rate of profit (ltrpf). These include the “neutral technological progress” argument, the “rising technical composition/stable organic composition” argument and the “choice of technique” argument. These are critically reviewed and evaluated in Invisible Leviathan (Smith 2019: 210–15) as well as in Carchedi (2011a) and Carchedi and Roberts (2014). None, in our view, provides a convincing case against Marx’s ltrpf. 14. This section reproduces pages 220–22 from Invisible Leviathan (2019).

Chapter 4

VALORIZATION CRISIS AND THE PATH TO GLOBAL DEPRESSION CAPITALISM AND VALORIZATION CRISIS

T

he capitalist mode of production is characterized by a contradictory unity of labour processes and processes of valorization (and self-expansion) of capital. Labour processes refer to how work is organized, directed and conducted in concrete “physical” terms — the types of human labour that are performed and the tools and materials that living labour employs to produce specific goods, services and effects (“use-values”) deemed useful by their creators. Labour processes are ubiquitous and necessary in all societies — capitalist and non-capitalist alike. Valorization processes, on the other hand, are specific to capitalism. They involve the subordination of all concrete labour processes to the primary aim of capitalist production. That aim, of course, is the generation of surplus value — the “social substance” of profit of enterprise, ground rent and interest — and therewith the perpetuation of the exploitative capital-labour relation upon which the capitalist class structure rests. For our purposes, a crisis of valorization refers to problematic conditions in which an insufficient amount of surplus value is created relative to the ever-changing requirements of the total social capital. These requirements involve several factors — particularly adequate rates of return on capital investment, acceptable systemic overhead costs and manageable levels of debt. Of course, the ways in which these factors are articulated with one another is always subject to a degree of change from one conjuncture to the next. As we’ve already seen in Chapters 2 and 3, Marx’s classic argument in regard to problems of valorization is that over time inter-capitalist competition and capital-labour antagonism compel capitalist firms to invest proportionately more of their capital funds in labour-saving

129

130  Twilight Capitalism and labour-displacing technologies (fixed constant-capital stock) than in productive labour power. But since only living labour can produce surplus value (as stipulated in Marx’s theory of value), such a pattern of investment tends to depress the average rate of profit, the key regulator of capital accumulation, investment and growth. This law, the ltrpf, is at the root of recurrent capitalist crises that manifest as a glut of commodities that can’t be sold at “adequate” profit margins due to weak purchasing power (“deficient effective demand”) in markets. At the same time, however, Marx considered the ltrpf to be an expression and harbinger of an emerging historical-structural contradiction between existing capitalist relations of production and the development of the forces of production. Precisely because capital stimulates the development of the productive powers of labour through technological innovation at the micro level, it also undermines its longer-term ability at the macro level to extract sufficient quantities of surplus value from a productive labour force that is shrinking relative to the rising total costs of capitalist production and reproduction. Although the ltrpf is central to explaining economic contractions that afflict capitalist economies over the course of regular business cycles, any profit-centred theory of capitalist crisis in our time must also take stock of the cumulative results of capital’s historically evolving — and now faltering — attempts to cope with long-term (“secular”) declines in profitability. For this reason, Marx’s ltrpf should be viewed as the most important but not the only aspect of a larger historical-structural crisis in the valorization of capital. Thus, the longue durée of the crisis of twilight capitalism encompasses not only the effects of a rising organic composition of capital (the displacement of living by dead labour) but also the expansion of the systemic costs of capitalist reproduction that began after World War II and the growing weight of finance, credit and debt in the world economy since the onset of the neoliberal era in the early 1980s. Now, to be sure, capital in the twenty-first century still strives to maximize profitability in the “old fashioned” way: by raising the rate of exploitation of productive wage labour in order to generate increased volumes of surplus value. Indeed, this remains the only way that “real profit” — that is to say, profit based on surplus value — can be earned. All the same, it’s quite clear that, beginning in the late 1970s, capital sought to boost the mass of profit by: 1) relying more and more on measures to

Valorization Crisis and the Path to Global Depression  131 reduce real wages, intensify labour processes and extend working hours (that is, by emphasizing the production of absolute surplus value); and 2) reducing systemic overhead costs in general (especially the snul wage bill and corporate taxes). While “successful” in lowering living standards for the majority of wage workers in such developed countries as the United States, the United Kingdom and Canada, these measures nevertheless failed to fully resolve the long-term profitability problems of productive capital — the component of the social capital that is directly and uniquely involved in generating fresh surplus value. The impasse reached by the productive “real” economy in the last third of the twentieth century ushered in the phenomenon of “financialization” — the attempt to realize profits increasingly through non-traditional financial activities, including hedge funds, credit-default swaps, cdos/ clos, stock market chicanery, debt peonage and state largesse directed toward financial elites. Although financial capital continued to routinely lay claim to a determinate portion of social surplus value as its due reward for carrying out various systemically useful and necessary activities (above all, money-capital loans to productive capitalist enterprises and credit loans to households), a rising share of its profits acquired a distinctly “fictitious” character. To borrow Carchedi’s (2011b) apt formulation, fictitious profits are profits based on relations of credit and debt rather than on relations of production. Fictitious profit is realized not through a transfer of currently produced (redistributed) surplus value from productive capital to the financial sector, but through making claims on future income — on surplus value not yet created. In Chapter 5, we explore this development in greater depth, especially in regard to its implications for empirical analysis of trends in the rate of profit. The continuous growth of increasingly fictitious forms of profit in recent decades is arguably the most salient feature of the phenomenon of “financialization.” Not long before the financial crisis of 2007–08, David Harvey described it this way: Increasingly freed from the regulatory constraints and barriers that had hitherto confined its field of action, financial activity could flourish as never before, eventually everywhere. A wave of innovations occurred in financial services to produce not only far more sophisticated global interconnections but also new kinds of financial markets based on securitization, derivatives, and all manner of futures trading…. This deepened the hold of

132  Twilight Capitalism finance over all other areas of the economy, as well as over the state apparatus and daily life. (2005: 33) In these few lines, Harvey summed up the essence of what Stavros Mavroudeas (2018) has called the “financialization hypothesis”: the idea that in recent decades, financial capital has displaced productive capital from its previously dominant role in the capitalist economy. We agree with Mavroudeas that this hypothesis (which is shared by Harvey, Lapavitsas, Kincaid, Rasmus and a host of other leftist political economists) vastly overstates the extent to which twenty-first-century capitalism has been transfigured by the “ascendance of finance.” But there is one respect in which we attach a good deal of significance to the changed relationship between finance and productive capital that proponents of the hypothesis tend to mischaracterize. In our view, the financialization phenomenon is yet another perverse expression of the profitability and valorization problems of productive capital. Financialization has not “transformed” capitalism in some fundamental way, allowing it to dispense with the exploitation of productive wage labour as a means to generating profit. On the contrary, the phenomenon testifies to the decay of the profit system and the frenzied efforts of powerful circles within the capitalist class to accumulate immense fortunes without contributing (even in indirect ways) to the production of commodities and surplus value. How and why did this situation come to pass? Chapter 2 offered a concise conspectus of the maturing of the valorization crisis of capitalism in the second half of the twentieth century and the opening decades of the twenty-first, as well as a survey of some attempts to develop a theoretical understanding of its root causes and consequences. In this chapter, we consider the impasse reached by Keynesian economic theory and policy that was provoked by the profitability and “stagflation” crises of the 1970s and how the (partial) pivot away from Keynesianism that began in the late 1970s prepared the ground for the neoliberal offensive against the working class. This history is particularly important to review in light of the efforts of would-be progressives since the Great Recession of 2008–09 to revive left-Keynesian approaches in response to the growing inequalities and economic malaise that are often attributed to “neoliberal financialization.” The next and longest part of the chapter focuses on the well-known and much-debated account by Robert Brenner of the evolution of the advanced capitalist economies in the sixty years following World War II. Brenner’s analysis of the “long downturn” in the global economy was an

Valorization Crisis and the Path to Global Depression  133 important effort to synthesize elements of Marx’s theory of profitability crisis with an account of capitalist economic crisis that emphasizes problems of “realization” or “effective demand.” To some extent, this approach shares common ground with both Keynesian and Marxian perspectives insofar as its rejects “Say’s law” (the idea that supply creates its own demand) and gives due consideration to the paramount role of profit in capitalist economies. That said, Brenner’s approach is sharply at odds with our Marxian theorization of a valorization crisis and is criticized on that account. In particular, inasmuch as Brenner’s thesis rests upon a concept of “realization crisis” that has much more in common with the Keynesian tradition than with Marx’s theory, our critique of Brenner serves the larger purpose of revealing the basic incompatibility of even the most “left” versions of Keynesianism with Marxism. The chapter concludes with some further commentary on the causes of the Great Recession of 2007–09 and a consideration of Michael Roberts’ argument that the latter crisis was the inaugural moment of a “long depression” in the global economy — one that was significantly aggravated by the crisis of 2020.

FROM THE KEYNESIAN “GOLDEN AGE” TO NEOLIBERALISM 1 After the tumultuous first half of the twentieth century — an era marked by two world wars, the Russian revolution, the Great Depression, the rise of European fascism and Japanese militarism, the consolidation of the Soviet Union and the emergence of the Soviet Bloc, the Chinese and Yugoslav revolutions, the successful independence struggle and partition of the Indian subcontinent and the onset of a wave of anti-colonial struggles in Africa and Asia — world capitalism managed to achieve a real, if precarious, stabilization by the 1950s. The “epoch of wars and revolutions” referred to by Lenin and Trotsky in the 1920s and 1930s seemed to have definitively passed — although some Marxists acknowledged only a temporary shift of the “epicenter of world revolution” from the “developed” to the “underdeveloped” world. In hindsight, the notion that socialist revolution was no longer even a possibility in the advanced capitalist world can be seen as an impressionistic and ideologically driven judgment. Yet what is incontrovertibly clear is that the decades following World War II did not see a return to the depression conditions of the 1930s as a great many expected it would. On the contrary, capital entered into a relatively

134  Twilight Capitalism stable era of robust growth, despite the presence of powerful labour movements and mass social democratic, labour and/or Communist parties in Western Europe, the Americas, Japan and Australasia, and despite the establishment of “socialist systems” in Eastern Europe, China, Vietnam and Cuba — not to mention the proliferation of left-nationalist regimes in many postcolonial Asian, African and Middle Eastern countries. This “golden age” of capitalism lasted from about 1950 up to the synchronized international recession of 1973–75 — a watershed moment that ended the “capital-labour accord” that had supposedly defined the political economy of the advanced capitalist countries for over two decades and which many had considered a permanent new reality. All in all, this era inspired hope that a more egalitarian, democratic and humane capitalism was achievable and that serious future conflicts between capital and labour could be avoided. This was never a realistic hope, in our view, even if its appeal was understandable. Yet it clearly had remarkable staying power. For us, the question is thus posed: What accounts for the persistence of this hope even after decades of economic malaise, austerity and declining living standards for major segments of the Western working class? There are several ways to answer this question, but for now we focus on just one: the great stock that many workers, labour movement leaders and would-be progressives came to place and continue to place in the “Keynesian revolution” in economics. Rather than recognize that World War II’s massive destruction of capital stock (not to mention human lives) created the material conditions for a new and significantly more profitable regime of capital accumulation to emerge after 1945, the conventional “centre-left” and even “radical-left” wisdom of the postwar era held fast to the notion that the ideas and policy prescriptions of British economist John Maynard Keynes (1883–1946) had made it possible to envision a form of capitalism in which capital and labour alike could prosper and collaborate in creating a better and more peaceful world.

The Keynesian Interlude and the Neoliberal Turn

The basic premise of Keynes’s economic theory is that “general gluts” (that is, economic depressions) are caused by a failure of savings to pass over into investment, but specific policies enacted by governments can effectively manage this problem. According to this view, the interests of capital and labour can be harmonized if aggregate demand is maintained at adequate levels. Fundamentally, economic crises are seen as resulting

Valorization Crisis and the Path to Global Depression  135 not from any serious problems in the sphere of production or from a fundamental conflict of class interests but from the non-productive hoarding of profits by capitalists and maladroit distributions of income that combine to lower effective demand and thus discourage investment. Of course, there are various shades of opinion within the Keynesian camp, often reflecting ambiguities, contradictions and changes within Keynes’s own thinking. That Richard Nixon, a conservative Republican president, could have stated in 1971 that “we are all Keynesians now” speaks not only to the pervasive influence of Keynes’s ideas in the post– World War II era, but also to their malleability and serviceability to a wide range of policy agendas. Thus, proponents of increased military (“permanent-arms economy”) spending, on the one hand, and advocates of greater social-welfare spending, on the other, could both argue that rising levels of state expenditure produced “countercyclical” effects in the postwar period and spared Western economies from the sort of severe economic contractions that typified the pre-Keynesian era. Of course, there were dissenters, mostly on the “free-market” right, who predicted that all this would end badly. When asked about concerns about the longrun sustainability of his policies to “smooth out” the boom-bust cycle of capitalism and to secure low levels of unemployment through deficit spending, income redistribution and progressive taxation, Keynes himself famously remarked: “In the long run, we’re all dead.” The “long run” came no more than thirty years after Keynes’s own death. In the mid-1970s, the advanced capitalist economies experienced the worst recession since the end of World War II — its aftermath bringing slow growth, rising unemployment, cratering profitability and runaway inflation. This specific combination of economic woes, dubbed “stagflation” at the time, was one that Keynesian theory was unable to explain, much less remedy. For the capitalist elites, Keynesian “fiscal policy” came to be widely viewed as a big part of the problem. What was now needed, it seemed, was a turn toward “monetarism” — the policy of manipulating the money supply and interest rates in order to stabilize the economy. Monetarist policy in the United Kingdom and the United States in the late seventies and early eighties inaugurated the neoliberal era. Highinterest rate policies and central banks’ curtailment of the supply of money served to break the back of inflation, mainly by generating a recession deep enough to subdue working-class militancy and block wage growth.

136  Twilight Capitalism This was accompanied by the introduction of a raft of neoliberal measures and policies carried out by private capital and the capitalist state. The basic elements of neoliberalism as a class strategy and state policy have been remarkably uniform across the capitalist world since that time and have involved the following: • Treating real wage growth as a greater problem than unemployment/underemployment • Weakening or dismantling social assistance (“welfare”) for those unable to work • Privatizing state-run enterprises and utilities • Deregulating businesses and markets • Replacing “Fordist” modes of organizing labour processes with “lean” and “just-in-time” production techniques to maximize efficiency and minimize waste • Promoting greater international mobility of capital, “free trade” policies and corporate globalization • Conducting a multifaceted offensive against organized labour (including banning or limiting the right to strike) • Commodifying public goods and services • Implementing regressive tax policies (lowering corporate taxes, making income tax rates less progressive, increasing sales taxes and government service fees, etc.) • Pursuing policies of austerity for the bottom 90 percent and of largesse for the top 1 percent • Creating an enlarged space for financial capital in the economy (e.g., by repealing the Glass-Steagall Act of 1933, which had separated investment from retail banking in the United States). This program was implemented — or strategically realized — in different ways in different countries. In the United States, the neoliberal project was shaped by America’s hegemonic position as the leading capitalist nation, by the significant economic and political role played by racial oppression and by the uniquely powerful role of ultra-reactionary religious values in its political culture. These factors shaped the “Reagan counter-revolution” of the 1980s, shifting the U.S. political spectrum far to the right. In particular, President Reagan’s breaking of the air traffic controllers’ strike in 1981 signalled the start of a major offensive against trade union power in America.

Valorization Crisis and the Path to Global Depression  137 In the United Kingdom, neoliberalism had to contend with the existence of a historically strong labour movement ostensibly committed to a form of “democratic socialism.” The power and militancy of the British trade unions stood as a major obstacle to a “business-friendly” resolution of the economic crisis of the 1970s, while the political limitations of organized labour (its predominantly reformist orientation) precluded any resolution on a genuinely socialist basis. This created an opening for Conservative prime minister Margaret Thatcher to undertake a major offensive against labour, culminating in the defeat of the historic miners’ strike of 1984–85. Thatcher’s statement that “there is no alternative” became a popular rallying cry of the neoliberal right. In Canada, the neoliberal project and strategy was implemented more gradually and unevenly, owing in part to the decentralized character of the pan-Canadian state. However, the attack on organized labour began earlier in Canada than in the United States or Britain and was spearheaded by both Liberal and social-democratic governments. Notable in this regard was the passage of draconian strike-breaking legislation by the New Democratic Party government of British Columbia in late 1975 that ended a massive strike wave in that province. This paved the way, only a week later, for the federal Liberal government of Pierre Trudeau to introduce countrywide wage controls, a move that received only a weak response from organized labour (Smith and Butovsky 2013). Despite all this, Canadian unions faced a far more gradual decline than their counterparts in either the United States or the United Kingdom. Much more could be said about the political economy of the neoliberal project as a global strategy of capital, but this will suffice for now. What needs to be emphasized is that the triumph of neoliberalism was fundamentally predicated on 1) the exhaustion of Keynesianism as a policy paradigm for capital in an era (the 1970s) marked by a severe profitability crisis and rising working-class militancy, and 2) the failure of organized labour throughout the advanced capitalist world to struggle to resolve that era’s crisis on a genuinely socialist basis — that is to say, through the establishment of workers’ governments and the expropriation of the capitalist class. Globally, organized labour was (and continues to be) increasingly dominated by bureaucratic conservatism, nationalism and overt class collaboration, rendering labour largely defenceless against capital’s offensive. The existing labour (mis)leaderships — despite occasional

138  Twilight Capitalism socialist rhetoric — revealed themselves to be the last line of defence of the capitalist order during the tumultuous decade of the 1970s. In good “left-Keynesian” fashion, they maintained that the capitalist system could still accommodate rising working-class living standards so long as labour productivity continued to increase. Only the wilful greed of capitalists and the “unfair” competitive practices of rival trading nations were identified as obstacles to a (re)distribution of the national income that would benefit all (even if unequally). Furthermore, all that was needed to secure such a distribution were determined efforts to rein in corporate greed and safeguard the economic interests of the national community through enlightened government regulation, expansion of the public sector, establishing a more progressive tax system and perhaps nationalizing certain industries. Unions, it was claimed, could contribute to these outcomes simply by defending the interests of specific sectors of the workforce through collective bargaining and supporting progressive-egalitarian and economic-nationalist policies in the political arena while also advocating for democratic reform of electoral systems and state apparatuses that were still presumed to operate above classes and in the service of a trans-class national interest. As the saying goes, that was their story and they were sticking to it! Forty years on, the failure and bankruptcy of this perspective is only too obvious, at least to those with some historical memory.

Neoliberalism and Globalization: The Early Years

As a project for reasserting the class power of the capitalist class, neoliberalism has remained the favoured strategy of most capitalist elites to the present day. A return to full-blown Keynesianism finds very little support in ruling class circles and political elites, the main function of Keynes’s ideas being simply “to keep the hope alive that ‘capitalism with a human face’ is at least a theoretical possibility, the better to discourage interest in socialism as an alternative among workers, youth, and left-leaning intellectuals” (Smith 2019: 9). Yet the very fact that no alternative to neoliberalism (in one form or another) is entertained by the representatives of capital today (with the notable exception of outright fascism, perhaps!) is a measure of just how decrepit capitalism as a system has become. It should be underscored that even in the period leading up to 1991, the year in which the Soviet Union collapsed, the neoliberal project proved incapable of restoring to capitalism the dynamism that it had enjoyed in

Valorization Crisis and the Path to Global Depression  139 the 1950s and 1960s. On only two economic metrics did it register much success: defeating wage inflation and inflating booked profits. Let’s consider the economic record of those early years of neoliberalism and corporate globalization. From 1950 to 1973, gdp per capita in the industrialized capitalist nations averaged an annual increase of 3.6 percent, followed by a decline to 2.0 percent from 1973 to 1989. This trend coincided with a decline in the average annual percentage increase of industrial production among the G7 nations over the period 1960–90. According to historical statistics compiled by the oecd, the developed capitalist world saw a general growth slowdown from 1960 to 1990. Between 1960 and 1973, oecd countries averaged an annual rate of gdp growth of 4.9 percent, while from 1973 to 1990, the average growth rate was only 2.7 percent. Moreover, worldwide gdp growth slowed from almost 5 percent per year in 1948–73 to only half that in 1974–89 and to a mere crawl during the recession years of the early 1990s. During this period, the declining performance of the advanced capitalist countries can hardly be attributed to accelerated globalization, as there was little “closing of the gap” between the industrially developed and underdeveloped regions of the world economy. Indeed, gdp per capita in the Third World (inclusive of certain “newly industrializing countries”) as a percentage of the developed, “core” capitalist countries declined from 8.7 percent in 1960 to 7.4 percent in 1970 and then to 6.1 percent in 1987. Moreover, what industrialization occurred in the capitalist-dominated Third World was largely confined to a handful of countries representing a tiny percentage of its population. Exports from these semi-colonial capitalist countries as a percentage of world exports of manufactured goods increased from 11.2 percent in 1966 to 13.8 percent in 1986; but once Hong Kong, South Korea, Singapore and Taiwan were removed from the picture, the trend was reversed. Excluding those “four dragons,” the remaining “peripheral” or “semi-colonial” countries (now often referred to as the Global South) accounted for only 6.8 percent of world exports of manufactured goods in 1986 compared to 9.6 percent in 1966. It should be emphasized that neither the dismantling of obstacles to world trade nor other vaunted manifestations of globalization over the period 1960–90 stemmed the slowdown in the world capitalist economy. Summarizing the conclusions of their analysis of the impact and significance of those trends, Glyn and Sutcliffe wrote: [While] the post-war period has seen a rapid increase in trade

140  Twilight Capitalism shares [export shares of gdp] for the advanced capitalist countries, (a) the increase has broadly returned these economies back to the position before the First World War; (b) it does not apply outside the accs; (c) if intra-European trade is excluded and Europe is regarded as one unit, then trade shares for the main blocs of accs, let alone Asia and the ex-U.S.S.R., are extremely small (Europe’s total commodity trade was 22.9% of gdp, but extra-European trade only 6.5%); and (d) further increases are limited by the rising importance of services (even in the absence of more intense protectionism). (1992: 81) The concerted efforts of transnational capital to promote globalization (as both ideology and corporate practice) aimed to resolve the global economic malaise on terms conducive to improved profitability and the perpetuation of the capitalist profit system. In this context, it was useful to distinguish between capitalist prosperity and popular prosperity, where capitalist prosperity referred to an economic situation marked by “adequate” rates of return on invested capital (that is to say, a high average rate of profit) and popular prosperity referred to an economic situation characterized by low levels of unemployment and rising average living standards (defined by such variables as the real wage, social protections afforded by the state, the general availability and affordability of health and educational services, life expectancy and the extent of social inequalities). The legitimacy of the advanced capitalist order during the post–World War II epoch depended critically on its apparent capacity to reconcile these two forms of prosperity, at least in the eyes of the working masses of the developed capitalist world. However, such reconciliation — which was problematic at the best of times — proved increasingly difficult to sustain. Indeed, after the mid-1970s, a vigorous assault on popular prosperity became a basic condition for capitalist prosperity in most of the advanced capitalist countries. During the 1950s and 1960s, the advanced capitalist world succeeded in maintaining an economic dynamism and level of social cohesion characterized by both adequate profitability and rising working-class living standards. However, in the 1970s, most of these countries experienced severe crises of profitability. The cyclical range of the average rate of profit fell to levels incompatible with robust growth or with a rate of new capital formation sufficient to sustain the sort of productivity increases associated with a regime of accumulation predicated on expanding mass production

Valorization Crisis and the Path to Global Depression  141 industries, rising real wages and strong consumer demand (sometimes designated as “Fordism”). Evidence of a long-term profitability crisis, manifested in secular downward trends in the average rate of profit in the advanced capitalist world, is now well known and incontrovertible. Interestingly, however, cross-national data compiled by the oecd also reveal a striking and increasing divergence between average profit rates and growth rates in the G7 capitalist countries after the early 1980s recession. The trend for the accumulation rate (that is, the average annual percentage growth rates of capital stock) within the advanced capitalist world began to decline with the onset of the profitability crises of the 1970s and continued its fall even after the recovery of profit rates in the 1980s. The average “all-business” accumulation rate for the advanced capitalist countries (i.e., the United States, capitalist Europe and Japan) declined from an average of 5 percent in 1960–73 to 4.1 percent in 1973–79 and then 3.9 percent in 1979–89. The corresponding figures for manufacturing alone were 5.5 percent, 3.6 percent and 2.9 percent. It’s not surprising that under such conditions of slowdown in investment in new capital stock, the rates of increase in labour productivity also declined. “All-business” labour productivity growth rates fell in the United States from an average of 2.2 percent annually in 1960–73 to 0.5 percent in 1979–90; in Japan, from 8.6 percent to 3.0 percent; and in Western Europe from 4.2 percent to 2.2 percent. The general pattern was also reflected in the slowdown in the average rate of growth of real gdp per person employed. The latter rate was at least twice as high in 1960–69 as it was in 1979–88 for the United States, Japan, West Germany, France and Italy. Our description of the post–World War II era may be summarized as follows. Long-term trends in average profitability rates fell throughout the developed capitalist world from 1950 until the 1970s and early 1980s. Following the deep recession of the early 1980s, the trend in average profit rates began to be reversed. However, the renewed profitability of the late 1980s was not accompanied by a serious recovery in the rate of accumulation and productivity growth. Indeed, while the post-recession 1980s boasted respectable rates of gdp growth, this growth and related gains in profits were accompanied by three highly negative economic indicators: a growing burden of debt (government, corporate and household) associated with high real interest rates, high levels of unemployment and stagnant or declining real wage levels. All three indicators pointed to a

142  Twilight Capitalism substantial erosion of popular prosperity amid the largely speculative boom of the 1980s while also foreshadowing a severe economic downturn. When the economy entered into a serious recession in 1990, one that was felt unevenly across the advanced capitalist world, the ideologists of capital could no longer credibly blame the malaise on “excessively high wages” as they did in the 1970s. But they could and did blame poor productivity performance — which had been occasioned by capital’s own desperate and draconian (neoliberal) responses to the profitability crisis. Those responses included corporate restructuring involving mass layoffs, non-productive capital investments and a continuing decline in the accumulation rate, as well as the high interest rate policy of the U.S. Federal Reserve under Paul Volcker’s leadership, beginning in 1979. While neoliberalism’s record in the 1980s and 1990s was abysmal in terms of improving popular living standards and promoting robust economic growth, there is no doubt that the neoliberal project was successful in altering the relationship of class forces decisively in favour of capital and against labour, in restoring profitability for a certain period and in preparing global capital for the opportunities opened up by the restoration of capitalism in the former Soviet Bloc as well as by China’s opening to the world market in the 1990s. It’s also clear that there was little in the policy toolbox of any variant of Keynesianism that could have achieved better results for capital in that conjuncture. And yet another, quite different question needs to be posed at this point. Was there any theoretical or political response from the side of labour that could potentially have pointed humanity in a genuinely progressive direction? We believe there was: the theory of capitalist crisis developed by Marx and the class-struggle socialist program associated with it. It is one of the great tragedies of modern times that the still-powerful workers’ movements of the 1970s failed to meet the historic challenge of mounting a revolutionary offensive against capital. And an important reason for that failure was the ability of the labour officialdoms (both in the unions and in the political parties of the working class) to maintain the illusion that there was a way out of the crisis — a reformist, Keynesian way, within capitalism — that would not come at a heavy cost to the working class. To the extent that the influence of left-Keynesianism waned within the workers’ movements at the time, it was due mainly to the idea that working-class struggle was itself the direct cause of the 1970s crisis. Proponents of the “wage-push-profit-squeeze” or “rising strength of labour” theory

Valorization Crisis and the Path to Global Depression  143 correctly pointed out that at the heart of the crisis was the decline in profitability. Yet, ironically, their analysis in some ways echoed the viewpoint of the bourgeoisie, even while giving the “class-struggle” explanation a positive spin. In doing this, however, they effectively abandoned Marx’s idea that the barrier to capital is capital itself — that capitalism’s inner workings produce a rise in the organic composition of capital and thus a fall in the rate of profit. Sadly, only a few voices emerged on the socialist left that paid heed to Marx’s ltrpf-based theory of crisis or to the ideas of some of its most important later exponents (Henryk Grossman, Paul Mattick Sr. [1969] and Shane Mage). In the 1970s, those voices belonged mainly to Anwar Shaikh, Fred Moseley, Joseph Seymour and (with some major qualifications) Ernest Mandel. Most of the left remained in thrall to the neo-Ricardian “profit squeeze” hypothesis or to some version of underconsumptionist or Keynesian theory. To be sure, the audience for a recovery of Marx’s own theory of crisis grew somewhat in the 1980s, but by then the opportunity to popularize the theory to a potentially large and mobilized working-class audience had largely passed. By the 1990s, with the “collapse of Communism” and amid the din of capitalist triumphalism, it entirely disappeared. This was the context in which an eclectic new approach to explaining the continuing malaise of global capitalism emerged at the turn of the millennium: an important study by ucla historian and political economist Robert Brenner.

GLOBAL TURBULENCE AND THE MARXIAN THEORY OF CRISIS: A CRITIQUE OF BRENNER In the decade leading up to the financial crisis and recession of 2007–09, Robert Brenner’s lengthy essay “Uneven Development and the Long Downturn: The Advanced Capitalist Economies from Boom to Stagnation, 1950–1998” as well as its updated version The Economics of Global Turbulence (published in 2006) attracted more attention than perhaps any other analysis associated with the broad traditions of radical or Marxist political economy.2 Although widely praised, it also provoked strong criticisms from proponents of Marx’s theories of labour value and the ltrpf. Among other things, Brenner was charged with a one-sided analytical preoccupation with capital-to-capital (competitive) relations at the expense of the capital-wage labour (class struggle) relation, with misunderstanding and dismissing Marx’s law of the falling tendency of the rate of profit and with ignoring Marx’s value-theoretic categories entirely.3

144  Twilight Capitalism While many of these criticisms were well founded, Brenner’s work nevertheless stood out as one of the few attempts by a contemporary socialist to analyze deeply the evolution of the leading advanced capitalist economies (the United States, Germany and Japan) over the six decades following World War II. Moreover, much of what Brenner argued, on the basis of an impressive compilation and synthesis of official data sets, lent indirect support to a more fully Marxist understanding of the dynamics of the capitalist mode of production. Indeed, in spite of several anti-Marxist theoretical presuppositions, certain aspects of his work could be seen as reinforcing the evidentiary case for an analysis of the “long downturn” — the deepening valorization crisis of the world capitalist economy since the 1970s — that recognizes with Marx that “the true barrier to capitalist production is capital itself ” (1981b: 358). All the same, the limitations of Brenner’s study point unmistakably to the necessity of the Marxian value theory that he sought so assiduously to exclude.

From the Golden Age to the Long Downturn: The Brenner Account

At the core of Brenner’s account of world capitalism’s trajectory in the last half of the twentieth century is the centrality of profitability — and the rate of profit on manufacturing capital in particular — to the operations of the capitalist mode of production. The relatively high level of the average rate of profit in the advanced capitalist world in the years immediately following World War II is recognized as the key to explaining the “golden age” of postwar capitalism, just as its descent into a much lower range is seen as responsible for the “long downturn” that began in the early 1970s. The rapid rate of growth of the capitalist world economy in the 1950s and 1960s was largely predicated on the strength of the U.S. economy (both its productive capacity and the size of its domestic market) as well as the willingness of U.S. capitalism to cultivate Germany and Japan as effective competitors as well as major trading partners in the global arena. The impressive growth of the German and Japanese economies drove the extraordinary wave of global economic expansion that marked the 1950s and 1960s. Yet, according to Brenner, it is also important to recognize that the ability of the German and Japanese manufacturers to wrest ever greater shares of the world market from U.S. (and U.K.) producers … made possible their postwar “miracles,” [and that] this capacity to seize market share could only come into play because

Valorization Crisis and the Path to Global Depression  145 of the willingness of the U.S. government to tolerate not only the broad opening of the U.S. economy to overseas penetration, but even a certain decline in U.S. manufacturing competitiveness in the interests of U.S. military and political hegemony, international economic stability, and the rapid expansion of U.S. multinational corporations and banks. (1998a: 47). Brenner refrains from elaborating on this point, but it clearly suggests that the dynamic global growth of the 1950s and 1960s was based to a considerable extent on a deliberate attenuation of the rivalries between the leading capitalist power (the United States) and its German and Japanese competitors. A geopolitical strategic calculation — the need to promote the stability of the world capitalist economy and to maintain the unity of the major imperialist powers against the “communist threat” during the Cold War — overrode the normal tendency of a capitalist nation-state to press its competitive advantages to the fullest. Crucially, however, this partial suppression of the “normal” dynamic of inter-imperialist competition was conditioned by — and likely conditional upon — the dramatic recovery of profitability in the United States made possible by World War II. Thus, the “long upturn” of the immediate postwar period depended upon both high levels of profitability and the conscious efforts of U.S. policymakers to (partially) sacrifice the short-term competitive position of U.S. manufacturing capital to the longer-term goal of preserving world capitalism. In general terms, such an understanding of the long upturn seems to be a quite reasonable one. The long upturn was succeeded by a transitional period that spanned the years 1965 to 1973, a conjuncture Brenner refers to as the “onset of crisis.” It was during this period that U.S. capitalism’s dominant economic position began to weaken within the world capitalist order. Profitability fell to unacceptably low levels as Germany and especially Japan sought to further enlarge their shares of the world market. In addition, the costs of prosecuting its dirty, losing war in Vietnam (roughly from 1964 to 1974) weighed heavily on U.S. imperialism, both economically and politically. At the same time, in many other advanced capitalist countries, the costs associated with maintaining low unemployment and popular socialwelfare programs began to have negative impacts on economic growth and profitability. President Nixon’s competitive devaluation of the U.S. dollar in 1971 and the termination of dollar-gold convertibility (a cornerstone of the Bretton Woods international monetary system established in

146  Twilight Capitalism 1944) signalled the onset of renewed inter-imperialist rivalries. By 1973, the stage was set for the most serious international recession since the 1930s — a slump directly triggered by skyrocketing oil prices but also presaged by a significant decline in profitability throughout much of the advanced capitalist world. The international recession of 1973–75 provoked a major offensive by capital against labour in a number of key capitalist countries, including the United States. This was followed by even more serious slumps in the early 1980s and 1990s. However, a partial turn away from Keynesianism and toward monetarist economic policies (presaging full-blown neoliberalism) along with the deflationary tendencies these generated were cushioned by the fiscal stimulus associated with high levels of military spending and the expansion of both public and private debt in the United States. The inauguration of the Clinton administration in 1993, more or less coinciding with the end of the Cold War, marked a significant turning point in U.S. policy in relation to the global economy. Clinton’s neoliberal commitment to the elimination of Keynesian-style deficit spending, which had previously tended to reflate the U.S. and global economies, broke a pattern that had persisted for some three decades. The result was that “by the midpoint of the 1990s, a certain recovery of the U.S. economy had … been purchased at the cost of exacerbating international stagnation” (Brenner 1998a: 157). The most important part of Brenner’s study is its account of the factors that produced and sustained the long downturn in the world capitalist economy, which began in the mid-1970s and which eventually culminated, in our view, in the Long Depression of the twenty-first century. The seriousness of this downturn was well documented. From 1973 to 1996, the growth of U.S. gdp per hour worked averaged 0.9 percent, well under half the historical average for the previous century, while the average for the 1990s (up to 1996) fell to 0.7 percent (1998a: 3). Brenner’s comparative analysis of the periods 1950–70 and 1970–93 revealed serious declines in such key economic indicators as the net profit rate, growth of output, capital stock formation, labour productivity and real wage growth throughout the G7 core of the world capitalist economy. Meanwhile, unemployment soared, particularly in the (then) eleven countries of the European Union. In 1996, it averaged 11.3 percent — higher than the average annual rate of unemployment for the sixteen leading capitalist economies during the Great Depression of the 1930s.

Valorization Crisis and the Path to Global Depression  147 At a certain level, Brenner’s explanation of the long downturn was appealingly straightforward and contained much truth. Proceeding from Duménil and Lévy’s (1993) defence of the central role of the rate of profit in regulating the performance of capitalist economies (an idea central to classical and Marxist political economy alike), Brenner demonstrated that falling profitability throughout the advanced capitalist world produced a serious decline in the rate of growth of investment and output, especially in manufacturing. This led to a decline in the rate of productivity growth, falling real wage growth and increases in unemployment. Having established these empirical trends and correlations, the key analytical task that remained for Brenner was to explain the underlying causes of the profitability crisis.

Brenner’s Theorization of the Profitability Crisis

Rejecting both the “fundamentalist” Marxist account of a rising organic composition of capital as well as the dominant “supply-side” account of profits squeezed by rising real wages, declining productivity or swelling welfare-state expenditures, Brenner (1998a: 8–9) suggested that the source of the profitability crisis of the last quarter of the twentieth century (and beyond) was “overcapacity and overproduction which resulted from intensified, horizontal inter-capitalist competition.” This intensified competition was “itself the manifestation of the introduction of lowercost, lower price goods into the world market … at the expense of already existing higher cost, higher price producers, and their profitability and their productive capacity.” Thus, Brenner offered not only an empirical and historical analysis of the fall in profitability, but a general theoretical framework for explaining it. Its point of departure was the “unplanned, uncoordinated, and competitive nature of capitalist production,” while its conclusion was that downturns produced by crises of profitability are likely to persist so long as the afflicted economies prove unable to reduce and profitably reallocate productive resources in such a way as to overcome overcapacity and overproduction in manufacturing. This general theoretical framework for explaining the long downturn and its profitability problems was fully consistent, it should be noted, with the emphasis that Brenner had accorded to the conscious attenuation of inter-capitalist competition in explaining the long upturn after World War II. Moreover, it tended to place him within the broad tradition of Marxist crisis theory associated with “disproportionality.” A possible

148  Twilight Capitalism consequence was that his analysis could be seen as lending itself, as one critic suggested, to the idea that the United States, the European Union and Japan might “jointly agree to co-ordinate their production and share out markets more equitably” as a solution to the downturn (Kilmister 1998). Such a prescription would have been redolent of social-democratic nostrums of the 1920s, according to which “the anarchy of capitalist markets” might be overcome through an “organized capitalism” (Hilferding) or some form of “ultra-imperialism” (Kautsky). Yet, quite to the contrary, Brenner appeared to recognize that the general crisis of profitability of the advanced capitalist economies during the long downturn not only resulted from heightened inter-capitalist competition but also created conditions conducive to less, not more, cooperation between the leading imperialist states as each sought to enlarge its market share at the expense of the others. Surveying the global economic scene at the end of the 1990s, he observed: “We may be on the verge of still another, perhaps even more brutal, round of that heavily zero-sum battle for world markets in manufacturing, under conditions of slow growing demand, that has for so long stood in the way of renewed economic dynamism” (1998a: 256). How, then, to account for the long-term decline in profit rates? Brenner’s answer was that, as a consequence of unbridled inter-capitalist competition, producers are “unable to mark up prices over costs sufficiently to maintain their established rates of return” (1998a: 96). In other words, profits are squeezed by the inability of producers to realize prices that are adequate relative to rising costs. Building upon Marx’s own insights into the profitability problems posed by fixed capital investments, Brenner focuses on the difficulties facing established manufacturers when, having sunk their capital in technologically or economically obsolescent fixed capital assets, they are confronted with competition from newcomers using cheaper but also more advanced means of production. So long as the established manufacturers can continue to achieve adequate rates of return on their circulating capital (raw materials, labour costs and so on), they may resist “exiting” the production line or retiring their outmoded fixed capital assets. Moreover, since the established producers also have significant advantages over new entrants in terms of market contacts and knowledge-based assets of various kinds, they still have a fighting chance to meet the competitive challenge of lower-cost producers. Due to inadequate exit of obsolescent fixed capital assets and even whole firms, the competition between established high-cost producers and their

Valorization Crisis and the Path to Global Depression  149 lower-cost upstart competitors leads to a growing problem of overcapacity and overproduction, and with this comes the “realization” problems that cause industry-wide profit rates to fall. In an article published later, in 1998, Brenner summarized the place of this analysis in his overall account of the origins and persistence of the long downturn: Why, in line with standard expectations, didn’t firms suffering from falling profitability in their lines shift into other lines of production to a sufficient extent to alleviate overcapacity? To this question, it seems to me there are three general answers. First, the great corporations of the United States, Germany and Japan that dominated world manufacturing appeared to have much better prospects for maintaining and improving profitability by seeking to improve competitiveness in their own lines than in reallocating into others. They had great supplies of sunk capital that they had already paid for in their own lines; they had longestablished relations with suppliers and customers that could not be easily duplicated in other lines; and they had developed, over a long period, hard-won specialized technological knowledge that was useful only in their own line. Thus, during the 1970s and after, U.S., German and Japanese corporations did not generally relinquish their positions unless they were forced to, with the result that there was insufficient exit and little alleviation of manufacturing overcapacity. Second, even despite the reduced profitability in world manufacturing lines, low-cost producers based especially in East Asia found it profitable to enter many of those lines, just as had their predecessors from Japan. There was therefore too much entry, further exacerbating overcapacity. Finally, Keynesian policies, which became universal in the 1970s and persisted in the United States into the early 1990s, actually contributed to the perpetuation of overcapacity and overproduction and thus helped to keep down rates of profit in aggregate. By increasing demand, deficit spending and easy credit thus allowed many high-cost, low-profit firms that would otherwise have gone bankrupt to continue in business and maintain positions that might otherwise have been occupied by low-cost, high-profit producers. Keynesianism thus unquestionably rendered the long economic downturn milder, but also made it longer, staving off

150  Twilight Capitalism a 1930s-type depression but at the cost of reducing the system’s dynamism by keeping in business firms that made low profits and did little investing. (1998b: 5) We noted earlier the affinity of Brenner’s approach with “disproportionality” theories of capitalist crisis. It should now be clear that his general framework also has something in common with “underconsumption” and Keynesian theory in its stress on realization problems and the problem of deficient effective demand. Unlike classical underconsumption theory, however, Brenner’s analysis focuses on falling profit rates in explaining the long downturn, a position normally associated with the “fundamentalist” falling-rate-of-profit account, which he rejected on theoretical grounds. It is the specific way in which Brenner combines these elements of Marx’s own theory of crisis that gives his analysis its distinctive character, just as it is his refusal to integrate them with other key elements of Marx’s theory that accounts for its inadequacy.

“Problems of Realization” and the Falling Rate of Profit: A Value-Theoretical Approach

In what might be seen as the central theoretical statement underpinning his analysis, Brenner writes: I start from the premise that, under capitalist social-production relations, the generalization of the individual norms of profitability maximization combined with the pressure of competition on a system-wide scale tends to bring about the growth of the productive forces and overall productivity, with the result that, on the assumption that the real wage remains constant, both the rate and the mass of profit rise, assuming there are no problems of realization. But given capitalism’s unplanned, competitive nature, realization problems cannot be assumed away. The same cost-cutting by firms which creates the potential for aggregate profitability to rise creates the potential for aggregate profitability to fall, leading to macroeconomic difficulties. (1998a: 24) This passage reveals serious problems with Brenner’s theoretical framework. To begin with, Brenner suggests that realization problems associated with overproduction are primarily the result of the unplanned and competitive nature of capitalism. In Marx’s theory, to the contrary, the inability of capitalists to realize prices adequate to sustain profitability

Valorization Crisis and the Path to Global Depression  151 stems from a crisis of valorization — that is, from inadequate production of new value and surplus value in particular. A crisis of valorization manifests itself within the sphere of circulation as a lack of effective demand, but its roots lie in the replacement of living labour in production by increasingly sophisticated labour-saving technology. The displacement of living labour from production has the effect of reducing the magnitude of profit in relation to the capital invested (resulting in declining demand for “capital goods”) as well as reducing the purchasing power of the productive workforce (resulting in declining demand for consumer goods). Under such conditions, capitalists find it difficult to realize prices that are in line with the anticipated rate of return on their invested capital. The phenomenon of falling prices stems in large part from efficiencies imposed under the whip of market competition, but such price adjustments are not the cause of problems of realization. A “realization crisis” arises only when the realized prices of commodities are inadequate to sustain the average rate of profit on an economy-wide scale. Thus, to blame a fall in the rate of profit on “problems of realization” is something of a tautology. What must be explained is why prices relative to costs (capital investment) cannot be sustained at levels that permit a stable (or, better yet, a rising) rate of profit. As suggestive as his account of inter-capitalist competition is in explaining the staying power of high-cost fixed capital assets and the debilitating effect of the resulting overcapacity and overproduction on prices, Brenner fails to answer this question. This is because he’s unable to explain why the sale of manufactured commodities at unprofitable prices fails to liberate demand for other commodities enjoying higher-than-average profit margins and why productive capital would not move massively enough into such profitable new lines to ensure a stable average rate of profit on an economy-wide scale. To put the matter slightly differently, Brenner is unable to account for the aggregate fall in purchasing power (in relation to the total capital invested) that prevents aggregate prices from remaining at levels compatible with a stable or rising average rate of profit. In contrast to Brenner’s analysis, Marx’s theories of value and of the falling rate of profit provide the conceptual resources needed to address this problem, and, inter alia, to salvage the most viable aspects of Brenner’s own account. It should be stressed that an adequate solution to this problem would seem to be a requirement of any account of the long downturn that, like Brenner’s, traces its source and intractability to a generalized crisis of

152  Twilight Capitalism profitability across the advanced capitalist world, not simply to a particular distribution of profits among competing capitals and capitalist economies. As established in previous chapters, Marx’s theory of labour value involves the defence of two fundamental propositions. The first is that living labour is the sole source of the new value that is the social substance of wages and profits. The second is that total value (previously existing as well as new) exists as a definite quantitative magnitude at the level of the capitalist macro economy — a magnitude that sets definite limits on profits, wages and the realizability of prices set by capitalists seeking “reasonable” profit margins. Marx’s law of the falling rate of profit is crucially predicated on the truth of these propositions. Indeed, they can be regarded as necessary, if not entirely sufficient, presuppositions of his argument that capital’s displacement of living labour from production will result in insufficient production of surplus value (that is, a problem of valorization) and downward pressure on the average rate of profit, whether or not this displacement involves an elevated level of labour productivity. If the two propositions central to Marx’s theory of value are affirmed, then we can at last adequately explain the contradiction between capital’s continuous success in increasing productivity at the micro level of the individual firm and the tendency of the capitalist macro economy to descend into periodic crises of profitability and deficient effective demand. Contrary to conventional economic theories that assume a monotonic relationship between rising labour productivity and economic prosperity, Marx’s value-theoretic analysis of capitalism recognizes that the lifeblood of the capitalist economy is not physical output (the use values that satisfy people’s needs and fancies), but surplus value — the value of the material output newly created by productive living labour above and beyond the value embodied in the wages received by productive workers. The social content of this surplus value is precisely the exploitation of living labour by capital — the specifically capitalist form in which surplus labour is extracted from the direct producers by the capitalist owners of the means of production. The non-obvious and seemingly counterintuitive relationship between productivity and the average rate of profit is the starting point of the following formulation by Marx of his ltrpf in Capital III: The progressive tendency for the general rate of profit to fall is … simply the expression peculiar to the capitalist mode of production of the progressive development of the social productivity of

Valorization Crisis and the Path to Global Depression  153 labour…. Since the mass of living labour applied continuously declines in relation to the mass of the objectified labour that it sets in motion, i.e., the productively consumed means of production, the part of this living labour that is unpaid and objectified in surplus-value must also stand in an ever-decreasing ratio to the value of the total capital applied. But this ratio between the mass of surplus-value and the total capital applied in fact constitutes the rate of profit, which must therefore steadily fall. (Marx 1981b: 319) Later, Marx states: The barriers to the capitalist mode of production show themselves as follows: 1) in the way that the development of labour productivity involves a law, in the form of the falling rate of profit, that at a certain point confronts this development itself in a most hostile way and has constantly to be overcome by way of crises; 2) in the way that it is the appropriation of unpaid labour in general … that determines the expansion and contraction of production, instead of the proportion between production and social needs, the needs of socially developed human beings. (Marx 1981b: 367, emphasis added) Productivity growth is, of course, a matter of central concern to capitalists, for it is precisely by enhancing productivity that individual capitalist firms seek to reduce their costs per unit of output and thereby enlarge their market share and mass of profits. But it is only because individual firms can realize (or capture) the surplus value produced by workers employed elsewhere in the economy (as a result of competitive processes of surplus value redistribution in circulation) that labour-displacing productivity enhancements are a viable micro tactic of individual capitals in trying to sustain or enhance their profitability. What is rational from the point of view of the individual firm in the short term, however, is inimical to the interests of capital in general in the medium to long term. The very means used by firms to enhance labour productivity diminish the role played by living labour in production and thereby force down the general rate of profit. In other words, the unintended and unanticipated consequence of efforts by individual capitalist firms to reduce their reliance on living labour in production in order to increase their share of social surplus value is a proportionally reduced role in production for living

154  Twilight Capitalism labour, which remains the sole input capable of producing surplus value. Capitalists compete to increase their share (profit of enterprise) of a pie (social surplus value) that is expanding at a rate slower than the expansion of their combined investments — and this is the necessary consequence of a shift away from the employment of variable capital (the productive living labour that directly produces surplus value) toward ever greater investments in constant capital (the elements of the process of capitalist production and reproduction that play only an indirect or incidental role in the production of surplus value). The contradiction that Marx identifies between the rationality of individual capitalist firms in promoting labour-displacing technological innovation and the macro-level requirements of the social capital to maintain the general rate of profit is an instance of a macro-micro contradiction under capitalism that Brenner himself claims to take as his “point of departure” — namely, “individual investors’ unconcern for and inability to take account of the effects of their own profit-seeking on the profitability of other producers and of the economy as a whole” (1998a: 8). Yet, as we’ve seen, Brenner rejects Marx’s understanding of the relationship between micro-level productivity enhancements and a declining average rate of profit, arguing that “the growth of the productive forces and overall productivity” produces a rising rate and mass of profit, provided there are no problems of realization and assuming a constant real wage (1998a: 24). In taking this stand, Brenner echoes the neo-Ricardian critique of Marx, a hallmark of which is a refusal to appreciate the importance of the contradiction between “the natural” and “the social” in explaining capitalism’s laws of motion. Indeed, the conflation of the natural and the social is key to Brenner’s misinterpretation of the “fundamentalist” Marxist theory of the falling rate of profit: According to the fundamentalist Marxist thesis, in order to compete, capitalists must cut costs by increasing mechanization, manifested in a rising organic composition of capital (capitallabour ratio). But, in so doing, they cannot avoid bringing about a fall in the aggregate rate of profit because the rising organic composition of capital issues in an increase in the output-labour ratio that is insufficient to counteract the parallel fall in the output-capital [ratio?] that it also brings about. The rate of profit falls … because, with the real wage assumed constant, investment

Valorization Crisis and the Path to Global Depression  155 in mechanization cannot but result in an increase in labour productivity (output-labour ratio) that is more than cancelled out by a decrease in capital productivity (real output-capital ratio). Were this theory correct, what would logically be entailed is the impeccably Malthusian proposition that the rate of profit can be expected to fall because, as a direct result of capital accumulation, overall productivity — productivity taking into account both labour and capital inputs — can be expected to fall. (1998a: 11) Thus, Brenner accuses Marxist “fundamentalists” and implicitly Marx himself of attributing falling profit rates to declining “overall productivity” despite Marx’s explicit statements to the contrary! Brenner’s misleading gloss of “the fundamentalist Marxist thesis” involves a refusal to recognize the critical distinction that Marx makes between the production of physical output and the production of value and surplus value. Marx’s view is clearly that “overall productivity” — material output in relation to physical inputs of all kinds — can be expected to rise as a result of capital accumulation and associated technological innovation. But this tells us nothing about what is happening in the realm of values. A completely automated economy, in which production is carried out entirely by robots, could continue to register rapid growth in overall productivity (as defined above), but would be unable to produce any new “value” in Marx’s sense. What, then, is “value”? Once again, we must emphasize the distinctiveness of Marx’s own understanding of this much-contested concept. In Marx’s theory, value is neither a psychological relation of people to things (as in neoclassical, marginalist theory) nor a relation between things and other things (as in neo-Ricardian physical surplus theory), but rather a social relation of people to people in the context of a society-wide, capitalist division of labour. For Marx, a commodity is a product of labour that is produced with a view to its sale in the market. Every commodity has a utility (a use value) as well as an exchange value (the power to command some sort of remuneration in exchange: a price). But the exchange value or price of a commodity is merely a form of appearance of the commodity’s value, with which it rarely coincides directly. The value of a commodity refers fundamentally to its relationship to all other commodities as a product of the social division of living labour. Accordingly, the value of a commodity is determined in a quantitative sense by the amount of socially necessary

156  Twilight Capitalism labour time required for its production; but its exchange value deviates from this value as a result of other factors bearing upon price formation (including surplus value redistributions in circulation). Regardless of how much individual prices and values diverge (owing to transfers and redistributions of value effected through market processes), total prices must equal total values — for without the social relations of capitalist production expressed by “value” (whose qualitative substance is nothing other than abstract social labour), the economic category of price could have neither theoretical pertinence nor concrete existence. The upshot of this argument is that “material wealth” — in the context of capitalist social production relations — is necessarily measured in terms of abstract socially necessary labour, the phenomenal form of which is money. The logic of capitalist development, defined by the exploitative and antagonistic relation between capital and labour as well as the competitive relations between capitals, is to continuously reduce the socially necessary labour time required to produce a given quantity of physical output. This means that as the magnitude of physical or material output expands, the quantity of value it represents may well decrease. In view of this, it is entirely possible for material productivity to grow as the production of surplus value declines. Indeed, the ever sharpening contradiction between humanity’s command over nature in production (expressed in the growth of productive forces embodying labour-saving technology) and the social imperative of capital to exploit wage labour and therefore to measure “wealth” and economic performance in terms of abstract labour time (money) is central to Marx’s understanding of the historical limits of the capitalist mode of production. All of this is overlooked by Brenner, and because of this, he is unable to recognize that there can be a contradiction between progress in overcoming the technical-natural obstacles to increased material productivity and the class-exploitative requirements of valorization — that is to say, between the “natural” and the “social” dimensions of capitalist production. The consequence is that Brenner is unable to see that the labour-saving technological innovation that enhances productivity must also, at the macro level, reduce the magnitude of aggregate values that are the basis of aggregate prices. Yet this phenomenon is at the root of the “problem” that Brenner emphasizes but fails to theorize: the problem of “realization.” Once this phenomenon is acknowledged, it is clear that aggregate prices

Valorization Crisis and the Path to Global Depression  157 must fall as the values sustaining them recede, and it is precisely this that accounts for the inability of capitalists to command prices for their commodities, in the aggregate, that can sustain the average rate of profit.4 Ignoring and implicitly rejecting all of the value-theoretic aspects of Marx’s theory of crisis, Brenner is obliged to base his alternative account of capitalist crisis on what is clearly a much more “manageable” contradiction: that between unbridled inter-capitalist competition and the social capital’s need to plan the economy in such a way as to avoid problems of realization. Abstracted and isolated from the class-relational contradictions that Marx highlights (and which are themselves an expression of the growing incompatibility between the social form and the technical-natural content of capitalist production), this latter contradiction emerges as one that, in principle, can be significantly mitigated within the framework of a reformed capitalism. Thus, Brenner’s analysis ultimately lends itself to a reform program of imposing “capital controls” and “supranational economic planning” as a means of addressing the self-destructive dynamics of inter-capitalist competition — precisely the sorts of ideas that were gaining some rhetorical ground in certain bourgeois circles at the end of the 1990s (see, for example, Soros 1997) but that went exactly nowhere in the subsequent twenty years of continuing “global turbulence.” This lays bare the real danger of Brenner’s mode of analysis: at a time when the long downturn was preparing the ground for a global depression, it served to divert attention from Marxist analyses that pointed unmistakably to the conclusion that the problem was not merely with the unplanned and excessively competitive nature of the capitalist system, but with the impossibility of further human progress (defined as a qualitative extension of human productive capacities) on the basis of the class-exploitative and antagonistic social relations of capitalist production.

Productivity, Valorization and the Problem of Unproductive Labour

Theoretical inadequacies and confusions aside, Brenner’s empirical analysis, as suggested earlier, can be seen as reinforcing the evidentiary case for a more fully Marxist account of the long downturn. It does so at two levels. First, it undermines the empirical grounds for more traditional, neo-Ricardian, supply-side accounts of “the profit squeeze” — accounts that suggest that rising real wages and/or declining productivity growth are the primary causes of falling profitability. Second, it presents data that,

158  Twilight Capitalism when interpreted through the lens of Marx’s value theory, tell a story that is consistent with Marx’s expectation that the average rate of profit will fall as a result of a rising organic composition of capital — that is to say, due to a rising ratio of dead to living labour in production. Despite some shared theoretical assumptions, Brenner departs from supply-side, neo-Ricardian accounts of the long downturn with his insistence that the profitability crisis of the 1970s and 1980s was not the result of rising labour strength but instead of manufacturing overcapacity and overproduction leading to falling prices. In general terms, such an analysis is not inconsistent with the fundamentalist Marxist view that the value of constant capital stock (money-capital invested in means of production) has grown faster than the new value represented in variable capital (the wage bill of productive labour) and surplus value (the income of the capitalist class) — the result being that the organic composition of capital (C/s+v) has risen and the average rate of profit (s/C) has fallen.5 Indeed, when specified in terms of Marx’s value categories, Brenner’s findings with respect to the fall in the output-capital ratio seem compatible with the Marxian expectation of a rising organic composition of capital. It is noteworthy that Brenner ignored the extensive Marxist empirical literature of the 1980s and 1990s that attempted to test Marx’s hypothesis that a falling average rate of profit is caused by or correlated with a rising organic composition of capital (Shaikh 1987, 1989; Moseley 1987, 1991; Shaikh and Tonak 1994; Smith 1991b, 1994a, 1996–97). Most of this literature lent substantial support to the fundamentalist view by insisting on the critical importance of distinguishing between productive and unproductive labour in measuring Marx’s value categories. Indeed, the productive-unproductive labour distinction was central to Marxist fundamentalist attempts to refute the “rising labour strength” account of the profitability crisis. That Brenner does not refer to the problem of unproductive labour is hardly surprising, as virtually all proponents of Marx’s view of the question accept the value-theoretic assumptions upon which it is based. To be sure, an increasing number of non-Marxist economists entertain the idea that certain categories of labour are intrinsically less productive than others, without embracing any notion of labour value. But the fact remains that, among Marxist political economists, Marx’s theory of labour value and the productive-unproductive labour distinction are generally seen

Valorization Crisis and the Path to Global Depression  159 as closely intertwined. This is because, for Marx, productive labour refers only to labour that is directly and immediately involved in the production of surplus value; it is wage labour that participates in the valorization process via its direct involvement in the creation of commodities. The Marxist concept of unproductive labour is in no sense a normative concept. Indeed, Marx allows that many types of labour (including non-capitalist forms of production labour) can be considered socially useful, even socially necessary in many different senses, without being “productive.” In contemporary capitalism, many wage and salary earners engage in activities that are socially or systemically necessary to the social capital (from retail sales, to finance, to working for the capitalist state in some capacity), but they are by no means productive of surplus value on that account. Many of these workers perform labour that is indispensable to the transfer of surplus value from productive capital to unproductive capital, and in this sense they make possible the profits that are realized by commercial and financial capitals. But in so doing, they do not enlarge the total magnitude of social surplus value available for distribution within the capitalist class.6 The importance of this theoretical issue is obvious when one considers the huge expansion of “socially necessary unproductive labour” (snul) in twentieth-century advanced capitalist economies. Not surprisingly, official government statistics fail to distinguish between labour income accruing to productive and snul wage labourers. At the same time, aggregate productivity statistics tend to consider output in relation to hours worked by both productive and snul wage and salary earners. Productivity figures for manufacturing alone provide a fairly good indication of the real trend in labour productivity among productive workers in that sector of the economy (since the great majority of the manufacturing labour force is productive of surplus value), but even there, trends can be skewed by the changing ratio of productive to unproductive labour. Our point is that as the snul workforce grew as a percentage of the total workforce in the twentieth century, conventional measures of productivity growth tended to understate the real growth of productivity among productive workers. This is because only the productive segment of the workforce is responsible for creating the new value that is the basis for measuring net physical output.7 This is not to suggest that the snul segment of the labour force doesn’t produce outputs that are measurable in physical terms; however, it is to recognize that the portion of net output that takes the commodity

160  Twilight Capitalism form (and is measured monetarily in national income accounts) is solely created by productive labour. All of this has important implications for assessing Brenner’s empirical observations in light of Marxist theory. For one thing, Brenner notes that, historically, productivity growth throughout the G7 has been lower in non-manufacturing sectors than in manufacturing and that the rate of growth of non-manufacturing productivity in the United States fell to shockingly low levels between 1979 and 1995 compared to manufacturing. Consider also Brenner’s observation that between 1965 and 1973 (the “onset of crisis” period) “aggregate profitability in the G-7 economies outside of manufacturing fell by only about 19 percent — compared to 25.5 percent in G-7 manufacturing — despite the fact that unit costs of production seem to have risen considerably faster outside manufacturing than within it” (1998a: 136–37). To assess the significance of these trends in value-theoretic terms, we would have to examine the ratio of productive to unproductive labour in these different sectors of the economy and the transfers of value occurring between them. Assuming that a proportionally larger mass of social surplus value is produced in manufacturing than in all other non-manufacturing sectors, we might hypothesize that one of the reasons for the larger fall in manufacturing profitability relative to non-manufacturing sectors involved changes in the distribution of surplus value that favoured non-manufacturing productive capital and/or unproductive (commercial and financial) capital (and perhaps the capitalist state) at the expense of manufacturing capital. Because the possibility of inter-sectoral transfers of value (especially between productive and unproductive spheres) isn’t considered by Brenner, such an explanation for the severe decline in manufacturing profitability during the critical period of 1965–73 isn’t available to him. The result is that the decline in manufacturing profitability is entirely attributed to falling prices resulting from intensified inter-capitalist competition. As discussed, Brenner’s explanation of the origin and persistence of the profitability crisis strikes us as both one-sided and undertheorized. At the same time, the more recent empirical work of Marxist political economists on the United States and the world economy (Roberts 2009, 2016a; Carchedi 2011b; Kliman 2011; Shaikh 2010; Smith and Butovsky 2012; Carchedi and Roberts 2018; Smith 2019) as well as empirical studies of the Canadian economy (Smith and Taylor 1996; McCormack and Workman 2015) support (either directly or indirectly) an explanation that

Valorization Crisis and the Path to Global Depression  161 is consistent with what Brenner calls “fundamentalist” Marxist theory. This explanation highlights two major phenomena: a secular increase in the organic composition of capital and a rising ratio of unproductive to productive labour in the wage-earning workforce. Taken together, these phenomena have contributed to what we call a “rising value composition of output” — that is, to a situation in which the total costs of capitalist production and reproduction have grown faster than the new value created by productive living labour (see Chapter 5). In Invisible Leviathan, Smith argued that, over the course of the second half of the twentieth century, the growth of snul, alongside a rising organic composition of capital, involved a kind of “adulteration” of Marx’s ltrpf and that this called for a new way of appreciating the declining dynamism of the capitalist mode of production: [If] the growth of constant capital in relation to newly created value once signified a growth in the productivity of labour, it now also signifies a relative diminution of productive labour in relation to socially necessary unproductive labour. If Marx argued that the rate of profit would fall cyclically (and perhaps secularly) due to progressive increases in the technical and organic compositions of capital, profitability now seems to be subject to a downward pressure stemming both from technical changes enforced by capitalist competition and from the circumstance that a diminishing percentage of the working class is involved in surplus-value production, as distinct from realization. If capitalism’s tendency to promote the “objective socialization” of labour and of production once reflected its historically progressive role in developing the forces of production, it now also reflects a hypertrophy of the capitalist state and the sphere of circulation — a hypertrophy which impedes the advance of the productive forces by diverting enormous economic resources away from production. (Smith 1994a: 180–81; 2019) This way of assessing the capitalist mode of production in the twilight of capitalism is profoundly different from the picture painted by Brenner — for there is really nothing in his account that allows us to assert that the capitalist mode of production has long since entered into historical structural crisis. Instead, Brenner invites us to focus on the “unplanned, uncoordinated and competitive” character of capitalist production even as he also insists that “the capitalist mode of production distinguishes

162  Twilight Capitalism itself from all previous forms by its tendency to relentless and systematic development of the productive forces” (1998a: 10, emphasis added). In a world in which over a third of the global labour force is either unemployed or underemployed; in which the diffusion of advanced technology to those who desperately need it is blocked; and in which the continued measurement of wealth in terms of abstract social labour (the law of value) has become an obstacle to the qualitative development of “real wealth” and to the extension of global human capacities, one can only wonder how Brenner failed to see that, by the turn of the twenty-first century, capitalism had long since forfeited any claim to so progressive a mission. As troubling as this issue might be to Brenner’s socialist conscience, we are convinced that it is not likely to arouse his or anyone else’s intellect outside of a serious engagement with Marx’s theory of value. Indeed, a fully adequate critique of capitalism’s historical limits calls for recognizing that theory as the necessary basis for grasping the deepening valorization crisis of twilight capitalism.

FINANCIALIZATION, THE GREAT RECESSION AND THE MAKING OF THE LONG DEPRESSION When first proposed in the early 1990s, Smith’s notions of a “hypertrophy of the sphere of circulation” and an “adulteration of Marx’s ltrpf” referred mainly to the growing costs (wages and benefits) associated with maintaining the snul workforce of the advanced capitalist world — whether in the capitalist state, in commerce and finance or in the bureaucratic structures of productive sectors like manufacturing. One of the strategic aims of neoliberalism was to arrest this growth, and this was largely accomplished by the end of the century. It came about in part through the downsizing of state apparatuses but also through the increased activity of the financial sector in imposing “lean production” techniques on productive enterprises or cannibalizing them through leveraged buyouts.8 The reduction in system-wide snul costs (as a proportion of gdp), alongside the ratcheting up of the rate of exploitation of productive labour (both domestically and in new regions of surplus value extraction like China), contributed to a rise in the average rate of profit in the United States, Canada, the United Kingdom and many other advanced capitalist countries. But this development was accompanied by a significant new manifestation of the crisis of valorization: the fantastic proliferation of fictitious capital and profits associated with what came to be known as financialization. It was not long before discussion and debate on the

Valorization Crisis and the Path to Global Depression  163 “Brenner thesis” was sidelined by this new preoccupation of many Marxist and radical heterodox economists. We will not delve into the large and diverse literature that now surrounds what Mavroudeas (2018) has called the “financialization hypothesis” (fh). For a concise yet quite comprehensive and incisive critique of that literature from a theoretical standpoint close to our own, we strongly recommend Mavroudeas’ own survey as one that correctly disputes the view that neoliberal financialization has significantly transformed capitalism (for instance, David Harvey’s contention that “accumulation by dispossession” has come to overshadow capitalist production as a means to generating profits). We must nevertheless register a caveat. In our view, Mavroudeas seems to understate the magnitude of the problem that fictitious capital (fc) presents to contemporary capitalism while also overstating the ease with which Marx’s original (quite undeveloped) theorization of fc can be used to analyze it. In this regard, we think that much of the debate concerning neoliberal financialization (including Mavroudeas’ contribution, to a certain extent) seems trapped within too narrow a conceptual field. Profits associated with fc tend to be treated either as elements of current surplus value, which the financial sector has somehow managed to enlarge its share of in recent times, or they are seen as a new form of real profit that is no longer dependent on the creation of surplus value, either currently or in the future. Both of these notions are misleading and wrong, although the latter is far more so. Fictitious profit belongs, in our view, to a “temporal mode of value” that Marx simply didn’t have occasion to discuss but which has nevertheless assumed great importance in recent decades, namely “anticipated future value” (afv) — value that has not yet been created but that is “represented” in a variety of financial securities and debt obligations that acquire (fictitious) monetary values. Over the past few decades, as the weight of afv increased and as financial profit came to display a wider range of “degrees of fictitiousness” (Smith 2019: 292–93), a new and significant element of instability was introduced into the functioning of the advanced capitalist economies: an ever-mounting debt load. Indeed, it was precisely the hypertrophic growth of fictitious capital and profit — itself a by-product of the longterm profitability problems of productive capital — that played a key role in triggering the financial crisis and Great Recession of 2007–09 (as discussed in Chapter 2). Despite this, the fact that financial practices

164  Twilight Capitalism strongly associated with fictitious capital and afv not only survived but continued to proliferate in a variety of forms in the post-recession “recovery” of 2010–19 only underscores the narcotic dependency that twenty-first-century twilight capitalism acquired to the accumulation of debt — both as a complement to and as something of a substitute for the accumulation of productive capital. This hypothesis goes a long way to explaining the very peculiar character of the 2010–19 economic conjuncture — what is probably the longest interlude between recessions in capitalist history. The very duration of the post-recession “recovery” and the failure of any real “boom” phase to materialize (either before or after the so-called “minirecession” of 2016) lends strong support, we think, to Michael Roberts’ argument that the crisis of 2007–09 constituted the starting point of a “long depression.” Roberts defines a depression as a period during which “economies are growing at well below their previous rate of output (in total and per capita) and below their long-term average. It also means that levels of employment and investment are well below those peaks and below long-term averages. Above all, it means that the profitability of the capitalist sectors in economies remain, by and large, lower than levels before the start of the depression.” Furthermore, depressions (as opposed to recessions) appear when there is a conjunction of downward phases in cycles of capitalism. Every depression has come when the cycle in clusters of innovation have matured and have become “saturated”; when world production and commodity prices enter a downward phase…; when the cycle of construction and infrastructure investment has slumped; and above all, when the cycle of profitability is in its downward phase. (2016a: 4–5) Roberts does a convincing job of substantiating his thesis that all of these historic characteristics of capitalist depressions apply to “the first great depression of the twenty-first century” (as Anwar Shaikh dubbed it as early as 2009). But the “long depression” of which Roberts speaks, and which is still with us, is marked by several new features that distinguish it from the depressions of 1873–97 and 1929–39. These features are associated with the massive debt that has been accumulated on a world scale as capitalist states have sought to stave off economic conditions that

Valorization Crisis and the Path to Global Depression  165 could disastrously compromise the political and ideological stability of the capitalist world order. The issue of debt, and in particular corporate debt, is discussed at some length by Roberts in a chapter appropriately titled “Debt Matters.” There he correctly points out that the expansion of global liquidity in all its forms (bank loans, securitized debt, and derivatives) has been unprecedented in the past thirty years. The Marxist view is that credit (debt) can help capitalist production take advantage of prospective profit opportunities, but eventually speculation takes over and financial capital becomes fictitious. It becomes fictitious because its price loses connection with value and profitability in capitalist production. This eventually leads to a bursting of the credit bubble, intensifying any economic slump. (2016a: 97) This view was abundantly vindicated by the events of 2007–09, which of course entailed the massive slaughter of operating and fictitious capital alike. Yet in a fashion unprecedented in the history of capitalism, the protracted recovery from that crisis also involved a rapid return to an overweening reliance on fictitious capital. This was made possible by the huge injections of liquidity into financial institutions, corporations and stock markets undertaken by governments and central banks, either through direct bailouts and loans or through the vaunted “quantitative easing” programs (bond buying and money printing) of central banks. Roberts correctly remarks that “the more fictitious capital distorts the price signals, the more information about the economy disappears” (2016a: 95). And yet in the delirium that followed the Great Recession, one very important and disturbing bit of information was both glaringly obvious and deliberately ignored: the rise in stock market equity values bore little to no relation to what was happening in the broader “real” economy. How was it possible for the Dow Jones Industrial Average to rise from a low of 6,540 points during the Great Recession to a high of just over 29,000 points in early 2020? Was it because the productivity of either the United States or the world economy had more than quadrupled in those eleven years? Obviously not, yet this phantasmagorical surge in equity values occurred nonetheless! Shamelessly revelling in this patent incongruity, capitalist elites and their political accomplices, in the midst

166  Twilight Capitalism of a protracted global depression, managed to keep the world economy afloat as a huge stream of fictitious profits continued to flow. With the advent of the extraordinary crisis of 2020, this collective Pied Piper of Hamelin continues to lead humanity to the edge of an abyss, all the while insisting that the only way to “save the system” (for which, we are told, there is no good alternative) is through still more sacrifice from working people, still more ecocide and still more militarism and war.

Notes

1. A portion of this section draws on Smith and Taylor (1996). 2. Brenner’s article (1998a) is better known as “The Economics of Global Turbulence: A Special Report on the World Economy, 1950–98,” the title that appeared on the cover of New Left Review. An expanded and updated version was published by Verso under the title The Economics of Global Turbulence in 2006. See also Brenner 2002. 3. See, in particular, the two-part symposium on “Robert Brenner and the World Crisis,” which appeared in the journal Historical Materialism (Nos. 4 and 5) in 1999 and 2000. 4. For a fuller discussion of the relationship between problems of surplus value production and problems of price/profit realization, see Smith 2019: 217–20. 5. The organic composition of capital is represented here as the ratio of the constant capital stock to the sum of two flows of new value: variable capital and surplus value. The rate of profit is represented as the ratio of surplus value to the value of the constant capital stock. The upper-case “C” is meant to distinguish the stock of constant capital from the flow of circulating constant capital (usually represented by a lower-case “c”). 6. See Chapter 5 of this volume and Chapters 8 and 11 of Smith 2019 for a fuller discussion of these issues. 7. We note that the original text upon which this section is based (Smith 1998), and which was reproduced as Chapter 3 of Global Capitalism in Crisis (Smith 2010), stated that “only the productive sector of the labour force … is responsible for the creation of the value by which gross output is measured” (pages 163 and 85 respectively). There is a sense in which this formulation is true historically, but it is nevertheless problematic to the extent that it fails to register that, in any given production cycle, a large portion of the value of output is constituted through a transfer of previously existing constant-capital values to the new gross commodity product. It is only the value of net output (i.e., the currently produced new value) that results from the performance of current productive labour. 8. A leveraged buyout involves the acquisition of a company by another company that uses a significant amount of borrowed money to meet the purchase cost. The tangible assets of the company being acquired, as well as the assets of the purchasing company, are typically offered as collateral for the loans.

Chapter 5

MARX’S LAW OF PROFITABILITY: EVIDENCE AND CONTROVERSY THE MARXIAN SYSTEM, CONTEMPORARY CAPITALISM AND NATIONAL INCOME ACCOUNTS

T

he centrality of the exploitation of wage labour to profit making and capital accumulation has been one of the core concepts of revolutionary Marxism since its inception. Even so, Marx’s ltrpf was largely ignored in the years immediately following the publication of Capital III and has become the subject of much controversy since the revival of interest in Marxist crisis theory during and after the profitability crisis of the 1970s. Although a growing body of empirical work supports the actuality of the ltrpf, it continues to be disputed on theoretical and even empirical grounds. Many of the more influential, if often esoteric, objections to it have been addressed by us elsewhere, as well as by other proponents of the ltrpf.1 Our chief concern here is to explore some of the differences that exist among those who defend the law and, more specifically, among those who have undertaken empirical work on it. This chapter surveys several attempts to empirically evaluate Marx’s ltrpf with a view to establishing its actuality as a law governing the cyclical dynamics of capitalist economies and influencing the secular evolution of the capitalist mode of production. Among proponents of the ltrpf, a virtual consensus exists that Marx was right to assert that this is the “most important law of modern political economy” — a law that is central to an adequate theory of periodic capitalist crises as well as an expression of an emerging historical-structural conflict between capitalist social relations and the development of the material forces of production. However, among those conducting research for the purpose of empirical verification or refutation of the ltrpf, there is also considerable variation in the ways that official economic data sets are

167

168  Twilight Capitalism translated into Marx’s value-theoretical categories of constant capital, variable capital and surplus value. This chapter explores the salience of some of these contrasting approaches, their connection to competing theoretical conceptions and their comparative strengths in comprehending the “real history” of capitalism since World War II. In this connection, the authors’ own empirical investigations of the ltrpf — and the theoretical suppositions informing them — are given special attention. It should also be noted that the greater part of the empirical work we survey is concerned with the specific performance of the U.S. economy as seen through the lens of the ltrpf. For reasons that should be fairly obvious, the U.S. economy has been subjected to more Marxist empirical analysis than any other national economy in the world. While this certainly has to do with its status as the globally dominant capitalist economic formation, it is also due to the especially good quality of the official data sets compiled by U.S. government agencies, in particular the Bureau of Economic Analysis. The U.S. capital stock and income data sets are the most fine-grained available, allowing for a nationally circumscribed “test” of Marx’s ltrpf that is superior to what is possible for any other country.2

THE U.S. POSTWAR PERIOD: PROFITABILITY TRENDS AND CRISIS For most ltrpf theorists, a rising composition of capital and associated downward pressure on the average rate of profit played a clear role in the emergence of the Great Stagflation crisis of the 1970s and the subsequent neoliberal response. This, in turn, set the stage for a colossal expansion of the financial system that resulted in the financial crisis and Great Recession of 2007–09. ltrpf proponents as diverse as Carchedi, Roberts, Mage, Moseley, Kliman and ourselves firmly reject the arguments of those, like Heinrich (2013) and Kincaid (2016), who dismiss the law as “stale” or a “one-trick pony” in explaining capitalist crises. These critics not only fail to present any conclusive theoretical arguments against the ltrpf, they also fail to offer any convincing empirical evidence against it. All the same, while the ltrpf theorists have many points of convergence, there are also divergences pertaining to theory and method that significantly influence what “the facts” reveal. Such divergences — for example, whether before- or after-tax profits ought to be used as a proxy for surplus value — can lead to different empirical assessments of the

Marx’s Law of Profitability: Evidence and Controversy  169 trajectory of the rate of profit, the rate of surplus value and the organic composition of capital. Before turning to our own empirical studies, we begin with a survey of several distinct approaches adopted by leading proponents of Marx’s law of profitability — namely, Fred Moseley, Andrew Kliman, Anwar Shaikh, Michael Roberts and Guglielmo Carchedi.

Moseley

Fred Moseley’s 1991 book The Falling Rate of Profit in the Postwar United States Economy presents an impressively rigorous empirical test of the ltrpf. Moseley notes that the most important conclusion of Marx’s analysis of the capitalist system is that the rate of profit tends to fall due to technological change in the methods of commodity production. However, his own empirical investigation concerning what he calls the “conventional rate of profit” (the ratio of total profit to the total capital stock, a rate that he distinguishes from the “Marxian rate”) concludes that its observed decline was due to “a very significant increase in the ratio of unproductive labour to productive labour, which almost doubled in the post-war U.S. economy” (1991: xiv). Moseley contrasts this explanation for the decline in the conventional rate of profit to the “wage-push/profitsqueeze” account that was influential in the 1970s. Moseley defines the Marxian rate of profit as the ratio of the beforetax profit of productive capital to the value of productive capital stock in the private capitalist economy. It is this rate alone, he insists, and not the conventional one, that is relevant to Marx’s theory of the falling rate of profit. By defining the relevant “Marxist variables” for his test of the ltrpf as 1) surplus value accruing solely to productive capital, 2) the constant capital stock as stock solely operated by productive capital, and 3) variable capital as wages solely accruing to productive wage labourers, Moseley’s analysis effectively leaves out major components of the “total process of capitalist production and reproduction.” This approach makes Moseley’s study not only unique but also quite problematic from the standpoint of most other ltrpf proponents. Along with some others (including ourselves), however, Moseley attaches great importance to the distinction between productive and unproductive wage labour, defining the latter as necessary to the operations of the capitalist system but also as external to the process of creating surplus value. At the same time, all the costs associated with the operations of unproductive

170  Twilight Capitalism capital (e.g., commercial and financial capital), including the wages accruing to unproductive labourers, are treated by Moseley as both an absolute “deduction from” (s-u) and a non-profit component of surplus value.3 Thus, Moseley explicitly rejects the treatment of the systemically necessary but unproductive expenses associated with capitalist reproduction as part of Marx’s value category of “constant capital” — an approach proposed by Mage in 1963 and one that we favour. Moseley’s empirical estimates disclose a steep postwar upward trend for the composition of capital (c/v) that fades by the late 1950s. Despite this, profitability still displays an upward trend over this period because the rate of surplus value (s/v) rose until the early 1960s. As long as the latter was maintained, the downward pressure on the rate of profit resulting from the rising composition of capital was effectively counteracted. But the rate of surplus value eventually levelled off and fell by the late 1960s, an outcome Moseley attributes to the relative growth of the unproductive labour wage bill. As the rate of surplus value fell, so did the rate of profit. By the early 1970s, the rate of profit had fallen to well below its previous peak.

Kliman

In his book The Failure of Capitalist Production (2011), Andrew Kliman measures the rate of profit in a variety of ways, all of which support the ltrpf as a theory of crisis. But Kliman emphasizes that, in his opinion, the ltrpf is an indirect theory of crisis. As the composition of capital rises and the rate of profit falls, this sets up a multitude of economic malfunctions that eventually leads to a crisis. For Kliman, Marx’s ltrpf pertains to cyclical crises only; it has no long-term (secular) significance for the historical development of capitalism. He calculates two principal rates of profit: one involving a broad measure of surplus value inclusive of all property income (a measure used by Roberts as well) and a second, narrower measure that involves before-tax corporate profits. Kliman is a leading proponent of the “temporal single-system interpretation” (tssi) of Marx’s value theory. tssi regards the relevant measure of valuation of the constant capital stock as historical — that is to say, for purposes of empirical research pertaining to the Marxian ratios, the historical cost of private fixed assets from the previous year (as opposed to their current cost) is the best measure of the constant capital stock. For

Marx’s Law of Profitability: Evidence and Controversy  171 example, the 1949 figure for fixed capital stock becomes the denominator of the rate of profit for 1950. Both of Kliman’s major rates of profit rebound following the Great Depression of the 1930s and during World War II but then decline over the entire postwar period as the composition of capital rises. His inflationadjusted and labour-time-adjusted rates of profit display similar trends to his two main measures; however, they both evince a stronger downward trend over the neoliberal period (from 1980 on) than his non-adjusted measures. We can assume that his fidelity to these adjusted measures has influenced his controversial conclusion that the rate of profit trended downward in the 1990s, a decade that witnessed a genuine recovery of profitability according to most analysts. According to Kliman, but contrary to the view of most others, the neoliberal response to the Great Stagflation of the 1970s did not succeed in elevating the rate of exploitation or lowering the share of national income allocated to the working class — that is, he considers mistaken empirical Marxian studies claiming that average real wages had fallen. In his view, it was the expansion of credit and financial activity, not a decline of the income share of the working class, that (seemingly) revitalized profitability. We consider Kliman’s approach to Marxian empirical analysis eccentric. He ignores the distinction between productive and unproductive labour, double-counts governmental social services and calculates an excessively inflated working-class wage bill by including the top 5 percent of national income (the chunk associated with the salaries of corporate executives as well as lower-level managerial and administrative personnel) as part of variable capital (which we think should refer only to the wages of productive workers).4 Kliman admits that his approach “slightly overstates” the income that wage workers have received, but despite this, he insists that it’s implausible that workers’ share of national income declined significantly after 1970 (2011: 223). While we are unable to see how Kliman’s overall approach can be defended, we readily agree with his point that that the increasingly voluminous mass of fictitious capital in circulation has created the false impressions that: 1) the (real, non-fictitious) rate of profit recovered significantly after the late 1970s/early 1980s; and 2) the relative economic dynamism of the 1950s and 1960s was restored in the years leading up to the crisis of 2007–09.

172  Twilight Capitalism Shaikh

The approach we use in our own empirical analysis has much in common with that of Anwar Shaikh, probably the most renowned advocate of the ltrpf over the past four decades. Our main differences/reservations with his work are as follows: 1) his rate of profit is calculated before tax; 2) he consistently uses current-cost measures of fixed capital assets and engages in a unique calculation of fixed asset depreciation; and 3) while correctly insisting on the importance of distinguishing between productive and unproductive wage labour, he adheres to the conventional approach (descending from Sweezy and Gillman) of treating all unproductive expenses as a “deduction” from social surplus value.5 Shaikh’s before-tax measure of the rate of profit is defined as the ratio of net operating surplus to the total net stock of fixed capital. In Chart 5-1, his rate of profit plummets more than 45 percent over the immediate postwar period, whereupon it flattens for a quarter century within a low range before falling below 6 percent in the midst of the 2008 crash. The precipitous fall of Shaikh’s calculated rate of profit between 1966 and 1982 raises some concerns about the procedure he followed to suppress the ballooning inflation of the 1970s. More importantly, however, there are two things that distinguish Shaikh’s rate of profit from most other profit-rate measures: 1) he includes monetary net interest paid Chart 5-1 Shaikh’s U.S. Rate of Profit of Enterprise, 1947–2011      

 

Source: Anwar Shaikh 2016.














 



 













Marx’s Law of Profitability: Evidence and Controversy  173 as part of total profit (noting that interest makes up a bigger portion of the composition of booked profit prior to the 1970s and a smaller one post-1980s); and 2) he includes inventories as part of the “total capital” denominator (2016: 249). Shaikh’s problem with the conventional calculation of the capital stock (which is used by most ltrpf analysts) is that the U.S. Bureau of Economic Analysis (bea) (n.d.) methodology treats assumed “depletion” rates (depreciation and retirement of fixed capital) as invariant over several distinctly different periods rather than recognizing the need for certain adjustments. He writes that his own adjusted “net stock measure … starts out lower in 1947 due to a combination of its lower initial value and the interwar [Great Depression “slaughtering of values”] effect, but then narrows the gap because it grows faster” (2016: 851). In effect, Shaikh’s recalculation of the bea’s net capital stock adjusts the rate of profit ratio in ways that shrink the denominator in the early postwar years (thereby positing a higher initial rate of profit) and then magnify it over time, thereby generating a sharply declining rate of profit up to the early 1980s. Whatever technical merit there is in his recalculation of the official net capital stock measures, we think that Shaikh’s procedure runs the risk of distracting attention away from what Marx regarded as the most important factor in the long-term fall in profitability: namely, an insufficient growth in the volume of surplus value. All the same, we agree that Shaikh’s unique calculations can be seen as lending strong support to the proposition that the performance of the “actual” rate of profit over the long term has been far worse than is generally recognized, even by most Marxists.

Roberts

In his 2016 book The Long Depression, Michael Roberts argues compellingly that Marx’s ltrpf is the Achilles heel of the capitalist system of value production. As profitability falls, so too does capitalist stability. A falling rate of profit and a falling mass of profit combined to precipitate not only the Great Stagflation of the 1970s but also the great majority of economic recessions and depressions throughout the history of capitalism. While playing a somewhat indirect role in the 2008 crisis, a falling rate and mass of profit instigated the financial crisis, which was the proximate cause of the Great Recession and the ensuing long depression — a conclusion with which we fully concur. Roberts argues that the protracted economic depression of 2008 to

174  Twilight Capitalism 2020 (and beyond) has much in common with the depression of the late nineteenth century; only absurdly high levels of debt have delayed a much more severe economic collapse. We are now witnessing unprecedented growth of both public and private debt as part of a desperate effort to keep the financial house of cards upright. Roberts insists that not only public debt but also private (corporate and household) debt is an extremely important economic variable and often a bellwether for an encroaching crisis. Private debt in the U.S. economy skyrocketed after the mid-1980s, shooting up before the dot-com crash of 2001 and more sharply still on the eve of the 2008 crash, as revealed in Chart 5-2. Moseley, Kliman and Shaikh define the rate of profit as s/C, but Roberts widens the scope of his estimates by including all working-class wages in the denominator along with the fixed constant capital stock. We agree that there are some definite analytical advantages associated with including the wage bill in the denominator of the rate of profit — defined as s/(c+v), a formula that is indeed found in Marx’s Capital I. But these advantages pertain mostly to the analysis of recurrent crises associated with “business cycles” (which are usually of five to seven years duration) rather than to long-term profitability trends or deeper (more secular) systemic crises of the capitalist system. Roberts measures surplus value by deducting employee compensation from net value added. In our view, this broad measure yields an estimate Chart 5-2 Private Debt as Percentage of GDP, U.S. Economy, 1952–2009    


 
 

  

     

Source: Michael Roberts (2016a).











 

 

 

 

 





 

 



 

 

 

 



 



Marx’s Law of Profitability: Evidence and Controversy  175 that includes much that falls well outside of Marx’s definition of surplus value. Nevertheless, Roberts’ measurement of the postwar U.S. rate of profit follows similar trends to many of the others surveyed here — it falls until 1958, rises somewhat up to 1966 and then falls to its lowest point in 1982. The neoliberal era brings a modest recovery until 1997, whereupon the trend is flat until 2006 before turning sharply downward during the 2007–09 crisis.

Carchedi

Guglielmo Carchedi’s rate of profit follows a similar trajectory to Roberts’ and Shaikh’s. Carchedi also includes a “composition of capital” estimate that evinces a strong upward trend over the entire period of study, which lends support to Marx’s hypothesis of a direct causal connection between a rising occ and a falling average rate of profit (arp). Carchedi’s rate of profit is a deflated before-tax historical cost measure of what he defines as “productive capital” — the proxy for which is “all goods-producing industries” (a “physicalist” measure that excludes service industries) (2018: 74). Interestingly, and contrary to most U.S. rate of profit estimates, which suggest a low point in the 1980s, Carchedi’s arp reaches its lowest point in 2001. Citing the persistent profitability problems plaguing productive capital, Chart 5-3 U.S. Rate of Profit and Organic Composition of Capital, 1948–2014







 



 



 





       

                 

          





Source: Carchedi 2018.



176  Twilight Capitalism Carchedi identifies several conjunctural factors that could emerge as catalysts for the next economic crisis. These include trade wars, military conflicts, increased financial parasitism, mounting debt and intensified far-right economic nationalism — in combination with a crippling austerity agenda inflicted on the working masses. He draws a picture of long-term intensifying malaise of the capitalist system, provoking a range of irrational and desperate reactions on the part of capital and the state. To one degree or another, all of the empirical evidence summarized here lends support to the fundamental postulates of Marx’s ltrpf as sketched over 150 years ago. Moreover, much of it can also be seen as lending support to the argument that, in the wake of the 2007–09 crisis, the capitalist system fell into a long and quite unique depression.

The LTRPF as a Global Phenomenon

In the World in Crisis collection, edited by Carchedi and Roberts (2018), Marxist economists from around the world provided a range of analyses of specific national economies that are both informed by and supportive of Marx’s ltrpf. These include the United States, Spain, Brazil, the United Kingdom, Greece and Japan. Even prior to the current long depression, none of these economies had been able to recover the comparatively robust growth they had experienced in the 1990s, let alone that of the pre-1970s era. Historically speaking, the 2010–19 period constitutes the longest interlude between major recessions on record. Now that it has come to an end, we can conclude that this prolonged “cycle” (if one can meaningfully call it that) was marked by the unusual distinction of having never experienced a “boom” — save the one associated with the enchanted world of “bullish” stock markets. There have been several attempts by Marxists to operationalize a “world rate of profit” (wrp). Given the formidable difficulties associated with measuring profitability at the level of national economies, those associated with calculating a world rate of profit are legion. Accordingly, all wrp estimates should be viewed carefully and with sober recognition of their unavoidable limitations. Nevertheless, Esteban Ezequiel Maito (2018) has compiled an impressive amount of data from countries around the world and calculated a “core rate of profit,” a “periphery rate of profit” and (by combining them) a “world rate of profit.” Maito’s empirical findings are interesting and quite clear on one point: historically, the “core” rate of profit

Marx’s Law of Profitability: Evidence and Controversy  177 was about half that of the periphery, but the former also declined more gradually since the 1970s than the latter did. Trends for both measures flatten in the neoliberal era and subsequently reach historic lows with the Great Recession of 2008–09. Across the board, empirical studies by ltrpf analysts have found that the performance of world capitalism hit a low sometime in the 1970s and was able to achieve some semblance of recovery only by shifting wealth around and piling up debt. But the tepid recovery following 2009 failed to address the fundamental problems of the capitalist system and birthed new problems while compounding old ones. All of this, of course, served to set the stage for the breakdown of 2020.

THEORETICALLY SPECIFYING AND OPERATIONALIZING THE MARXIAN VALUE CATEGORIES AND RATIOS: ON THE ORIGINS OF THE LONG DEPRESSION Our own approach to empirically specifying the value categories of the Marxian system builds on the pioneering work of Shane Mage (1963) and, subsequently, Murray Smith (1984, 1991b, 1993, 1994–95, 1996–97). A more recent study by Smith and Butovsky (2018) that is informed by these specifications and that seeks to test the ltrpf for the U.S. economy can be found in Carchedi and Roberts’ (2018) World in Crisis as well as in Chapter 10 of Smith’s Invisible Leviathan (2019). The study reported here builds on these analyses as well as additional empirical work undertaken by Watterton (2019). Our approach involves several concepts and considerations that distinguish it from the approaches of other ltrpf analysts. These include the following: 1. The distinction between productive and unproductive wage labour is rigorously upheld, yielding a “narrower” specification of both variable capital and surplus value than is common in other studies. Unproductive labour costs considered necessary to the reproduction of the system are treated not as a non-profit component of social surplus value but as “systemic overhead costs” and thus as a distinct form of constant capital. In addition, the wage bill associated with snul is considered to be part of the constant capital flow but not a component of the constant capital stock. 2. Marx’s theory is regarded as “underproductionist” because the

178  Twilight Capitalism crises of capitalism are seen as stemming from insufficient creation of surplus value relative to the total “capital advanced” for purposes of capitalist production and reproduction. 3. Marx’s value categories of constant capital, variable capital and surplus value are seen as referring to two temporal modes of value: previously existing values (constant capital) and current/ new values (variable capital and surplus value). However, Marx’s relatively underdeveloped concept of fictitious capital invites the introduction of a third temporal mode, namely afv, one that is particularly important to the analysis of an era marked by the accumulation of immense volumes of debt. Some of the booked profits that are often included in measures of surplus value are in fact manifestations of afv. For this reason, it’s all too easy to overestimate the real volume of surplus value. If “fictitious” elements of booked corporate profits are uncritically treated as elements of current surplus value, then measures for the latter become skewed and the volume of total surplus value will be overestimated. Accordingly, Marxist researchers must be cognizant of the fact that national income account data sets normally include fictitious profits, that the specific weight of such profits has undoubtedly grown in “the age of fictitious capital” and that this will inevitably distort trends for all three of the fundamental Marxian ratios by inflating the estimates of surplus value over time. In short, “real” surplus value is based on relations of production, whereas fictitious profit represents afv and is based on relations of credit/debt. It follows that afv should be excluded as much as possible from any Marxian ratio involving the value category of surplus value. 4. Marx’s analysis of capitalism’s laws of motion in Capital abstracts from significant problems associated with the proliferation of both snul and afv. But to empirically operationalize his value categories for the purpose of “testing” his principal hypotheses regarding the ltrpf over the long term, it’s necessary to address these problems in a serious and rigorous manner. Our approach seeks to reveal the underlying processes that point to the systemic decay — the “historical-structural crisis” — of twenty-firstcentury capitalism.

Marx’s Law of Profitability: Evidence and Controversy  179 On “Bourgeois” Statistics

Official national accounts depict economic activity in a “bourgeois” manner, downplaying the contradictions and antagonisms endemic to capitalism and occluding the labour theory of value. Abstract labour and value may not be directly observable, but they are nevertheless “represented” in masses of commodities and find phenomenal expression in money. This makes official gdp data useful in assessing the actuality of Marx’s law of profitability. On this point, we completely agree with all other proponents of the ltrpf who undertake empirical research. The categories of constant capital, variable capital and surplus value can and should be conceptualized in terms of sums of money that function as capital and that correspond to the behaviour of individual capitalist firms (Smith 2019).

The Problem of Unproductive Labour in National Income Accounts6

One of the major ways in which bourgeois national income accounts make it difficult to undertake empirical Marxist analysis of the ltrpf is that they fail to distinguish between productive labour and unproductive labour, which, in our view, is a critically important distinction for research informed by Marx’s value theory. In all his writings, Marx is unequivocal that his concept of productive labour is by no means coextensive with “production labour” — that is, manual and/or mental labour directly involved in the production of useful things or effects. Production labour is not specific to capitalism; it is also performed in non-capitalist modes of production (e.g., feudalism) and in non-commodified spheres of capitalist society (e.g., domestic labour). Productive labour, on the other hand, is labour that is productive for capital; it is labour that not only produces commodities (marketed use values) but also creates surplus value for capital. For Marx, this last point is key: labour may be in the employ of capital and yet not be productive. It may even produce a measurable output in physical terms and/or assist individual capitalists in realizing a profit, yet still not be productive. Labour is productive in the specifically capitalist sense solely when it participates directly in a labour process that augments social surplus value — the surplus value that is generated on an economy-wide scale on behalf of “capital in general” (i.e., the social capital as a whole).

180  Twilight Capitalism In brief, the principal forms of unproductive labour are: 1) labour that belongs to non-capitalist socio-economic activities and therefore cannot serve to augment social surplus value (the labour of self-employed commodity producers is a major instance of this form within capitalist societies); and 2) labour that is in the employ of unproductive capital and therefore “facilitates” the valorization process but does not contribute directly to the augmentation of social surplus value. To these should be added: 3) labour that is supported by the capitalist state and likewise contributes “indirectly” to valorization and accumulation through its role in maintaining the institutional framework of capitalist society; and 4) labour in the employ of productive capital that nevertheless contributes only indirectly to valorization and accumulation (supervisors, security guards and so on). The last three forms of unproductive labour — what might be referred to as “circulation labour” (form 2) and “social-maintenance labour” (forms 3 and 4) — have expanded considerably under advanced capitalism, while the first form has declined precipitously. In Capital II and Capital III, Marx clearly affirms the existence of forms of unproductive labour that are not exchanged with revenue but rather with capital. In these treatments, Marx is preoccupied with the specifically capitalist incarnations of unproductive labour: the socially or systemically necessary forms of unproductive labour that serve the reproduction requirements of the capitalist socio-economic order. At different times and in different theoretical contexts, Marx subsumed the costs of snul under each of the principal value categories, but he never definitively resolved the problem of how snul should be specified in value-theoretical terms. In our view, the conventional Marxian treatment of the problem, which treats the wage bill of snul as a non-profit component of social surplus value (and as a straightforward deduction therefrom), is a false solution that does justice neither to the dialectical subtlety of Marx’s theory nor to the complexity of the snul phenomenon under capitalism.7 But if the costs of circulation are not to be regarded as a part of the aggregate surplus value, how then should they be treated? The most adequate answer to this was originally formulated by Mage: “What takes place in the unproductive spheres is simply the outlay of a determined and necessary constituent part of the total social capital” (1963: 65). Since circulation activity can add no new value to the commodity product, Marx concludes that “the additional value that [the merchant] adds to commodities by his expenses is reducible to the addition of previously existing values, even

Marx’s Law of Profitability: Evidence and Controversy  181 though the question still arises here as to how he maintains and conserves the value of this constant capital” (1981b: 406, emphasis added). Mage elaborates on the “temporality” of the unproductive expenses incurred by capital as follows: The difference between variable capital and constant capital is founded on their differing modes of transferring value to the commodity-product; and in the case of constant capital this characteristic mode is precisely the addition of previously existing values. Consequently, the appropriate treatment for the outlay on unproductive expenses in general, provided only that they are “socially necessary” under the existing form of social organization, is to regard them as part of the constant capital advanced and expended. (1963: 66, emphasis in original) Mage applies this reasoning both to circulation labour and to the social maintenance labour supported by the capitalist state. Like unproductive capital in the sphere of circulation, the state carries out a range of tasks that are indispensable to maintaining the institutional framework of the valorization process. In this sense, it contributes indirectly to the production of social surplus value. Yet the capital exchanged with snul in the state sphere is not regarded by any segment of the social capital as contributory to profits. While the sense in which state employees perform “unpaid labour” may seem problematic, it is safe to say that such state-supported “social maintenance labour” is exchanged with a form of constant capital that has even less in common with “variable capital” than that exchanged with circulation labour. “State capital” (tax revenues or borrowed money, for the most part) is exchanged with snul with a view not to transferring surplus value from the sphere of production to the state, but to centralizing and rationalizing some of the overhead costs of the social capital as a whole and attenuating systemic contradictions. The capitalist state is obviously not involved in surplus value redistribution on the basis of the average rate of profit except where it involves itself directly in commodity production (as in nationalized industries) or circulation (as with nationalized banks). The great majority of its revenues are obtained through a political taxation process, which may have the appearance of “democratically” involving all citizens as “taxpayers” but which finally always amounts to a tax on the social capital. In defining the elements of the three basic value categories, what matters

182  Twilight Capitalism is the particular social relation that these elements of capitalist production and reproduction express as well as their specific connection to the creation or realization of new value. To reduce the value-theoretic concept of “constant capital” to “physical means of production” is a fetishistic error, one that confuses the social and the natural. And to treat snul wages simultaneously as a “non-profit component” and a “deduction from” surplus value is an absurdity, the effect of which is to greatly overestimate the volume of surplus value that is considered at least “potentially” available for capitalist investment and accumulation.

The Structure of Capitalist Reproduction and the Specification of Marx’s Value Categories

This brings us to a consideration of the political-economic structure of the modern capitalist profit system. The social capital’s total sphere of reproduction encompasses the following: 1) production (the creation of social use values and with them the creation of surplus value); 2) circulation (the distribution of social use values); 3) social maintenance (the consumption of social use values for purposes of social upkeep); and 4) personal consumption (social use values consumed by individual social actors and households) (Shaikh and Tonak 1994). At both the micro level (individual commodity) and the macro level (gross product), commodity output is divisible into three fundamental values flows: commodity product = constant capital (c) + variable capital (v) + surplus value (s). Variable capital is the portion of new value that the social capital pays out as wages to workers who are directly involved in the production of surplus value. The value represented in their wages enables productive workers to purchase means of subsistence. Variable capital expresses the exploitative social relation of surplus value extraction; its “elasticity” involves the fact that it activates the sole input to capitalist production (namely, productive labour power) that is capable of creating more value (surplus value) than it represents as a cost of production. In other words, variable capital refers to the cost of producing/reproducing the commodity “labour power” in its specifically productive form. Empirically, this cost refers primarily to the “take-home pay” of productive workers. Variable capital is best understood as a flow rather than stock variable. Furthermore, it should not be seen as encompassing compensation to all members of the workforce, even in predominantly productive economic sectors like manufacturing. Indeed, it is reasonable to exclude the top

Marx’s Law of Profitability: Evidence and Controversy  183 5 percent of the productive labour wage bill from the category of variable capital on the grounds that it represents compensation for largely unproductive labour performed by managerial and supervisory personnel. In our accounting scheme, as previously indicated, this component of national income is best understood as a component of the constant capital flow. Surplus value is the value form that currently produced surplus product assumes under capitalism and it arises from the performance of surplus labour by the working masses. As such, surplus value is equal to the surplus labour performed by productive workers above and beyond the costs of their reproduction (i.e., beyond their remuneration). Surplus value — in its independent forms of 1) profit of enterprise, 2) interest, 3) rent and 4) salaries paid to capitalists and top executives — is distributed and realized in money form through competitive processes and interactions involving “many capitals” in the sphere of circulation. It follows that tax revenues in our accounting scheme are not considered part of surplus value. Constant capital, in the first instance, refers to the value of the privately owned means of production and other economic assets consumed in the overall process of production and reproduction: raw materials, fixed capital depreciation, fuel and so on — inputs that transfer previously existing value to the new commodity product without contributing any new value. Importantly, fixed capital assets are valued here according to their historical costs rather than their current costs of reproduction. The value of the previous year’s fixed assets are treated as the capital advanced (the denominator of the profit rate) for the next year. Although the “fixed capital” assets of the state form part of the historically constituted surplus product and the costs associated with the operations of the “state machine” are elements of circulating constant capital, the value of state-owned “capital stock” is not part of the denominator of the rate of profit, for it is not capital that is “advanced” for the purpose of generating or realizing private profit. However, state expenditures should clearly be conceived as necessary systemic overhead costs of capitalist reproduction as a whole. Constant capital has a stock as well as a flow expression. The flow of constant capital (normally referred to in lower-case as c or cf) refers to the values that are preserved and transferred over a given period through fixed capital depreciation as well as the physical consumption of raw materials, fuel and energy, and unproductive labour power. The stock of

184  Twilight Capitalism constant capital refers to the total value of the fixed capital as well as the inventories maintained by private capitalist firms over that same period. To summarize our approach to the specification of Marx’s value categories: variable capital is equal to the aggregate after-tax wage bill of productive workers; surplus value is equal to aggregate after-tax corporate profits plus the after-tax personal income of the capitalist class (here, we use the income of the top 0.1 percent of wage and salary earners as a proxy); the constant capital flow is the value of all circulating “previously existing value”; and the constant capital stock (the denominator of the rate of profit) is the net value of corporate fixed assets (which includes all productive and unproductive capital stock operating in the “private sector”). (Other details concerning our methods and the empirical statistics used here can be found in the appendix to this chapter, which is available at ).

The Fundamental Marxian Ratios

Our empirical findings pertaining to the actuality of the ltrpf in the U.S. economy between 1950 and 2018 concern the vicissitudes and trends of five key ratios: 1) The average rate of profit (arp), which is total surplus value divided by the value of the constant capital advanced, i.e., s/C; 2) The rate of exploitation (RE), which is the ratio of total surplus value to the total wage-bill, i.e., s/ (variable capital + snul wagecosts); 3) The rate of surplus value (rsv), which is the ratio of total surplus value to variable capital (the wage-bill of the specifically productive segment of the workforce), i.e., s/v; 4) The value composition of capital, which is the ratio of constant capital advanced to variable capital, i.e., C/v; 5) The organic composition of capital, which is C/(s+v). Our test of Marx’s ltrpf is mainly concerned with the effect of changes in C/v and C/(s+v) on the arp. In accordance with Marx’s hypotheses, we anticipate that when C/v rises faster than s/v, s/C will fall. However, if and when C/(s+v) rises, s/C must fall, as changes in s/v find reflection in the organic composition of capital (Smith 2019: 202–07).

Marx’s Law of Profitability: Evidence and Controversy  185 The Temporal Modes of Value and Fictitious Profit

Marx’s three fundamental value categories are vital to an adequate conceptualization of capital accumulation, valorization and the distribution of value in national income and gross output. But the temporal composition of the value of gross output is particularly important to grasp given the recent hypertrophy of fictitious capital. This is also related to the tssi approach to Marx’s value theory, which emphasizes the temporal dimension of value formation and sees capitalist production and reproduction as a single system that encompasses distinguishable “temporal moments” as well as qualitatively distinct forms of social labour.8 Our approach to the Marxian system as outlined so far has immense implications for the analysis of capitalist reality in part because it leads to the conclusion that the flow of constant capital — the temporal mode of previously existing value — makes up a much larger share of the value of gross output under conditions of advanced capitalism than is usually thought. Other things being equal, real growth of the snul wage bill and the flow of tax revenues will inflate the flow of constant capital relative to the flow of new value. This increase in the “value composition of output” (vco) could be associated with a rising occ and a falling arp as well as being a distinct indicator of a valorization crisis. The key point here is that while increases in the surplus labour performed by productive workers translate into rising surplus value, increases in the surplus labour performed by snul workers allow for a reallocation of previously existing values and could lower the vco by reducing “systemic overhead costs” (Smith 2019: 234, n. 31). In this connection, the “rate of exploitation” ratio (which accounts for the activity and costs of both the productive and the snul workforces) can be seen as a distinct factor in determining changes in the rate of profit and the overall prospects for the valorization of capital. As with productive and unproductive labour, official national accounts make no distinction between financial profits based on flows of NV [new value] (s+v) and financial profits based on speculative bets or arising from transfers of previously existing value (pev). The various financial instruments used in the accumulation of absurd levels of money income via financial speculation are fictitious capital; as such, they are claims on afv (value that may or may not ever be created): Our claim is that the proliferation of forms of fictitious capital whose “temporal value composition” is weighted more and more

186  Twilight Capitalism toward afv has emerged as a hallmark of the historical-structural crisis of capitalism in the neoliberal era — an era whose latest phase might well be dubbed the age of fictitious capital. The proliferation of fictitious capital and the generation of fictitious profits are expressions of an advanced stage of decay of the profit system. The “value” rate of profit — conceptually apprehended in terms of the socially necessary abstract labour currently constituted by the social division of labour — has been subject to powerful downward pressures. The active response of the agents of capital, following many “failed” responses to this problem of valorisation, now involves a massive expansion of credit and debt as a means of sustaining the system — and the result of this is a “money” rate of profit that is increasingly autonomous from the (underlying) value rate of profit — that is to say, increasingly reliant on purely fictitious claims to value. The “money form” seeks more and more to assert its independence from socially necessary abstract labour time by acquiring a stronger foundation in “relations of credit/ debt.” Hence, money printing, quantitative easing, the growing gap between the “value” of total securities in the global economy and the value of current real output. (Smith 2019: 276) As real value under capitalism is measured by the yardstick of “socially necessary abstract labour time,” fictitious capital is essentially money capital seeking to enlarge itself through speculative claims on future income: income that may never be created and that allows an economy to appear to be much larger and more robust than the non-financial capital assets and new value that underwrites it. Thus, the poor performance of “advanced” capitalism has, to some extent, been concealed by the widespread proliferation of fictitious profits that are included in the official national accounts alongside actual profits. The upshot is that money profits, particularly in the financial sector, are less and less likely to represent “redistributed” shares of surplus value originating in capitalist production and are more and more likely to represent aliquot shares of afv circulating as paper assets in an increasingly debt-burdened economy. At the same time, due to the ongoing displacement of living labour from production as well as the relative growth of the snul wage bill over the postwar period, the flow of new value shrinks relative to the flow of previously existing value, a process that also encourages increased reliance on afv. This process is depicted in Chart 5-4.

Marx’s Law of Profitability: Evidence and Controversy  187 Chart 5-4 Ratio of New Value to Previously Existing Value (NV/pev), U.S. Economy, 1947–2018 
 
 
 
 


      

               

 

 



     



Source: Authors.


 Over the entire period 1947–2018, the ratio of NV to pev displayed a gradual but fairly steady decline. This downward trend, however, appears to have been mitigated by a rise in afv beginning in the 1990s and continuing until the financial crisis of 2007. The growing reliance on afv is illustrated by Chart 5-5, which reveals a dramatic rise in the level of fictitious profit beginning in the early 1990s. Chart 5-5 highlights the difference between the fire sector’s mass of currently booked profits and the mass of “normalized” profits that could be allocated to that sector if its average rate of profit had been the same as that of the non-fire economy. In other words, the fire sector’s rate of profit is equalized with the prevailing rate for productive and commercial capital. The growing gap presented in the chart conveys a sense of just how enlarged a role fictitious capital and profit are now playing in the U.S. economy. Starting with the 1986 banking crisis, the magnitude of fictitious profits slowly swelled and by the early to mid-2000s it had skyrocketed, nearly quadrupling from a mere $45 billion in 2000 to $174 billion in 2005 and then jumping to $247 billion by 2012. In sum, the growth of pev — which incorporates the snul wage bill — has an inverse relationship to the arp. Although snul operates in conjunction with the social capital, its magnitude depends on the quantity of output. The purpose of the vco ratio is to track fluctuations

188  Twilight Capitalism Chart 5-5 fire Profits before and after “Normalization,” United States, 1947–2018 ! 


  



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in the composition of flows of value that indirectly impact the arp in the age of fictitious capital. As such, the temporal modes of value 
 the significance of the long-term divergence are key in registering between the rate of profit on productive capital and the rate of profit on financial capital and, further, the divergence between the value rate of profit and the money rate of profit. As Smith suggests, conceptualizing pev and snul as systemic overhead costs puts a new twist on Marx’s dictum that “the true barrier to capitalist production is capital itself ” (2019: 239).

Crisis, Overaccumulation and the Mass of Profit

For periodic crises to recur under capitalism, they must have a general cause that is historically specific to the capitalist system. Of course, many concrete and proximate factors may intervene to trigger a crisis — financial panics, crop failures, pandemics, foreign trade and so on — but such factors simply give crises unique historical appearances. What needs to be grasped is that the general cause that gives cyclical crises their recurrent character is to be found in the historically specific social and class relations of capitalism — specifically, the socially antagonistic character of value production. The characteristic form of capitalist crisis — namely, “overproduction” — has a precise meaning in Marx’s theory: it refers above all to the overaccumulation of capital (Marx 1981b: 359). Essentially, this

Marx’s Law of Profitability: Evidence and Controversy  189 means that too much capital is accumulated in relation to what can be profitably employed in production. Due to the class-antagonistic structure of capitalist production and inter-capitalist competition, capital investment tends to exhibit a laboursaving and labour-displacing bias. This means that the process of expanded reproduction under capitalism involves a rise in the occ, which in turn necessitates an increase in the rate of exploitation to secure the conditions of valorization. At the same time, however, individual capitals seek to realize adequate profit margins on their commodities in ever more competitive markets. At a certain point, a violent shock occurs in the form of a crisis that lowers the occ and thereby pushes up the arp to a level sufficient for expanded reproduction.9 But how and why do such shocks materialize? This has been discussed at some length in previous chapters. What needs to be stressed here is that the key variable in the making of a crisis is the actual “mass of surplus value” available for investment to meet the requirements of economic reproduction. At a certain point, as the arp falls, the mass of profit (or, more precisely, the mass of surplus value) stops growing. Once a falling arp is no longer accompanied by a rising mass of surplus value, capital can no longer be sufficiently valorized. This signals an “absolute overaccumulation of capital,” dramatically increasing the probability of a crisis. The crisis itself then performs its restorative function of “slaughtering” capital values in volumes sufficient to restore the conditions of profitability and therewith of expanded reproduction. In Chart 5-6, we observe a clear drop in the mass of surplus value that precedes conjunctural crises in 1970, 1974, 1981, 1990, 2000 and 2008. In analyzing the proximate causes of conjunctural contractions (often referred to as business-cycle recessions), it is useful to include the total wage bill of the workforce (v + snul) in the denominator of the arp. Indeed, Marx himself remarks that crises are generally preceded by a rise in wages and that this additional squeeze on profits can be sufficient to tip the economy into a recession: “Crises are always prepared by a period in which wages generally rise, and the working population actually does receive a greater share in the part of the annual product destined for consumption” (1981a: 486–87). All the same, we are convinced that the inclusion of wages in the arp denominator over the long term can also obscure the precise contribution of a rising occ to the fall in the rate of profit (and, more generally, to the valorization crisis of capital). Excluding

190  Twilight Capitalism Chart 5-6 Mass of Surplus Value, U.S. Economy (Billions of Dollars), 1947–2019           

                  

                

  



Source: Authors. (Note: this chart refers to our “after-tax” measure of surplus-value, inclusive of “normalized” [non-fictitious] profits of the fire sector.)


 wages from the denominator is therefore warranted to examine the “secular” (long-term) significance of the ltrpf. When looking at cyclical trends, it is also useful to not only consider an arp measure that includes wages in the denominator, but one that also limits our purview to those non-fire economic sectors most responsible for the kinds of labour-saving technological innovation that Marx’s ltrpf posits.10 Chart 5-7 hones in on precisely such sectors: manufacturing, construction, transportation and storage, wholesale, retail, broadcasting and telecommunications. This narrow “physicalist + commercial” measure of the arp (which excludes not only fire but also service industries) peaked in 2006; it then experienced a relatively strong (albeit, delayed) recovery following the crisis of 2008–09 but also a pronounced decline after 2014, fully confirming that a falling arp was once again setting the stage for a serious slump well before the eruption of the pandemic-triggered crisis of 2020. The ltrpf does not operate identically in every developmental phase of the capitalist system. Cyclical crises whose impact and solution tend to push the system in somewhat new directions are to be understood against the backdrop of “supra” or “meta” historical waves of development that give rise to systemic crises. As such, the approach needed to evaluate long-term trends differs from what is needed for cyclical trends. The past century

Marx’s Law of Profitability: Evidence and Controversy  191 Chart 5-7 “Physicalist + Commercial” arp (s/[C + v + snul]), United States, 1998–2018 

 
 



 
 

 


 






 




 

 













































Source: Authors.

was indeed an epoch of wars and revolutions, and this lends support to the idea of an epochal structural crisis of the capitalist order within which conjunctural economic crises must be situated. The recent massive expansion of fictitious capital, as a last-ditch effort to cope with the deepening con
 tradictions of the profit-system, is itself indicative of a historical-structural crisis of valorization in the twilight phase of capitalism.

Empirical Results of Our Study

So, what does our data say? As the U.S. economy emerged from World War II, the trend lines for both the value composition of capital (vcc) and the rsv rose for several years, but by the mid-1950s, the trend line for the latter began a long descent that continued to 1980. In the meantime, the vcc maintained a steady rise (see Chart 5-8). This suggests that a rising value composition of capital and a falling rate of surplus value were both factors in depressing the arp over the postwar period, culminating in the profitability and stagflation crises of the 1970s. It’s noteworthy that the trend for the ratio of variable capital (productive labour wage bill) to the snul wage bill, as depicted in Chart 5-9, exhibits a very slight rise between 1947 and the 1970s, but it then begins a long and rather dramatic drop after 1980. At the same time, Chart 5-10 indicates that the snul wage bill as a percentage of gdp rose steadily from 1947 up to the early 1970s. This suggests that while the growth of unproductive labour costs

192  Twilight Capitalism certainly contributed to the 1970s profitability crisis, labour’s “squeeze” on profits also resulted from rising real wages in the productive sectors of the economy between the mid-1950s and the early 1970s, although gains in wage levels occurred largely in tandem with the growth of labour productivity. As discussed in Chapter 2, a divergence between real wage growth and productivity growth only becomes significant following the mid-1970s, as productivity continues its inexorable rise and wages stagnate or decline. Our charts also shed light on how the neoliberal offensive that began in the 1980s impacted these economic indicators. The trend lines for both the rsv and the vcc rise strongly between 1980 and the Great Recession of 2007–09, but after 1998, the rise in the rsv becomes more pronounced than the rise in the vcc. Other things being equal, this would suggest that the rate of profit was trending upward, as it was for several years in the 1990s and in the early 2000s (see Chart 5-9). One should keep in mind that both ratios involving surplus value in this study (s/C and C/[s+v]) include growing volumes of fictitious profit, so the behaviour of these ratios can be wildly anomalous at times. With that noted, Chart 5-11 nevertheless indicates that the arp began its fall prior to the financial crisis of 2007–08 and Chart 5-5 suggests that the fall in the mass of surplus value/profit began as early as 2005–06, whether we’re Chart 5-8 Rate of Surplus Value (rsv) and Value Composition of Capital (vcc), U.S. Economy, 1947–2018 %



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Marx’s Law of Profitability: Evidence and Controversy  193 Chart 5-9 The Ratio of Variable Capital to snul, U.S. Economy, 1947–2018          

 

                  

                

  



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considering the inflated (fictitious profit) measure or the “normalized” measure. To be sure, the fall in the inflated measure of surplus value/profit is much more pronounced than it is for the normalized measure, but that is precisely what one would expect considering that the immediate trigger for the crisis was a meltdown of
 financial markets.

Long-term Trends in the ARP and the OCC

The postwar expansionary phase forced a decline in the arp as the occ increased up to the mid-1970s (accompanied by massive expansion of the snul wage bill). The arp reached its lowest point of the immediate post–World War II era in 1975, in the aftermath of a “synchronized” world recession triggered by skyrocketing oil prices. Thereafter, it remained consistently below its long-term trend line until the mid-1990s. From the mid-1990s to the present, the arp has exhibited wild gyrations above and below a trend line that falls from about 13 percent to 10 percent across the entire seventy-year period. Between 1975 and 1985, the occ remained consistently below a longterm rising trend line that almost doubled between 1947 and 2018. From 1986 on, the occ exhibits a fairly steady rise, exhibiting only one major gyration: a pronounced spike during 2007–09 (a consequence of the collapse in the production of new value resulting from the Great Recession rather than an increase in the value of the constant capital stock).

194  Twilight Capitalism Chart 5-10 snul Wage Bill as Percentage of Output, U.S. Economy, 1947–2017      

 

                  

                

  

 

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Marx’s Law of Profitability: Evidence and Controversy  195 The Great Stagflation of the 1970s and the deep recession of 1981–82 had a severe impact on the arp. It plummeted by about 30 percent between 1978 and 1981. The turn to neoliberalism served to propel profitability by increasing exploitation (see Chart 5-8) and redirecting investment away from new productive capital formation and into financial markets. The colossal expansion of the financial sector culminated in a massive speculative boom in the early to mid-2000s, paving the way for the 2008 financial crash that shook the world. The arp’s dramatic rise in the mid-2000s was the result of a credit boom and a massive growth of fictitious capital and profit; accordingly, it should be regarded as somewhat anomalous. Nevertheless, since the 2008 crisis, the arp has yet to return to its earlier 2006 level — not to mention the peak level it reached in the 1960s. Thus, the U.S. economy has remained in a “long depression.” The era following the 2008 crash has been marked by extremely sluggish economic growth in real terms and by almost unfathomable levels of debt. Little wonder that the intersection of the Covid-19 pandemic with so fragile an economy as this resulted in such a disaster in 2020.

CONCLUSION We conclude by operationalizing an alternative set of formulations for the arp, occ and vcc (see Charts 5-12 and 5-13) based upon the aforementioned “adjusted” measure for fixed constant capital stock suggested by Anwar Shaikh (2016). Shaikh’s modified calculation for the denominator of the arp yields similar yet distinct results from our original measures (specifically in comparison to Chart 5-11). The most notable difference concerns the period leading up to the 1970s. Using Shaikh’s measure of the capital stock as the denominator, the arp falls much more markedly and also fails to recover as much with the onset of neoliberalism compared to our principal arp measure in Chart 5-11. At the same time, compared to Shaikh’s surplus value numerator, our measure for surplus value yields a more robust recovery in the 1990s and 2000s. The empirical results are quite striking indeed. Shaikh’s modified capital stock measures reveal a remarkable loss of dynamism in what is still considered to be one of the most advanced capitalist formations in the world. The massive spike in the vcc around the turn of the century is particularly telling as a harbinger of the 2008 crisis, even as the arp and occ trends also suggest that the general conditions of valorization

196  Twilight Capitalism Chart 5-12 arp and occ, U.S. Economy, 1947–2011 (s/C and C/s+v, using authors’ measures of surplus value and variable capital as well as Shaikh’s measures of constant capital stock) 

  








          

         

 







 

    

  

  

Source: Authors and Shaikh (2016), 6.8 Data Table, 6.8 II.7, denominator.


 Chart 5-13 vcc, U.S. Economy, 1947–2011 (C/v, using authors’ measures of variable capital and Shaikh’s measures of constant capital stock)          

                  

                





Source: Authors; Shaikh (2016), 6.8 Data Table, 6.8 II.7, numerator.


 following the 1990s “boom” as well as those preceding the 2008 crash were relatively weak overall. In combination, Shaikh’s measure of the constant capital stock and our estimates of the mass of surplus value and

Marx’s Law of Profitability: Evidence and Controversy  197 variable capital produce a picture that supports the proposition that the profitability crisis of the 1970s was actually considerably more severe and a much more significant turning point in the “real history of capitalism” than is usually recognized. This may help us to more adequately connect the threads of the 1970s crisis, the Great Recession and the long depression in which the world economy remains deeply mired.

Notes

1. See, in particular, Smith and Butovsky 2012; Smith 2019; Carchedi 2011a; Carchedi and Roberts 2014. 2. World in Crisis (Carchedi and Roberts 2018) contains many papers that empirically evaluate the operation of the ltrpf in several countries. 3. The numerator of Moseley’s rate of profit includes as a deduction from surplus value the costs associated with unproductive labour and capital while the denominator excludes the stock of unproductive capital. 4. We acknowledge Kliman’s criticism of the Saez-Piketty data set and methodology (as measured in tax units reported by income earners rather than business statistics) even though we’ve decided to cite that data set here. 5. See Shaikh and Tonak (1994) for an impressive exposition of the history of unproductive labour in national accounting. 6. This section draws extensively on Chapter 8 of Smith 2019. 7. The conventional Marxist treatment of the unproductive labour wage bill as part of social surplus value has been most frequently challenged by neo-Ricardian or neoclassical critics, who insist that the income of all wage labourers should be subsumed under variable capital. As we suggest later, the conventional conceptualization of unproductive labour is indeed susceptible to this sort of critique (which simply obviates the productive-unproductive distinction entirely) insofar as it involves a fetishistic departure from Marx’s value theory. 8. We find it peculiar that the productive-unproductive distinction — a distinction shown to be vital in Shaikh and Tonak’s masterful book of 1994 — is ignored by many tssi proponents. In our view, this distinction is de rigueur for Marxist fundamentalist value theory. 9. The recovery occurs through the devaluation of capital. Bankruptcies, layoffs, the destruction of fixed assets, low interest rates and much more serve to reduce costs and create new opportunities in the market for surviving firms. As massive liquid injections by the state are mixed with low wages resulting from the crisis, profitability recovers. All of this contributes to stemming a rise in the organic composition of capital and even to lowering it in order to restore the average rate of profit to a level conducive to a robust pace of expanded reproduction. 10. Certain sectors serve to push down the value of labour power more than others. Revolutions in productive technique can take a long time to finally make their way to sectors associated with the reproduction of labour power.

Chapter 6

MARXIST VERSUS RADICAL HETERODOX ECONOMICS: IN DEFENCE OF THE LABOUR THEORY OF VALUE WHY DOES MARX’S LABOUR THEORY OF VALUE MATTER?

O

ur aim in this chapter is to provide more detailed discussion of some key aspects of Marx’s labour theory of value (ltv) beyond that given earlier. The twofold intention is to show that: 1) Marx’s production-centred theory offers a much better theoretical basis for understanding the economic malaise of twenty-first-century capitalism than rival economic theories (including “left heterodox ones”) that focus on markets and/or the policies of capitalist states; and 2) Marx’s value theory is both theoretically defensible and essential to developing an adequate program for overcoming capitalism. In earlier chapters, the most important postulates of Marx’s ltv were identified as: 1) living labour is the sole source of all new value (understood as a mode of measuring wealth that is specific to capitalism); 2) value exists as a definite quantitative magnitude at the level of the capitalist economy as a whole, setting parametric limits on wages, profits, prices and so on; and 3) the capitalist law of value governs the macroeconomic allocation of social labour and other resources by imposing on the socio-economic life process a single yardstick for measuring “wealth” — that of abstract, socially necessary labour time, the phenomenal expression of which is money. What then can be said about the substantive implications of Marx’s ltv, and why does it matter? A concise answer to these questions is offered by Smith: Taken together [the postulates of the theory of value] constitute the essential presuppositions of Marx’s “law of the tendency of the

198

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  199 rate of profit to fall” — a law that Marx regarded as central both to his theory of cyclical crisis and to his account of the historicalstructural crisis of capitalism.… Marx’s theory awakens us to the reality that the imperative to produce value is a social imperative, an imperative of capitalist social relations, and not a technical or natural necessity inherent in the metabolic relation between humanity and nature. Only a society burdened by the need to “produce value” can give birth to so absurd, and monstrous, a phenomenon as a “crisis of overproduction.” And only such a society can transform the benefits flowing from labour-saving technological innovation into ecological devastation, declining living standards, depression, and war. (2019: 188–89) It is of course commonplace for non-Marxist critics to argue that the capitalist system breeds exploitation, injustice and inequality, that social, economic and political life in capitalist society is organized in ways that serve to perpetuate the wealth, privilege and power of a small class of people who monopolize ownership of the productive assets of society and are driven by “the profit motive.” But Marx goes much further, arguing that human need under capitalism is systematically and necessarily sacrificed to private profit and that this state of affairs is not only morally troublesome but also subject to a scientific analysis of its long-term unsustainability. The institutions, property relations and social relations of production that define capitalism give effect to historically specific economic laws that point to the increasing irrationality of capitalism as a mode of production — and the need for fundamental systemic change. Perhaps the most striking expression of this irrationality is the way in which capitalism continuously promotes the development of labour productivity through labour-displacing innovation while also relying on a measure of “wealth” dictated by capitalism’s class-antagonistic law of value — that is, quantities of money representing abstract social labour. The drive to improve labour productivity at the micro level (firms) reduces the amount of new value that is being created at the macro level (the economy as a whole) relative to the overall capital invested, thereby paving the way for profitability crises and socio-economic disturbances that evoke a range of class-based responses. Our argument is that these concrete responses, whether consciously understood as such or not, always constitute reactions to specific conjunctural manifestations of a valorization crisis of capital (a fall in the mass of profits, a financial disturbance,

200  Twilight Capitalism a stock-market crash, etc.) that are generally preceded by a decline in the average rate of profit. The previous chapter provided considerable empirical evidence in support of the ltrpf theory of capitalist crisis, much of which has been on offer for some time. Yet resistance to the theory remains strong. Moreover, this is the case not only among pro-capitalist economists/ideologues but also among many scholars and activists who claim to be Marxists. At the same time, there is a clear — and by no means coincidental — connection between resistance to the ltrpf and rejection of the fundamental postulates of Marx’s ltv. It is quite remarkable that many would-be left critics of capitalism and virtually all of its ardent defenders share significant common ground in their economic theory: the view that the systematic exploitation of productive (surplus value-generating) labour is not the foundation of the capitalist system and that capitalist crises are not indicative of any systemic limit to capitalist production. Instead, economic crisis is viewed as an expression of problems arising in the sphere of circulation and exchange (“the market”) that are often exacerbated by poor fiscal or monetary policies. Despite the great diversity of views existing among neoclassical economists (Paul Samuelson, Gregory Mankiw), Austrian libertarians and monetarists (Friedrich Hayek, Milton Friedman), orthodox Keynesians (Paul Krugman, Robert Skidelsky), left-post-Keynesians (Hyman Minsky, Steve Keen) and ostensible Marxists who place “problems of realization” at the centre of their understanding of capitalist crisis (David Harvey, Michael Heinrich, Jim Kincaid and Riccardo Bellofiore), all evince a focus on the sphere of circulation and most are committed to developing policies to simply mitigate the crisis tendencies of capitalism. Michael Roberts has outlined many of these issues concisely and with admirable clarity: For the orthodox Keynesians, [the cause of crisis] is due to the collapse in aggregate or effective demand in the economy (as expressed in a fall of investment and consumption). This fall in investment leads to a fall in employment and thus to less income. Effective demand is the independent variable and incomes and employment are the dependent variables.… This is the view of Keynes: “Nothing, obviously, can restore employment which does not first restore business profits. Yet nothing, in my judgement, can restore business profits that does not first restore the volume of

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  201 investment.” (Collected Writings, Vol 13, p. 343).… But if investment is the independent variable, according to Keynes, Krugman and Minsky-Keen, what causes a fall in investment? [The answer] is an ending of “animal spirits” among entrepreneurs or a “lack of confidence”.… So, profits depend on expectations and crises are the result of changed expectations by financial speculators. Investment and credit grow as long as there is confidence.… Instability in finance and/or excessive credit leads to a collapse of investment or “effective demand” and then on to employment and incomes/profits. For Marxists, instability in the financial sector would not be enough to cause a major crisis if profitability is rising. The Keynes/Minsky approach is subjective, based on “expectations.” The Marxist approach is objective and based on the law of value. Depending on your view, the policies for economic recovery are also different. Keen advocates controlling the level of private debt as the main solution. Krugman advocates regulation of finance and easy money. Failing that, he wants fiscal intervention to stimulate the private sector. Marxists look to replace the profit system. (Roberts 2012) The search for “solutions” within capitalism seems to be a neverending one, despite its historically proven futility. With this in mind, we turn now to consider some currently fashionable and purportedly novel “left-heterodox” offerings that are largely in tune with traditional Keynesian themes and that we view as no less vulnerable to a Marxian value-theoretic critique.

MARIANA MAZZUCATO ON VALUE AND STEPHANIE KELTON ON MONEY Mariana Mazzucato

In her widely acclaimed 2018 book The Value of Everything: Making and Taking in the Global Economy, left-heterodox economist Mariana Mazzucato presents a scathing critique of the progressive financialization of Western economies in recent decades, one that draws heavily on the ideas of John Maynard Keynes and Hyman Minsky. She writes: According to Keynes and Minsky, the possibility of financial crisis was always present in the way that money circulated — not

202  Twilight Capitalism as a means of exchange, but as an end in itself (an idea based predominantly on Marx’s thinking). They believed that government had to intervene to avert or manage crises…. Over the past decades, Keynes’ and Minsky’s insights and warnings about the potentially destructive nature of an unbridled financial sector have been totally ignored. Today, the economic mainstream continues to argue that the bigger (measured by the number of actors) or “deeper” financial markets are, the more likely they are to be efficient, revealing the “true” price and therefore value of an asset. (2018: 120, 122) Throughout her book, Mazzucato offers insightful criticisms of the “marginal utility” theory of value, which she correctly associates with the mainstream, neoclassical notion that “the expansion of finance is highly desirable and should increase its value added and hence its positive contribution to gdp growth, even though it was only a convenient decision to treat finance as productive in the national accounts in the first place” (2018:122). In the end, however, her observations are essentially about promoting a “reinvented” non-Marxian theory of value that restores the “making of wealth” to a position of primacy in the modern economy (whether that wealth is generated by private capital or the state) while also deploring the ability of the financial sector to opportunistically “take wealth” for unproductive purposes. For the advanced capitalist economies to be restored to health, advises Mazzucato, investment in specifically productive economic activity needs to be revitalized, and finance needs to be reined in, regulated and restored to its proper function of facilitating the production of real social wealth. The capitalist state has a key role to play in regard to both of these imperatives. In sum, Keynes plus Minsky plus a reimagined concept of economic value are the key ingredients in Mazzucato’s unique recipe for overcoming the malaise of twenty-first-century capitalism. Mazzucato’s eloquent argument contains several seemingly original insights. But for our purposes, one of her assertions warrants special scrutiny, namely that “the possibility of financial crisis was always present in the way that money circulated — not as a means of exchange, but as an end in itself (an idea based predominantly on Marx’s thinking).” The ambiguity in this statement is quite remarkable and unpacking it goes some distance toward understanding the great separation between Mazzucato’s post-Keynesian perspective and Marx’s view. A careless

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  203 reading might suggest that Marx was himself committed to the idea that money’s “proper” role is as “a means of exchange” rather than “an end in itself.” Yet it is not Marx, but rather Keynes, Minsky and Mazzucato who imagine that this could actually ever be the case within capitalism. For Marx, money is not simply a means of exchange but also the necessary measure and form of appearance of value (understood as abstract social labour), and for just that reason, economic crises (both financial and non-financial) are not only immanently possible but inevitable within capitalism. As Marx’s M–C–M΄ formula for the circuit of productive capital makes crystal clear, the real goal of capitalist enterprise is precisely the enlargement of the money form of capital through the creation of surplus value. In this sense, surplus value converted into money profit and appropriated by a class of capitalists monopolizing the means of production is indeed “an end in itself ” … even if it is also the starting point of a renewed circuit that involves taking that money profit and investing it in still more surplus value creation. Mazzucato has a very different vision of what capitalism is, or at least could become, if and when we embrace her own, somewhat novel understanding of what “real value” represents. For her it is “a flow” — a “process” — through which wealth is created (i.e., goods and services), and so value refers to activities that “promote the outcomes we want.” Thus, in its own peculiar way, Mazzucato’s concept of value is no less subjective than the one posited by marginal utility theory. Where the marginalists consider that “rareté is the cause of value in exchange” and that the value of a commodity is determined by “the proportionality of prices to intensities of the last wants satisfied” (Walras 1954: 145), Mazzucato, in a fashion reminiscent of Jean-Jacques Rousseau or Émile Durkheim, invokes the need for some sort of social contract or conscience collective to properly define the goals of economic action. Apparently, the vagaries of the market and of individual preference are to be supplanted, or at the very least radically supplemented, by collective mechanisms capable of harmonizing the multifarious processes of value creation. Toward the end of her book, Mazzucato writes: Rather than focusing on which activities are inside or outside the production boundary, today we can work to ensure that all activities — in both the real economy and in the financial sector — promote the outcomes that we want: if the quality and characteristics of an activity in question help deliver true value, then it

204  Twilight Capitalism should be rewarded for being inside the boundary. Policymakers must be emboldened to broker “deals” that generate symbiotic public–private partnerships. (2018: 275–76) Recognizing perhaps that this argument might raise more questions than it answers, Mazzucato at the end of her book ultimately poses a more general question and then offers a more open-ended solution: “More fulfilling jobs, less pollution, better care, more equal pay — what sort of economy do we want? When that question is answered, we can decide how to shape our economic activities, thereby moving activities that fulfill these goals into the production boundary so they are rewarded for steering growth in the ways we deem desirable” (2018: 279). Fine words and seemingly noble intentions, but who exactly is this “we”? This brings us to the nub of the problem, for within capitalism there is no collective “we” that can even pose the question of “what sort of economy do we want?,” let alone provide a practicable answer. And the reason for this, quite simply, is that no cross-class commonality of interests can be invoked much less empowered to regulate macroeconomic activity. On the contrary, so long as capitalism continues to exist, the regulation of that activity must be dominated by the imperative to reproduce the conditions of exploitation and class division. The perpetuation of this class-divided society requires that a definite principle of regulation and allocation of resources must continue to predominate: the class-antagonistic law of labour value. This law dictates that money must not only function as a convenient means of exchange but, above all, as the essential means of measuring wealth in terms of abstract socially necessary labour time. Mazzucato is by no means alone in imagining that “we” can wish away the operations and imperatives of the capitalist law of value by simply redefining the role of money in some novel new way. Proponents of both modern monetary theory and the digital currency Bitcoin (not to mention traditional libertarians who want to abolish central banks and engineer a return to the gold standard) are even more ardent than Mazzucato in promoting specifically “monetary” solutions to such contemporary economic problems as growing unemployment, rising income inequality, lagging effective demand and worsening economic downturns. For such people, the relevant level of analysis is clearly the “surface” of economic life. Money and monetary systems are viewed as having an effectively autonomous role in generating activity within the “marketplace.” The

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  205 world of production and consumption, exploitation and surplus generation — and thus labour value — is ignored in favour of a fetish world of money untethered from any objective measure of production costs and conceived as a mere means of exchange. The basic idea is that a different money-form (independent of central banks controlled by wealthy elites), or a more effective and expansive use of state-issued fiat currency, or perhaps new forms of credit money, can restore vitality to increasingly lethargic and “financialized” Western economies.

Stephanie Kelton

Currently, the most prominent figure in the camp of modern monetary theory (mmt) is Stephanie Kelton, an economic adviser to presidential candidate Bernie Sanders in 2015 and the author of the bestselling book The Deficit Myth, published in 2020. Very briefly, mmt is a heterodox macroeconomic theory that contends that currency is a state monopoly and that currency monopolies tend to restrict the supply of financial assets needed to pay taxes and stimulate investment. The indicated remedy is either to break up the state currency monopolies (e.g., through the proliferation of “subversive” digital currencies like Bitcoin) or to give the existing state monetary powers a new mandate and understanding of how they should operate. Kelton’s argument in The Deficit Myth falls into the latter category. With or without the sale of government bonds (a new populist version of “quantitative easing”), a central state power should simply print money in order to prime aggregate demand whenever this is needed. In principle, the main limit to money printing would be the attainment of full productive capacity utilization on an economy-wide scale. Once full or near-full capacity is reached, continued money printing should be halted to prevent inflation. “The limits,” Kelton argues, “are not in our government’s ability to spend money, or in the deficit, but in inflationary pressures and resources within the real economy. mmt distinguishes the real limits from the delusional and unnecessary self-imposed constraints” (2020: 3). The principal obstacle to the implementation of mmt is the “deficit myth” — the widespread but mistaken conviction of powerful political and economic forces that deficit spending by government is bad (irresponsible, inflationary, etc.) for the economy. In Kelton’s mmt view, low capacity utilization is therefore not the result of low rates of return on capitalist investment (as it is in Marxist theory), but rather the consequence of

206  Twilight Capitalism retrograde ideas and the overweening influence of malign powers committed to them (whether out of self-interest or sheer ignorance). Kelton points out that conventional economic thinking is committed to the idea that taxing and borrowing come first, spending comes last: “A handy mnemonic for the conventional way of thinking is [tab]s: taxing and borrowing precede spending” (2020: 17). Kelton reverses this; for her, spending precedes taxes and borrowing s[tab]. All this is surely “Keynesianism on steroids”! mmt, says Kelton, rejects the “superficial story about money printing being invented to overcome the inefficiencies associated with bartering — trading goods without the use of money.” Instead, it draws on an extensive body of scholarship known as chartalism, showing that taxes were the vehicle that allowed ancient rulers and early nation-states to introduce their own currencies, which only later circulated as a medium of exchange among private individuals. From its inception, the tax liability creates people looking for paid work (aka unemployment) in the government’s currency. The government (or other authority) then spends its currency into existence, giving people access to the tokens they need to settle their obligations to the state.… Taxpayers weren’t funding the government; the government was funding the taxpayers. (2020: 31) What is most striking about all this from a Marxist point of view is how remote it is from any consideration of how money — above all, under modern capitalist conditions of generalized commodity production and exchange — must serve as a standard of value or “unit of account” in the exchange of commodities conceived as products of human labour. What’s more, Kelton blithely ignores the fact that the sort of “popular” quantitative easing or money printing that she advocates could actually alter the balance of class forces in favour of labour and against capital. For precisely this reason, it is virtually inconceivable for a capitalist government to implement such policies, since they could only serve to increase the material security of the working class and thereby reduce currently powerful inhibitions to class struggle (such as anxiety over household debt, fear of job loss, etc.). Indeed, other things being equal, the shift in the balance of class forces that would result from putting more (“unearned”) money in the pockets of workers could only

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  207 lead to further downward pressure on the rate of profit and a worsening crisis of valorization. Since the profitability of capital doesn’t figure very prominently in mmt theory (there are just twenty references to profit in Kelton’s three-hundred-page book), this may not seem to be much of a problem from Kelton’s perspective. But from the perspective of capital, it clearly would be. It’s noteworthy, however, that in a backhanded fashion, Kelton actually acknowledges in the passage quoted previously that money/currency is ultimately dependent on the performance of labour, not the other way around. In her own transhistorical account, most people are compelled to work in order to pay taxes and to purchase the products of others’ labour. Under capitalism, the main exceptions to this rule, as noted in Chapter 3, are those who are fortunate enough to “earn” money by dint of their ownership of significant economic assets and their concomitant ability to appropriate the surplus labour of others. The following critique of mmt is apposite and provides a convenient bridge to our defence of Marx’s ltv in the next section of this chapter: For Marx, under capitalism money is the representation of value and thus of surplus value. In M–C–P–C΄–M΄, M can exchange with C because M represents C and M΄ represents C΄. Money could not make exchange possible if exchangeability were not already inherent in commodity production, if it were not a representation of socially necessary abstract labour and thus of value. In that sense, money does not arise in exchange but instead is the monetary representation of exchange value or socially necessary labour time. Marx’s theory analyses the functions of money in a capitalist-commodity economy. It is a historically specific theory, not a general theory of money throughout history, nor a theory of money in pre-capitalist economies. (Roberts 2019a)

THE VALUE CONTROVERSY: WHY MARX’S LTV HOLDS 1 Our main purpose in this chapter is to show 1) why the dismissive attitude toward Marx’s labour theory of value that is shared by so many schools of economic thought is intellectually indefensible and 2) why, consequently, the most important corollary to the ltv, Marx’s law of profitability, should be taken seriously at the level of theory — all the more so given the compelling empirical evidence supporting it.

208  Twilight Capitalism As noted in Chapter 2, the most common and seemingly cogent criticism of Marx’s theory of value — one endlessly repeated by mainstream economists— rests on a basic misunderstanding of the theoretical purpose served by a particular “operating assumption” of Capital I — namely, that commodities are sold (exchanged) in proportion to the labour value represented in them. For Marx, this assumption is neither a statement of empirical fact nor an explanation of the formation of individual market prices. On the contrary, it is a simplifying device to establish that the creation of surplus value depends on the exploitation of wage labour in the process of production rather than on any violation of the market principle of the exchange of equivalents. Put differently, this “exchange of equivalents” assumption is a useful step in an analytical procedure that provisionally suspends certain aspects of concrete reality in order to bring other aspects into sharper focus. Procedures of “abstraction” such as this are routinely employed by mainstream economists; indeed, the latter are well known to entertain far more unrealistic assumptions (such as “perfect competition in markets”) when constructing their own theoretical models. Once this methodological consideration is appreciated, the standard “commonsensical” criticism of Marx’s theory of labour value as presented in Capital I loses all its force. Nevertheless, more serious objections to Marx’s labour-value theory continue to be advanced by a range of critics, including some who express sympathy for Marx’s theoretical and political projects. Historically, such objections inspired the formation of a number of rival schools of thought regarding the theoretical content and methodological underpinnings of Marx’s Capital. Although a comprehensive discussion of the controversy is not provided here, a brief survey of some of the major issues and currents within “the value controversy” should be helpful in establishing the theoretical coherence and integrity of Marx’s labour theory of value and its indispensability to a theory of capitalist crisis grounded in a critique of capitalist production rather than the vagaries of circulation and exchange. Our starting point is the debate surrounding Marx’s analysis of the transformation of commodity values into prices of production — the so-called transformation problem. The first major critique of Marx’s transformation procedure was advanced by Ricardian economist Ladislaus von Bortkiewicz ([1907] 1975) and later popularized by Paul Sweezy ([1942] 1968). According to von Bortkiewicz and Sweezy, Marx’s theoretical formula for the

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  209 transformation of commodity values into prices of production in the third volume of Capital should be rejected because “it excludes the constant and variable capitals from the transformation process, whereas the principle of the equal profit rate … must involve these elements” (von Bortkiewicz 1975: 201). To correctly transform values into prices of production, von Bortkiewicz and Sweezy claimed, the values of the input commodities (constant capital and variable capital, which together constitute the “cost price” of the commodity) need to be transformed in accordance with the general rate of profit along with the newly produced surplus value. The premise of the von Bortkiewicz/Sweezy critique has been challenged, from several angles, by Mage (1963), Mandel (1981) and, more recently, proponents of the temporal single-system interpretation (tssi) of value theory (Carchedi 1986; Kliman 2007; Carchedi 2011a). What these replies to the critique have in common is their insistence that the cost price of the commodity inputs to production should be seen as a form of value that has already been transformed in a previous production cycle. The market price paid by a capitalist for an input commodity “finds a renewed value expression in the value of the money capital invested in its purchase” (Smith 1994a: 104–5 and 2019: 122). Or, as Mage puts it, “the difference between the value created by [an input commodity’s] production and its price of production has already been transferred to other capitalists through the average rate of profit” (1963: 243, emphasis in original). Thus, the Bortkiewicz-Sweezy “solution” is based on an entirely mistaken assumption that “prices of production of inputs should be calculated within the same time-span as prices of production of outputs” (Mandel 1981: 22–23). Once such stratagems for “correcting” Marx’s transformation procedure are rejected, the aggregate equalities “total prices = total value” and “total profits = total surplus value” can be sustained and the core postulates of the Marxian theory of value upheld. One of the most lucid and concise defences of Marx’s own understanding of the value-price transformation is provided by Michael Roberts (2018a, 2018b). Rather than reviewing the long (and frankly tedious) debate provoked by the “simultaneist” Bortkiewicz-Sweezy arguments, Roberts focuses on the critique of Marx’s value theory advanced by Paul Samuelson (1971, see 399–443) and the response it drew from an unlikely defender of Marx — the prominent neoclassical economist, William Baumol (1974, see 51–62).

210  Twilight Capitalism According to Samuelson, Marx’s value-price transformation procedure is unnecessary because market prices are best explained by the movements of supply and demand in markets. Labour values play no role whatsoever in market price formation, and any consideration of them can only lead to “logical complication and confusion.” Thus, Samuelson’s argument was really more about “erasing” than “correcting” Marx’s procedure. To this, Baumol responded — quite correctly — that Samuelson had misunderstood Marx’s purpose in positing the value-price transformation. Marx was not trying to establish how market prices are directly related to values measured in labour time. Rather, according to Baumol, [Marx’s] aim was to show that capitalism was a mode of production for profit and profits came from the exploitation of labour; but this fact was obscured by the market where things seemed to be exchanged on the basis of an equality of supply and demand. Profit first comes from the exploitation of labour and then is redistributed (transformed) among the branches of capital through competition and the market into prices of production. (Baumol 1974; quoted in Roberts 2019c: x) Roberts suggests that this interpretation of Marx “provides a powerful answer not only to Samuelson but also to the ‘standard interpretation’ of the transformation problem.” Indeed, it anticipates the main thrust of more recent Marxist efforts to defend Marx against the BortkiewiczSweezy charge of logical inconsistency. By combining the temporalist (tssi) insights of Carchedi (1986, 2011a) and Kliman (2007), as well as aspects of Moseley’s (2015) macro-monetary theory of the distribution of total surplus value, Roberts lays to rest the “transformation problem” with disarming efficiency: Values in a commodity do not have to be “transformed” into prices.… Prices are the appearance in the market of the exploitation of labour in the production process.… There is no need to transform the values of constant capital (machinery, etc.) and variable capital (labour power/workforce) into prices. They are already given as prices from the market in the previous process of production. The only transformation that takes place is the transformation of the total new value from the production process in a re-distribution through market competition, with

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  211 profits going to the various capitalists depending on the size of capital each advanced at the start of production. (2018a: 83–84; emphasis in original) To be sure, some ostensibly Marxist and most non-Marxist economists continue to insist that Marx’s transformation procedure is flawed and that his supposed “dual system” of values and prices of production needs to be refined in order to meet the challenges of Bortkiewicz and “neo-Ricardian” critics such as Steedman (1977). But their arguments ultimately rest on the assumed need for a transformation procedure relevant to explaining the formation of individual commodity prices in the context of a static equilibrium model. Whatever merits such arguments may (or may not) have, they are entirely irrelevant to Marx’s purposes and methods — and so no “logical inconsistency” in Marx’s own transformation procedure can be demonstrated when deploying them. The preceding discussion of the “transformation problem” is useful as an entry point for considering the relationship between the form of value and the magnitude of value. This often-neglected relationship is vitally important, in our view, to a defence of the core postulates of Marx’s law of value and to a Marxian theory of capitalist crisis that highlights falling profitability rather than inadequate market demand as the key regulator of capitalist accumulation, investment and growth.

The Ricardian-Marxist Orthodoxy and the Rise of Neo-Ricardianism

Faced with the Bortkiewicz critique, an earlier generation of Marxist economists (Meek 1956; Sweezy [1942] 1968; Dobb 1973) mistakenly yielded to an approach that seemed close to Marx on substantive issues yet more rigorous on “technical” ones. Unfortunately, the failure of these “orthodox” Marxist economists to pay heed to Marx’s value-form theory and to fully appreciate the profound methodological differences between Marx and David Ricardo (the leading classical exponent of “profit-rate uniformity”) resulted in their promotion of a “Ricardian Marxism.” By the 1960s, this decisively compromised their ability to meet the neo-Ricardian challenge posed by Piero Sraffa and other proponents of what might be called “Ricardianism minus a labour theory of value” — a challenge initiated with the publication of Sraffa’s The Production of Commodities by Means of Commodities (1960). The hallmarks of what came to be known as “neo-Ricardian Marxism”

212  Twilight Capitalism were the claims that a theory of labour value is inessential to a theory of exploitation and surplus generation; that models of economic reproduction that entertain the notion of a surplus must assume the actual existence of a “uniform rate of profit” (rather than just a tendency toward the equalization of profit rates); and that wages ought to be considered the crucial “independent variable” of capitalist development. The latter proposition was also closely connected to the neo-Ricardian view that wage inflation is the root cause of falling profit rates.

The Rediscovery of Marx’s Value-Form Theory

In reaction to the exhaustion of orthodox Marxist value theory and to the Sraffian/neo-Ricardian challenge, new interpretations of Marx emerged in the 1970s. These interpretations emphasized the critical character of Marx’s project and pointed to Marx’s analysis of the value form as an area of his theory that had been given insufficient attention by the orthodox (Ricardian-Marxist) value theorists. One of the currents emerging from this “rediscovery” of the value form — what is today often simply called “value-form theory” but which we prefer to call “pure value-form theory” — went so far as to see Marx’s analysis of the value form as not only the core of his theory of value but also as a solid basis for abandoning his value-magnitude analysis and even his labour theory of value. A brief digression into certain aspects of Marx’s labour theory of value and his value-form analysis will be helpful before we proceed. In Chapter 1 of Capital I, Marx identifies the “substance” of value as “abstract labour” — defined as labour abstracted from its concrete utilityshaping characteristics and conceived as an aspect of the homogeneous mass of social labour entering into the production of commodities. The measure of this value-creating substance is socially necessary labour time, defined as “the labour-time required to produce any use value under the conditions of production normal for a given society and with the average degree of skill and intensity of labour prevalent in that society.” It follows from this proposition that “[t]he value of a commodity is related to the value of any other commodity as the labour-time necessary for the production of the one is related to the labour-time necessary for the production of the other” (Marx 1977: 129, 130). Marx’s subsequent analysis of exchange value (or the forms assumed by value) identifies two “poles” of the value relation, the relative form of value and the equivalent form:

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  213 Whether a commodity is in the relative form or in its opposite, the equivalent form, entirely depends on its actual position in the expression of value. That is, it depends on whether it is the commodity whose value is being expressed, or the commodity in which value is being expressed. (1977: 140) Further analysis of this relation discloses three peculiarities of the equivalent form. First, “use-value becomes the form of appearance of its opposite, value” (1977: 148), as the physical body of the commodity standing in the equivalent form expresses the value of commodities standing in the relative form. It follows from this that the concrete labour going into the production of this commodity stands in a relation of equivalence to the abstract labour “embodied” (or represented) in the commodities standing in the relative form. Hence, “concrete labour becomes the form of manifestation of its opposite, abstract human labour.” This leads directly to a third peculiarity: the equivalent form reveals that “private labour takes the form of its opposite, namely labour in its directly social form” (1977: 150, 151). The reversals or inversions suggested in this analysis of the value form are of central importance to Marx’s value theory as a whole. Within value relations, Marx asserts, use value appears as value, concrete labour as abstract labour, and private labour as social labour. The commodity is a unity of use value and value, but this dual character of the commodity is only expressed when its value has a form of appearance distinct from its natural (use-value) form. This form of appearance is its money exchangevalue: its price. Analyzing the forms of value leads to a conclusion that is critical to Marx’s distinctive labour theory of value: “Money as the measure of value is the necessary form of appearance of the measure of value which is immanent in commodities, namely labour-time” (Marx 1977: 188, emphasis added). The peculiarities of the equivalent form find final expression in the money commodity (the universal equivalent). These insights point to the problem of distinguishing between the commodity’s natural/use-value aspect and its socio-economic or value aspect. It’s hardly surprising, therefore, that Marx’s value-form analysis culminates in his famous, if often misunderstood, discussion of the “fetishism” of commodities, a concept that is pivotal not only to his critique of political economy but also to his historical-materialist analysis of the “bourgeois mode of production.” Marx argues that the (monetary) forms

214  Twilight Capitalism of appearance of value lead us away from the recognition that commodities both reflect and give expression to definite social relations existing between commodity producers. Indeed, value relations systematically encourage a confusion of the natural and the social, and this fetishistic confusion creates and sustains the illusion that, as producers, people can relate to one another only through the mediation afforded by “things.” Following his initial discussion of value as socially necessary abstract labour, Marx’s analyses of the value form and of commodity fetishism explain his refusal to follow David Ricardo in directly proceeding from the “magnitude of value as labour time” to the money-price of individual commodities. Indeed, Marx establishes his theory of value not as a theory of market-price formation (in the vein of Ricardo’s labour theory of value), but as a basis for disclosing the macroeconomic processes issuing from the contradictions of the commodity form of the product of labour. The relevance of such an investigation, he makes clear, can only be grasped by those prepared to recognize that the product of labour can assume different (that is to say, non-commodified) forms and that the social form of the division of labour need not involve private exchange. On one level, the value-form analysis seems to relieve Marx of any obligation to address the problem of the magnitude of value as this was traditionally conceived in Ricardian political economy. Accordingly, many pure value-form theorists want to defend this “qualitative side” of Marx’s value theory even while also conceding that the neo-Ricardian criticisms of Marx’s value-magnitude analysis are correct and that Sraffa’s physicalmagnitude model of economic reproduction (which dispenses with labour values) can be a superior tool of macroeconomic analysis (Himmelweit and Mohun 1981; Elson 1979). Where the orthodox school of value theory subordinates the value form to the value-magnitude analysis, these value-form theorists do precisely the reverse. The only real “continuity” between them lies in their mutual dissociation of the “quantitative” and “qualitative” aspects of Marx’s theory. An important consequence of the preoccupation with the “form of value” over the “magnitude of value” is a tendency to go beyond the correct perception that interaction occurs between production and the other moments of reproduction (circulation, exchange, realization, consumption) to the wrong conclusion that, under capitalism, exchange emerges as the predominant moment. Indeed, by implicitly rejecting the primacy of production, this postulate abandons Marx’s historical-materialist ontology

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  215 and results in a major concession to bourgeois economics. In fact, through their excessive focus on the qualitative aspects of exchange relations existing between individual commodities, pure value-form theorists draw close to a simple identification of value and price. Such a drift is particularly evident in the following statement: “The transformation from Volume I [of Capital] to Volume III is not a transformation from value to price, but from value and price considered purely from the point of view of production to value and price as modified by circulation and capitalist competition” (Gerstein 1986: 68). And further, “the creation of value” should not be located “in production but at the articulation of production and circulation” (De Vroey 1981: 173). The logic of this value-price identification is also evident in Himmelweit and Mohun’s discussion as well as that of Elson, despite occasional references to “value produced in production” and the like. In this connection, Alain Lipietz rightly notes that the failure of the French school of value-form theory (for instance, Benetti and Cartelier) “to deal with the problem of magnitude had an unexpected result: they abandoned the pole of substance and slipped irresistibly towards a purely formal and subjectivist theory of value” (1985: 158).2

Fundamentalist Value Theory

Lipietz’s reference to the “pole of substance” is a convenient point of departure for assessing the value controversy as a whole on a “fundamentalist” basis — that is, one that recognizes the importance of both aspects of Marx’s theoretical program: the analysis of the form and the magnitude of value. First, it should be acknowledged that the emphasis on the value form is associated with a legitimate and important move to radically differentiate Marx’s notion of “abstract labour” from the Ricardian notion of “embodied labour.” The problem is that the pure value-form theorists tend to regard the distinction between an “embodied-labour theory of value” and an “abstract-labour theory of value” as both the starting point and the terminus of any Marxist response to the neo-Ricardians. Against this, the fundamentalists argue that, although this distinction is certainly important, the neo-Ricardian challenge needs to be confronted more comprehensively. It’s not enough to say that the neo-Ricardians have misunderstood Marx’s theory of value; it’s also necessary to demonstrate the macroeconomic superiority of Marx’s value-magnitude analysis over the Sraffian physical-magnitudes model of the neo-Ricardians. In our view, Marx’s concept of “abstract labour” is the crucial conceptual

216  Twilight Capitalism nexus uniting his value-form and value-magnitude analyses. Since abstract labour is the substance of value, it needs to be referred to whether one is discussing the qualitative (form-analytic) or the quantitative (magnitude) aspects of the Marxian theory of value. Our contention is that in avoiding the controversy surrounding the value-magnitude analysis, many proponents of pure value-form theory have redefined abstract labour in a fashion that fatally damages and misrepresents Marx’s theoretical project. In their hands, the concept has become a theoretical rationale for denying that value exists as an “objective, quantitatively determined magnitude” and for obscuring the processes through which value is created. Against this equivocation (and sometimes open rejection of Marx’s ltv), the fundamentalist value theorists refuse to relinquish the historicalmaterialist principle that what transpires in circulation and exchange must be regulated and dominated by the way in which social labour time has been allocated in the sphere of production. This notion permits a conception of abstract labour as reflecting the real social processes through which commodities are produced for the purpose of sale and the realization of profit. Abstract labour and value now appear as the results of commodity production; both are generated through the real activity of producing commodities before the latter enter the realm of exchange. This approach reinstates the concept of “socially necessary labour time,” which is also central to Ricardian and neo-Ricardian interpretations of Marx. At the same time, however, it is linked to a notion of how commodities “represent” value (rather than “embody” labour time), an idea aptly described by Anwar Shaikh: It is clear in Marx … that it is not the historical cost of a commodity in labor time, but rather its current cost of reproduction, which determines the magnitude of a commodity’s Value. As such, it is not a question of the labor time “embodied” in a commodity but of the social cost which the current production of the commodity entails. (1977: 113) This understanding of labour value informs Shaikh’s “iterative” approach to the transformation issue, as informed by the value-form analysis; but it is equally relevant to other fundamentalist approaches, such as Carchedi’s (2011a) temporal single-system interpretation. For the fundamentalists, abstract labour (as the substance of value) serves to link the value-form and value-magnitude analyses and consequently is

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  217 measurable in two senses: at the level of exchange or circulation, money appears as its sole measure; however, at the level of production, the concept is apprehended and measured in terms of socially necessary labour time. By denying that abstract labour can be measured at the level of production in terms of socially necessary labour time, the pure value-form theorists render consistent their theoretical revision, according to which the formation or constitution of value reaches completion only in the act of exchange. Fundamentalists overturn this revision by showing how the “form of value” and the “magnitude of value” are contradictory only in the sense that they are conceptual reflections of the real contradictions of commodity production: Labour involved in the production of commodities produces value, while exchange merely realizes it in money-form. It is only because of this that Marx can distinguish between the amounts of value and surplus value created in commodity production and the generally different amounts realized through exchange. (Shaikh 1981: 274, emphasis in original) On the basis of this understanding of Marx’s value theory, the (otherwise heterogeneous) fundamentalist school has elaborated a formidable response to the neo-Ricardian/post-Sraffian challenge over such matters as the transformation problem, the alleged redundancy of the valuemagnitude analysis to a physical-magnitude analysis and the so-called “joint production problem.”3 Unfortunately, the attention given to answering the neo-Ricardians has often been at the expense of considering the larger methodological and ontological issues that are key to distinguishing Marxist-fundamentalist theory from contending theories of value, whether of “orthodox” Marxist, quasi-Marxist or non-Marxist provenance.

The Ontology of Abstract Labour and Value

Marx’s procedure in Chapter 1 of Capital I is implicitly to establish “value” as a general or universal concept corresponding to a real social process. This holistic commitment is rendered explicit in a passage from his appendix to the first German edition of Capital (“The Value Form”), where he speaks of a “reversal, whereby the sensuously concrete is considered as only the form of appearance of the abstract universal, as opposed to the case where the abstract universal is a property of the concrete.” No less than the other reversals peculiar to the equivalent form of value, this

218  Twilight Capitalism reversal “characterizes the value expression” (Marx 1953: 271, cited in Fischer 1982: 31).4 Marx’s observations here would seem to support the notion that abstract labour — as a real structure — finds expression through the concrete particulars of the products of labour. Thus, to conceive of abstract labour as a “universal structure” is not to deny that it finds particular expressions or concrete forms (in which, indeed, it is apprehended as a “property of the concrete”); rather, it is to insist that it has an existence independent of these concrete particulars as well. The quantitative dimensionality of abstract labour is therefore not confined to concrete particulars (the money form) but also exerts itself at the level of its social-structural existence (as socially necessary labour time). In our view, such a conceptualization is the implicit ontological basis of the fundamentalist approach to value theory. As we’ve emphasized, this core fundamentalist account recognizes the importance of both the “magnitude of value” and the “form of value” to Marx’s ltv. The magnitude-of-value problematic directs attention to the macro level and to the measurement of value in terms of socially necessary labour time. The form-of-value problematic addresses the micro-level issue of the quantitative relation between particular commodities as expressed through the money form. Dissociating these problematics can only lead to a dualistic separation of the universal and the particular, thus denying their dialectical unity. In practical terms, moreover, such a dualism must lead to the kind of methodological privileging of “the particular” that is characteristic of all theories of value that focus on the “individual commodity” at the expense of an understanding of “the world of commodities.” Such an approach is characteristic ofRicardo’s theory (despite his concern with the macroeconomic issue of the distribution of income between classes), of John Stuart Mill’s “cost of production” theory and of neoclassical marginal-utility theory. Orthodox (Ricardian) Marxist value theory is characterized by an uneasy, and ultimately untenable, compromise between a dualistic and a dialectical-monistic handling of the universal/particular relation, while neo-Ricardianism boldly reasserts a dualistic position while according an analytical privilege to “macro-level” economic phenomena (abstracted from any theory of value). Pure value-form theory, in this context, can be interpreted as reasserting the microeconomic side of Marx’s value theory (the function of which is to remind us that the product of labour has value

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  219 only by virtue of the existence of determinate social relations) within a theoretical space that accepts both a dualistic framework and a macroeconomic analysis that rejects any value-magnitude theory. For these reasons, pure value-form theory is at odds with Marx’s dialectical-monistic social ontology as well as his labour theory of value (Smith 2019: Ch. 6). In opposition to pure value-form theory, Marxist fundamentalism needs to stress that money becomes the form of value precisely in its role as the universal equivalent, a universal unit of account. To cite Marx: “Since all other commodities are merely particular equivalents for money, the latter being their universal equivalent, they relate to money as particular commodities relate to the universal commodity.” Money, as the universal commodity, is the expression of undifferentiated abstract labour. Significantly, Marx goes on to say that “the money-form is merely the reflection thrown upon a single commodity by the relations between all other commodities” (1977: 184). This can be expressed otherwise as follows: money is the form of appearance or “reflection” of a real structure of abstract labour that mediates the relations between all commodities. Yet to understand this structure and its mediating role, one must look to the macro-level problem of the magnitude of value. Hence, abstract labour needs to be conceived as a structure (of relations) grounded in production but reflected by individual commodities in the sphere of circulation — which is the general position taken by the fundamentalist school of value theory. It is precisely in this way that the leading postulates of Marx’s value theory can be sustained: namely, that living labour is the sole source of all newly produced value (including surplus value) and that value exists as a definite quantitative magnitude at the level of the capitalist economy as a whole. As we’ve seen, these leading postulates constitute the essential theoretical underpinnings to Marx’s distinctive theory of capitalist crisis. In their absence, it becomes impossible to definitively sustain Marx’s ltrpf, which “dictates that the tendency of the social capital to increase its organic composition (that is, to replace “living labour” with the “dead labour” embodied in an increasingly sophisticated productive apparatus) must exert a downward pressure on the rate of profit, the decisive regulator of capitalist accumulation” (Smith 2019: 41). Moreover, once the ltrpf is denied, the door is opened wide to a range of theories of capitalist crisis that point to the possibility of creating a “crisis-free capitalism” through the implementation of policies that, in one way or another, address problems that are perceived to be rooted in “the market,” such as “deficient

220  Twilight Capitalism effective demand,” “disproportionalities,” “underconsumption” or “failure to realize (or absorb) surplus value.” Carchedi has correctly observed that pure value-form theorists “share a characteristic feature, the belief that value and surplus-value come into existence only at the moment of realization. Consequently, production and the realisation of value and surplus value are collapsed into each other and time is wiped out … this approach chooses a view in which production and realisation are simultaneous” (2011a: 84–85). We would add that it also chooses a view in which capitalism’s tendency toward crisis is, for all intents and purposes, relocated to the sphere of circulation/exchange. Once this is accepted, the remedies to this tendency are also to be sought there — whether in monetarist, anarcho-libertarian, Keynesian or Marxo-Keynesian guises.5

CONCLUSION As demonstrated in Chapter 5, Marx’s ltrpf stands up rather well to empirical scrutiny, and certainly much better than any alternative theory of capitalist crisis of which we are aware. And as we’ve shown in this chapter, the fundamental theoretical postulates of the ltv, upon which the ltrpf rests, have by no means been conclusively refuted — indeed, they flow logically from the principles of Marx’s social ontology. In sum, Marx’s ltrpf and production-centred view of capitalist crisis are theoretically robust and empirically demonstrable. What then explains the continuing resistance to Marx’s ltv and ltrpf from those who profess to be “progressive,” “anti-capitalist” and even sympathetic to Marx’s political project of socialist transformation? We believe that the answer to this question is a simple one. The resistance to Marx’s theories stem from their relationship to his program of socialist revolution and his strategy for implementing that program, namely an independent revolutionary movement of the working class. Marx’s critics on these matters — including those who profess to be Marxists, neo-Marxists, left social democrats and radical democrats — are attracted instead to theories of capitalist crisis that point toward the possibility of reforming capitalism in ways significant enough to make revolution “unnecessary.” In other words, their programmatic horizon is one of creating a more humane, egalitarian and sustainable capitalism, either as a “first step” toward achieving socialism or as a self-sufficient alternative to the latter.

Marxist versus Radical Heterodox Economics: In Defence of the Labour Theory of Value  221 The theory-program dialectic is a subject that has received too little attention in Marxist debates, even from those firmly committed to Marx’s ltv and ltrpf (see Smith 2019: Ch. 6). In the next chapter, devoted to making the case for a revolutionary-socialist programmatic response to the multiple crises of twilight capitalism, we return to that theme.

Notes

1. This section is an edited and somewhat expanded version of Appendix One from Murray Smith’s Global Capitalism in Crisis (2010), which, in turn, drew on Smith 1991a. A much extended and more detailed survey and evaluation of the value controversy is to be found in Smith’s Invisible Leviathan: Marx’s Law of Value in the Twilight of Capitalism (2019), particularly Chapters 5 and 6. 2. Elena Louisa Lange (2020) offers an interesting and highly sophisticated survey and critique of several neo-Marxist “monetary” approaches that often begin by dissociating Marx’s theory of money from his abstract labour theory of value and end up by dismissing the latter. These include the Japanese Uno School, the post-Uno school, and French theorists Benetti and Cartelier. The German Neue Marx-Lektüre theorists Backhaus and Heinrich also figure in her discussion, not as open antagonists of Marx’s ltv but as influential interpreters of Marx who attenuate Marx’s production-centred approach to value. Rejecting the “conflation” of value and the value form (a conflation she considers the “original sin of conventional political economy”), Lange writes that to “claim that Marx’s labour theory of value as a theory of the quality and the quantity of value is a ‘Classical residue in Marx’s theory’ (Itoh [1976]), [that it] is ‘derived from classical political economy’ (Reuten [1993]), or even [that it] is a theorem that Marx ‘refused’ (Harvey [2018]), has no theoretical basis. Marx time and again stressed that value, and with it, abstract labour, are never constituted in exchange…. Value, as abstract labour, expended as ‘socially necessary labour time,’ is the obfuscated ground of the value-forms” (2020: 77–78). Lange’s critique is broadly complementary to Smith’s (2019) “fundamentalist” assessment of the value controversy, which notably includes a highly relevant critique of Patrick Murray’s (2011, 2017) “co-constitutive value-form theory.” See also Stavros Mavroudeas (2020a) for a fundamentalist critique of the Neue Marx-Lektüre school. 3. See in particular: Shaikh 1977, 1981, 2016; Foley 1986; Mandel and Freeman 1984; Smith 1991, 1994a, 1994b, 2010, 2019; Freeman and Carchedi 1996; Saad-Filho 2002; Kliman 2007; Carchedi 2011a; Moseley 2015; Fine and Saad-Filho 2016; Roberts 2018b; Tsoulfidis and Tsaliki 2019; Lange 2020. In his Invisible Leviathan (2019), Smith refers to Moseley as a value-form theorist occupying a position near the boundary between value-form theory and fundamentalist value theory. This judgment was based on the slight attention that Moseley gave to the “substance of value” — namely, abstract labour — in his book Money and Totality (2015), as well as his strong emphasis on the monetary dimension of Marx’s theory. In private correspondence with Smith, Moseley disputed this characterization and

222  Twilight Capitalism affirmed his agreement with the basic tenets of fundamentalist theory as set out in Invisible Leviathan. Smith welcomes the clarification and now accepts that Moseley is better characterized as a fundamentalist theorist than as a proponent of what is currently understood to be “value-form theory.” 4. See also “The Value-Form” . 5. For an excellent discussion of the relationship between the so-called transformation problem and the alleged “realization of surplus value” problem, see Roberts (2016b).

Chapter 7

TWILIGHT CAPITALISM OR SOCIALIST REVOLUTION? MARXIST-SOCIALIST VERSUS CAPITALIST POLITICS IN THE TWILIGHT OF CAPITALISM

I

n his introduction to Marxist Phoenix (2014), Murray Smith offered the following retrospective on the post-Soviet era and the fateful choices now confronting humankind: Owing to the hugely disappointing and often disastrous results of capitalist restoration in the erstwhile [Soviet Bloc] “Communist” societies; the troubling performance of Western capitalism in the post-Cold-War era; the manifest inability of neoliberalism to address the severe ecological crisis confronting humankind; and, above all, the deep systemic crisis of the global capitalist economy that has become increasingly manifest since 2007–08, the “End of History” announced by Francis Fukuyama in 1992 [following the collapse of the Soviet Union] has acquired a meaning far removed from the one originally intended. Far from looking to a luminous future in which any serious challenge to “liberal-democratic, free-market capitalism” is unimaginable, sober-minded observers of the contemporary scene are now obliged to consider a very different prospect: Will the victory of world capitalism over what passed for communism in the Soviet bloc end up being a prelude to the wholesale destruction of human civilization? … The very fact that such a question can be seriously posed today invites another, related but far more hopeful one: Will the intensifying contradictions and multiple crises of the “new world order” fashioned by capitalism in the post-Soviet era incite the emergence of an insurgent socialist workers’ movement committed not merely to the “reform” of capitalism but to its successful overthrow? For profoundly moral as well as scientific reasons, this

223

224  Twilight Capitalism latter question … can only be answered in the affirmative. To be sure, such a “Marxist Phoenix” — a mass workers’ movement, constituted from the ashes of its past and infused with the theory and program of Marxism — has been seen only fleetingly since the 1920s. And yet the current, perilous condition of humanity urgently demands its re-emergence. Indeed, its eventual triumph may well represent the last, best hope for the collective future of our species. (Smith 2014: 3, emphasis in original) The experiences of the last several years and, above all, the social crisis of 2020 have powerfully confirmed this assessment. To be sure, nothing resembling a Marxist phoenix has yet to appear. Nevertheless, the urgent need for one is increasingly evident as economic, ecological and militarist threats to human survival continue to multiply. At the same time, however, the multiple challenges facing humanity have provided fertile ground for the germination of new threats — specifically political ones — now emanating from particularly reactionary circles within the ruling classes of many nations. In 2012, we concluded a study of the causes of the global crisis with this warning about the “new period” ahead: Barring the eruption of serious working-class resistance and the emergence of a consciously anti-capitalist labour movement, a major restructuring of capital values and class relations seems imminent — one that is likely to augur well for profitability (and perhaps capital accumulation) but that will produce devastating results for the working class of the developed capitalist world. This new period — one which might be dubbed “neoliberalism with a vengeance” — is clearly fraught with great perils, including the likelihood of intensified rivalry among the major economic powers, the rise of right-wing populism, and an accelerated assault on the rights and living standards that working people took for granted in the liberal-democratic West for decades after World War Two (and even well into the neoliberal era). The conclusion is unavoidable. Now, more than ever, socialists must declare boldly and without equivocation that the time has arrived to replace a socio-economic order geared toward generating profits for the few with a socialist system of production to meet the needs of the many. (Smith and Butovsky 2012: 14; reproduced in Smith 2014: 17)

Twilight Capitalism or Socialist Revolution?   225 Globally, we are now witnessing a revival of working-class struggle and a general movement to the left on the part of masses of people, with more and more workers and youth displaying a genuine desire for radical change and a growing attraction to socialist ideas (however amorphously defined). The taboo surrounding the very words “socialism,” “Marxism” and “communism,” a taboo successfully promulgated by the elites, ideologues and publicists of world capitalism for many years after the collapse of Soviet-bloc communism, has largely disappeared, at least among many in the “bottom 90 percent.” Critiques of neoliberalism and capitalism as well as interest in socialist alternatives proliferated during the Long Depression and found mass expression in the Occupy Wall Street movement of 2011–12, the rise to government of Greece’s Coalition of the Radical Left (Syriza), the emergence and growing influence of the left-populist Podemos party in Spain, the left insurgency in the United Kingdom associated with Jeremy Corbyn’s tenure as leader of the Labour Party, the hugely popular campaign for the U.S. presidency of self-identified democratic socialist Bernie Sanders in 2016 and the rapid growth of the Democratic Socialists of America (dsa) in the wake of Sanders’ campaign. For many on the socialist and populist left, these political developments within the advanced capitalist world were hopeful portents of a deepening global radicalization, one that had already found expression in the “pink tide” that swept Latin America earlier in the century (particularly the formation of left governments by Lula da Silva’s Workers’ Party in Brazil, Hugo Chávez’s United Socialist Party in Venezuela and Evo Morales’ Movement for Socialism in Bolivia).1 In the lead-up to the social crisis of 2020, the mass popularity of these putative experiments in “twenty-first-century socialism”2 reflected a new openness and thirst for anti-capitalist and socialist ideas in many countries — anticipations, perhaps, but hardly authentic manifestations of a Marxist phoenix. Most, of course, ended in retreat or outright defeat. But precisely because none of these leftist political eruptions embodied or evolved toward Marxist revolutionary socialism, each one lost momentum, betrayed even its own modestly reformist goals and finally accommodated itself to a bourgeois realpolitik that was continuing its inexorable movement to the right. The disappointments flowing from these experiences of defeat and capitulation are real, but they have by no means halted the leftward motion of the masses — nor have they resolved any of the major social,

226  Twilight Capitalism ecological and economic ills of twenty-first-century capitalism. Powerful capitalist cabals in every country know this, and for that reason, many are now encouraging the growth of extreme right and even fascistic forces. At times, this is done with a view to placing them in power directly (as in India, Italy, Poland, Ukraine, Hungary, Brazil and Bolivia) and at other times with the aim of simply shifting the entire political spectrum further to the right (as in the United Kingdom, Germany and France). In the United States, long dominated by an essentially far-right (by international standards) political duopoly, the second strategy played out in the 2016 presidential election and its aftermath in an altogether surprising way. Democrat Hillary Clinton, a rightist neoliberal candidate, backed by prominent neoconservative war hawks and national security figures, faced off against Mussolini impersonator Donald Trump, whose seemingly improbable bid to win the Republican nomination was assisted greatly by enormous corporate mass media coverage proffered free of charge. Although Trump certainly enjoyed enthusiastic support from some fringe elements of the bourgeoisie (personified by casino mogul Sheldon Adelson), the dominant U.S. capitalist elites in control of most of the media saw him simply as a welcome counterweight to Bernie Sanders during the presidential primaries and later as someone who would be easily defeated by Clinton. But the ill-defined “centre” of this uniquely far-right bourgeois political configuration failed to hold. Trump’s surprise election to the presidency and Clinton’s rabidly Russophobic reaction to her defeat (the “Russiagate” circus) paved the way for an accelerated move to the right by the establishments of both major parties. Russiagate in particular had the effect of convincing a lot of self-styled liberals and progressives that new regimes of censorship were necessary and that evidence-free (“guilty until proven innocent”) accusations of bad behaviour were justified to catalyze the pro-Democrat “resistance” to the Trump administration … as well as to thwart the alleged efforts of the serpent Putin to slither his way into the Garden of Eden of American Democracy. A noteworthy casualty of this censorious (“cancel culture”) faux liberalism was courageous Wikileaks journalist Julian Assange, the target of relentless persecution by U.S. and British authorities for exposing U.S. war crimes in Iraq and Afghanistan and releasing a trove of emails exposing the corruption of Hillary Clinton and the Democratic Party establishment. Shamefully, very few on the ostensibly progressive or socialist left have

Twilight Capitalism or Socialist Revolution?   227 spoken out against Assange’s persecution and related efforts by the social media giants to curtail the free speech of political forces anywhere to the left of the Democrats. As the Republicans, under Trump’s presidential leadership, adopted an ever more openly xenophobic “white nationalist” identity (reminiscent of the Dixiecrats and Ku Klux Klan of years past), the Democrats presented themselves as the “woke” political arm of the national security apparatus, cautiously committed to racial and gender “social justice” at home (more to the point, a particularly odious version of “identity politics”) and fervently dedicated to a reassertion of U.S. imperialist hegemony on the global stage. Politically, the period from 2016 to 2020 was characterized by a bitter contest between two establishment political factions seeking to whip up anti-democratic, national-chauvinist and militaristic sentiments in the wider population in sometimes complementary (rabid hostility toward China) and sometimes divergent ways. For their part, Trump and the Republicans generally promoted an anti-globalist, economic-nationalist message (as well as social-conservative “wedge” issues of particular interest to the evangelical Christian Right), while the Democrats promoted a neo-McCarthyite narrative centred on the supposed dangers posed to “American democracy” by malign foreign actors. The fact that the social crisis of 2020 erupted in a presidential election year inevitably meant that both (right) wings of what American writer Gore Vidal once called the “Property Party” would try to contain growing social discontent by channelling its diverse expressions into safe electoral channels. But as the massive protests that began in May and June began to ebb during the summer months, Trump ominously deployed federal agents to cities still experiencing leftist protests, incited the most fascistic elements of his “base” to mobilize against an imaginary “Antifa” threat and denounced the Democratic Party (the oldest capitalist party in the world) as the home of “radical left” and “Marxist” opponents of law and order. All this signalled a new and dangerous stage in the polarization of U.S. politics. Regardless of the outcome of the November 2020 election, it seemed all but certain that an incipient fascist movement was emerging under the auspices of the U.S. president, alongside the spectre of an emboldened police state. From a Marxist-socialist perspective, the political crisis in the United States — a crisis that is in many ways pivotal to the international situation as a whole — is the result of the ever worsening contradictions of U.S.

228  Twilight Capitalism capitalism and the inevitable erosion of U.S. imperialist global hegemony. Trumpism is a symptom of this, not its cause. At the same time, the presence of “democratic socialists” (whose real goal is an American version of European-style social democracy) is symptomatic of the crisis of Democratic Party “liberalism.” The tolerance of the party establishment for the dsa’s presence in the “big tent” of the Democratic Party, likely to be short-lived, in no way signifies any serious movement to the left. Rather it is calculated to head off the growth of genuinely socialist, anticapitalist and anti-imperialist movements among working people and youth that could threaten the two-party dictatorship’s perennial shell game. No confidence can be placed in this party of Wall Street, Silicon Valley and the military-industrial-security complex to stem the growth of American fascism, much less to pursue a “progressive” agenda either at home or abroad. The only progressive way forward is through the building of a mass workers’ party committed to the political independence of the working class, the defence of democratic rights and the fight for a socialist society through resolute class struggle — in brief, a revolutionary Marxist phoenix. Failing that, the triple crisis of twilight capitalism will only intensify, imperiling the very existence of humanity through nuclear world war and ecological calamity. In this regard, a statement issued by the widely respected Bulletin of the Atomic Scientists in the spring of 2020 is worth noting. According to the announcement, the famous bas “doomsday clock” stood at just “100 seconds”– closer than ever before — “to midnight”: Humanity continues to face two simultaneous existential dangers — nuclear war and climate change — that are compounded by a threat multiplier, cyber-enabled information warfare, that undercuts society’s ability to respond. The international security situation is dire, not just because these threats exist, but because world leaders have allowed the international political infrastructure for managing them to erode. (Bulletin of the Atomic Scientists 2020) In reality, the authors of this statement were far too kind to “world leaders.” The capitalist powers that be, whether they sit in corporate or political offices, are wholly responsible for these major existential threats to humanity. The task is not to restore a capitalist political infrastructure

Twilight Capitalism or Socialist Revolution?   229 that had been allowed to erode — the task is to overthrow it. For the doomsday clock to be stopped from striking midnight, political power and the economic power from which it springs must pass to the working class and the new institutions of a global socialist democracy. In the remainder of this chapter, we address what we consider to be the critical programmatic and strategic questions facing those who earnestly seek to transcend capitalism and move toward the building of a genuine world socialism.

MARXIST SOCIALISM AND THE CRISIS OF THE RADICAL LEFT Following the Soviet Bloc collapse and the emergence of a seemingly revitalized, rapidly “globalizing” capitalism in the 1990s, opponents of Marxism argued, with predictable alacrity, that the only sensible thing for its one-time supporters to do would be to admit that the socialist project had ended as an unrealizable utopia and consign the theories supporting it to the trash heap of history. Marxism, we were repeatedly told, was effectively dead — except in the minds of a few hopeless dogmatists. To varying degrees, Francis Fukuyama’s thesis, according to which liberaldemocratic capitalism had triumphed as the non-transcendable final chapter of human history, was accepted widely. In the advanced capitalist countries of the West, this view was embraced not only by aggressively pro-capitalist ideologues but also by many left-progressive activists and even by a good number of disillusioned erstwhile Marxists. Partly in reaction to the bleak and often disastrous results of capitalist restoration in Eastern Europe and the former Soviet Union and partly due to the emergence of a militant anti-corporate-globalization movement, the political and intellectual climate had undergone a sea change by century’s end. Far from improving human well-being and security, capitalism’s triumph had actually resulted in the premature (“excess”) deaths of many millions in the former Soviet Bloc and reinforced a virulent neoliberalism that was devastating much of the semi-colonial world while also corroding the Western “welfare state.” The opening years of the new century witnessed the descent of global geopolitics into a squalid clash of fundamentalisms and the recrudescence of an adventurist and bellicose form of neocolonialism (the U.S.-led occupations of Afghanistan and Iraq), as well as stagnation and austerity across broad swaths of the world economy. By the end of the first decade of the new millennium, the impact of the financial crisis/Great Recession of 2007–09 combined

230  Twilight Capitalism with growing alarm over the impending climate emergency to signal the very real likelihood that capitalism was entering into an era of protracted and possibly terminal crisis. While these developments encouraged a revival of interest in Marxism, both as a tool of analysis and as a guide to changing the world, Marxist socialism nevertheless continued to face a severe crisis of credibility. The popular identification of Marxism with the failed Soviet system remained a formidable problem, and, owing in good part to the persistence of this identification, new, non-Marxist forms of radical thought won the allegiance of many young activists who defined themselves as anti-capitalist.3 Most of these radical activists identified with an amorphous “global social justice movement” that addressed a range of issues — from ecological sustainability, fair trade and global poverty to racism, gender inequality and economic democracy — with a minority self-identifying as independent socialists and a still smaller minority as revolutionary Marxists. Amongst the most militant of these activists, a new generation of anarchists also emerged whose prejudices against Marxism were particularly strong.4 In light of all this, the question is posed: Why did the Marxists persist? What sustained us in our commitment to a body of ideas and a vision of social change whose global appeal had undergone such a drastic decline over the course of a single generation? The answer, we think, should be apparent to anyone with some knowledge of the complex history of Marxist socialism. For a great many reasons, Marxism has never been a seamless or monolithic body of ideas, and so activists and intellectuals have always had a variety of different and competing ostensible Marxisms with which to identify. The simple and perhaps paradoxical fact is that many of us saw in the events of the late 1980s and early 1990s (that is to say, in the disappearance of what had passed for “actually existing socialism” or “Communism”) a vindication of the fundamental ideas of “our Marxism.” None of these events had forced upon us the conclusion that our ideas had been proven wrong, even if other ostensible Marxisms had not withstood the test of time and experience nearly as well. Accordingly, many of us felt a profound intellectual and moral responsibility to resist the zeitgeist of capitalist triumphalism and to stand firm in defence of certain fundamental Marxist truths. What are those truths? They can be summed up in two major propositions. The first is that capitalism is a historically specific mode of production and societal form that had, by the early twentieth century,

Twilight Capitalism or Socialist Revolution?   231 exhausted its potential to promote continued human progress. By human progress, we refer not so much to improvements in technical gadgetry or collective scientific understanding (which is ongoing under capitalism in certain respects), but to real advances in realizing the productive and creative capacities of each and every human individual. The second proposition is that the attempt to construct a systemic alternative to capitalism in the twentieth century — beginning with the Soviet Union — foundered decisively on the Stalinist project of building “socialism in one country” under the leadership of a nationalistic-bureaucratic oligarchy hostile to the Marxist principles of socialist democracy and the self-emancipation of the working class. In what follows, we summarize the evidence supporting each of these propositions and consider what each suggests about the responsibilities and challenges confronting the socialist left — and would-be progressives in general — in the twenty-first century.

The Decadence and Decay of Capitalism

The first proposition, regarding the historical limits of capitalism, should be understood as a much stronger statement than another that has been frequently defended by leftist intellectuals in recent years. It has been common enough for Marxist, “neo-Marxist” and even many non-Marxist intellectuals to argue that fundamental aspects of Marx’s analysis of the capitalist mode of production remain fully relevant to our present situation; that the phenomena of alienation, commodity fetishism, exploitation, capital accumulation, overproduction, internationalization of capital and so on are all still very much with us and that so long as these facts of capitalist life persist, there will continue to be a place for a Marxist analysis of them. This line of argumentation, coupled with well-founded outrage over the moral depravity of contemporary capitalism, is certainly both correct and compelling. By itself, however, it is insufficient to support the idea — which is crucial to a transformative socialist project — that capitalism long ago entered into world-historical decline and that it has now reached its twilight. What gives Marx’s theory its great force and originality is the fact that it furnishes a powerful scientific basis for the proposition that the capitalist system not only ought to be superseded by socialism but that it must be if human civilization is to avoid a catastrophe and chart a progressive and sustainable path forward. Marx’s critical analysis of capitalism discloses

232  Twilight Capitalism the dynamic — the laws of motion — through which capitalist development undermines itself and fosters increasingly serious crisis tendencies even as it also creates the material conditions for the transition to a new, socialized mode of production and a classless society. Having established a world market and an intricate international division of labour, capitalism reaches a point of maturity where the forces of production must be liberated from the perverse logic imposed by capitalist social relations — or these relations will eventually destroy the productive forces and much else besides. In such an era, we confront — in the words of the great classical Marxist Rosa Luxemburg — the alternatives of “socialism or barbarism.” Historical experience fully confirms this prognosis. Two world wars in the last century testify to how capitalist accumulation and competition can lead to the massive physical destruction of both capital and human lives. The deaths of over a hundred million people from starvation in most decades since the last world war; the horrors of innumerable regional conflicts and massive, wasteful expenditures on armed forces by large and small nations alike; the bondage of tens of millions of chattel slaves in India, Africa and the western hemisphere — all this and much more attest to how a world dominated by capital has been unable to secure peace, security or a decent standard of living for the great majority of humanity. Beyond this overwhelming evidence of actually existing capitalist barbarism, the dire threats posed by the rampant degradation of the biosphere and the spectre of thermonuclear warfare suggest that we are now very probably confronting the alternatives of socialism or human annihilation. To be sure, much controversy surrounds Marx’s analysis of capitalism’s laws of motion. Yet a hundred and fifty years on, it retains a remarkable power. Once widely presumed to be dead and buried, Marx’s theories of labour value, capitalist crisis and a falling average rate of profit have returned with a vengeance in recent decades — revived not only by Marxist scholarship but also and above all by the real trends and vicissitudes of capital accumulation itself. What other economic theory can match Marx’s in explaining why, despite ongoing productivity gains and enormously improved productive technology, the living standards of much of the world’s population, including the working-class majorities of many advanced capitalist nations, have declined in recent decades? What explanation for this phenomenon is more compelling than Marx’s own — one that highlights the continuing (unconscious, market-mediated) measurement of wealth in terms of

Twilight Capitalism or Socialist Revolution?   233 “abstract social labour” in an era in which living labour is a less and less significant material input to production? Furthermore, what rival economic theory has been more prophetic than Marx’s in insisting upon the globalizing and concentrating imperatives of the capitalist accumulation process? At the turn of the twentieth century, most social scientists and not a few “revisionist Marxists,” like Eduard Bernstein, disputed Marx’s law of the concentration and centralization of capital. Yet who today would contest the accuracy of Marx’s forecast that capitalism promotes a process of “objective socialization” in which more and more of the economic activity of humanity is brought under the control of a smaller and smaller number of giant capitalist concerns? With transnational corporations comprising seventy of the world’s hundred largest “economies” and a dozen or so billionaires possessing more wealth than the poorest half of humanity, Marxists are surely on firm ground in pointing to the extraordinary predictive power of Marx’s analysis and, more importantly, insisting with him that so great a concentration of economic power in private, self-interested hands constitutes a formidable obstacle to the well-being and progress of the great majority of humankind.5 On a whole series of issues pertaining to the basic dynamics and logic of capitalist development, the past few decades have given Marxists an abundance of reasons to affirm that many of Marx’s most important predictions have proved remarkably accurate. Numerous studies have now established that Marx was right to think that the average rate of profit would fall over the long term and that this would be associated with the displacement of living labour from production through technological innovation (that is, a rising organic composition of capital). As Marx anticipated, profitability crises have indeed been answered by capital with concerted attempts to lower real wage levels, intensify the labour process, undermine workers’ rights and cut or eliminate popular social programs that have negative implications for private profitability. At the same time, the world economy has created a huge “surplus population” of unemployed and underemployed people, a mass of human beings whose capacity for productive activity is being squandered by global capitalism and which has grown rapidly due to the massive global slump of 2020. The near-universal monopoly exercised by the capitalist class over the world’s most powerful means of production can only mean that the advanced technologies that capitalism has brought into being will not be used to raise the productivity of the economically marginalized with

234  Twilight Capitalism a view to meeting human needs — but used instead as pawns in an ongoing competitive and class-antagonistic game whose overriding object remains the amassing of private wealth. None of this is registered by Marxism’s obituary writers. Instead, what is usually stressed (all too often in smug, self-satisfied fashion) is the purported failure of Marx’s predictions that the working class would 1) eventually become a revolutionary class “for itself ” and 2) proceed to build an egalitarian socialist society in which political power is democratically exercised by the “associated producers.” The failure of the first prediction is said to demonstrate that Marx assigned too great a significance to class struggle in human affairs and harboured illusions about the revolutionary capacity of the working class; the failure of the second is said to show that democracy and “economic collectivism” are incompatible and that any attempt to move beyond capitalism can only lead to the rise of a totalitarian social order dominated by a new class of state bureaucrats. Such is the “politically correct” (if shamelessly tendentious) balance sheet on Marxism that is assiduously promoted by an army of mainstream academics and pundits — and accepted to varying degrees by many contemporary radical intellectuals and activists. A compelling Marxist response to this familiar critical assessment of Marxist theory and practice exists, but it is rarely addressed by Marx’s critics or even by many of his would-be defenders. It involves insisting on an accurate historical accounting of the record of working-class struggle against capitalism. While it is true that history has seen only one successful working-class, socialist revolution — the Bolshevik-led revolution of 1917 in Russia — it is utterly wrong to suggest that the working class has not shown a revolutionary capacity in a great many other times and places since Marx’s time. That this history is not only ignored but deliberately buried by the enemies of Marxist socialism should surprise no one. That it remains unknown or at least understudied by many of today’s leftist intellectuals and activists is a truly striking confirmation of Marx’s thesis that the educators must themselves be educated.6 Marx’s confidence in the ability of the revolutionary working class to build an egalitarian socialist order on the road to a classless society also appears to have been misplaced in view of the record of “socialist construction” in the past century. But once again, a careful historical appreciation of these experiences suggests that the assumptions upon which that expectation was based have been scarcely refuted. If anything,

Twilight Capitalism or Socialist Revolution?   235 the historical record confirms, albeit in the negative, Marx’s warning that a fully socialist/communist transcendence of capitalism requires highly developed forces of production brought into being by capitalism itself — among them, a global division of labour, a technologically sophisticated productive apparatus and a well-educated working class capable of assuming the tasks of democratic self-administration. It is only too obvious that the conditions under which countries like the Soviet Union and China attempted socialist construction during the twentieth century were marked instead by a comparatively low level of development of the productive forces so defined.

The End of Soviet-Bloc Stalinism

This brings us to the second truth referred to earlier: that Stalinism — the social phenomenon of bureaucratic rule on the basis of collectivized property that characterized all of the nominally socialist countries — was a nationalist and anti-proletarian-socialist departure from Marxism in the realms of both theory and practice. From this standpoint, the demise of Stalinism in the Soviet Bloc countries in no way signifies the death of authentic Marxism (Smith 1996–97; 2014).7 Three further observations need to be made in this connection. First, the end of the Stalinist projects in the former Soviet Bloc confirms Marx’s proposition that the practical premise for the development of fully socialist institutions, relations and practices is the abolition of capitalism on a world scale and the incorporation of the productive forces created under capitalism into a worldwide socialist division of labour (a socialist globalization). Without this, Marx and Engels observed, want is merely made general, and with destitution the struggle for necessities and all the old filthy business would necessarily be reproduced…. Empirically, communism is only possible as the act of the dominant peoples “all at once” and simultaneously, which presupposes the universal development of productive forces and the world intercourse bound up with communism. ([1845] 1969: 37, emphasis in original) Proceeding from these observations, Trotsky (1970b [1937]) elaborated a powerful Marxist analysis of the Stalinist “bureaucratic degeneration” of the Soviet workers’ state as early as the 1930s — one that has withstood the test of time remarkably well. Indeed, his analysis was unique

236  Twilight Capitalism in predicting the ultimate fragmentation of the Soviet bureaucratic oligarchy, which occurred in the late 1980s and early 1990s, as well as the growing attraction of a program of capitalist restoration to significant segments of the Soviet nomenklatura. According to Trotsky, only the international extension of the revolution to the citadels of world capitalism, through a process of permanent revolution, could open a road to a healthier socialist transition in the Soviet Union and to the triumph of world socialism. In his memoirs, Leopold Trepper, the head of the Soviet “Red Orchestra” spy network in Nazi-occupied Western Europe, paid tribute to the Trotskyist opposition to Stalin’s regime — a regime that Trepper had faithfully served throughout World War II despite his growing misgivings that it had betrayed the principles of the October socialist revolution: The Trotskyites can lay claim to this honor. Following the example of their leader, who was rewarded for his obstinacy with the end of an ice-axe, they fought Stalinism to the death, and they were the only ones who did. By the time of the great purges, they could only shout their rebellion in the freezing wastelands where they had been dragged in order to be exterminated. In the camps, their conduct was admirable. But their voices were lost in the tundra. Today, the Trotskyites have a right to accuse those who once howled along with the wolves. Let them not forget, however, that they had the enormous advantage over us of having a coherent political system capable of replacing Stalinism. They had something to cling to in the midst of their profound distress at seeing the revolution betrayed. (Trepper 1977, emphasis added) The Trotskyist political system referred to by Trepper encompasses many elements, but a key element — implacable opposition to Stalinism combined with unconditional defence of the Soviet Union against any and all attempts at capitalist restoration (either from within or without) — was always the touchstone of orthodox Trotskyism. In a pithy yet definitive programmatic statement of 1939, Trotsky wrote: [The] question of the overthrowing of the Soviet bureaucracy is for us subordinate to the question of preserving state property

Twilight Capitalism or Socialist Revolution?   237 in the means of production in the U.S.S.R.; [the] question of preserving state property in the means of production in the U.S.S.R. is subordinate for us to the question of the world proletarian revolution. ([1939–40] 1970c: 21) Trotsky’s insistence on defending the bureaucratized Soviet workers’ state from the forces of capitalist counter-revolution was rooted in the conviction that the socialist elements of its transitional economy — collectivized property, central planning and the state monopoly of foreign trade — represented precious gains for the workers of the Soviet Union. While progress toward full socialism required the triumph of the socialist revolution on a world scale, the preservation of such a transitional economy was no less important to the international working class than the preservation of their trade unions, which were (and are) similarly often dominated by conservative bureaucratic apparatuses. The same can be said today of the transitional-socialist elements of the remaining deformed workers’ states: China, Cuba, Vietnam and North Korea. No genuine socialist can shirk the principled responsibility to defend these countries against the unceasing machinations of world imperialism to return them to the capitalist fold. The idea that the transitional, incipiently socialist economies of the twentieth century constituted important historic gains for the working class finds powerful support in a study published in 1991, the year in which capitalist counter-revolution triumphed in the Soviet Union. Working with Human Development Index (hdi) data compiled by the United Nations Development Programme, Francois Moreau generated a set of comparisons between two broad groups of countries for the year 1987. The first group comprised capitalist economies at two levels of development: the capitalist core and the capitalist periphery. The second group comprised transitional economies, also at two levels of development: the advanced Eastern European economies (including the U.S.S.R.) and “Third World” transitional economies (including China, North Korea, Vietnam and Cuba). The results of this analysis are presented in Table 7-1.

238  Twilight Capitalism Table 7-1 Indicators of Development, 1987 Type of economy and level of development

Per capita product ($)

Life expectancy (years)

Literacy rate

Human development index (maximum = 1000)

Capitalist Core

14,164

76

97

970

Cap. Periphery

1,928

59

58

529

Cap. World

4,684

63

67

629

Trans. E. Europe

5,540

71

98

916

Trans. 3rd World

2,051

69

70

710

All Transitional

3,001

70

78

764

Note: Means for each group of countries, weighted by population. Source: Moreau 1991.

While core capitalist countries like the United States, Canada and Britain ranked highest on the hdi, peripheral capitalist countries like India, Nigeria and Brazil ranked lowest. At the same time, the average hdi of the transitional countries — as of 1987, when they were still considered socialist — ranked well above the average hdi for the capitalist world as a whole. In terms of its hdi index, Mexico emerged as an average capitalist country. Summing up, Moreau commented: “What the undp analysis shows, no doubt without consciously intending to do so, is that transitional societies have actually achieved a higher level of ‘human development’ for a given level of economic development than capitalist countries” (1991: 141). Shortly after the publication of this undp data, the transitional economies of the former Soviet Bloc were dismantled and reabsorbed into the capitalist world system. The relative political stability alongside the absolute wealth and power of the capitalist core proved to be an almost insurmountable obstacle not only to the spread of transitional-socialist economic forms but even to their preservation in most of the countries in which they had taken root. As Trotsky predicted, the subordination of the world revolution to the nationalist objective of building socialism in one country — the political policy pursued by all of the Stalinist regimes presiding over the various transitional economies — had contributed to a decisive strengthening of world capitalism (notwithstanding the growing economic turbulence it was experiencing) and had thereby prepared the way for a historic rollback of the “socialist beginnings.”

Twilight Capitalism or Socialist Revolution?   239 This leads us directly to a third observation. If, in the historic contest between Stalin’s program of “socialism in one country” and Trotsky’s “permanent revolution,” the latter should now seem fully vindicated, it is nevertheless clear that the revolutionary Marxism that Trotsky represented continues to be accorded surprisingly little consideration by non-Trotskyist leftists and Marxist intellectuals.8 The reasons for this are worth exploring, we think, for they reveal a great deal about the current disorientation of the radical left and highlight some important obstacles to the re-emergence of a serious global movement toward socialism.

The Revival of Gradualism

The immediate political beneficiary of the collapse of Stalinism within the broadly defined international labour movement was unquestionably the social democratic current. By the 1990s, however, it was already abundantly clear that the great majority of social-democratic parties had long since abandoned any project of fundamental social transformation. When and if it was still used at all, the phrase “democratic socialism” (as originally formulated, most often in opposition to “totalitarian communism”) had ceased to refer to a programmatic goal — a socialist society involving democratic planning — and had come to refer exclusively to a strategy of gradual, piecemeal reform of capitalism “through the ballot box.” The social-democratic project had become entirely one of administering capitalism “humanely” — and pre-eminently within the bounds of “one’s own” country. The fact that, by the 1990s, most governing social-democratic parties had also embraced the neoliberal agenda of austerity and deep cuts to the social welfare functions of the capitalist state only confirmed that social democracy’s first loyalty was not so much to “capitalism with a human face” as to “capitalism as such.” The collapse of Stalinism and the sharp rightward turn of social democracy created a renewed opportunity for many Marxist intellectuals and self-styled independent socialists to carve out a specific political niche for themselves, one simultaneously critical of contemporary social democracy and hostile to an undifferentiated Leninism. Whether acknowledged or not, the socialism they sought to promote was remarkably similar, in programmatic and strategic terms, to the Marxism of the Second International (1889–1914). This was a socialism committed to a gradualist strategy and to what are often called “inclusive” (that is to say, “non-vanguardist”) organizational forms. It was also a socialism whose

240  Twilight Capitalism implicit point of departure was the notion that, for the foreseeable future, the global spread of capitalism was likely to remain unstoppable. Such a prognosis carried with it profound programmatic and strategic implications, the main one being that a socialist transformation could not be on the immediate agenda and that there was still considerable scope for significant “progressive reform” within the framework of capitalism. Rejecting Trotsky’s ([1938] 1998) call for a transitional program of working-class struggle — a necessarily revolutionary struggle for a system of demands that prefigure the social, political and economic content of a future workers’ state — these “independent” socialist intellectuals openly or tacitly embraced the “minimum-maximum” programmatic approach of pre–World War I social democracy, as classically codified in the Erfurt Programme of 1891.9 “Socialism” was to be talked about as a distant goal, as the “maximum program” they hoped somehow, someday to achieve. But the real program of struggle in the here and now had to be a “minimum program” of reforms to be won within capitalism, a program of ameliorating the conditions of the working masses, extending and expanding “democracy” and incrementally weakening the prerogatives of capital.10 Accordingly, most of these Marxist intellectuals associated themselves with liberal-reformist initiatives like “alternative budgets,” tax increases on corporations and the wealthy, and anti-corporate-globalization measures (such as the “Tobin tax”) designed to discourage and regulate capital flows across national borders, while never posing the question of the expropriation of capital. In response to the 2008 financial crisis, many called for the nationalization of the banks, echoing conservatives like Willem Buiter, who argued that such a measure was desperately needed in order to stabilize capitalism. The favoured vehicles for such initiatives were often not even political parties in the classical social-democratic mould (a broad “party of the whole class”) but rather “grassroots social movements,” “structured movements against capitalism,” world or regional social forums and “inclusive” cross-class coalitions (such as the misbegotten “Respect” project in Britain and the disastrous Syriza-led coalition government in Greece). Much of this was strongly reminiscent of the Stalinist “popular front” strategies that derailed working-class revolts in Spain, France and Italy in the 1930s and immediately following World War II. Oddly, this neo-reformist perspective was championed by many social justice activists, independent socialists and Marxist intellectuals without any attempt to link it to a theoretical analysis of contemporary capitalism

Twilight Capitalism or Socialist Revolution?   241 that clearly supported it. Yet the absence of such analysis was hardly surprising, for trends in the world economy over several decades had provided little reason to think that capitalism had resumed a historically progressive trajectory. What was called “corporate globalization” was the form that the internationalization of capital had taken in a new world situation defined in large part by the disappearance of most of the degenerated and deformed workers’ states. What was called “neoliberalism” was the class-struggle program that capital had implemented to jack up the rate of exploitation and arrest the decline in the rate of profit at the expense of the working class. And what was called “financialization” was really just a means to resuscitate world capitalism through the proliferation of fictitious capital and the accumulation of unsustainable debt. From the perspective of 2020, the most compelling proof that the postSoviet era, from 1991 up to the onset of the Long Depression, was not at all an era of renewed capitalist ascendancy is that neither the restoration of capitalism in the former Soviet Bloc nor the partial reopening of the People’s Republic of China to capitalist exploitation helped to generate dramatically higher rates of growth in global output or improved prospects for progressive social reform anywhere in the world. With the exception of a few countries (China in particular), stagnation and austerity remained pervasive on a global scale, and today the post-Soviet neoliberal era has culminated in the triple crises of twilight capitalism. All of this suggests, forcefully and unmistakably, that a worldwide socialist transformation cannot be delayed for long without putting at risk the very survival of the human species. Facing up to this reality and developing a political practice adequate to the challenges it poses is unquestionably the central responsibility confronting the radical left. What, then, accounts for the implicit denial of this reality by leftists who continue to embrace what American Trotskyist leader James P. Cannon once called “inch-at-a-time reformism”? In part, it can be explained by the continuing pre-eminence of academics within the contemporary radical left. Owing to their relatively privileged social location and the liberal, class-collaborationist pressures of their milieu, even avowedly Marxist academics have never been particularly good at envisioning or promoting a class-struggle politics. Occupying a contradictory class location, leftist academics are most often influenced, if not entirely seduced, by many of the characteristic prejudices of the traditional petty bourgeoisie and the professional-managerial class (pmc):

242  Twilight Capitalism illusions about the bourgeois-democratic electoral process, a distaste for the sharper forms that the struggle between labour and capital can assume and a belief in the possibility of reconciling antagonistic classes through reason, compromise and gradual social reform. What’s more, they have a proclivity to jealously guard their “independence” and display an unwillingness to subordinate their individual interests, whether material or intellectual, to the needs of a determined movement to achieve world socialism. It is by no means unfair to point out that they, along with most others in the pmc, continue to be cultivated by capital as a buffer between the “top 1 percent” and the (predominantly working-class) “bottom 90 percent” of income earners. However, unlike trade union bureaucrats, professional mainstream politicians, senior administrators within capitalist state or parastate apparatuses, not to mention the handsomely paid journalist-propagandists of the corporate mass media and so many other pmc functionaries entrusted with representing capitalist interests and ideology as eternal human truths, radical left academics are given some limited latitude to “talk the talk” of critique and even opposition to capitalism … just as long as they generally “walk the walk” of diverting leftward-moving workers and youth into relatively safe channels of mainly “cultural” resistance. Metaphorically speaking, reformist suggestions to “rearrange the deck chairs on the Titanic” or “put some lipstick on the pig” are okay, but incitement to revolutionary working-class struggle, well, not so much! In our view, these considerations go far to explain the widespread disdain within the academic “independent socialist” milieu for “vanguardism” (that is, serious attempts to unite revolutionary socialist activists into disciplined, programmatically based organizations) and so-called “insurrectionary socialism,” as well as a corresponding attachment to gradualism and left reformism.11 Social reality may thunder that the struggle to rid the world of capitalism is an urgent necessity, but the “social being” of the academic leftist urges a political practice that falls well short of any full-blown attack on the capitalist system. Similar considerations apply in explaining the persistent unwillingness of so many leftist intellectuals to question the Leninism-Stalinism amalgam that is routinely used to dismiss Trotsky’s Marxism — arguably the only programmatically coherent alternative to the failed nationalreformist projects of “parliamentary socialism” (social democracy) and “building socialism in one country” (Stalinism). The conventional

Twilight Capitalism or Socialist Revolution?   243 wisdom among a great many of these intellectuals is that the traditional social-democratic critique of Leninist communism has been substantially vindicated. Accepting the premise that Stalinism was the logical and necessary outgrowth of Leninism (an idea tirelessly disputed and effectively demolished by Trotsky), they exhibit an unseemly haste — even eagerness — to conclude that the Stalinist debacle confirms the folly of Lenin’s attempt to forge a revolutionary Marxist alternative to the social-democratic Second International. At the level of theory, this conclusion sanctions the notion that the gradualist democratic socialism once advocated by the mass social-democratic and labour parties is the only feasible Marxist alternative to the imaginary amalgam known as Leninism-Stalinism-communism, and that fidelity to Leninist principles by Trotskyists only shows that they too are upholding “totalitarianism.” A tendentious reading of the history of Leninism is thus adduced to support the rehabilitation of classical social-democratic politics and “strategy” (or, less frequently, a neo-anarchist perspective of “changing the world without seizing state power”). It is adduced, in other words, to support a politics that has no real prospect of success. The essential problem with this approach is that it fails to confront the altogether obvious fact that the struggle to abolish capitalism (however that abolition might be conceived) is no easy task — that any serious struggle will encounter the determined resistance of the capitalist class and its agencies at every level. One does not need to accept each and every action taken by Lenin’s Bolsheviks following Russia’s socialist revolution in order to see that the fundamental tenets of Lenin’s strategy — the need for a disciplined and programmatically cohesive “democratic-centralist” party, a resolute commitment to the political independence of the working class on the basis of an internationalist socialist program and a perspective of “smashing” the existing capitalist state machine and replacing it with organs of working-class power (a system of “council democracy”) — are entirely indispensable to any determined effort to uproot the capitalist order and achieve socialism. No doubt this claim will be ridiculed by many as an example of “dinosaur Marxism” or denounced as “ultra-left sectarianism.” But the stubborn fact remains that the avowedly anti-Leninist radical left has yet to articulate any serious, much less convincing, alternative to the body of program and strategy developed by Lenin’s Bolsheviks in the early years of the Third (Communist) International and subsequently augmented by

244  Twilight Capitalism Trotsky and his followers after the Stalinist degeneration of the international communist movement. Unfortunately, instead of paying heed to the “lessons of October” or the hard-won lessons of other important working-class revolts, contemporary radicals are much more likely to agree with Susan George’s dismissive suggestion that a “twenty-first-century ‘revolution’ might, perhaps, occur in several ways, but the storming of the Winter Palace isn’t one of them” (2004: 93). Of course, George doesn’t comment on what those several ways might be. Nor does she acknowledge that the conquest of the seat of state power by insurrectionary forces (whether that seat is the Winter Palace, Westminster or the Washington Capitol) is a necessary, if not entirely sufficient, condition for the victory of any revolution worthy of the name. But then, the real purpose of George’s argument against an “all-consuming one-off revolutionary transformation” (whatever that might mean) is not to urge the formulation of a better, more “up-to-date” revolutionary strategy, but rather to reject the very idea of preparing for a decisive confrontation between an insurgent mass anti-capitalist movement and the repressive agencies of the capitalist order. She writes: I can barely visualize what such a gigantic one-off event might look or feel like, but history suggests it could only come about after a series of wrenching crises in which millions would suffer and thousands die…. Frankly, I hope such traumatic events can be avoided. (2004: 93) In this single passage, George succeeds in distilling much of the confused thinking that prevails not only in the “global justice movement” but also among many “independent socialist” Marxists. To be a revolutionary socialist — a Leninist or a Trotskyist — is not to hope for “traumatic events”; it is to expect and prepare for them. Indeed, it is to recognize that humanity lives with them now and must continue to live with them as long as the rule of capital continues. Furthermore, to be a revolutionary socialist is to recognize that, periodically, mass struggles of workers and other popular forces must face the question of state power. Decisive (and often bloody) showdowns will occur irrespective of whether a revolutionary vanguard party is present and poised to lead an insurgent mass movement to victory. Replying to a critique of “insurrectionary socialism” by independent socialist Ralph Miliband some years ago, Murray Smith wrote:

Twilight Capitalism or Socialist Revolution?   245 Ultimately, the question [of the relevance of the lessons of the October Revolution] concerns whether — in the context of episodes like the Russian Revolution of 1917, the Spanish Revolution of 1936, or the Portuguese Revolution of 1975 — one will take one’s stand with those seeking to limit the mass movement to constitutionalist avenues or with those seeking to lead the working class forward to the conquest of state power. To be a Trotskyist means to affirm well in advance of such revolutionary situations which side one will take in the midst of a decisive confrontation (a situation of “dual power”), and it is to proclaim the need to construct a party that will know how to resolve the confrontation decisively in favor of workers’ power. Such a Trotskyist party will certainly distinguish itself from other organizations on the Left in non-revolutionary conjunctures as well, but it will do so precisely as an organization of militants participating in broader movements of struggle against exploitation, oppression, and social injustice — articulating these struggles with a program of socialist transformation… and, through it all, cultivating a spirit of revolution that has at its core a fundamental disrespect for the constitutional limitations, legal framework, and repressive agencies of the capitalist state. (1996–97: 58–59) To make such an argument is not to indulge in sectarianism or to build castles in the sky. It is to emphasize what Susan George herself tells us “history suggests” — that wrenching crises can indeed give birth to revolutionary events … and to counter-revolutionary ones as well. What distinguishes George and other leftist “progressives” from revolutionary Marxists is not realism or their pious hopes that traumatic events can somehow be avoided. Rather, it is their determination to shrug off the elementary responsibility incumbent on all those who would lead the charge for “global social justice” — to learn the lessons of history and to build the political instruments needed to win real victories in the struggle to change the world. Exactly how can it be seen as “realistic” to reject the need for a programmatically coherent revolutionary socialist party with a clear strategic orientation and tested tactical capacities, while urging on a rising movement of workers, peasants and social justice activists to confront a well-organized and violent counter-revolution backed by capitalist states and fascist shock troops? Hasn’t this scenario played out far too many

246  Twilight Capitalism times over the past century (in Spain, Indonesia, Chile, Bolivia, etc.), and haven’t these defeats led precisely to the demoralization and defeatism that now makes it so very difficult for Susan George, and even many socialists to her left, to “visualize” another October revolution? No, such a perspective is not realism. It is not even simple naiveté. A better name for it would be political irresponsibility.

The Pivot of Consciousness

As the ideological pathologies associated with the collapse of Stalinism begin to abate and new possibilities open for political and theoretical clarification, one can only hope that an increasing number of social justice activists and self-styled independent socialists will put aside their residual prejudices and begin seriously engaging with the revolutionary Marxist tradition represented by Lenin and Trotsky. In our opinion, this is a sine qua non for the rebirth of a genuine socialist project. To be sure, sympathetic engagement with Trotskyism is hardly a talisman — or a guarantee of anything. Just as there are many ostensible Marxisms on offer, so too are there many ostensible Trotskyisms. Confusingly, some are programmatically indistinguishable from the left reformism they claim to combat, while others are characterized by extreme sectarianism. Regardless of what might be said about specific Trotskyist currents, however, we consider it imperative that the foundational theses and principles of the Trotskyist movement receive the sober consideration they deserve from all intellectuals and activists seeking a socialist world. Rather than expending precious time and energy debating postmodernist fashions, catering to a lifestyle/counterculture politics or formulating policy recommendations for capitalist governments, the radical socialist left (within the academy and without) must begin to explore issues that speak to the problems of a revolutionary political practice and a transformative socialist project. To this end, a number of crucial questions posed by the theory and the practical experiences of Trotskyism must be addressed. These questions include: 1) Are there reasonable grounds for claiming that the twentieth century witnessed several opportunities for working-class revolutions, opportunities thwarted by the weakness, ineptitude or betrayal of working-class leadership? If so, what are the principal lessons of those revolutionary (or near-revolutionary) situations? 2) Is the present crisis of humanity reducible to the crisis of work-

Twilight Capitalism or Socialist Revolution?   247 ing-class leadership, as Trotsky argued in 1938? Does the regression in class consciousness and socialist commitment throughout the world, especially since the early 1990s, require modifications to this thesis? And does the demise of Stalinism in the international labour movement and the current “combined” global crises open up new possibilities for the construction of revolutionary oppositions to bureaucratic misleaders? 3) What are the conditions for the construction of a revolutionary Marxist organization that can avoid the opportunism, sectarianism, bureaucratism and cultism that have afflicted so many avowedly Leninist and Trotskyist organizations? 4) What does it mean to have a strategy centred on the working class today, and how should this be understood in a global context? What sort of orientation is needed to existing mass organizations of the working class, particularly trade unions? 5) What is the significance of the so-called “new social movements” for a working-class-centred socialist strategy? How can socialists relate constructively to and win the allegiance of those participating in struggles on behalf of racialized communities, women, immigrants and other victims of “special” oppression without succumbing to the reformism and narrow sectoralism of identity politics? How can Marxist-socialist ideas be most effectively popularized in a world dominated by capitalist mass media? What kinds of socialist education, agitation and propaganda should be prioritized, and what forms should these take? 6) What lessons can be drawn from the twentieth-century experience in “socialist construction” and how can these lessons be applied to “erecting in thought” an attractive alternative to the capitalist global order? 7) What is the contemporary meaning of Marxist internationalism? If nationalism has been the bane of the dominant politico-ideological expressions of the labour movement over the past century, how can it be combated? What should an internationalist program and perspective for contemporary socialists look like, and how might it be implemented? 8) What are the real meanings of “sectarianism” and “dogmatism” in the contemporary context? Is it not sectarian for erstwhile Trotskyists to cling dogmatically and nostalgically to the icon

248  Twilight Capitalism “Trotsky” even after they have effectively abandoned the revolutionary core of Trotsky’s thought? And is it not sectarian for “independent socialists” to refuse to engage in debate and sometimes in joint actions with those more authentic Trotskyists who have not abandoned their revolutionary commitment? This latter question brings to mind an instructive example of the malaise and disorientation that currently exists on the socialist left. On May 1, 2008, the International Longshore and Warehouse Union (ilwu) shut down every port on the U.S. West Coast in an illegal eight-hour strike against the Iraq War — the only successful labour strike against U.S. military intervention ever organized in the United States and an inspiring example of the kind of action that must multiply if the capitalist order is ever to be brought to its knees. It should surprise no one that this event was met with silence by the capitalist mass media (except in cities that were directly affected). What perhaps is surprising (not to say disheartening) is that the great majority of the “socialist and anti-imperialist left” ignored — indeed, effectively boycotted — a public forum in Toronto a few months later where one of the key organizers of that strike, the long-time ilwu militant and socialist Jack Heyman, was the featured speaker. No doubt this boycott was largely attributable to the fact that the forum had been organized by a Trotskyist group that many consider sectarian! The meeting attracted about fifty people — but none, it seemed, from the International Socialists, the Communist Party of Canada, New Socialists, Socialist Project or most of the other organized socialist groups on the Toronto left. Conspicuous by their absence, too, were most of Toronto’s more prominent Marxist academics. This de facto boycott poses another important question: what can be said about “anti-sectarian” leftists who place their disdain toward a particular left group ahead of the opportunity to learn about and discuss such a historically significant labour-based political action? What does this sort of “anti-sectarian” sectarianism reveal about the real priorities and principles of much of the ostensibly socialist left? 9) What is the proper relationship between revolutionary strategy and tactics? Why is it that, in the name of the latter, so many

Twilight Capitalism or Socialist Revolution?   249 Trotskyist groups have allowed themselves to be propelled to the right and to effectively abandon a revolutionary strategic perspective? Consider just one example: can the insistence of many such groups to reflexively extend “critical” electoral support to one or another “labour-based” party be justified any longer? The “critical support” tactic was originally conceived by Lenin as a way to expose the ostensibly socialist but actually pro-capitalist leadership of a “bourgeois workers’ party” before its workingclass base — to “support” these reformists in the same way that “a rope supports a hanged man.” Arguably, however, a tactic that made sense in relation to the British Labour Party in the 1920s has been transformed by many of today’s ostensible Leninists and Trotskyists into a means of training would-be revolutionaries in opportunist manoeuvring and political support for the lesser evil. Isn’t the call for a vote to a political party that doesn’t even pretend to champion a socialist program — that fails to draw a class line in even a crude way — just a way of signalling one’s intention to abandon Marx’s class-struggle socialism and to enter the arena of capitalist politics? These are some of the more important questions that socialist activists and intellectuals need to explore in the coming period if the consciousness of progressive activists is to be directed away from reformist gradualism (or, alternatively, from romantic, anarchist-style resistance to capitalist injustice) and toward a serious fight to achieve world socialism. If only one-tenth of the human energy that is now expended on reforming capitalism, protesting its depredations and cobbling together electoral alliances within the arena of bourgeois politics could be channelled instead into an effective revolutionary/transformative political practice, one suspects that a new era of socialist globalization would be close at hand.

The Climate Crisis as an Incitement to Revolutionary Action

There is another, more contemporary question that, by itself, has the potential to drive a final nail into the coffin of reformist gradualism: the global climate crisis. In Chapter 3, we delivered a hard verdict on Michael Moore’s 2009 documentary Capitalism: A Love Story. Moore remains to this day a tame left-liberal and a fervent loyalist of the U.S. Democratic Party. Yet, to his credit, Moore was also involved over the succeeding decade in financing, producing and publicizing a hugely

250  Twilight Capitalism controversial and important film directed by long-time environmental activist Jeff Gibbs. Released on “Earth Day” 2020, Planet of the Humans warns of an impending climate catastrophe resulting from the continued use of fossil fuels. However, it also sounds an urgent alarm against regarding putatively enlightened and ecologically conscious elements of the capitalist class as genuine allies in the necessary effort to defeat this grave threat to human survival. From a Marxist standpoint, the film is not without important flaws. The first is that it sometimes implies that global overpopulation is somehow responsible for the fossil fuel consumption driving global warming when in fact most of that consumption is carried out by the rich, industrially advanced countries of the capitalist West. The great majority of people in the world consume relatively little energy per capita, and historically it was the centres of world capitalism (Europe and the United States) that were most responsible for the emissions that have brought the world so perilously close to a point of no return with respect to average global temperatures. The second major problem with the film is that because it offers no solutions, it may leave viewers with the feeling that there are none — and that a catastrophe is therefore inevitable. With that said, however, the search for real and viable solutions can only make progress once false and misleading ones are exposed. This is the true strength of Gibbs’s film. Its central theme is that there can be no “green capitalist” solutions to climate change (or to any other major environmental problem, for that matter) and that a great many of the claims being made about renewable energy by commercial interests and environmental activists alike are fraudulent. Fossil fuels continue to be essential to the production and operation of even the most ostensibly fuel-efficient and environmentally friendly vehicles; the burning of biomass as a renewable form of energy brings new hazards; and the production of solar panels requires ongoing industrial consumption of materials that themselves bear immense carbon footprints. Moreover, Gibbs points out that many of the biggest and most influential organizations promoting “Green New Deal” solutions are actually financed by capitalist interests that profit from activities involving major greenhouse gas emissions. In light of all this, Gibbs concludes quite rightly at the end of his film that “[w]e must take control of our environmental movement and our future from billionaires and their permanent war on planet Earth. They are not our friends.”

Twilight Capitalism or Socialist Revolution?   251 In the spirit of opposing the “anti-sectarian sectarianism” of which we spoke earlier and drawing attention to a perceptive Marxist analysis consistent with what has been argued throughout this chapter, we offer this extended passage from a review of Planet of the Humans posted on the website of the Bolshevik Tendency: In an interview defending the film Moore criticised the big environmental ngos “who decided to hook up with corporate America” to “try to get them to go green” and asserted: “There’s no working with the Devil here and we the people hold the power and we need to exercise that power.” But he proceeded to lamely conclude: “We need to demand that this issue is on the agenda in this election year and we need to have candidates acknowledging this and ringing that warning bell loud and clear.” Yet the documentary’s obvious conclusion is that it is no accident that capitalism, which operates on the basis of maximising private profit, has brought humanity to the brink of ecological collapse. It is a social system that cannot be turned into its opposite — it must be replaced. Capitalist electoralism is not a solution—it is a dead-end; all the major contenders are constrained to act within a framework that excludes the possibility of posing a serious challenge to the mechanisms that have ravaged the natural world. In the upcoming U.S. presidential election, Joe Biden and Donald Trump are united in their commitment to preserving the right of Wall Street’s corporations and banks — the embodiment of the “Devil” that Moore rails against — to continue down a path which is destroying the environment and with it the material preconditions for human civilisation. Marxists may choose to participate in the electoral process to promote the programme of revolutionary socialism and to advance the struggle for immediate reforms. But if an election somehow produced a result that was perceived as posing a threat to the interests of the ruling elites that could not be neutralized through legal or other constitutional manoeuvres, the option of termination through extra-legal intervention would be pursued. Nothing fundamental can be achieved without transgressing property rights and capitalist legality. (bt 2020b)12

252  Twilight Capitalism

CONCLUSION The objective historical conditions for a socialist transformation are not only ripe, they have become altogether rotten. The global capitalist order is presently in an advanced state of decay. The vital task today is to align human consciousness and activity — the “subjective factor” —with the urgent need to confront and transform objective reality. Given the worldwide regression in class consciousness that has occurred among working people over the past generation, those who maintain an attachment to the socialist idea (in the first place, leftist intellectuals) bear a heavy responsibility to play a positive role in fulfilling this task. But to do so, they must shed their contempt for programmatically based vanguard organizations; recognize, with Lenin, that “socialist consciousness” will not develop spontaneously within the working class or its potential allies; and rediscover the vocation of earlier generations of radical intellectuals: to champion ideas and programs that pose a fundamental challenge to the bureaucratic, pro-capitalist misleaderships of organized labour (Butovsky and Smith 2007; Goldfield and Palmer 2007; Smith and Butovsky 2013). In the mid-1990s, Murray Smith published a piece that was devoted to assessing Trotsky’s theoretical and political legacy, the damage done by Stalinism to the socialist project and the disorientation pervading much of the independent socialist milieu. The conclusion to that article retains all of its relevance for socialist intellectuals and activists today: Those of us who remain seriously committed to socialism — not to “advanced democracy,” not to “a family of the Left,” and not to “capitalism with a human face in one country” — must learn to work and argue with each other in the context of genuine “united fronts.” We must learn, as Lenin and Trotsky’s early Communist International urged, to “march separately but strike together.” We must learn to accept with good grace the criticism of groups either larger or smaller than our own as a condition not only for joint action but for the clarification of political differences and the eventual regroupment and unification of socialist forces on principled, and hopefully more adequate, foundations. Only in this way can a healthy socialist praxis begin to mature in this post-Stalinist era. Beyond this, we must all seek a political practice that is appropriate to our political understanding, without gratuitously vilifying those whose understanding has led them in

Twilight Capitalism or Socialist Revolution?   253 different directions. We must seek, in other words, to avoid both opportunism and sectarianism — the opportunism which tempts us to keep our ideas under wraps until the dawning of a better day, and the sectarianism which deludes us into thinking that the organizational interests or political shibboleths of a single group can or ought to supersede the needs of the broader movement. In this spirit, the socialist Left as a whole could do worse than to reflect upon and take to heart the “rules” that Trotsky elaborated for his “world party of socialist revolution” at its founding conference in 1938: “To face reality squarely; not to seek the line of least resistance; to call things by their right names; to speak the truth to the masses, no matter how bitter it may be; not to fear obstacles; to be true in little things as in big ones; to base one’s program on the logic of the class struggle; to be bold when the hour of action arrives — these are the rules of the Fourth International” (Trotsky [1938] 1998: 68). (Smith 1996–97: 64–65; 2014: 238)

Notes

1. A November 2019 U.S. poll in Forbes magazine found that young people ages eighteen to thirty-nine had equally favourable views of socialism and capitalism (Sandler 2019). In May of 2019, a Gallup poll had previously indicated that 43 percent of Americans of all ages believed that socialism would be a “good thing” for the country (Younis 2019). To be sure, in studies like this, one can’t be sure what sort of vision of socialism respondents had in mind. All the same (and especially for people who lived through the Cold War), this incipient openness toward socialism is nothing short of astonishing. 2. See Veltmeyer 2011 for a collection of essays organized around this theme. 3. For an interesting exchange of views, see the debate between Michael Albert and Alex Callinicos 2003. 4. It is significant that the best known and most influential radical academic in the world today likely remains Noam Chomsky, whose impressive critiques of the U.S. empire display an intellectual rigour that is conspicuously lacking from his tendentious passing shots at the revolutionary Marxism of Lenin and Trotsky (see, for example, Chomsky 2004: 69–70). Chomsky’s anti-Bolshevism is informed by a peculiar mix of liberalism and anarchism but also resembles that of many contemporary Marxist academics in its appeals to crude anti-communist prejudices. For substantial Marxist critiques of the anarchist tradition, see Spartacist 2001 and ibt 2002. 5. For further elaborations on this theme, see Chapters 13, 15, 17, 34 and 37 of Blackwell, Smith and Sorenson 2003. 6. An outstanding eductional resource on this question has been the British-based journal Revolutionary History.

254  Twilight Capitalism 7. On the occasion of the twentieth anniversary of the demise of the Soviet Union, Murray Smith circulated a contrived “conversation” — substantially based on Trotsky’s own writings of the 1920s and 1930s — between a contemporary socialist and Trotsky on Stalinism. Entitled “Leon Trotsky Speaks,” the piece was subsequently published by a few Trotskyist websites and is available at , as well as in Smith 2011. 8. A notable exception is the work of historian Bryan D. Palmer. See, in particular, his impressive biography of James P. Cannon (Palmer 2007) and his account of the Trotskyist-led Minneapolis Teamsters strike of 1934 (Palmer 2013). See also Workman 2009, whose critique of the contemporary left complements our own in several respects, and Das 2017, who provides a compelling and sophisticated defence of the Marxist theory of class while also reasserting the primacy of class analysis to the revolutionary socialist project. 9. See Trotsky [1938] 1998. This edition of Trotsky’s manifesto, published by the International Bolshevik Tendency, is particularly recommended for its excellent introductory and supporting materials. We note that since its publication, the ibt has split into two separate groups. Each group (the ibt and the bt) makes this edition available on its respective website: and . 10. See, for example, most of the more directly political articles that have appeared in such academic Marxist journals as New Left Review and the Socialist Register in recent decades. 11. For a response to the “independent socialist” critique of Trotskyism as “insurrectionary socialism,” see Smith 1996–97 and Smith and Dumont 2011 (both pieces reprinted in Smith 2014). The case for a class-struggle strategy in the labour movement, involving the coalescing of an anti-bureaucratic, revolutionary socialist vanguard, is made in Butovsky and Smith 2007 as well as in Smith and Butovsky 2013. 12. See also “Communism and Ecology: Human Emancipation and the Materialist Conception of History,” available at , for a more general Marxist analysis of the ecological crises facing humanity; and Smith 2019: 332–34.

Chapter 8

IMAGINING SOCIALISM Nothing prevents us from connecting our criticism with real struggles. We, then, don’t appear before the world as doctrinaires with a new principle: Here is truth — here kneel down! We unfold to the world from its own principles, new principles. We do not say to the world: Cease your struggles, they are foolish; we will give you the true slogan of struggle. We merely show the world what it is really fighting for, and consciousness is something that it has to acquire, even if it does not want to. — (Marx 1843, emphasis in original)

L

eftists, broadly defined, tend to rush to judgment and present one-sided critiques of the planned economies of the erstwhile Soviet Union and the other Soviet Bloc nations. Many of the most commonplace objections concerning the inefficiency or lack of productivity of those excessively autarkic and authoritarian systems are exaggerated and can be easily refuted — above all, the claim that they simply “didn’t work.” The plain fact is that the planned economies did “work” — even if there are also good reasons to believe that they could have worked far better under circumstances conducive to socialist democracy and a socialist international division of labour. In this chapter, we review several notable ways of conceiving an alternative to capitalism. However, our main aim is to defend and revitalize the case for a form of socialist-democratic planning, the broad contours of which are discernible in the writings of Marx and Engels as well as those of Lenin and Trotsky. While we are fully aware of the many distortions and poor outcomes that plagued Soviet-style economies, we nevertheless believe that there are good reasons to think that these can be avoided in future attempts at “socialist construction.” Important lessons (both positive and negative) can be drawn from the Soviet, Chinese, Yugoslav and Cuban experiences concerning possible pathways out of and beyond capitalism once the working class has carried

255

256  Twilight Capitalism out its historic task of conquering power and expropriating the capitalist class. We think that, informed by those lessons, an attractive vision of a democratically administered planned economy can help to inspire the struggle to bring down capitalism and to inaugurate a socio-economic system that is well-suited to meeting the principal economic, ecological and social challenges of the twenty-first century. We begin with a brief consideration of the Soviet experience, Trotsky’s critique of Stalinism (the social phenomenon of bureaucratic rule on the basis of collectivized property forms) and some lessons that can be drawn from the experiences of “actually existing socialism” in the U.S.S.R. and Eastern Europe. We then discuss and critique two prominent recent examples of “socialist imagining” — the thought experiments of Michael Albert (2003) and Sam Gindin (2018). While such musings are not without interest, in our view they also tend to confirm Marx’s sage advice to avoid writing recipes for the kitchens of tomorrow. At the same time, in their haste to distance themselves from the twentieth-century experience of Stalinism, such contemporary attempts to “construct a socialist society in thought” tend to deny or downplay some of the core strengths of postcapitalist central planning systems that have already been tested. In the final section, we discuss some key elements of an economy transitional between capitalism and the socialist/communist future roughly outlined by Marx in The Critique of the Gotha Programme ([1875] 1974). The shape that a socialist society will take in the more distant future must be left for later, post-capitalist generations to decide, for, in our view, “What vistas will open up with the democratic involvement of millions of people in social and economic planning cannot be predicted from our present vantage point” (Smith 2019: 338).

TROTSKY ON STALINISM AND PROBLEMS OF SOCIALIST CONSTRUCTION Leon Trotsky, the co-leader with Lenin of Russia’s socialist revolution of 1917, is the most incisive Marxist critic of the Stalinist model of socialist construction in the Soviet Union. Trotsky argued that Stalin’s nationalist and totalitarian regime was the product of the isolation and material poverty of the world’s first workers’ state and constituted a tragic deviation from the Marxist principles of working-class democracy and proletarian internationalism. As early as 1937, in his classic The Revolution Betrayed, Trotsky provided a brilliant account of the impressive accomplishments of the Soviet

Imagining Socialism  257 planned economy while also pointing to the contradictions and limits of the Stalinist bureaucratic-command structure that administered it: The progressive role of the Soviet bureaucracy coincides with the period devoted to introducing into the Soviet Union the most important elements of capitalist technique. The rough work of borrowing, imitating, transplanting and grafting was accomplished on the bases lain down by the revolution. There was, thus far, no question of any new word in the sphere of technique, science or art. It is possible to build gigantic factories according to a ready-made Western pattern by bureaucratic command — although, to be sure, at triple the normal cost. But the further you go, the more the economy runs into the problem of quality, which slips out of the hands of the bureaucracy like a shadow. The Soviet products are as though branded with the gray label of indifference. Under a nationalized economy, quality demands a democracy of producers and consumers, freedom of criticism and initiative — conditions incompatible with a totalitarian regime of fear, lies and flattery. ([1937] 1970b: 275–76) We must approach the world and world history with sober senses and patiently uncover how and why Stalinist bureaucratic rule was able to supplant the incipient rule of Russia’s revolutionary workers’ councils, resulting in gross violations of the principles of socialist democracy in the aftermath of revolution and wrenching civil war. Were the egregious Stalinist departures from the fundamental Marxist-socialist goals of working-class self-emancipation and proletarian internationalism inevitable — the “real, hidden agenda” of Marx and his followers, as the cynical ideologues of capitalism insinuate? Trotsky counters with a compelling materialist explanation of the Stalinist degeneration: We … defined the Soviet Thermidor as a triumph of the bureaucracy over the masses. We … tried to disclose the historic conditions of this triumph. The revolutionary vanguard of the proletariat was in part devoured by the administrative apparatus and gradually demoralized, in part annihilated in the civil war, and in part thrown out and crushed. The tired and disappointed masses were indifferent to what was happening on the summits…. [The] bureaucracy succeeded in raising itself above society

258  Twilight Capitalism and getting its fate firmly into its own hands.… The basis of bureaucratic rule is the poverty of society in objects of consumption, with the resulting struggle of each against all. When there is enough goods in the store, the purchasers can come whenever they want to. When there is little goods, the purchasers are compelled to stand in line. When the lines are very long, it is necessary to appoint a policeman to keep order. Such is the starting point of the power of the Soviet bureaucracy. It “knows” who is to get something and who has to wait.… Thus, out of necessity there … developed an organ … which far outgrew its socially necessary function, and [became] an independent factor and therewith the source of great danger for the whole social organism. ([1937] 1970b) This is not the place to enter into a full-scale analysis of the lessons of “socialist construction” in the former U.S.S.R. and the Soviet Bloc countries of Eastern Europe, nor a discussion of all the factors leading to the terminal crisis of their systems (on this topic, see Smith 1996–97). However, what many on the socialist left have taken away from the demise of the transitional Soviet-Bloc countries (the U.S.S.R., East Germany, Poland, Czechoslovakia, Hungary, etc.) is that “free markets” are essential to a “successful” modern economy. We consider this conclusion to be simplistic. The notion of “market socialism” is an oxymoron — even if it is undoubtedly true that markets must play a role in the construction of a transitional socialist economy. Moreover, the collapse of “actually existing socialism” was hardly the result of the “planning principle,” even if there were indeed grave problems with the distorted form this principle had assumed — that of bureaucratically centralized state planning. An important touchstone for the discussion of how the first stages of socialist construction should be conceived remains Trotsky’s proposal for a democratically centralized planning system — one that would rely on (socialized) market mechanisms for as long as these may be required: The problem of the proportionality of the elements of production and the branches of the economy constitutes the very heart of socialist economy…. The innumerable living participants in the economy, collective and individual, must serve notice of their needs and of their relative strength not only through the statistical determinations of plan commissions but by the direct pressure

Imagining Socialism  259 of supply and demand. The plan is checked and, to a considerable degree, realized through the market. The regulation of the market itself must depend upon the tendencies that are brought out through its mechanism. The blueprints produced by the departments must demonstrate their efficacy through commercial calculation…. The art of socialist planning does not drop from heaven nor is it presented full-blown into one’s hands with the conquest of power. This art may be mastered only by struggle, step by step, not by a few but by millions, as a component part of the new economy and culture. ([1939–40] 1973c: 265, 274, 260) Trotsky emphasized that central planning is by no means a selfsufficient method of regulating the economic affairs of human beings in the transition to full socialism/communism. This transition must also rely on other important principles of social and economic organization: [A] successful socialist construction is unthinkable without including in the planned system the direct personal interests of the producer and consumer, their egoism, which in its turn may reveal itself fruitfully only if it has in its service the customary reliable and flexible instrument, money. The raising of the productivity of labour and bettering of the quality of its products is quite unattainable without an accurate measure freely penetrating into all the cells of industry — that is, without a stable unit of currency…. For the regulation and application of plans two levers are needed: the political lever, in the form of a real participation in leadership of the interested masses themselves, a thing which is unthinkable without Soviet [council] Democracy; and a financial lever, in the form of a real testing out of a priori calculations with the help of a universal equivalent, a thing which is unthinkable without a stable money system. ([1937] 1970b: 67–68) Trotsky refers here to the ongoing need for money in the transitional economy. It is true that for an extended period, money and markets will persist as instruments of resource allocation and as means to distribute income in accordance with the measurement of labour time (“from each according to his ability, to each according to his contribution,” as Marx put it in the Critique of the Gotha Programme [(1875) 1974]). However, in the transition to socialism, money must cease to be a form

260  Twilight Capitalism of capital; it must not be used to turn the means of production into the private property of profit seekers. In the absence of private ownership of the major economic assets of society and enterprise competition, the levers of planning and the institutions of socialist democracy must play the paramount roles in economic coordination, resource allocation and income distribution, ensuring that market mechanisms serve rather than subvert the goals of satisfying human needs and achieving a classless society: The survival of “exchange value” in such a post-capitalist society would not, in other words, entail the survival of surplus-value. Human activity could henceforth be geared toward the satisfaction of human needs and the all-round development of the human personality rather than toward the appropriation of wealth in the socially antagonistic form of private profit. But for this to happen, “socialist exchange-value” would have to be the form of appearance of a new set of social relations based pre-eminently on cooperation, solidarity and proletarian democracy, and not upon the invidious enterprise competition that currently fashionable models of market socialism unabashedly posit and even celebrate. (Smith 2019: 339)

IMAGINING SOCIALISM: THE “MODELS” OF ALBERT AND GINDIN Michael Albert

Michael Albert (2003) has produced one of the more detailed and comprehensive blueprints of a post-capitalist political economy. His Parecon model (an acronym for participatory economics) includes detailed examples of how workplaces could be organized in terms of job tasks, decision-making and compensation. It also addresses how people might live and consume under socialism. Workers in an organization would rotate through jobs that suit their interests and aptitudes. Compensation would be roughly equal for the great majority of jobs, with some adjustments for difficulty or risk. Decision-making as to what and how much to produce would be made through an iterative process, with as many as eight iterations. In Albert’s example of a book publishing company, decisions on what to publish might be made over a series of meetings that would consider such matters as market viability but also whether the book is socially beneficial and

Imagining Socialism  261 how it could be distributed in an environmentally conscientious manner. Albert believes that most people, given the innate human propensity for creativity, would relish the chance to be directly involved in such decisionmaking as an integral component of their work lives. Consumption decisions would not be made at the sole discretion of the citizen consumer in Parecon, since purchasing decisions may have an impact on others (for instance, they might lead to noise, pollution or road congestion). But there could be mechanisms through which people could decide to work additional hours in order to purchase, say, a new guitar or canoe. There is much to like in Albert. He washes away the distorted images of our human nature and desires as currently generated by consumer capitalism and emphasizes our core human capacities and desires. He is optimistic that people will gladly forgo the latest iPhone or two-car garage in exchange for genuine community, social solidarity and a life rich in purpose. Albert has devoted decades to crafting and then refining his models — and even experimented with them in practice at South End Press, a small radical book publisher. To his credit, Albert covers a great many questions and even anticipates potential objections to his blueprints, such as: “wouldn’t there be too many meetings?” and “what if someone doesn’t show up to work?” His commitment to his project is admirable, even though he sometimes gives the impression of a child explaining why she should be given permission to stay up late on a weeknight. So, what’s the problem? It’s not hard to see how participatory workplaces could exist in small cafes or bookstores — or even as tiny pockets within existing capitalist enterprises or the capitalist state. However, there is no consideration as to how this type of organization might fit into a strategy for defeating and displacing capital. For instance, would the workers at particular enterprises overturn the existing corporate structures and redefine their roles with a copy of Parecon at the ready? Could the labour unions be enlisted to do this, as the syndicalists of the Industrial Workers of the World imagined a hundred years ago? We are also reminded of the wage-earner funds project (the Meidner Plan) during the heyday of Swedish social democracy — a plan that projected a gradual buyout and transfer of enterprise ownership from capitalists to workers. But even that seemingly practical experiment, initiated under optimal social-democratic political conditions, was easily blocked by the capitalist class in the end.

262  Twilight Capitalism Our point here is that if a plan has no concrete way of being achieved, then it can only be regarded as utopian and diversionary. It can only help sow illusions, waste time and energy, and lead to disappointment and disillusionment.

Sam Gindin

Almost twenty years after Albert’s Parecon appeared, Sam Gindin, a retired union researcher and prominent Canadian left political economist, published a long essay in the journal Catalyst. His 2018 piece “Socialism for Realists” is clearly written and reflects his long experience on the left. However, in the end, it suffers from many of the same faults as Albert’s imaginings. Strangely, it is at once both far-fetched and much too limited in its vision. To explain his foray into what might be labelled derisively as “utopian socialism,” Gindin writes that to establish popular confidence in the feasibility of a socialist society is now an existential challenge. Without a renewed and grounded belief in the possibility of the goal, it’s near impossible to imagine reviving and sustaining the project. This, it needs emphasising, isn’t a matter of proving that socialism is possible (the future can’t be verified) nor of laying out a thorough blueprint (as with projecting capitalism before its arrival, such details can’t be known), but of presenting a framework that contributes to making the case for socialism’s plausibility. (2018, emphasis in original) Thus, Gindin argues that it’s necessary to present details about how socialism might look precisely because, in the current moment, the topic of socialism “rings oddly in our ears.” At first blush, Gindin’s goals seem to be contradictory: We can’t know the details of a socialism still to be built, yet we can still write pages full of details about how socialism might look. Putting that seeming contradiction to the side, what sort of socialism does he have in mind? Gindin begins by stressing his “realist” objective: In the past, socialists made unrealistic claims about the future socialist society, imagining it as a paradise on Earth that could be achieved without setbacks. Gindin considers that approach dishonest and bound to lead to disappointment. As a self-proclaimed realist, he believes that the problem of economic

Imagining Socialism  263 scarcity will never be solved and that ways must be found to ration goods and motivate people to show up for a hard day’s work. A higher level of consciousness in a socialist world and the discovery of new collective capacities (“moral incentives”) won’t be enough without other, more material incentives in place. For Gindin (2018), it’s not a question of markets versus planning but of how we can institutionally incorporate markets and planning into a new vision of socialism: Rejecting markets in favor of leaving decision-making to the central planners comes up against the fact that, as the Soviet central planner Yakov Kronrod noted in the 1970s, economic and social life are simply too diverse, too dynamic, and too unpredictable to be completely planned from the top. No amount of planning capacity can fully anticipate the continuous changes encouraged by socialism among semi-autonomous local groups, nor — given that many of those changes occur simultaneously with repercussions upon repercussions across workplaces and communities — respond without pronounced and disruptive lags. Putting too great a load on central planning can therefore be counterproductive; plans work best if they concentrate on a limited number of key variables and don’t overload themselves with too much detail. There are certain realms in which Gindin completely rejects markets. The most important is the labour market. If we treat “labour” as a commodity, we debase a central element of our human capacity. Some limited labour markets will need to exist in order to, say, attract workers to remote areas or to engage in dangerous work. On the other hand, financial markets would be eliminated entirely since they are disconnected from any measure of what is of “true value.” Gindin envisions an open marketplace for a host of consumer products and experiences: restaurants, pubs and bakeries would operate under a competitive logic. Larger workplaces would be organized cooperatively but owned by regional, provincial and federal bodies. A social wage would cover the full range of life’s necessities: health care, housing and education. This social wage would sever the connection that exists under capitalism between a person’s employment situation and their ability to meet their needs.

264  Twilight Capitalism In order to incentivize high levels of productivity and efficiency, there would be market mechanisms that would reward those traits. However, this would present risks, as Gindin concedes, because “with this comes the downgrading of other priorities: a tolerable work pace, health and safety, solidaristic cooperation, democratic participation.” Gindin advocates sectoral councils, a middle-range level of planning higher than workplaces and lower than centralized planning by the state. Sectoral councils would be made up of a selection of representatives from local workplaces that make decisions on how to invest funds to enhance their productive capacities, with the goal of raising the least productive members of the group to the average. Teams of engineers and other workplace specialists would be enlisted to aid underperforming workplaces. In Gindin’s socialism, knowledge and know-how would be shared freely to promote the common good and address societal needs. (The importance of this commonplace socialist idea was never clearer than during the Covid-19 pandemic.) In the end, Gindin (2018) advocates for “layers” of planning: These interdependent layers include the central planning board of course, and the sectoral councils. They also include markets as an indirect form of planning and, with the critical role of the sectoral councils in constraining market authoritarianism, planning also extends to internal workplace relations. And they include a spatial dimension supplementing the sectoral emphasis. Gindin goes on to discuss leisure, community organizing and environmental stewardship in a comprehensive and quite reasonable fashion. But what surprises is the tenth of his “core principles”: “Navigating the relationship with what will likely still be a predominantly capitalist global economy.” Thus, Gindin’s horizon remains one of “socialism in one country” — the implicit national reformist socialism of classical social democracy that later became the defining ideological dogma of the Stalin regime and the “official” Communist movement. For us, following Trotsky, one of the clearest lessons of the Soviet experience, not to mention the Chinese and the Cuban, is that full socialism is not achievable within the confines of a single nation-state and that the attempt to achieve it — while abandoning or even undercutting the struggle for a world revolution — can only expose an isolated workers’ state to the debilitating pressures of world imperialism. Both Albert and

Imagining Socialism  265 Gindin are utterly silent on the key question of how the power of capital can be defeated, which is surely a prerequisite for the emergence of any imagined model of socialism. Ends and means in the transition to socialism are disconnected and we are simply left with new variations on what Trotsky aptly called “national reformism”: In respect of the techniques of production, socialist society must represent a higher stage than capitalism. To aim at building a nationally isolated socialist society means, in spite of all passing successes, to pull the productive forces backward even as compared with capitalism. To attempt … to realize a shut-off proportionality of all the branches of economy within a national framework, means to pursue a reactionary utopia. ([1929] 1970a: 146)

IN DEFENCE OF SOCIALIST CENTRAL PLANNING In their 2019 book, The People’s Republic of Walmart, Phillips and Rozworski cleverly shift our thinking about economic planning as a relic of the erstwhile Soviet model to the realities of contemporary consumer capitalism. They make the case that to counterpose ham-fisted decisionmaking and directives by faceless state bureaucrats to the supposedly supple responsiveness of capitalist markets is seriously misguided, for the reality is that companies like Walmart are themselves case studies in (capitalist) central planning. Walmart, which is one of the world’s largest private employers, has a level of economic activity comparable to that of Switzerland. Moreover, the economic calculations of that massive company involve supply chains and retail outlets operating around the world. Somehow — and yes, “from above” — this corporation can make decisions that seem to satisfy consumer needs the world over. If Walmart can do this while trying to maximize its profits, why couldn’t a workers’ state, operating on the basis of a plan geared toward meeting the consciously and democratically decided needs, demands and priorities of its citizens?

Ernest Mandel

A deep dive into socialist planning by the late Ernest Mandel helps us to address precisely this question: Can a planned economy meet the needs of the masses in a way that is more equitable and effective than the existing capitalist system? Written on the eve of the “collapse” of the Soviet Bloc, and at a time when socialists were becoming more and more enamoured

266  Twilight Capitalism with the idea of market socialism, Mandel’s 1986 essay “In Defense of Socialist Planning” retains much value as a reminder that a planned economy is not merely a viable direction for socialists but a necessary one. Unlike Albert and Gindin, Mandel follows in the tradition of Marx and Engels’ scientific socialism and argues that the contours of the new society will take its shape from the materials and structures bequeathed by the old society. He also stresses that his essay is not about describing socialism per se but rather about establishing some realistic principles to guide a healthy transition toward socialism. At its core, a planned economy means that economic decisions are made directly (“up front”) rather than indirectly through “after-the-fact” processes of market allocation. Planned economies can take different forms, ranging from the despotic to the technocratic to the democratic; each of these has historical precedents. Market economies also vary considerably, although nowhere has one embodied the “laissez-faire,” “free market” and “perfect competition” ideals of libertarian dreams. (Mandel asks: who will drive across town to purchase apples selling for twenty-five cents a pound less than your grocery store down the street?) Mandel refutes the pro-capitalist critiques that say that planning consumption patterns is a form of tyranny (a “dictatorship over needs”), observing that, under capitalism, tyranny is actually in effect not only in the realm of production but also in the economy-wide allocation of resources. It is capital that decides what to produce and where, when and how, not the individual consumer. All the same, there is room in Mandel’s vision of the transitional society for small-scale private and co-operative enterprises to satisfy niche consumer needs, desires and wants. Much of Mandel’s piece is a critique of Alec Nove’s The Economics of Feasible Socialism (1983), a book that advocates a form of market socialism. Nove mounts a major attack on the viability of planned economies, and Mandel refutes his objections one by one. Two of these refutations deserve to be highlighted: Nove: Too many decisions must be made about consumption requirements for central planning to work well — Nove says that under capitalism (circa 1982), about two million specific goods are produced. But Mandel counters this by saying that most of us will never sample the vast majority of those products in our entire lifetimes. In any case, most of these products are just variations on the same thing: thirty types of bread, fourteen types

Imagining Socialism  267 of laundry detergent. Other large-scale public works like a hydro dam are made to order and are also not subject to market mechanisms. Later in his essay, Mandel talks about a clear hierarchy of needs when it comes to consumption, meaning that across time and space, certain consumer items are seen as essential and others much less so. Accordingly, planning what needs to be produced is considerably less daunting than Nove and other critics would suggest. For Mandel, a limit to consumers’ desires “emerges from growing consumers’ maturity itself, as people’s priorities shift and their self-interest becomes more self-aware.” Such a state, he notes, is impossible to reach in the face of the constant presence of predatory advertising. In any case: “For liberals and market socialists alike, it seems obvious that the despotism of the market — ‘rationing by the wallet’ — is less painful for the individual and less damaging to personal freedom than the despotism of a plan — or rationing tout court.” But, Mandel asks, why should that be the case under conditions of popular democratic planning, involving the participation of masses of working people and consumers? Indeed, and we would add: why shouldn’t ordinary people, after public debate and due deliberation, help to formulate answers to “planning” questions like “should the pharmaceutical industry prioritize research into minor variations on Viagra or should it prioritize research into developing a broad-spectrum vaccine capable of preventing major deadly pandemics?” Mandel then discusses the very real “tyrannies” on the production side of the ledger if “the market” (in reality, capital) gets to call most of the shots. After all, the workplace is where most people spend most of their waking hours. Jobs vary tremendously in terms of pay, safety, creativity, variety, alienation, stability and so on. In a planned economy, job quality could be equalized and gains in productivity could be shared among everyone. We could decide collectively on the appropriate length of the workweek for a given level of consumption. Mandel proposes that an immediate reduction of the standard workweek to twenty-five hours would be in order and easily achievable in the earliest stages of the transition to socialism. This would create more “free time” during which working people could enrich their lives in many ways, including by participating actively in important decisions affecting their households, communities, countries and human civilization as a whole. Nove: A planned economy is only manageable if scarcity is replaced by

268  Twilight Capitalism abundance — Human appetites for accumulating economic goods are virtually unlimited, according to Nove, so conflict must persist in the absence of abundance. Mandel counters that many goods — water, for instance — are already available in abundance in many jurisdictions and are often freely distributed outside of the market system, even under capitalism! When water is made available to the public as a free public utility, people don’t react by suddenly increasing their consumption and wasting it. In many cases, marketing (especially for profit) doesn’t result in a conservation of scarce resources nearly so much as it results in otherwise unnecessary costs associated with charging for them. Over time, Mandel suggests, a transitional socialist economy could radically widen the scope of goods and services that are produced and distributed free of charge, lessening the grip of “money” even in the consumer-goods sector. To be sure, Mandel does recognize that the Soviet economy was excessively centralized and excluded the masses from the planning process. As an alternative to the Soviet model, he proposes a system of “articulated worker’s self-management.” In this conception, there are several layers of input about what to produce and how to produce it, ranging from the international and national levels to the sectoral level and workplace councils.

Minqi Li

In a provocative 2013 essay, the Marxist economist Minqi Li encourages us to rethink the experience of the historically existing “socialist” economies: “There is no clear evidence,” he asserts, “that the socialist economies performed worse than the capitalist economies in terms of economic growth. But there is evidence that the socialist economies met the population’s basic needs better than did the capitalist economies, especially when the experiences of the periphery and semi-periphery are included.” Indeed, Li’s argument is similar to the one advanced by Francois Moreau and summarized in Chapter 7. Li suggests that the Soviet Union and its satellites were national experiments in central planning “within a capitalist world system” and were therefore subject to distortions arising from the attempt to carve a path in the face of powerful enemies. These relatively underdeveloped “socialist” countries are usually judged according to how well they compare to the richest, most developed capitalist nations. But even if we were to accept that this is a fair way to compare “actually existing socialism” with capitalism, Li presents evidence that these countries performed remarkably well

Imagining Socialism  269 and often better than capitalist ones, particularly with respect to achieving fairness in the distribution of the fruits of economic growth. Soviet-style socialism lacked the private economic incentives for productivity growth characteristic of capitalism and, to make matters worse, workers and managers at the enterprise level had perverse, systemically inspired, incentives to mislead central planners and bureaucrats about their economic performance. Even so, production and technological innovation were quite robust, especially with respect to military infrastructure — a social and political priority given the relentless threats these countries faced from the capitalist West. Had they been able to survive, this experience suggests that their well-developed planning capabilities may have enabled them to achieve other important social and political goals — environmental conservation, for example — much more effectively than the capitalist world. Li sees life expectancy as an important index of the social development of a nation. On that measure, the Soviet Bloc countries had similar life expectancies to those in West Europe during the postwar period, at least up to the 1960s. During the 1970s and 1980s, life expectancy in Eastern Europe levelled off as it continued to rise in Western Europe. But the gap in life expectancy widened much more after the fall of the Soviet Union and the restoration of capitalism throughout the former Soviet Bloc. In Cuba, a beleaguered “Third World socialist country,” life expectancy caught up to the United States level in the 1970s and since 2003, it has surpassed it. Phillips and Rozworski point out that despite free-market mythologies promoted by the mass media and university economics departments, much of our economy is already planned. A historical-materialist approach to economic planning suggests that planning in a highly developed postcapitalist economy will look very different from the Soviet experience, shaped as it was by an extremely low level of development of the forces of production at the time of the revolution, by the deep wounds inflicted by the invading armies of the advanced capitalist West during the civil war of 1918–21 and by the hugely destructive impact of World War II, which claimed twenty-seven million Soviet lives and destroyed much of the industry and infrastructure built up through enormous effort during the five-year plans of the 1930s. Together, the contributions of Mandel, Li and Phillips-Rozworski provide a useful antidote to the hasty rejection of democratic central planning by many on the radical left. However, none approaches the

270  Twilight Capitalism power of Trotsky’s admonition: “Only the interaction of three elements, of state planning, of the market and of Soviet democracy can provide the country with correct leadership in the transitional epoch [to socialism]” (1973b: 275). In a section of his Transitional Program of 1938 devoted to “The U.S.S.R. and Problems of the Transitional Epoch,” Trotsky wrote in a related vein that a precondition for the “revision of the planned economy from top to bottom in the interests of producers and consumers” was a democratization of the soviets involving a “legalization of soviet parties. The workers and peasants themselves by their own free vote will indicate what parties they recognize as soviet parties.” Furthermore, “Factory committees should be returned the right to control production. A democratically organized consumers’ cooperative should control the quality and price of products” ([1938] 1973a: 65). In a very general way appropriate to a political manifesto, Trotsky was suggesting the need for a form of democratic central planning that transcends “workers’ self-management of enterprises” and that instead points to the need for a centralized production plan that is heavily informed by the input of consumer co-operatives as well as enterprises operating under workers’ control. A comment about the difference between the “council” democracy of a socialist workers’ state and a system of workers’ self-management in a society still largely based on the allocation of resources through markets is appropriate here. Whether one is considering the erstwhile Yugoslav model of workers’ self-management under a regime of “market socialism” or an anarchist model of autonomous communes interacting (trading) with each other “free” of any state authority, both are distant from Trotsky’s conception of proletarian-democratic central planning aimed at the development of productive capacities and the satisfaction of human needs on a global scale. The anarchist model in particular would lack any ability to effectively coordinate production to meet human needs beyond a very localized level, much less redress the vast inequalities in living standards that exist globally. Ironically, in some ways, anarchist conceptions complement the Stalinist notion of socialism in one country by positing a network of “anarchist co-operatives” limited to a single neighbourhood or region. The difference is that Stalin pushed relentlessly for the development of economic productivity (by any horrendous means available) as the way to build “socialism,” whereas anarchists focus on the development of individual consciousness and personal growth, albeit in

Imagining Socialism  271 parochial contexts. We would add that the anarchist perspective is an individualist and “petty bourgeois” one that is unable to pose any real threat to the established structures of capitalist power. Objectively, it diverts young radicals from the historical task at hand: to mobilize the working class to overthrow the capitalist system on a world scale, not to “coexist” with capitalism while pursuing alternative “lifestyles” or a “participatory economics” residing at its fringes (after the manner of the Hutterite colonies of Western Canada).

Joseph Seymour

What, then, is the role of the market in Trotsky’s formula? Joseph Seymour, the long-time theoretician of the Spartacist tendency, suggests the following: The output mix of consumer goods and services should be determined through a centralized market mechanism. How would this work? Take the clothing industry, for example. A centralized distribution agency would be responsible for supplying a number of stores and consumer cooperatives. In turn it would command the resources of various clothing factories. If a particular style or size of shirt is in short supply, the agency would order the factory(ies) to produce more of this item and fewer items in relatively ample supply. The clothing factories would in turn be serviced by a centralized distribution agency commanding the resources of various textile mills. If a particular kind of synthetic fabric is in short supply, the agency would order the mills to increase the production of this fabric and reduce those in relative oversupply…. In general prices should be proportional to the cost of production, i.e. if one dress style costs twice as much to produce as another style, consumers should pay twice as much for it. This does not rule out subsidies or additional taxes in special cases. (1988: 20) When considering this, we should bear in mind that Seymour was writing in 1988, on the very eve of capitalist restoration in Eastern Europe. The tremendous advances we’ve seen in information technology over the intervening decades would make the task of replacing decentralized market signals with those of a centralized market authority much more practicable than it was even at that time, not to mention the 1920s when Austrian economist Ludwig von Mises (1972) sparked the “socialist calculation”

272  Twilight Capitalism debate by arguing that effective central planning was impossible due to the vast amounts of information that would need to be inputted about the millions of different products then being produced by a network of autonomously operating capitalist enterprises. However, even in 1988, Seymour was able to observe that: The idea that market competition is needed to adjust production of consumer goods to demand is a myth of bourgeois economics. In fact, it isn’t even true of the highly monopolized economy of the advanced capitalist countries. Computerized stock control is now common in the U.S. and West Europe. When someone goes to one of the larger supermarkets, the items they purchase are recorded at the checkout counter where a photoelectric cell reads the product code on the package. This information is fed into a complex distributional network linking factories to stores. A socialist economy would be even more efficient in constantly adjusting production to the shifting needs and wants of society. (1988: 20) Beyond these considerations, however, what must be emphasized is the decisive role that the mass of citizens of a transitional socialist commonwealth would play in democratically deciding on the great macroeconomic and social questions facing the workers’ state. How much should be invested in the production of new machinery for production, and where? How much in transportation and communication infrastructure? How much should be allocated to health care and education? How much to consumer goods and social services? How much ought to be devoted to research and development of new medicines and technologies? How much to the military, regional and international development, and foreign aid? And how much should go to local workers’ councils seeking funds for new investments at the enterprise level? Debates over such questions — above all, what should be prioritized at any given time? — would be centred on the contending policy platforms of the “freely elected soviet parties” to which Trotsky referred. The great questions facing those parties and the populace as a whole would have nothing whatsoever to do with considering whether capitalism should be restored (any more than the early parliamentary democracies of Europe were preoccupied with debating the merits of returning to feudalism!). On the contrary, a vibrant socialist democracy would draw the masses of

Imagining Socialism  273 people into free debate at every level of society with a view to allowing an increasingly well-informed and educated socialist citizenry to themselves determine their collective destiny and “the shape of things to come.”

CONCLUSION Perhaps the most tragic and ominous result of our having failed to consign capitalism to the dustbin of history many decades ago is the existential crisis that humanity now confronts. The Covid-19 emergency and the wildfires that ravaged the U.S. West Coast in the summer of 2020 are clearly just a preview of the devastating disruptions that we will continue to face due to the deepening rift between the profit requirements of capital and the imperatives of ecological (and climatic) sustainability. More than ever, twilight capitalism remains hooked on endless quantitative growth and the profitable extraction and consumption of fossil fuels. Although the challenge of creating a radical alternative is daunting and indeterminate, the emergence of a globally planned socialist economy is clearly the last and best hope for human survival. A socialist organization loyal to Trotsky’s ideas, the Bolshevik Tendency, recently offered these observations as part of a larger discussion on how an ecological catastrophe might be averted: A rationally planned socio-economic system, freed from considerations of profitability, would prioritize the production of energy with the lowest environmental overheads. It would also reduce unnecessary energy consumption, primarily in the former imperialist heartlands, through phasing out commodities most likely to damage the environment and eliminating planned obsolescence. In a socialist world the historical impoverishment and looting of the neo-colonial countries by imperialist powers would be ended, and value flows would be reversed. The destructive processes of resource extraction, like the longstanding practice of using less developed countries as dumping grounds for poisonous trash and industrial detritus, would be ended. The imperialist model of mono-culture plantations would be phased out in favour of gearing agricultural processes to the sustainable production of food primarily for the consumption of the people of the region. The construction of a truly socialist economy would require massive investments in reorganising industry and transport

274  Twilight Capitalism and the creation of a system of equitable work-sharing. Under capitalism, where short-term profitability and maximum capital accumulation determine economic priorities, fossil fuels dominate every aspect of production and distribution. An economic order designed to promote social equality and avert catastrophic ecological collapse would pursue a very different agenda. (bt 2020b) Socialists face a difficult paradox. In order to win a world in which we can truly realize our most authentic human capacities, we need to act in ways that are hard-headed, strategic and disciplined. Capitalism cannot be reformed, tweaked or reoriented. Rather, it must be replaced … and that, quite simply, will be no easy task. The existing capitalist ruling classes will do everything in their power to prevent the destruction of the system to which they are wed. We must be no less determined in our efforts to prevent them from having their way. The bulk of this book has analyzed the many contradictions of a decaying capitalism and the vast and unnecessary suffering it has wrought. As for the socialist future, we are convinced that, joined to a system of council democracy and a socialist international division of labour, a centrally planned and collectivized economy can produce spectacularly beneficial outcomes for the mass of humanity. Marxist social theorist Raju Das took the opportunity provided by the Covid-19 crisis to reflect on what “could be” in a post-capitalist world, poignantly reminding us why we should redouble our commitment to the struggle for socialism. In the end, it’s really not so much about meeting the targets of a five-year plan as it is about creating a canvas for us to live, laugh, create and wonder. For Das, “in a good society, everyone should be able to perform enjoyable work for a few hours every week. Everyone should have enough time for their family, friends, and for leisure, meditation, yoga, voluntarily helping each other, enjoying nature, expressing love and affection, painting, singing, and so on.” As we transition toward socialism, our conceptions of work and leisure will radically change: “Doing productive work will become a need, and not a means to earning a livelihood. And when people do their work because they love doing it, they will produce, every day, things/services in more quantity and with better quality” (Das 2020). In February of 1940, just six months before his assassination by a Stalinist agent in Mexico, the exiled and ailing Leon Trotsky composed

Imagining Socialism  275 the following lines of his testament. They seem equally fitting as a conclusion to this book: My faith in the communist future of mankind is not less ardent, indeed it is firmer today, than it was in the days of my youth. Natasha has just come up to the window from the courtyard and opened it wider so that the air may enter more freely into my room. I can see the bright green strip of grass beneath the wall, and the clear blue sky above the wall, and sunlight everywhere. Life is beautiful. Let the future generations cleanse it of all evil, oppression, and violence and enjoy it to the full. (1973c [1940])

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INDEX Bulletin of the Atomic Scientists, 228 bureaucracy, 68, 70, 76n10, 236, 257-258 Butovsky, Jonah, 1

absolute surplus-value, 106-108, 131 abstract labour, 93-94, 106, 156, 179, 186, 207, 212-219, 221n2, 221n3 accs (advanced capitalist countries), 140 accumulation/overaccumulation of capital, 39, 89, 103, 107, 113, 164, 188-189, 241 Adelson, Sheldon, 226 afv (anticipated future value), 163-164, 178, 185-187 Albert, Michael, 253n3, 256, 260 alienation, 7, 231, 267 “Antifa”, 227 anthropomorphic, 39 Assange, Julian, 226-227 arp (average rate of profit), 175, 184-185, 187-196, 208

Callinicos, Alex, 253n3 Canada, 13, 15-16, 18, 42-43, 50, 62, 67, 118, 120, 131, 137, 162, 238 capital mobility, 60 capital-saving innovation, 110 capitalist class, 24, 26-27, 32, 34-35, 52, 59, 61, 65-66, 68, 73, 86, 88-89, 110, 117, 126, 127n1, 129, 132, 137-138, 158-159, 184, 233, 243, 250, 256, 261 capitalist mode of production, 1, 8, 29, 54, 56, 59, 75n5, 87-88, 98-100, 106, 112, 115-117, 126, 129, 144, 152153, 156, 161, 167, 231 capitalist state, 17, 33, 45, 47, 53, 73, 9799, 122, 127-128n8, 136, 159-164, 180-181, 198, 202, 239, 242-243, 245, 261 Carchedi, Guglielmo, 131, 168-169, 175177, 216, 220 cares (Coronavirus Aid, Relief, and Economic Security Act), 14 cdo (collateralized debt obligation), 4445, 57, 131 central planning, 3, 13, 237, 256, 259, 263-266, 268-272 Chavez, Hugo, 225 Chile, 17, 246 China, 10-11, 13, 18-19, 53, 62, 65-71, 76-77n11, 82, 117, 124, 134, 142, 162, 227, 235, 237, 241 choice of technique, 128n13 circuit of capital, 63, 66, 95-96 circuit of capitalist revenue, 66 class interest, 135

Basu, Deepankur, 77n11 Bellofiore, Riccardo, 200 Bernstein, Eduard, 233 Bitcoin, 204-205 Black Lives Matter, 9 Bolivia, 225, 226, 246 Bolshevik Tendency, 251, 273-74 bourgeois, 40, 54, 74, 78, 80, 88, 96, 157, 179, 213, 215, 225-226, 242, 249, 271-272 bourgeoisie, 29, 31, 48, 70, 88-89, 143, 226 Brenner, Robert, 132-133, 143-151, 154158, 160-163, 166n2 Bretton Woods, 145 Britain/British, 17, 62, 116, 137, 226, 238, 240, 249 bt (Bolshevik Tendency), 35n5, 76n10, 251, 254n9, 273-74 Buffett, Warren, 52 Buiter, Willem, 240

287

288  Twilight Capitalism

strategy, 75n6, 136 structure, 129 struggle/conflict, 2, 36n5, 59, 69, 80, 142-143, 206, 225, 228, 234, 240, 242, 253 classical political economy, 221n2 Clinton, Bill, 146 Clinton, Hilary, 74n2, 86, 226 clo (collateralized loan obligation), 45, 131 collateralized debt obligation (cdo), 4445, 57, 131 collateralized loan obligation (clo), 45, 131, combined crises of 2020, 26, 32 commercial and financial capital, 63, 100, 127n8, 159, 170 commodity, 31, 41, 63, 79, 89, 91-103, 109, 117, 127n4, 140, 155, 159, 164, 166n7, 169, 180-183, 207-214, 217219, 231, 263 Communist International, 252 competitive relations, 156 composition of capital, 64-65, 100, 107109, 120-121, 124, 130, 143, 147, 154, 158, 161, 166n5, 168-171, 175, 191-194, 197n9, 233 constant capital, 98-100,107-110, 124, 128n9, 154, 158, 161, 166n5, 168170, 174, 177-185, 193, 195-196, 209-210 Coronavirus Aid, Relief, and Economic Security Act (cares), 14 costs of circulation, 98, 180 costs of production, 105, 160 counteracting tendencies to falling rate of profit, 65, 108-110 Covid-19, 5-6, 10-11, 13-15, 17-20, 23-26, 28-29, 32-33, 36-37, 42-43, 46-47, 51, 58, 195, 264, 273-274 crisis Covid-19, 47, 190, 273-274 economic/capitalist, 1-3, 7-8, 29, 46, 56, 71, 78, 102, 111, 114-115, 137, 157, 199-200, 208, 211, 219-221, 232 financial, 28, 39, 43-44, 47, 50-52, 57, 59, 62, 76n8, 83, 102, 104, 131, 143, 163-165, 187, 190, 192-197, 201202, 229, 240



of leadership, 3, 53, 246 of realization, 103 of valorization, 103, 129-130, 132133, 144, 162, 185, 189, 191, 199, 207 of overproduction, 199 health, 5 profitability, 59, 62-63, 65, 70, 104, 107, 137, 141-143, 147-151, 158, 160, 167-178, 189, 192, 197, 201 social, 7, 10, 20-21, 25, 35n5, 53, 72, 82, 122, 224-228 triple, 8, 28, 31-32, 50 critique of political economy, 80, 213 da Silva, Lula, 225 Das, Raju, 274 Davis, Mike, 23 De Brunhoff, Susanne, 75n5 debt, 15, 32, 37, 39, 45-47, 51, 60, 61, 67, 129-131, 146, 163-165, 174-178, 186, 195, 201, 206, 241 deduction from surplus-value, 128n8 degenerated/deformed workers’ state, 76n10, 241 democratic socialism, 137, 239, 243 democratic socialist, 225, 228 Democratic Socialists of America (dsa), 225 Deng Xioping, 67, 70-71 depression economic, 38, 74, 134 Global, 3, 39, 51, 70-71, 157, 166 Great, 5, 41, 123, 133, 146, 150, 164, 171, 173 Long, 51, 71, 77n11, 123, 133, 146, 162, 164, 173, 176-177, 195, 197, 225, 241 dialectics, 94, 113, 180, 218-221 “direct prices”, 101 djia (Dow Jones Industrial Average), 40, 165 Dolack, Pete, 15 domestic labour, 179 Dow Jones Industrial Average (djia), 40, 165 dsa (Democratic Socialists of America), 225 dualism, 218

Index  289 Durkheim, Emile, 203 effective demand, 102, 111, 130, 133, 135, 150-152, 200-201, 204, 220 Elson, Diane, 215 “embodied labour”, 215 Engels, Friedrich, 5, 10, 58, 66, 80, 115, 235, 255, 266 equalization of profit rates, 100-101, 212 equilibrium, 110, 211 equivalent form of value, 217 Erfurt Programme, 240 European Union, 15, 41, 83, 146, 148 exchange-value, 93, 101, 156, 207, 212, 260 expanded reproduction, 42, 95, 103, 189, 197 exploitation, 29, 33, 36n5, 39, 43, 46, 5253, 61, 67, 69, 72, 74, 75n4, 76n7, 79, 90-91, 95, 97-98, 100, 106-109, 111, 114, 116-119, 127n1, 130, 132, 152, 162, 167, 171, 184-185, 189, 195, 199-200, 204-205, 208, 210, 212, 231, 241, 245 Federal Reserve, 14, 45-46, 59, 66, 75n2, 142 fetishism (commodity and/or capital), 213-214, 231 feudalism, 87-88, 179, 272 fc (fictitious capital), 1, 57, 63, 65-67, 75n5, 162-165, 171, 178, 185-187, 191, 195, 241 fictitious profits, 39, 47, 131, 166, 178, 186-187 financial crisis, 2, 28, 39, 43, 47, 50-52, 59, 67, 83, 102, 104, 131, 143, 163, 168, 173, 182, 192, 201-202, 229, 240 financialization, 47, 57-58, 61, 65-67, 76n8, 104, 131-132, 162-163, 241 fire (Finance, Insurance and Real Estate), 47, 62, 187-188, 190 Floyd, George, 6 forces of production, 80, 87, 106, 112113, 125, 130, 161, 167, 232, 235 foreign trade, 68, 108, 110-111, 188, 237 “Fordism”, 141 formal equality, 127n1 Fourth International, 253

France, 9, 41, 62, 141, 226, 240 Fukuyama, Francis, 223, 229 G7, 9, 62, 68, 139, 141, 146, 160 Gates, Bill, 27, 81 gdp (gross domestic product), 32, 40-41, 60-62, 98, 139-141, 146, 162, 174, 179, 191, 202 Geithner, Timothy, 85 general rate of profit, 56, 100-103, 127n8, 152-154 George, Susan, 244-246 Germany, 9, 13, 41, 62, 141, 144-145, 149, 226, 258 Gibbs, Jeff, 250 Gillman, Joseph, 172 Gindin, Sam, 256, 262-266 Global Justice Now (Organization), 118 Globalisation, 59, 122, 136, 138-140, 229, 235, 240-241, 249 global south, 12, 17, 26. 82, 139 Glyn, Andrew, 139 Gotha Programme, 54, 125, 256, 259 Great Recession, 2, 5, 40-47, 50-51, 67, 69, 71, 75n6, 83, 104, 122-123, 132133, 162-163, 165, 168, 173, 177, 192-193, 197, 229 Green New Deal, 82, 250 Greenspan, Alan, 66, 76n9 Grossman, Henryk, 103 growth rates, 62, 67, 69, 77n11, 141 Harvey, David, 76n8, 90-91, 131-132, 163, 200, 221n2 Hedges, Chris, 14 hegemony, 145, 227-228 Hertz, 42 Heinrich, Michael, 200, 221n2 Heyman, Jack, 248 Hilferding, Rudolf, 90, 148 Himmelweit, Susan, 215 historical-structural crisis, 1, 112, 114, 130, 178, 186, 191 housing, 16, 22, 26n5, 37n5, 43-44, 57, 102, 119, 263 human capacities, 2, 162, 261, 274 hdi (Human Development Index), 237238

290  Twilight Capitalism human progress, 78, 87, 91, 126, 157, 231 ibt (International Bolshevik Tendency), 37n5, 76n10, 254n9, 254n12 ig (Internationalist Group), 36n5, 76n10 identity politics, 227, 247 ideology, 7, 34, 126, 140, 242 ilo (International Labor Organization), 117 immiseration, 53, 121 imperialism, 114, 118, 145, 148, 237, 264 intellectual labour, 89, 126 international trade, 127n6 Japan, 62, 66, 71, 117, 124, 133-134, 141, 144-145, 148-149, 176, 221n2 joint production, 217 Keen, Steve, 200-201 Kelton, Stephanie, 201, 205-207 Keynes, John Maynard, 59, 75n6, 115, 123, 132-138, 142-143, 146, 149150, 200-203, 206, 220 Khrushchev, Nikita, 70-71 Kincaid, Jim, 132, 168, 200 Klein, Naomi, 75n6 Kliman, Andrew, 168-174, 197n4 Krugman, Paul, 82, 200-201 labour power, 29, 31, 54, 57, 75n3, 89, 96-98, 106, 109, 116-117, 120-121, 128n12, 130, 182-183, 197n10, 210 labour process. 97, 106-108, 129, 131, 136, 179, 233 labour-saving/displacing innovation, 54, 56-57, 71, 80, 105, 107-108, 110, 120, 129, 151, 156, 190, 199 labour time, 54, 55, 92-93, 98, 101, 106, 124, 156, 186, 198, 204, 207, 210, 212, 214, 216-218, 221n2, 259 Lapavitsas, Costas, 132 law of the tendency of the rate of profit to fall (ltrpf), 3, 57, 63, 65, 72, 93, 104, 110-113, 124-125, 128n13, 130, 143, 152, 161-162, 167-170, 172173, 176-179, 184, 190, 197n2, 200, 219-221 law of value, 8, 31, 54, 68, 75n3, 77n11, 91-92, 102, 124, 127n4, 162, 198-

199, 201, 204, 211, 221n1 laws of motion, 1-2, 88, 92, 101, 103, 154, 178, 232 Lehman Brothers, 51 Lenin, Vladimir/ Leninism, 90, 114, 118, 133, 239, 242-240, 252, 253n4, 255-256 Leontieff, Wassily, 120 Li, Minqi, 268-270 libertarian, 45-46, 87, 200, 204, 220, 266 Lipietz, Alain, 215 London, Eric, 119 long-term care (ltc), 6, 14, 21-22, 26, 43, 75n3 ltc (long-term care), 6, 14, 21-22, 26, 43, 75n3 ltrpf (law of the tendency of the rate of profit to fall), 3, 57, 63, 65, 72, 93, 104, 110-113, 124-125, 128n13, 130, 143, 152, 161-162, 167-170, 172-173, 176-179, 184, 190, 197n2, 200, 219-221 Luxemburg, Rosa, 90, 232 Mage, Shane, 143, 186, 170, 180-181 magnitude of value, 93 Maher, Bill, 85 Maito, Esteban, 176 Mankiw, Gregory, 200 Mandel, Ernest, 116, 123, 127n4, 143, 265-269 Mao Zedong (Maoist), 67, 70, 77 marginal-utility theory, 218 market socialism, 258, 260, 266, 270 Marx, Karl, 1-10, 19, 29-30, 33-35, 39, 42, 48, 53-55, 57-58, 61-65, 72-74, 75n3, 75n4, 75n5, 76n7, 78, 80, 83, 86-88, 90-116, 118, 120-126, 127n5, 127n6, 128n9, 128n10, 128n13, 129-130, 133, 142-144, 148, 150-164, 167180, 182, 184-185, 188-190, 197n7, 198-200, 202-203, 207-219, 221n1, 221n2, 222n3, 224-225, 227, 229235, 249, 255-257, 259, 266 Mattick (Sr.), Paul, 143 Mavroudeas, Stavros, 132, 163, 221n2 Mazzucato. Mariana, 201-204 McCain, John, 51-56 McCormack, Geoff, 103

Index  291 Menger, Karl, 115 metabolic rift, 7, 8, 38 Mexico, 17, 65, 117, 238, 274 middle class, 48, 72, 74n2, 83, 117 Minsky, Hyman, 201-203 mode of production, 1, 8, 25, 29, 54, 56, 59, 75n5, 78, 80, 87-89, 98-100, 102, 106, 112, 115-117, 126, 129, 144, 152-153, 156, 161, 167, 199, 210, 213, 230-232 modern monetary theory (mmt), 204207 Mohun, Simon, 215 Moore, Michael, 83-87, 249-251 money money form, 56, 96, 183, 203, 218 Morales, Evo, 225 Moreau, Francois, 237-238, 268 Moseley, Fred, 143, 168-170, 174, 197n3, 210, 221n3 Murray, Patrick, 221n2 natural law, 30-31 natural science, 24 neoliberalism, 9, 43, 58, 75N6, 76N8, 87, 136-139, 142, 146, 162, 195-196, 223, 224-225, 229, 241 neo-Ricardianism, 211, 218 neoclassical economics/ economists, 200, 209 neutral technological progress, 128n13 new value, 54-56, 61, 92, 95, 97, 100, 102103, 107, 151-152, 158-159, 161, 166n5, 166n7, 178, 180, 182-183, 185-187, 193, 198-199, 210 Nixon, Richard, 135, 145 Nove, Alec, 266-268 occ (organic composition of capital), 6465, 100, 107-111, 121, 124, 128n13, 130, 143, 147, 154, 158, 161, 166n5, 169, 175, 184-185, 189, 193-196, 197n9, 219, 233 Occupy Movement (Occupy Wall Street), 47-48, 74n2, 225 oecd (Organisation for Economic Cooperation and Development), 43, 61, 139, 141 ontology of abstract labour, 217

organic composition of capital (occ), 6465, 100, 107-111, 121, 124, 128n13, 130, 143, 147, 154, 158, 161, 166n5, 169, 175, 184-185, 189, 193-196, 197n9, 219, 233 output-capital ratio, 155, 158 overproduction, 56, 60, 102-103, 111, 122-123, 147, 149, 151, 158, 188, 199, 231 Palmer, Bryan, 254n8 Payday Report, 9 pandemic, 1, 5-7, 10-29, 33, 35n5, 36n5, 39-46, 50-51, 58, 74, 104, 11, 188, 190, 195, 264, 267 Paumgarten, Nick, 51 Perelman, Michael, 90-91 perfect competition, 208, 266 petty bourgeoisie, 48, 241 pev (previously existing value), 96, 99, 178, 180-181, 185, 187-188 Phillips, Leigh, 265, 269 Piketty, Thomas, 82, 197n4 Planet of the Humans (film), 250-251 planned economy, 36n5, 70, 77, 256-257, 265-267 Podemos (Spain), 225 post-Sraffian, 212, 215, 217 Powell, Jerome, 46 praxis, 252 pre-capitalist modes of production/ social formations, 89, 102, 207 previously existing value (pev), 96, 99, 178, 180-181, 185, 187-188 price formation, 101, 156, 210, 214 prices of production, 101, 127n3, 208-211 primitive accumulation of capital, 89 private property, 31, 33, 35, 80, 83, 89, 260 productive capital, 5, 45, 58-59, 61-63, 65, 76n8, 131-132, 142, 151, 159-160, 153-164, 169, 175, 180, 188, 195, 203 productivity, 29, 39, 44, 50-57, 63, 65, 71, 88, 105-113, 138, 140-142, 146-147, 150, 152-161,165, 192, 199, 232-233, 255, 259, 264, 267, 269-270 profit margin, 100, 102-103, 105, 130, 151-152, 189 proletariat (see also working class), 29,

292  Twilight Capitalism 35, 88-89, 117, 257 property rights, 251 quantitative easing, 15, 45, 75n2, 165, 186, 205-206 Ramonet, Ignacio, 82-83 rate of profit, 56, 59-60, 63-65, 99-111, 124, 126n8, 128n9, 128n10, 128n13, 130-131, 140-162, 166n5, 168-176, 181, 182-189, 192, 194, 197n3, 197n9, 199-200, 207, 209, 121, 219, 232-233, 241 rsv (rate of surplus value), 100, 107-109, 169-170, 184, 191-192 rationality, 57, 103, 154 Reagan, Ronald, 60, 84, 136 real contradiction, 75n6, 217 realisation, 220 realism 245-246 Republican Party, 9, 51, 135, 226-227 recession, 2, 5, 40-51, 59, 62, 65, 67, 69, 71, 75N6, 77N11, 83, 102, 104, 112, 123, 132-136, 139, 141-143, 146, 162, 163-165, 168, 173, 176-177, 189, 192, 193, 195, 197, 229 redistribution, 101-102, 105, 127n8, 135, 153, 156, 181 reformism (left), 73, 241-242, 246-247, 265 Reich, Robert, 82 relations of production, 30, 72, 78-79, 83, 87, 113, 126, 130-131, 178, 179 relative form, 212-213 relative surplus-value, 106-107 reserve army of labour, 28, 121 Respect (Britain), 240 reversals (value-form), 213, 216 Ricardo, David, 115, 211, 214, 218 rising strength of labour (crisis theory), 63, 142 Roberts, Michael, 51, 53, 76n9, 128n10, 133, 164-165, 168-170, 173-176, 200, 209-210 Roosevelt, Franklin, 85 Rousseau, Jean-Jacques, 203 Rozworski, Michael, 265, 269 Russia, 11, 18, 33, 34, 81, 133, 226, 234, 243, 245, 256-257

“Russiagate”, 226 Sachs, Jeffrey, 81-83 Saez, Emmanuel, 41, 48, 197n4 Samuelson, Paul, 92-93, 97, 115, 127n5, 200, 209-210 Sanders, Bernie, 74n2, 86, 205, 225-226 Say’s law, 133 Schumpeter, Joseph, 115 science, 24, 36n5, 125, 257 scientific socialism, 10, 74, 266 Second International, 239, 243 Seymour, Joseph, 143, 271-272 Shaikh, Anwar, 53, 63-64, 94, 127n3, 143, 169, 172-175, 182, 195-196, 197n5, 216 Skidelsky, Robert, 200 simple commodity production, 94 skill/ skilled labour, 51, 94, 126, 212 sliding scale of wages and hours, 73 Smith, Adam, 115 Smith, Murray E.G., 32, 127n7, 161-162, 177, 188, 198-199, 221n1, 222n3, 244, 252, 254n7 snul (socially necessary unproductive labour), 63, 99, 121, 159, 161 social democracy, 228, 239-240, 242, 261, 264 social ontology, 219-220 socialism, 3, 10, 34, 36n5, 38, 45, 67-69, 72, 74, 80, 83-84, 114-116, 122, 125, 137-138, 220, 225, 229-232, 234, 236-240, 242-245, 251-252, 253n1, 254n11, 256, 258-270, 274 socialism in one country, 69, 231, 238239, 242, 264, 270 socialist consciousness, 252 socialist construction, 234-235, 247, 255256, 258-259 socialist planning, 69, 259, 265-266 socialist transformation, 39 socially necessary labour, 93, 101-102, 106, 156, 198, 204, 207, 212, 216218, 221n2 socially necessary unproductive labour (snul), 63, 99, 121, 159, 161 South Africa, 17 Soviet Bloc, 66, 115, 133, 142, 223, 229, 235, 238, 241, 255, 258, 265, 269 Soviet bureaucracy, 236, 257-258

Index  293 Soviet democracy, 270 Soviet Union, 3, 68, 76n10, 133, 138, 223, 229, 231, 235-237, 254n7, 255-257, 268-269 Spain, 176, 225, 240, 246 Spanish Flu/Influenza pandemic, 5 Sraffa, Piero, 211, 214 Stalin, Joseph, 68, 76n10, 236, 239, 256, 264, 270 Stalinism/ Stalinist, 69-71, 115, 231, 235236, 238-247, 252, 254n7, 256-257, 274 state expenditures, 147, 183 Steedman, Ian, 211 Stiglitz, Joseph, 82 substance of value, 216, 221n3 subsumption of labour, 106 surplus labour, 29-31, 89, 97-99, 105-106, 126, 152, 183, 185, 207 surplus population, 17, 120-121, 125, 233 surplus-value, 3, 30-32, 46, 52, 55-56, 61, 63, 66-67, 69, 75n4, 89, 94-109, 129-132, 151-166, 166n4, 166n5, 168-175, 177-193, 195-197, 197n3, 197n7, 200, 203, 207-210, 217, 219220, 222n5 Sweezy, Paul M., 172, 209-210 Syriza (Greece), 225, 240 taxes and tax revenues, 14, 32, 49, 89, 9899, 123, 127n7, 131, 136, 205-207, 271 tcc (technical composition of capital), 107, 109, 120-121 temporal modes of value, 178, 185, 188 tssi (temporal single system interpretation), 170, 185, 197n8, 209-210 “Tobin Tax”, 240 Tonak, E. Ahmet, 197n5 total value, 95, 98-99, 102, 110, 152, 156, 184, 209 transformation (problem, procedure, process), 101, 115, 121, 125, 208211, 215-217, 222n5 transitional demands/ program, 33, 68, 237, 240, 256, 258-259, 266, 268, 270. 272 transitional economy/ society, 68, 70, 77n11, 237-238, 258

Trepper, Leopold, 236 triple crisis of the 21st century, see crisis Trotsky, Leon/ Trotskyism, 68, 76m10, 133, 235-253, 253n4, 254n7, 254n8, 254n9, 254n11, 255-260, 265, 270274 Trudeau, Justin, 18 Trudeau, Pierre, 137 Trump, Donald, 8, 14, 16, 18, 20, 26, 40, 42, 226-228, 251 Twilight capitalism, 1, 9, 32, 38, 40, 51, 71, 115, 130, 162, 164, 221, 228, 241, 273 Ukraine, 9, 226 uhnw (ultra-high net worth), 118 underconsumption, 111, 143, 150, 220 underdevelopment, 117 unemployment, 5, 27, 37n5, 59, 121, 123, 135-136, 140-141, 145-147, 204, 206 uniform rate of profit, 212 union, 36n5, 50, 53, 81, 83-84, 86, 109, 124, 136-138, 142, 237, 242, 247248, 261-262 United Kingdom, see Britain/British United Nations Development Program, 237 United Socialist Party (Venezuela), 225 United States, 6, 9, 11-18, 20-21, 27, 39, 41-44, 48, 50, 52, 59, 62, 66, 71, 81-83, 90, 102, 104, 117, 119-120, 128n12, 131, 135-137, 141, 144-149, 160, 162, 165, 169, 176, 226-227, 238, 248, 250, 269 universal equivalent, 213, 219, 259 unproductive capital, 159, 180-181, 184, 197n3 unproductive labour, 1, 63, 99, 157-160, 169-171, 177, 179-180, 183, 185, 191, 197n3, 197n5, 197n7 use-value, 55-56, 93, 102, 152, 155, 179, 182, 212-213 valorization, 2, 8, 32, 94, 103, 129-130, 132-133, 144, 151-152, 156-157, 159, 162, 180-181, 185, 189, 191, 196, 199, 207 value categories, 158, 177-178, 180-185 value composition of capital (vcc), 184,

294  Twilight Capitalism 191, 192, 196 value composition of output (vco), 161, 185, 187 value form, 93, 101, 183, 185, 212-215, 217, 221n2 variable capital, 68, 98-100, 124, 127n7, 128n8, 128n9, 154, 158, 166n5, 168169, 171, 177-179, 181-184, 191, 193, 196-197, 197n7, 209-210 vcc (value composition of capital), 184, 191, 192, 196 vco (value composition of output), 161, 185, 187 Vidal, Gore, 227 Von Bortkiewicz, Ladislaus, 208-211 wage-labour, 90, 112 wages, 28-29, 44, 50, 52, 54-55, 59-60, 63, 69, 73, 75n2, 88, 92, 96, 99, 102, 108-109, 119-120, 127n7, 129n12, 131, 141-142, 147, 152, 157, 162, 169-171, 174, 182, 189-190, 192, 197n9, 198, 212 Wall Street, 14, 41, 75n2, 84-85, 228, 251 wealth, 6, 16, 21, 25, 28, 31, 34, 35n4, 43, 47, 54-56, 61, 74, 74n2, 75n2, 82-83, 87, 89, 91-92, 94-95, 112, 118, 119, 122, 126, 127n2, 156, 162, 177, 190, 198-199, 202-204, 232-234, 238, 260, 272 White, Jerry, 41 Wolff, Richard, 46 Workers’ Party (Brazil), 225 working class, 3, 31, 37n5, 46, 48, 50, 5253, 69, 71, 73, 76n10, 85-86, 88-89, 100, 115, 119, 125, 132, 134, 142, 161, 171, 206, 220, 224, 228-229, 231, 234-235, 237, 241, 243, 45, 247, 252, 255, 271 world capitalism, 1, 8, 53, 68-71, 115, 117, 133, 144-145, 177, 223, 225, 236, 238, 241, 250 world history, 5, 257 wrp (world rate of profit), 176 world market, 69, 71, 111, 114, 116, 127n6, 142, 144-145, 147-148, 232 world war, 2, 7, 41, 72, 114, 133, 228, 232 World War I, 240, World War II, 3, 65, 77n11, 114, 130,

132-135, 140-141, 144, 147, 168, 171, 191, 193, 236, 240 who (World Health Organization), 12, 14, 16-19, 21, 24 Workman, Thom, 4,103 Yugoslavia/Yugoslav, 133, 255, 270 Zakaria, Fareed, 122 Zucman, Gabriel, 48