Sraffa and Althusser Reconsidered : Neoliberalism Advancing in South Africa, England, and Greece 9781784410063, 9781784410070

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SRAFFA AND ALTHUSSER RECONSIDERED; NEOLIBERALISM ADVANCING IN SOUTH AFRICA, ENGLAND, AND GREECE

RESEARCH IN POLITICAL ECONOMY Series Editor: Paul Zarembka State University of New York at Buffalo, USA Recent Volumes: Volume 21: Neoliberalism in Crisis, Accumulation, and Rosa Luxemburg’s Legacy
Edited by P. Zarembka & S. Soederberg Volume 22: The Capitalist State and Its Economy: Democracy in Socialism
Edited by P. Zarembka Volume 23: The Hidden History of 9-11-2001
Edited by P. Zarembka Volume 24: Transitions in Latin America and in Poland and Syria
Edited by P. Zarembka Volume 25: Why Capitalism Survives Crises: The Shock Absorbers
Edited by P. Zarembka Volume 26: The National Question and the Question of Crisis
Edited by P. Zarembka Volume 27: Revitalizing Marxist Theory for Today’s Capitalism
Edited by P. Zarembka and R. Desai Volume 28: Contradictions: Finance, Greed, and Labor Unequally Paid
Edited by P. Zarembka

RESEARCH IN POLITICAL ECONOMY VOLUME 29

SRAFFA AND ALTHUSSER RECONSIDERED; NEOLIBERALISM ADVANCING IN SOUTH AFRICA, ENGLAND, AND GREECE EDITED BY

PAUL ZAREMBKA State University of New York at Buffalo, USA

United Kingdom
North America
Japan India
Malaysia
China

Emerald Group Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2014 Copyright r 2014 Emerald Group Publishing Limited Reprints and permission service Contact: [email protected] No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-78441-007-0 ISSN: 0161-7230 (Series)

ISOQAR certified Management System, awarded to Emerald for adherence to Environmental standard ISO 14001:2004. Certificate Number 1985 ISO 14001

CONTENTS EDITORIAL ADVISORY BOARD

vii

LIST OF CONTRIBUTORS

ix

PART I: RECONSIDERING SRAFFA FROM ‘POOL OF PROFITS’ TO SURPLUS AND DEFICIT INDUSTRIES: ARCHIVAL EVIDENCE ON THE EVOLUTION OF PIERO SRAFFA’S THOUGHT Scott Carter

3

COMMENTS ON SCOTT CARTER Robert M. Solow

63

RESPONSE TO COMMENTS OF ROBERT M. SOLOW Scott Carter

69

FIXED CAPITAL AND WAGE-PROFIT CURVES A` LA VON NEUMANN-LEONTIEF: CHINA’S ECONOMY 1987
2000 Bangxi Li

75

PART II: NEOLIBERALISM IN ACTION THEORY AND PRACTICE IN CHALLENGING EXTRACTIVE-ORIENTED INFRASTRUCTURE IN SOUTH AFRICA Patrick Bond

v

97

vi

CONTENTS

MARKETISATION, COMMODIFICATION AND THE IMPLICATIONS FOR TEACHERS’ AUTONOMY IN ENGLAND Martin Upchurch, Phoebe Moore and Aylin Kunter

133

STRANGER THAN FICTION: FICTITIOUS CAPITAL AND CREDIT BUBBLES IN POST-EMU GREECE Jesse Hembruff

155

PART III: RETROSPECTIVE ON ALTHUSSER EPISTEMOLOGICAL PROBLEMS AND ONTOLOGICAL SOLUTIONS: A CRITICAL REALIST RETROSPECTIVE ON ALTHUSSER Brian O’ Boyle and Terrence McDonough

183

PART IV: FOLLOW-UP: DEBATING LABOR ARISTOCRACY THE ROOTS OF WORKING CLASS REFORMISM AND CONSERVATISM: A RESPONSE TO ZAK COPE’S DEFENSE OF THE “LABOR ARISTOCRACY” THESIS Charles Post

241

A COMMENT ON THE POST
COPE DEBATE ON LABOUR ARISTOCRACY AND COLONIALISM Amiya Kumar Bagchi

261

FINAL COMMENTS ON CHARLES POST’S CRITIQUE OF THE THEORY OF THE LABOUR ARISTOCRACY Zak Cope

275

EDITORIAL ADVISORY BOARD GENERAL EDITOR Paul Zarembka State University of New York at Buffalo, USA EDITORIAL BOARD Radhika Desai University of Manitoba, Canada

Ozgur Orhangazi Kadir Has University, Turkey

Juanita Elias University of Warwick, UK

Paul Cooney Seisdedos Universidade Federal do Para´, Brazil

Thomas Ferguson University of Massachusetts at Boston, USA

Susanne Soederberg Queens University, Canada

Seongjin Jeong Gyeongsang National University, South Korea

Jan Toporowski SOAS University of London, UK

Jie Meng Tsinghua University, People’s Republic of China

vii

LIST OF CONTRIBUTORS Amiya Kumar Bagchi

Institute of Development Studies Kolkata, Salt Lake Campus, Salt Lake, Kolkata, India

Patrick Bond

University of KwaZulu-Natal, Centre for Civil Society, Durban, South Africa

Scott Carter

Department of Economics, The University of Tulsa, Tulsa, OK, USA

Zak Cope

Belfast, Northern Ireland, UK

Jesse Hembruff

Department of Political Studies, Queen’s University, Kingston, Ontario, Canada

Aylin Kunter

Business School, Middlesex University, The Burroughs, Hendon, London, UK

Bangxi Li

Institute of Economics, School of Social Sciences (MingZhai), Tsinghua University, Beijing, China

Terrence McDonough

Department of Economics, National University of Ireland Galway, Galway, Ireland

Phoebe Moore

School of Law, Middlesex University, The Burroughs, Hendon, London, UK

Brian O’ Boyle

St. Angela’s College (Sligo), National University of Ireland Galway, Galway, Ireland

Charles Post

Department of Sociology, Borough of Manhattan Community College-CUNY, New York, NY, USA

ix

x

LIST OF CONTRIBUTORS

Robert M. Solow

Department of Economics, M.I.T. (retired), Lexington, MA, USA

Martin Upchurch

Business School, Middlesex University, The Burroughs, Hendon, London, UK

PART I RECONSIDERING SRAFFA

FROM ‘POOL OF PROFITS’ TO SURPLUS AND DEFICIT INDUSTRIES: ARCHIVAL EVIDENCE ON THE EVOLUTION OF PIERO SRAFFA’S THOUGHT Scott Carter ABSTRACT This chapter argues that the Marxian theory of exploitation underlies the concepts of surplus and deficit industries that appear in Sraffa’s (1960) Production of Commodities by Means of Commodities. This is seen from archival research of the unpublished papers of Piero Sraffa housed at the Wren Library, Trinity College, University of Cambridge. There it is shown that the origin of these concepts lies in the Marxian theory of exploitation that Sraffa developed regarding the notion of the ‘pool of profits’ the Italian economist utilized over a 14-year period from 1942 to 1956. The chapter engages in an extensive textual study of the archival evidence and then presents a simple analytical model of these relations.

Sraffa and Althusser Reconsidered; Neoliberalism Advancing in South Africa, England, and Greece Research in Political Economy, Volume 29, 3
61 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 0161-7230/doi:10.1108/S0161-723020140000029001

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4

SCOTT CARTER

Keywords: Sraffa; Marx; exploitation; transformation problem; Sraffa Papers; surplus and deficit industries

INTRODUCTION The opening of Sraffa’s unpublished archival material beginning in 1993 has led to a wealth of new insights and interpretations regarding the development of the Italian economist’s thought. One of the most controversial aspects to emerge out of archival material is the relationship to Marx’s theoretical project and how this influenced Sraffa’s thinking with respect to his research agenda and eventual publication in 1960 of Production of Commodities by Means of Commodities (hereafter referred to simply as Sraffa’s ‘book’). The received ‘Sraffian’ interpretation argues that although sympathetic to Marx and socialistically inclined generally, the theoretical lineage in Sraffa runs from Ricardo to the critique of Marshall. What Marx brings to the table, so goes the argument, is actually found in Ricardo, and thus there exists for Sraffa a redundancy theoretically between Marx and Ricardo. This ‘redundancy’ argument has an interesting parallel to the ‘Sraffian’ rejection of labour values as also being ‘redundant’ according to the analysis first put forth by Steedman (1977). However new insights into the Marx
Sraffa connection can now be offered and the present chapter is written along these lines. The basic premise here is that far from being a marginal figure in Sraffa’s theoretical development, Marx actually plays a very heavy role in both how Sraffa frames the problems tackled in his book as well the solutions that he advanced for those problems, and further that this is revealed through unpublished archival evidence.1 Our inquiry here will be very specific and is by no means complete. What we present here is a sketch of the development of particular concepts that play a significant role in Chapter III, §16 through §22, of Sraffa’s book
namely those of surplus and deficit industries. We attempt to show using archival evidence2 that Sraffa developed these concepts over a gestation period of 14 years, beginning in 1942 with what he terms the ‘pool of profits’ and ending in 1956 with surplus and deficit industries conceptually developed in the form eventually employed in his book. We further argue that the latter retain the ‘fossil’ of the earlier ‘pool’ idea and that the earlier ‘pool of profits’ concept actually derives from Marx’s theory of exploitation, especially after Sraffa re-read Volume I of Capital while interned on the Isle of Man in 1940.

From ‘Pool of Profits’ to Surplus and Deficit Industries

5

The analysis below attempts to demonstrate that for Sraffa the ‘pool of profits’ represents unpaid labour
and hence exploitation
plain and simple. We argue that for Sraffa, following Marx, this profits poolas-unpaid labour represented the booty extracted from the working class by the capitalist class which, subsequent to its extraction, is distributed to owners of the means of production according to the general rate of profits on the value of the means of production advanced, and given that industries employ different proportions of labour to means of production, price distortions inevitably arise; this is precisely what surplus and deficit industries are all about. The structure of the following analysis is broken down into two parts. Part I consists of three sections. In the section ‘The Concept of Surplus and Deficit Industries’ the notion of surplus and deficit industries (SI and DI) as they appear in Sraffa’s book is presented, and explicit emphasis is made on the normalization of the value of living labour set equal to the value of the net product. The section ‘The ‘Pool of Profits’ in Sraffa’s Unpublished Notes’ introduces the relationship between the ‘pool of profits’
a conceptual category that Sraffa utilized for 14 years from 1942 to 1956
the Marxian theory of exploitation, and SI and DI; presented here are the two sets of notes that ‘bookend’ this 14-year period. The section ‘Textual Evidence’ engages in a detailed textual study of much of the archival material within this 14-year span. Part II consists of sections ‘Price Movements as the Wage Share Falls’ and ‘Input Remuneration as the Wage Share Falls’. These represent initial efforts at modelling analytically the content of the archival material and analysis advanced in the previous part. The last section concludes.

PART I THE CONCEPT OF SURPLUS AND DEFICIT INDUSTRIES The notion of surplus and deficit industries appears in the third chapter of Sraffa’s book entitled ‘Proportions of Labour to Means of Production’. Here the surplus- or net output-producing system of basics is subject to variations in distribution wherein relative price changes ensue for all commodities. In order to better understand this third chapter, we put it

6

SCOTT CARTER

in context and consider first the inquiry expounded in the previous two chapters wherein the relative character of the price form is established. In Chapter I an integrated multi-commodity basic system of production is introduced such that the physical or material gross output (Q) is produced in exactly the amounts required in the productive consumption of the material inputs (A). Sraffa calls this ‘production for subsistence’ and an important quality about this system is the fact that despite output being produced at levels necessary for the system only to maintain itself, a set of ‘unique’ exchange values, or relative prices, no less arises; and that this ‘set of exchange values’ when adopted allows the subsistence system to ‘restore’ itself. This ‘restoration’ takes the form of allowing for the proper allotment of the ex post gross output of a previous round of production to that of the ex ante input requirements of a subsequent round of production. Sraffa takes as given the ‘methods of production and productive consumption’ which by definition constitutes the particular configuration of ex ante input usage to ex post output production. In the subsistence model of Chapter I this productively consumptive process is assumed to occur such that no new output results; in terms of the language of Quesnay’s Tableau Economique, Sraffa’s subsistence model can be said to consist of a basic system of vertically integrated net-sterile industries. And what Sraffa shows is that net-sterility notwithstanding, a ‘unique set of exchange values’ or relative prices no less arises. In Chapter II the exercise is extended to the case wherein a physical surplus product now arises in the sense that more gross output is produced than required as aggregate means of production; such industries would in our Quesnaysian parlance be net-fertile. Sraffa (§4, p. 4), speaks of the system’s ‘self-contradictory’ character in that in the surplus model more physical gross output results ex post than required as physical inputs ex ante. And here the relative price form is saddled with an added responsibility. As with the subsistence model, in surplus-production prices must serve to ensure that the system restores itself. But unlike the former, in the latter surplus production prices have the added burden of having to equitably distribute at a uniform rate the (aggregate or global) net product to the different (individual or local) industries. And given the heterogeneity associated with the multi-commodity model, the rate at which the surplus is equitably distributed must be simultaneously determined with the relative prices themselves. The initial sections §4 and §5 of Chapter II introduce these relations within the context of a particular distributive regime, namely that associated with the maximum rate of profit. Now Sraffa does not make this explicit in his book, and retains instead the assumption from the net-sterile

From ‘Pool of Profits’ to Surplus and Deficit Industries

7

system of the first chapter that subsistence for workers is included in the overall input requirements. But in reality this amounts to the de facto assumption of a net-fertile system at the maximal profit rate regime of distribution, since in this case the labour input is absent and the surplus or net product is wholly distributed to the different industries according to the value of their aggregate means of production requirements. It is not until §10 that Sraffa makes explicit the labour input which he normalizes to the value of the net output in §123 and refers to both as ‘the national income’ (§13, p. 12). Here the system is made more general in the sense that changes in the distribution of the net output are conceived thereby resulting in the inverse relation between profits and post-factum wages, although it will not be until Chapter IV (§30, p. 22) on the Standard commodity that Sraffa will make this inverse relation explicit in terms of the relation r = (1 − ω)R and the accompanying linear downward-sloping graph. Arriving to this inverse relation necessitates the traverse of the notions of surplus and deficit industries in Chapter III where beginning in §13 Sraffa generalizes the model by considering the effect on price changes with changes in distribution of the national income. A concept that emerges here for Sraffa as ‘key in the movement of relative prices’ (§15, p. 12) is the ratio of labour to means of production (or LMP ratio), defined as the living labour of an industry divided by the value of its means of production. Here we have the particular expression the organic composition of capital takes in Sraffa’s book, which in Marxian parlance is simply the inverse of the materialized composition of capital (Carter, 2013, Perri, 2014). And what Sraffa shows at this stage is relatively straightforward: if the LMP ratio is uniform across all industries, then changes in the distribution of national income between wages and profits would have no effect on the prices of commodities. However if there were inequality in LMP ratios across industries then complications begin to arise. This of course is the well-known problem of the transformation of labour values and/or direct prices into prices of production; but it is instructive to note that Sraffa’s approach to this is novel indeed and it is here that the notion of surplus and deficit industries arises. In §14 (and Appendix A on Subsystems) Sraffa commences the analysis from the perspective of prices being at their labour values, and it is from here that systemic distortions ensue from distributional changes associated with decreasing the wage share: Since in any one industry what was saved by the wage-reduction would depend on the number of men employed, while what was needed for paying profits at the uniform rate would depend on the aggregate value of the means of production used, industries with

8

SCOTT CARTER a sufficiently low proportion of labour to means of production would have a deficit, while industries with a sufficiently high proportion would have a surplus, on their payments for wages and profits … There would be a ‘critical’ proportion of labour to means of production which marked the watershed between ‘deficit’ and ‘surplus’ industries. An industry which employed that particular ‘proportion’ would show an even balance
the proceeds of the wage-reduction would provide exactly what was required for payment of profits at the general rate. Whatever the value of that ‘proportion’ in any particular system, it can be said a priori that, in a system including two or more basic industries, the industries with the lowest proportion of labour to means of production would be a ‘deficit’ industry and the one with the highest proportion would be a ‘surplus’ industry. (Sraffa, 1960, §16 and 17, p. 13)

It is from this passage that we are able to read the theory of exploitation in the development of surplus and deficit industries. In Marxian terms we can say the situation begins with a rate of exploitation equal to zero wherein all labour is paid and the national income accrues as pure wage revenue. It then moves to a situation of positive exploitation in the sense that only a portion of labour is paid as accrued proportionate wages out of the total national income, with the remaining unpaid portion of labour accruing as profit revenue. Surplus and deficit industries thus emerge here as the discrepancies associated with the fact that as the rate of exploitation rises, the (initial) amount of unpaid labour extracted from owners of labour (‘workers’) in an industry is a function of the hours worked; whereas the (subsequent) distribution of this (initially extracted) unpaid labour to owners of means of production (‘capitalists’) of that industry is a function of the uniform rate of profits on the value of their ‘capital’4 advanced. The key as Sraffa tells us lies in the notion of an ‘average’ LMP ratio for the system as a whole; Sraffa calls this the ‘critical proportion’ which serves as the ‘watershed’ between surplus and deficit industries.5 And here a fullblown Marxian interpretation of the analysis begins: ‘surplus industries’ are labour intensive and ‘deficit industries’ are means of production (or ‘capital’) intensive with respect to the average ‘watershed’ proportion. Accordingly as the wage share falls from unity, workers in labour-intensive industries will have a magnitude of unpaid labour extracted per hour worked greater than the distribution of unpaid labour owners of such industries receive according to the uniform rate of profit on the value of their (labour-intensive) ‘capital’ advanced, and Sraffa says that such industries are surplus industries in that there is a surplus in the unpaid labour extracted versus that distributed within this industry. Similarly ‘capital’ intensive industries are deficit industries in that the unpaid labour extracted from workers there is less than that distributed to the owners of the (means of production-intensive) ‘capital’ advanced.

From ‘Pool of Profits’ to Surplus and Deficit Industries

9

And in developing this Sraffa utilized over a 14-year period the pool of profits. Thus, the pool of profits represents the mass of unpaid labour extracted at the particular rate of exploitation associated with any ‘given’ regime of distribution. This unpaid labour once extracted is subsequently distributed to the owners of the means of production according to the value of their ‘capital’ advanced. In §20 Sraffa remarks that the distortions giving rise to surplus and deficit industries in any actual economic system can yield quite complex and unexpected variations in prices, yet such complexity does not render the basic arguments advanced any less valid, only more complex: However complex the pattern of the price-variations arising from a change in distribution, their net result, and their complete justification, remains the simple one of redressing the balance in each industry. They fully achieve that objective, but it could not be achieved with anything less. (Sraffa, 1960, §20, p. 15)

From this we can discern that the price form itself serves as the mechanism by which this extractive-distributive process is at once manifested and at the same time concealed.

THE ‘POOL OF PROFITS’ IN SRAFFA’S UNPUBLISHED NOTES We first find the concept of the ‘pool of profits’ in notes written on September 20 and November 12 of 1942. These notes are collected under the heading ‘Exploitation’ and will be referred to some 14 years later by Sraffa in the ‘Majorca draft’ of March 1955.6 The ‘Majorca draft’ (D3/12/52) consists of 31 handwritten pages of material written in March 1955 and constitutes the genesis of Part I of Production of Commodities (single product industries). After specification of the production equations and a fascinating discussion on the choice of the wage share (‘proportional wages’) as opposed to the wage bundle (‘commodity’ wages),7 Sraffa in that manuscript begins to discuss the nature of price changes in the face of changes in distribution. We read from the ‘Majorca draft’ (note that all inserted and cross-out words and paragraphs are Sraffa’s8): D3/12/52/13 All we can say at this stage is that the prices will change in all sorts of ways, some rising and some falling. We cannot even be sure that wages + the rate of profits will move in

10

SCOTT CARTER the opposite direction: for there seems to be nothing to exclude that when, e.g. we transfer a part of the national income from wages to profits, there might be such a fall in the price of the goods composing the national income as compared with those composing the capital, as to cause the rate of profit to actually fall. This problem of the price relation between commodities composing the national income + those composing the capital is the first that must occupy us. The notion of national income at bottom is basically independent of prices. In effect the systems we have been considering are capable of reproducing themselves after each annual cycle, since we find among their aggregate product all the commodities, + in at least the same quantities, as have been used up in production. These can therefore item by item be segregated from the product, + what is item by item left over is the net national income: this is a collection of commodities which can be determined without need to know their values.

Insert pages of 1942 on prices, wages, and pool of profits headed ‘Exploitation’9 and then Insert pages of 1945-6 on Social Revenue or National Income (repetitive or not).10

The circle around these two concepts appears in Sraffa’s hand. Clearly he was inserting here important ideas that he had developed in the 1940s. The interesting part of this for our immediate purpose is the inclusion of the 1942 ‘Exploitation’ insert. The pages that Sraffa is referring to are found in D3/12/17 (Notes: Prove and Finding Lists; 1942
1955). In fact this entire folder contains a wealth of information related to the ‘pool of profits’ and the nascent development of the surplus and deficit industries concept as well as the above referenced 1945
6 pages on Social Revenue. The file begins with the aforementioned notes headed ‘Exploitation’ and ends with notes of September 1955 on the ‘pool of profits’ and the implications this concept has for the problem of pricing in socialism. The fact that the end of the file contains notes from September 1955 indicates that Sraffa compiled its contents after his writing of the ‘Majorca draft’.11 It is here that the ideas from the 1940s and the mid to late 1950s begin to meld.12 The question Sraffa raises in the context of the ‘pool of profits’ refers to the complex distortions of prices from values when distribution of the net product changed. In the early 1940s Sraffa began to study and conceptualize this problem from a Marxian perspective as evidenced by the above referenced notes ‘Exploitation’ and also by an instructive note that Sraffa

From ‘Pool of Profits’ to Surplus and Deficit Industries

11

had made on a piece of ruled paper that appears folded inside the front cover of the English edition of Capital, Volume I that Sraffa had (re-)read while interned on the Isle of Man in 1940:13 The greater the degree of exploitation in a society as a whole, the greater is the distortion (i.e. the greater the divergence between values and prices). As, the greater the amount of snow fallen, the greater is the distortion of the surface of a piece of broken ground (i.e. divergence between the surface of the snow and that of the ground underneath; supposing that since the snow collects in the cavities). (Sraffa, p. 3731)

Notice here how Sraffa begins to frame the problem
and it will be shown that the way he framed it led him to the specific solution he advanced. Here Sraffa compares unpaid labour extracted as ‘snow’, and that the more unpaid labour extracted (‘snow fallen’), the greater the distortion between value and price (‘surface {and}… broken ground’). Sraffa’s ‘snow’ here is essentially the same concept as the ‘pool of profits’ he would pen two years later. Sraffa was deeply influenced by his re-reading of Capital in 1940. Indeed his understanding of the historical nature of exploitation we can in large part trace to Marx. He was especially taken by Marx’s exposition of the expression of paid and unpaid labour across historical epochs. In Part Six: Wages, Chapter 19 ‘The Transformation of the Value (and Respectively the Price) of Labour-Power into Wages’, Marx discusses how in slavery all labour appears to be unpaid when in fact a portion is paid for; how in feudalism the demarcation between paid and unpaid labour is transparent in both time and space; and how in capitalism all labour appears paid when in fact a portion is unpaid. From Marx we read: The wage form thus extinguishes every trace of the division of the working day into necessary and surplus labour, into paid and unpaid labour. All labour appears as paid labour. Under the corvee´ system it is different. There the labour of the serf for himself and his compulsory labour for the lord of the land, are demarcated very clearly both in space and time. In slave labour, even the part of the working day in which the slave is only replacing the value of his own means of subsistence, in which he therefore actually works for himself alone, appears as labour for his master. All his labour appears as unpaid labour.† In wage-labour, on the contrary, even surplus labour, or unpaid labour, appears as paid. In the one case, the property-relation conceals the slave’s labour for himself; in the other case the money-relation conceals the uncompensated labour of the wage-labourer. †

The Morning Star, a London free-trade organ which is so naı¨ ve as to be positively foolish, protested again and again during the American Civil War, with all the moral indignation of which man is capable, that the Negroes in the ‘Confederate States’ worked absolutely for nothing. It should have compared the daily cost of a Negro in the southern states with that of a free worker in the East End of London. (Marx, 1976, p. 680)

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SCOTT CARTER

In Sraffa’s copy of Capital we find the following notes on this passage by Marx written on a piece of ruled paper also inserted in the front cover the text: Serfdom: labour for lord, and labour for himself, are clearly separated Slave-labour: all labour appears as done for the master Wage-labour: all labour appears to be paid for N.B. 1. Those who (like Croce) say that the labour theory of value applies to an ‘ideal’ community, in which commodities actually are exchange at their value, might as well say that the theory of surplus value only applies to serfdom, in which labour is clearly actually divided into two parts, paid + unpaid. However, the only difference (between these cases and capitalism) is the fact that there obvious + here concealed. N.B. 2. It is as absurd to say that the theory of surplus value implies an attack on capitalism, as it would be to say that it implies a defence of slavery: it simply removes a veil, which whitewashes the former + blackens the latter (See M’s footnote … ridiculing the Morning Star for being taken in by the appearances + saying that the negro slaves ‘worked for absolutely nothing’). (Sraffa p. 3731)

This idea had a lasting impact on Sraffa. It is our contention that Sraffa’s task was to render clear the concealed exploitive nature of capitalism through the demonstration that the mechanism through which it is hidden is the price system (money form) itself. We further contend that this idea remained for Sraffa the modus operandi of his book. In 1942 we find Sraffa again grappling with the question of exploitation. In the above referenced notes headed ‘Exploitation’, we find four pages written on notebook paper (D3/12/17/2
5). The first page is dated September 20, 1942 and is a self-contained document. The latter three pages are a continuous document dated November 12, 1942 which continues discussion from September. The first page contains a very interesting diagram of price movements in the face of changes in distribution. In constructing this diagram Sraffa distinguishes commodities according to the respective value of the organic composition of capital. We read from that first page: D3/12/17/2 20.9.42 ‘Exploitation’ Having built up the system, make it move. Begin by moving w, by steps, to its maximum position. All the prices of individual commodities will move, some rising, some falling. Represent all this by a single diagram. On the ordinate represent prices so that there is a curve for each commodity: arrange the commodities, from top to bottom, in order of

13

From ‘Pool of Profits’ to Surplus and Deficit Industries decreasing organic composition, so that, with a fall of w, the top commodities will fall, the middle one unchanged, + the bottom one rise. The point 0y represents ‘values’.

Machines Wheat

y

Cotton

A

0

none

x

s On the abscissa represent 1
w, or ,14 or some other function of the proportions v in which the product is distributed (!); choosing the function that gives the simplest curves, preferably the one (if available) that gives straight lines.15

w increases equally in all industries. We notice that in low composition industries, w, as it increases, absorbs more than the total profits previously made in that industry; when w reaches its maximum (at the point 0) in each of the industries below the middle, w has increased more than the profits have decreased in the same industry. (On the other hand in industries above the middle, w rises by less than profits fall). It is clear that ‘exploit.’ was equal in all industries, in spite of appearances. It is also clear that this is a social phenomenon; even if the capitalist in the low comp. industries gave all their profits to w, they would still be exploited by cap. society as a whole.

The logic of the graph is brilliant in its simplicity. What it shows are prices of a variety of products produced by a variety of industries. At the origin the wage share is unity such that the vertical intercepts represent labour values. As we move away from the origin the wage share declines and distortions begin to set in with respect to values. The price of some commodities increases while that of others decreases. The rise or fall of the respective prices will be functions of the value of the organic composition in the producing industry. An average composition is clearly demarcated as a horizontal line (it also appears darker in the notes). As wages fall those commodities produced with lower organic composition of capital (labour intensive) will exhibit a fall in price relative to the average and those commodities produced with higher organic composition of capital (capital intensive) will exhibit a rise in price relative to the average.

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SCOTT CARTER

Sraffa will come back to this very idea in notes written on February 12, 1956. We find in the file D3/12/59: Balancing of Wages and Profits16 the following interesting restatement 14 years later: D3/12/59/31-2 12.2.56 Under these circumstances as we reduce the wage the prices of commodities would depend exclusively + in a simple manner from the proportions by which they were produced. The price of each commodity would uniformly rise, or uniformly fall, throughout the interval, the degree of the rise and fall depending exclusively on the proportion of labour to means by which it was produced. We could arrange the various products in the order of the degree of price variation beginning with at one extreme with the one whose rise was steepest + ending with the one which fell most sharply.

In the foll. diagram the unit of each commodity is supposed to be chosen of such size as to be equal in value:

p

w=1

w

0

In the middle there is just room for one product which has no tendencies either to rise or to fall: since the standard of prices is the aggregate means of production this implies that it is produced by such proportions of labour + means of production that there is within the industry producing it an exact balance at all steps in the variation between deduction from wages + addition to profits.

It is of interest to note that Sraffa crossed the diagram out in his notes and it is curious why he would do so given the simplicity of exposition of the argument such a graph can (and does) provide. This could perhaps be related to the ultimate non-inclusion of the ‘profit pool’ in the published work. These two diagrams represent an interesting restatement and reappraisal of the concepts behind the pool of profits some 14 years removed. But more than that, these diagrams also bookend both the beginning and ending points, the alpha and the omega, for the ‘profit pool’ concept. In other words, although in its nascent form in the notes on Capital of 1940, we first find the usage of the term ‘pool of profits’ in notes dated three months after the initial 1942 diagram (first graph dated September 20, 1942; ‘pool of profits’ first appears in notes dates December 11, 1942); alternatively five days before the second diagram we find the last usage of the ‘pool’ concept

From ‘Pool of Profits’ to Surplus and Deficit Industries

15

(‘pool’ last appears February 7, 1956; second graph dated February 12, 1956). This is in fact a very interesting discovery because we argue it indicates how Sraffa came full-circle in developing and then discarding an important idea that would help him evolve the concepts of surplus and deficit industries which do in fact prominently appear in his book.

TEXTUAL EVIDENCE The period of gestation for the ‘pool’ concept lasts for 14 years, from September 1942 to February
March of 1956. Our initial research has uncovered 46 specific document pages from 10 different file folders in Sraffa’s Archives over these 14 years. Table 1 lists the 10 different file folders and the corresponding titles which contain the 46 relevant documents for this study. Note that the file folders are sorted according to archival number and not chronologically. Of these 10 file folders, in addition to the Majorca Draft (the importance of which we discussed above), the most important are D3/12/17 which contains seven documents, D3/12/45 and D3/12/53, each of which contains six documents and D3/12/59 which contains 18 documents. D3/12/17 spans 13 of the 14 years of gestation of the profits pool concept and accordingly this Table 1. File Folder Number

Archival File Folders Used in Present Study Sorted by Archival File Folder Number. Number of Documents

D3/12/2

1 document

D3/12/17 D3/12/44 D3/12/45

7 documents 1 document 6 documents

D3/12/50 D3/12/52 D3/12/53

2 document 1 document 6 documents

D3/12/54

2 documents

D3/12/59

18 documents

D3/12/61

2 documents

Title of Folder (Quotation Marks Indicates File Name Given by Sraffa) ‘Notes including some working by Frank Ramsey and Abram Besicovitch (1926
1955)’ Notes: ‘Prove and Finding List (1942
1955)’ ‘Notes (August 1946
1948)’ ‘Points possibly still useful on the balance of wages and profits (November 1955)’ ‘Rubbish (transferred to clean copy)
1955’ ‘Majorca Draft’ (March 1955) Notes: ‘Discard (almost certainly), mostly on the Standard commodity (January
March 1955)’ Notes: ‘Left at Cambridge September 1955 on Standard Commodity (August 1955)’ ‘Balance of Wages and Profits (probably finished) 24.11.55 up to March 1956 (1955
1956)’ ‘Discarded used drafts (1955
1956)’

16

SCOTT CARTER

file folder gives a nice birds’ eye view of the development of Sraffa’s thinking. In D3/12/45, written in November 1955, we find only one direct reference to the profits pool concept but several references to the idea of a ‘dividing line’ between industries and first and second order price complications-Sraffa calls them ‘factors’-that arise with changes in distribution. In D3/12/53, written from January through March 1955 (immediately prior to the Majorca Draft), we find the two conditions for the ‘stability’ in a standard as well as discussion of changes in the physical net product with changes in income distribution, the latter being something that Sraffa will return to in the eventual demise of the profits pool concept. In each of these three major file folders the profits pool concept is presented in a very positive light and we infer that at this point Sraffa intended to include it in his book. However when we get to D3/12/59, written in the three month span from September through November 1955, things begin to change. Here we begin to find skepticism on Sraffa’s part regarding the profits pool concept. It must be noted that this skepticism seems to have troubled Sraffa. It seems, at least from our reading of the documents, that Sraffa became uneasy with what he saw as a ‘collapsing’ of the pool concept. We further argue that out of the ruins of the profits pool concept rose those of surplus and deficit industries and that the latter contain the fossil of the former, and hence also that of the theory of exploitation Sraffa discerned from Marx. Table 2 contains in chronological (not archival) order these 46 documents and Fig. 1 reproduces many of the important documents in terms of a timeline. In retracing Sraffa’s chronological development of the profits pool concept during the 14 years between 1942 and 1956, our research has uncovered the following tripartite periodization: First period: September 1942 ‘Exploitation’ notes (D3/12/17/2) through March 1955 Majorca Draft (D3/12/52). Here the pool concept is derived from Sraffa’s interpretation of Marx’s theory of exploitation (as evidenced from Sraffa’s Notes on Capital). In this period the concept is laid as a conceptual building block for Sraffa’s system. Second period: September 1955 (D3/12/17 and D3/12/53) through November 1955 (D3/12/59), as well as spattered comments in July and August 1955. Here we have a full-blown study of the ‘pool’ concept complete with its rise (September) and its ultimate fall (November). Third period: Post-November 1955 through Post-March 1956 (D3/12/67). Here we have the development of the surplus/deficit industry concept and spattering references to the ‘pool’, each marked with increasing uncertainty. After March 1956 ‘pool’ disappears from notes and exclusive focus is on the surplus/deficit industry concept.

Date

Trinity Catalogue

1942
1948 20/9/1942

D3/12/17/2

12/11/1942

D3/12/17/3

Early 1945 (?) D3/12/2/20 27/8/1946 27/8/1948

D3/12/44/10 D3/12/17/11

1955 March 1955

D3/12/52

17/7/1955 8/1955

D3/12/54/12 D3/12/54/3

9/1955

D3/12/17/20

7/9/1955

D3/12/50/8-9

7/9/1955

D3/12/53/1

‘Pool’ Concept Chronologically Sorted (with Brief Comment). Comment

Years subsequent to Sraffa’s 1940
1941 re-reading of Marx’s Capital, Volume I ‘Exploitation’ with diagram. Sraffa begins this with statement ‘Having built the system, make it move …’ The ‘move’ Sraffa refers to is that of distributional changes. Earliest usage found so far of term ‘social pool’; Sraffa here develops the distinction between social or aggregate profits versus individual industry profits. No date and in a folder labelled ‘Useful’ which contains documents from 1926 to 1955; probably 1945 because of the use of ‘organic composition’ term. ‘Pooling of profits’ is seen as an automatic process achieved through ‘price-reckoning’. Document entitled ‘The Profits Pool’; Note that Sraffa revisits this document in January 1955. This is an early extended statement of the ‘pool’ concept (very important).

17

September through November 1955 are the most prolific months Majorca Draft. This is an important pivotal document in Sraffa’s intellectual development. Among other developments this document contains explicit references to notes written in 1942 and 1945
1946. Part of two page document that speaks of commodities adding and taking from pool. In a table included in an early outline of his work, the ‘pool’ concept appears as one of the ‘passi essenziali’ or ‘essential steps’. This document is an outline of Sraffa’s ‘schema’ or plan. Here he speaks of the ‘two causes of change in price relatively to other commodities’: (1) different quantities of labour to means of production for the ‘immediate’ commodity; and (2) change in the value of aggregate means of production of one commodity relative to another. Sraffa will speak of these two ‘factors’ or ‘causes of change’ in repeated documents. ‘Rubbish’ folder; contains a small blurb that speaks of complexities with respect to changes in prices. This speaks especially to the second ‘cause’ or ‘factor’ as per D3/12/17/20. This document speaks to the idea of ‘stability’ in the means of production with respect to price changes and also discusses the use-value aspect of the distribution problem; namely that the size of the net product in an industry can change with changes in distribution. This will be related to Sraffa’s example of the ‘shoe industry’.

From ‘Pool of Profits’ to Surplus and Deficit Industries

Table 2.

Date

Trinity Catalogue D3/12/53/2

10/9/1955

D3/12/17/16

10/9/1955

D3/12/17/17

24/9/1955 9/1955 9/1955

D3/12/53/22 D3/12/53/24 D3/12/53/25

29/9/1955

D3/12/17/18

9/1955 14/10/1955

D3/12/53/31 D3/12/59/73

10/1955 14/10/1955

D3/12/59/74 D3/12/59/63

10/1955

D3/12/59/65

Comment Document entitled ‘Approach’. Here Sraffa speaks of the conditions of invariability as being such that no price change is required when distribution changes for the invariable commodity. This document discusses the conditions for the equalization of profits among industries with a change in distribution. Here Sraffa notes that the wages changes per industry do not go into the ‘pockets’ of owners of these industries. Also noted here is the idea that prices distribute physical net product in each industry. This document follows immediately from the previous and is a concise statement of how the profits pool concept and the resulting price movements shows that the criticism of pricing in socialism is ‘not wellfounded’. Sraffa here accuses both von Hayek and Joan Robinson of this error. Brief outline of Sraffa’s plan with ‘pool (anti-socialist)’ as one of the entries. Another outline
looks like a subsequent development of D3/12/53/22. Sraffa speaks of the ‘criss-crossing of prices’ as shifting the use-value quantity and distribution of the physical net product. This is a more developed version of D3/12/53/25. In this version Sraffa more clearly locates how the distribution of the profits pool is ‘effected through the price system’. Another version of the criticism of the critique of socialist pricing using the profit pool concept. This document is a non-numeric exposition of Sraffa’s ‘shoe industry’. The example of the ‘shoe industry’ is one that illustrates the fact that the physical size of the net product of an industry changes simple with respect to the change in distribution. Sraffa’s shoe industry is an example of a surplus industry and he shows there that as the wage share falls, the size of the net product will also fall. Thus, whenever Sraffa puts ‘shoes’ in an outline or a marginal note he is referencing the idea of quantity size changes with changes in distribution. This document is a numeric illustration of Sraffa’s ‘shoe industry’. This document speaks of the ‘second factor’ complications such that what are at first sight either surplus or deficit industries may experience, due to the second factor, price movements that are not to be expected if only the first factor is taken into account. No mention of ‘pool’ explicitly but does address the need for price movements to redress the balance in wages and profits at the industry level.

SCOTT CARTER

7/9/1955

(Continued )

18

Table 2.

D3/12/59/68 D3/12/59/67 D3/12/59/69 D3/12/59/70 D3/12/59/71

11/1955

D3/12/59/72

28/10/1955

D3/12/59/53

11/1955 11/1955

D3/12/45/3 D3/12/45/4

11/1955

D3/12/45/5

11/1955

D3/12/45/12

11/1955

D3/12/45/13

11/1955

D3/12/45/17

11/1955

D3/12/59/50

19

Earlier draft of D3/12/59/65. Later draft of D3/12/59/68. This document is a small blurb on the complications from ‘secondary influences’. Outline of plan that begins with ‘organize’; discusses aspects mentioned in documents above. More detailed outline of plan in D3/12/59/70; does include ‘image of the pool (limitations)’ which indicates somewhat of a retreat of the ‘pool’ concept. Could be the earliest evidence of the ‘retreat’; see D3/12/59/ 53 which has an exact date in late October. Sraffa refers to ‘a sort of pool’ and that this ‘pool operated through the price system’; includes term ‘deficiencies’ and ‘surpluses’. The idea of a ‘sort of pool’ again indicates a retreat from the concept. In this document we have a specific date RE: Sraffa’s uneasiness with the ‘profits pool’ concept based, on the physical use-value changes in net product with changes in distribution. We read here that ‘… is then not the pool a myth?’ No specific mention of the ‘pool’ but a brief blurb on the conditions for surplus and deficit industries. Again no specific mention of the ‘pool’ but advanced development of the idea of a ‘dividing line’ industry from which no change in price is necessary with distributional changes. Also Sraffa speaks of the ‘element of instability’ that arises from the ‘second factor’. In this document Sraffa speaks of the ‘general conditions of stability’ of a standard which is related to the ‘two causes’ spoken about in D3/12/17/20. In this document Sraffa asks the question of whether or not the search for an invariable standard (or ‘stability’ generally) ‘is … a chimerical question?’ Subsequent page of a document (the first page was not found in our initial research) in which Sraffa speaks of price changes in the face of distributional changes ‘… the same as if a social pool of profits were operated …’ Also Sraffa in various marginal notes speaks of how the price system accomplishes ‘redress’ or ‘balance’ as well as the notion that complications from the ‘second factor’ can be abstracted from, but not so of the ‘first factor’. This is an important document that speaks of the ‘redistribution of national income between industries … as a complement of its redistribution between capital and labour’. Sraffa returns to this idea in D3/12/59/50
51. This is a more advanced version of the idea that the ‘redistribution of national income between industries … as a complement of its redistribution between capital and labour’. Also here the ‘pool’ concept is not definite: ‘The result is the same as if there were a social pool of profits …’. The ‘as if’ once again indicates Sraffa’s retreat.

From ‘Pool of Profits’ to Surplus and Deficit Industries

15/10/1955 16/10/1955 10/1955 11/1955 11/1955

Date

Trinity Catalogue D3/12/59/51

4/11/1955

D3/12/59/55

5/11/1955

D3/12/59/57

6/11/1955

D3/12/59/78

15/11/1955

D3/13/59/62

17/11/1955

D3/12/59/60

1956 1/1/1956

D3/12/61/48

7/2/1956

D3/12/61/42

Comment This document speaks of the diagram idea in content and also the idea that the ‘redistribution of national income between industries … as a complement of its redistribution between capital and labour’. This document is probably before this date since date is written on back. On the front we find more of Sraffa’s skepticism. It is entitled ‘After pool’ and there we find ‘[t]he image of the pool is suggestive but not accomplished too far … after pool (not to take too literally)’. But the 4/11/1955 note on the back notes that maybe the pool concept is not as unaccomplished as the front page indicates. We take this as Sraffa’s indecision at this point on the pool concept. Here Sraffa gets very negative on the pool concept. We read that the ‘collapse of pool seems more disastrous than ever …’ Develops the pool concept in a positive light which we take as an effort to rehabilitate it; this document also includes the example of the shoe industry which we argue is related to the reason why the pool concept was ultimately abandoned. This document is an outline of Sraffa’s plan. Although the term ‘pool’ is not mentioned, the term ‘pockets’ is and this latter term is a reference to the pool. Document entitled ‘On the retrieve of the pool’; here Sraffa attempts to rehabilitate the pool concept but in the end indicates that it may be somewhat tautological; although he does not clearly spell this out. By 1956 ‘profits pool’ concept all but abandoned This document is a rough outline of how Sraffa intended to proceed. In developing the idea of unbalance we find explicitly the statement that ‘N.B. This is also the opportunity to revive the transfer of profits between industries (profit pool)’. Thus, we conclude that by this time Sraffa had abandoned the pool concept such that if it were to be included it would have to be ‘revived’. In relatively advanced notes on how prices move when distribution changes we find on the back of the document an outline of the argument that has the term ‘pool?’ (with the question mark) circled. This is the last instance of the term ‘pool’ that our research has uncovered. From this point forward Sraffa does mention the ‘profits pool’ concept again.

SCOTT CARTER

11/1955

(Continued )

20

Table 2.

Sraffa’s ‘snow’

1942

1946

‘Exploitation’ First Diagram D3/12/17/2

‘pooling of profits’ D3/12/44/10

Notes on Capital, Volume I

1948

‘The Profits Pool’ D3/12/17/11 comments added January 1955

Sraffa 3731

Jan 1955

Mar 1955

Jul 1955

Aug 1955

D3/12/17/11 comments added January 1955 to 1948 document

Majorca Draft D3/12/52

‘some take and some give to pool of profits’ D3/12/54/12

outline: ‘passi essenziali’ (Italian for ‘essential steps’) containing ‘pool’ D3/12/54/3

Pivotal document between concepts of 1940’s and 1950’s

First use of term ‘pool’ D3/12/17/3 Sraffa revisits this document in September 1955

Synopsis of Timeline 0. 1.

1940: Genesis of concept of ‘pool of profits’ in Sraffa’s ‘snow’ in notes on Capital I. 1942: September 20 - Begin with diagram showing changes in price in document entitled ‘Exploitation’; December 11 – Earliest usage of concept of ‘social pool’ 2. 1948: August 27 – Document entitled ‘The Profits Pool’ 3. 1955: January – Sraffa re-reads and makes additions to 1948 ‘The Profits Pool’ document 4. 1955: March – Majorca Draft. This document is the pivot between the concepts of the 1940’s and the finished book in the late 1950’s. 5. 1955: September – This is a very prolific month for Sraffa. The terms ‘criss-crossing’ and ‘deficiencies’ can be seen as transitional concepts between the ‘pool’ and ‘surplus and deficit industries’; also the notion of ‘socialist pricing’ is presented almost as a by-product of Sraffa’s inquiries. 6. 1955: November – Also a very prolific month. Here we find Sraffa vacillating on the ‘pool’ concept; we find that the pool ‘collapses; that it should not be taken literally; and that he tries to ‘retrieve’ it. 7. 1955: December - The ‘surplus’ and ‘deficit’ concept emerge as the ‘stronghold’. Here we do not yet find surplus and deficit ‘industry’ but rather that the ‘products of industry show a deficit (or surplus)’ 8. 1956: January – Sraffa speaks of the ‘opportunity to revive the pool’, but does not do so. 9. 1956: February 7 – The term ‘pool?’ with the question mark is circled in an outline of his plan. This is the last time we find this term. In this same document we find the term ‘industry’ attached to ‘surplus’ and ‘deficit’. 10. 1956: February 12 – Sraffa revisits the diagram of 1942 but crosses it out. The diagram never appears again. 11. 1956: Post-February – We find drafts of the relevant chapters of Sraffa’s book (Chapters III and V) with no mention of ‘pool’ concept or any reference to the diagram.

Fig. 1.

Sep 1955

9 documents: ‘criss-cross’ D3/12/17/18 D3/12/53/25 ‘Schema’ D3/12/17/20 ‘socialist pricing’ D3/12/17/20 D3/12/53/31 D3/12/53/22 D3/12/17/17 with terms ‘surpluses’ and ‘deficiencies’ D3/12/53/24 D3/12/53/25 D3/12/53/31 D3/12/17/20 D3/12//50/8-9 D3/12/53/2 D3/12/17/16 D3/12/17/17 revisit 1942 document D3/12/17/3

Oct 1955

Nov 1955

Dec 1955

Jan 1956

‘After pool 10 documents: Term ‘This is also …is then not outlines of plan ‘deficit’ the the pool a D3/12/59/70 appears for opportunity myth?’ D3/12/59/71 first time: to revive the ‘operates Sraffa notes transfer of D3/12/59/53 through price ‘stronghold’ profits system’ on this between D3/12/59/72 document industries ‘collapse of D3/12/61/47 (profit pool)’ pool’ D3/12/61/48 D3/12/59/57 ‘after pool; do not take literally’ D3/12/59/55 ‘retrieval of pool’ D3/12/59/60 other: D3/12/45/13 D3/12/59/50 D3/12/50/51 D3/12/59/70 D3/12/59/71 D3/12/59/78

Feb 1956

In this document the term ‘pool?’ (with question mark) appears for last time; in same document the term ‘surplus and deficit industry’ appears for the first time (my emphasis). D3/12/59/42 Second Diagram appears but is crossed out. D3/12/59/31-32

From ‘Pool of Profits’ to Surplus and Deficit Industries

1940

From November 1955 through March 1956 the terms ‘surplus and deficit’ appear all over the place, see D3/12/59; in February 1956 Sraffa first put the terms together with ‘industry’. See D3/12/59/31-32.

From ‘Pool of Profits’ to ‘Surplus and Deficit Industries’: Timeline. 21

22

SCOTT CARTER

First Period: September 1942 through March 1956 We have seen earlier that upon re-reading Marx in 1940 Sraffa argues that price distortions will be magnified as exploitation increases. We have also seen from this re-reading that Sraffa was keenly aware of the idea that the exploitive nature of capitalistic systems is concealed such that wage labour has the appearance of being completely paid. It was Sraffa’s contention, developed below, that the price system itself is that which is responsible for concealing this exploitation. Consider again the document ‘Exploitation’ (D3/12/17/2) quoted earlier. Recall this was written on September 20, 1942 and there we find the interesting first diagram of value-price distortions across industries and commodities in the face of changes in distribution. Since in general different industries have different compositions of capital (or proportions of labour to means of production), Sraffa notes that relatively labour intensive industries fall in price as wages fall whereas capital-intensive industries rise in price with this same wage reduction. It is the general rate of profits coupled with the uniform rate of exploitation that cause these distortions in values from prices. Thus, here we infer that for Sraffa the key notion is the relationship between the unpaid labour extracted by workers at the level of the industry versus the unpaid labour distributed to owners at the level of the industry, the two in general not being equal in value due to different conditions of production across industries. The mediating relation between the extraction and distribution is that of total social profits. In terms of logical rather than historical time, workers in each industry create an amount of unpaid labour which is subsequently aggregated for society as a whole (the ‘pool’), and it is from this aggregated extracted unpaid labour that the owners of capital are equally remunerated according to the general rate of profits. Sraffa here clearly echoes Marx. Indeed Marx too refers to such a process occurring in capitalist society, a process which he calls ‘capitalistic communism’. In a letter to Engels dated April 30, 1868, Marx writes: It then follows that, the rate of surplus value, i.e. the exploitation of labour, being assumed as equal, the production of value and therefore the production of surplus value and therefore the rate of profit, are different in different branches of production. But out of these different rates of profit a mean or general rate of profit is formed by competition. This rate of profit, expressed in absolute terms, can be nothing else than the surplus value produced (annually) … in relation to the total capital advanced by society as a whole … What competition between the various amounts of capital
which are invested in different spheres of production and have different composition
is striving

From ‘Pool of Profits’ to Surplus and Deficit Industries

23

to produce is capitalistic communism, namely that the mass of capital belonging to each sphere of production receives an aliquot part of the total surplus value proportionate to the part of the total social capital which it constitutes. (Marx & Engels, 1975, p. 193; emphasis in text)

And from Theories of Surplus Value we read: It is a matter of indifference to the capitalist whether his commodity contains more or less unpaid labour than other commodities, if into its price enters as much of the general stock of unpaid labour, or the surplus product in which it is fixed, as every other equal quantity of capital will draw from the common stock. In this respect the capitalists are ‘communists’. (Marx, 1971, p. 83; emphasis in text)

It is in this respect that we argue Sraffa’s inquiries were at least in part an attempt to formalize and explain the ‘communism of the capitalists’ that capitalistic price formation brings about. Also note from the TSV quote that Marx considers the reallocation of surplus product as well as surplus (unpaid) labour. This idea of surplus product redistribution will become an important element in Sraffa’s inquiries. Sraffa returns to many of these ideas in the next set of notes already introduced above entitled ‘Exploitation, cont.’ written three weeks later on November 12, 1942 (D3/12/17/3-5)17: D3/12/17/3 ‘Exploitation’ cont. As wages decrease by a given proportion the total of profits, for society as a whole, increases by the same amount. But this is by no means true for any individual industry taken as separately: the increase in the total of profits, in any one industry, may be e.g. smaller than the decrease in the total wages paid in that industry. Where does the difference go? It goes, of course, to industries where the profits increase more than by the fall in their wages. And the adjustment is brought about by a fall in the price of the commodities produced by the former industry and a rise of those produced by the latter. 8.9.55 N.B. in terms of their means of prod.’ Thus, the proceeds of a reduction of wages, don’t simply pass from the pockets of the workers to those of their employer. They go, as it were, into a social pool of profits to which each industry contributed in proportion to the importance of its particular variable capital†; and which is then shared out, among the various industries, each receiving in proportion to their particular total capital (variable and constant). Expand this and say ‘and its contribution has no relation whatever with the amount of [rather ‘unknown’] constant capital which it employs. (Cp. Bo¨hm-B., Cap. and Int. (Smart), p. 390)

24

SCOTT CARTER

This is the first explicit usage our research has uncovered of the term ‘pool’. The parallel to Marx is quite striking. Profits generated at the industry level do not, argues Sraffa, ‘pass from the pockets’ of workers in that industry to capitalists of that industry. Rather, there is a larger ‘social’ mediating process at work
one that equalizes the return to each aliquot part of capital according to its value. The language of ‘passing from the pockets’ is here used for the first time and will reappear often in subsequent notes. Indeed, in some instances, for example, in outlines, etc., Sraffa will simply put ‘pockets’ which we now know refers to the processes behind the redistribution of the profits pool. It is of interest to note that the ‘of profits’ part in the document was inserted by Sraffa some 13 years later. This is conclusive evidence of Sraffa’s revisiting the profits pool concept at this later date, and the fact that the insert dates from September 1955 is consistent with our claim above that at this time the concept itself had not yet ‘collapsed’. We next consider evidence from what we conjecture is early 1945.18 In D3/12/2/20 we find the following short statement: D3/12/2/20 Point out how by knowing the organic composition and the value of each capital for r = 0 we know what the proportionate contribution of each will be to the pool of profits with the fall of w.19 But that knowledge is not sufficient to determine how much each capital will receive in the distribution of profits: for that depends on the price of known capital, which (although known for society as a whole) varies in price in each particular industry with the variations in wages. For that it is necessary to know also the periods of rotation of the components of known capital

Once again the extractive-distributive process is presented. Here however the ‘feedback’ effects in terms of the changing price of means of production with changes in distribution are explicitly problematized, here expressed in terms of the turnover (‘rotation’) of the different capitals. But generally speaking cracking this nut of the feedback effect (the so-called ‘transformation of the inputs’) would occupy Sraffa’s thinking for many years, and it was precisely on this path that he was led to the concept of ‘stability’ in the means of production, a notion which eventually blossomed into the Standard commodity and the Standard system. What is significant is that here, in 1945, the price system itself begins to emerge as the ‘mechanism’ (a term he would use a year later) from which the distribution of the unpaid labour of capitalist society manifests. Sraffa has now explicitly embarked on his effort to ‘lift the veil’ of capitalist exploitation.

From ‘Pool of Profits’ to Surplus and Deficit Industries

25

This role of the price system in effectuating this redistribution process is explicitly recognized in a document dated August 27, 1946. In D3/12/44/10 we read the following: D3/12/44/10 27.8.46 Price-reckoning may be defined as a method which automatically (i.e. through the mechanism of prices) distribute profits in proportion to capital. But such a distribution can be secured also by value reckoning
only then it requires an additional mechanism, e.g. taxation or pooling of profits.

This is a very interesting statement. In it Sraffa makes the explicit distinction between ‘price-reckoning’ and ‘value-reckoning’. The idea of ‘reckoning’ in general refers to the process that occurs when both the rate of exploitation and the rate of profits are assumed to be uniform in a system of production with different compositions of capital. In later developments (including that of his book), Sraffa refers to this process as the ‘redressing of unbalance’ between wages and profits within and across industries when distribution changes. In either the price or the value case, this ‘reckoning’ results in the unpaid labour extracted being distributed equitably to the owners of capital. In the case of price-reckoning, this redistribution is ‘automatic’ that is, by the mere formation of the competitively determined (natural) prices. If however we stay in the value system, then some ‘additional mechanism’ will be required, and it is here the profits pool come into play. This is the closest Sraffa comes in explicitly identifying the profits pool-as-unpaid labour. This would also be the last time that Sraffa tied the profits pool concept explicitly to reckoning in the value system. In 1948 Sraffa conceptualizes the pool concept not only in terms of price reckoning, but also considers the reckoning in terms of the use-value products of each industry. Gone is the reference to the reckoning in the value system and from this point further value is referenced only in terms of prices when the wage share is unity. The reckoning in terms of product will later in 1955 become a crucial point, and it was precisely this notion of reckoning in use-values, and the subsequent changes in the size of the physical net product of an industry resultant from changes in distribution alone (technology constant), that in the end forced Sraffa to abandon the pool concept altogether and replace it with that of surplus and deficit industries. The following document from 1948 thus represents the most developed statement and assessment to date of the concept of the pool. It is dated August 27, 1948 and is simply entitled ‘The Profits Pool’ (note that

26

SCOTT CARTER

Sraffa revisits this document in January 1955 in the marginal notes and insertions in pencil): D3/12/17/11 27.8.48 The Profits Pool When general wages fall, what the workers in any one industry lose does not go directly to the owners of the capital that employs them; it goes as it were into a pool, from which it is redistributed to the capitalists, not in proportion to their wage bill, but in proportion to their capital; thus the capitalists in one industry may get more, or less, than the workers they employ have lost in wages. Thus the aggregate of profits + wages in any one industry varies with its distribution (is not independent of the way in which it is distributed) . It may be thought that this arises from our reckoning wages + profits in money or in an aggregate com the commodities they are spent upon; but and that if we reckoned in terms of the product of the industry in question, and considered its own products as being distributed between its capitalists and its labourers, the aggregate of product distributed would be constant. That is not so: the aggregate number of pairs of shoes that goes to all the participants in distribution taken together varies with that distribution (although production of course is unchanged). Where is the leak? With changes in wages, the price of shoes varies, but it varies differently from the price of the constant capital raw materials, machinery, etc., employed in its their production; consequently, out of the (unchanged) gross product of shoes a greater, or smaller, quantity must be diverted to buy the replacements of constant capital
thus changing the numbers in the ‘net product’ of the industry. Quid of society as a whole? It would seem that if its system is repetitive there is perfect compensation, + the net product is unchanged, for the ‘replacements’ are made ‘in kind’; but if not-repetitive, it is not so. There will be some compensation between various industries, but it will not be complete. (Cp. the depreciation quotas in ‘complete group of looms’, or single loom
the former fixed ‘in kind’, the latter variable). Thus the picture of the ‘pool’ seems justified.

This document contains much insight and we deal with it paragraph by paragraph. The first paragraph is a concise restatement of the propositions Sraffa had been developing since September 1942. Here we find the ‘pool’ concept together with the individual industry
aggregate system nexus and the resultant redistribution of profits among capitals. The second and third paragraphs however represent a development beyond that which was written previously. Here Sraffa inquires whether price distortions arise due simply to the fact that ‘reckoning’ occurs according to wages and profits being expressed in terms of money and/or the heterogeneous basket of wage and profits goods; and that if ‘reckoning’ were to be done in terms of

27

From ‘Pool of Profits’ to Surplus and Deficit Industries

the product of the (single product) industry no such distortions would take place. In terms of the heterogeneous bundles of commodities, in a twocommodity single product industry non-growing system the following breakdown of the net product would hold:


 YN11 ½CONW1 = YN
21  YN12 ½CONW2 = YN22




 YS11 ½CONK1 = YS
21  YS12 ½CONK2 = YS22

YN1 = YN11 þ YN12

YS1 = YS11 þ YS12

YN2 = YN21 þ YN22

YS2 = YS21 þ YS22

Y1 = YN1 þ YS1

Y2 = YN2 þ YS2

where i = industry 1, 2 Yi = physical net product of industry i YNi = necessary product from industry i YSi = surplus product from industry i YNki = necessary product of good k for industry i YSki = surplus product of good k for industry i [CONW]i = column vector of worker consumption basket for industry i [CONK]i = column vector of capitalist consumption basket for industry i Changes in distribution will come about through changes in the last row of equations. Such changes would be ‘reckoned’ in terms of changes in the heterogeneous consumption baskets for both workers and capitalists and the question Sraffa poses here is whether or not this reckoning in terms of heterogeneous goods is that which is responsible for changes in the physical size of the net product. In the third paragraph of the document Sraffa answers ‘no’ to this inquiry
whether or not the net product was ‘reckoned’ in terms of the heterogeneity across consumption baskets or the homogeneity in terms of an industry’s product, when compared relative to the price of means of production distributional changes alone can alter its physical size. Sraffa gives the example here of the ‘shoe industry’, an example that he will use repeatedly in his inquiries from this point further. To see this point clearly, consider the following numeric example taken from Sraffa’s shoe industry in notes probably20 written in October 1955. This document is archived as D3/12/59/74 and from it we read the following:

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SCOTT CARTER D3/12/59/74 As an example consider a shoe-factory which produces one million pair a year: at a given wage-level, 400,000 pairs go to wages and profits together, while the rest pays for the means of production (raw materials, fuel, etc.). Now suppose that after a given reduction in the wage only 380,000 pairs are required to pay wages and profits at the general rates: the means of production must in the process have risen in relative price so as to absorb the excess 20,000 pairs which are in this way transferred to other industries have ceased to form part of the net product of the shoe factory.

Let us illustrate this numeric example with the following adaptation. First we assume that the shoe industry represents output that is destined for consumption purposes; that is to say the shoe industry produces output for Department II.21 Next we introduced the assumption that the physical means of production for shoe production takes the form of tons of leather (MPshoe = tons of leather). Lastly, following Sraffa, the shoe industry is assumed to be relatively labour-intensive, thus a fall in the wage share will result in a fall in the price of shoes. According to Sraffa’s example, the gross output (Q) of the shoe industry is 1 million pairs, the net product at the initial level of distribution (Y0) is 400,000 pairs, thus 600,000 pairs of shoes will be the initial payment (A0) in shoes for the means of production, which for simplicity we assume to be 6 tons of leather. It must be pointed out here that the 600,000 pairs of shoes are payment in kind for the means of production. In terms of use-values, these 600,000 pairs are Department II output and therefore destined for consumption
they are not means of production themselves. They simply represent the exchange of shoes for the 6 tons of leather, the latter in fact being means of production (hence leather is Department I output which is destined for production). We thus have the following scenario: Initial conditions: ω0 = initial wage share Qshoe = 1; 000; 000 pairs ðYshoe Þ0 = 400; 000 pairs ðAshoe Þ0 = 600; 000 pairs⇆ðMPÞshoe = 6 tons of leather Given these initial conditions the exchange of shoes for means of production will be 600,000 pairs for every 6 tons of leather, or a relatively price of 100,000 pairs per ton. Sraffa then supposes that the wage share falls. After the fall in the wage share the new physical net product amounts to 380,000 pairs of shoes.

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New conditions: ω1 = new wage share; such that ω0 > ω1 Qshoe = 1; 000; 000 pairs ðYshoe Þ1 = 380; 000 pairs ðAshoe Þ1 = 620; 000 pairs⇆ðMPÞshoe = 6 tons of leather Nothing has changed with respect to the production process of shoes; hence the gross output remains fixed at 1 million pairs and the means of production required to produce these 1 million pairs remains constant at 6 tons of leather. What has changed however is the quantity of shoes now required to purchase these 6 tons; specifically 620,000 pairs of shoes are now required to purchase 6 tons of leather. Thus, the fall in the price of shoes resultant from the reduction in the wage share causes a rise in the price of means of production relative to the price of shoes. What formerly was 100,000 pairs per ton now becomes 133,3331/3 pairs per ton: Old relative price of means of production   pairs pMP pshoe = 100; 000 ton 0

New relative price of means of production   pMP 1=3 pairs pshoe = 133; 333 ton 1

This numeric illustration, adapted from Sraffa’s notes conjectured to be from October 1955, should be sufficient to demonstrate the proposition that he was making in the 1948 ‘Profits Pool’ document.22 The last paragraph of the 1948 document is an insertion made in January 1955 (two months prior to the Majorca Draft). Here Sraffa inquires whether the above scenario was consistent with society as a whole and speaks of ‘repetitive’ versus ‘non-repetitive’ systems. A ‘repetitive’ system is one where the physical quantities on both sides of the equations (inputs and outputs) consist of the same composition of use-values; a non-repetitive system is one where the physical composition on either side is different. This therefore is an early characterization of what would later become basic versus nonbasic systems. The non-repetitive system would be the general case, and from this January 1955 insertion Sraffa justifies the profits pool concept as being applicable to this general case. The next instance of the profits pool concept appears in the Majorca Draft of March 1956. After this draft Sraffa moves into the full development of the profits pool concept. We thus enter the second period of the above periodization.

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Second Period: September 1955 through November 1955 (with Spattered Comments in July and August 1955) We now enter into the most prolific period regarding the concept of the profits pool. We begin with a two page document that Sraffa drafted in July 1955: D3/12/54/12-13 17.7.55 We now suppose imagine that, starting from the actual position as observed in reality wages and the rate of profit change + we want to see how the prices of the several commodities move. But first, suppose that we raise wages, how will the rate of profits move? The complications seem to close in all at once, for, first of all it depends on what is commodity has been chosen as the standard of wages. If we raise money wages (i.e. gold wages) by ten per cent we get one result, and if we ran If the given rise, say 10%, is in money wages (i.e. gold wages) we get one result; if in corn wages, another; for since the movement itself may will bring about a change in the gold price of corn. Suppose that we take the national income (i.e. the comp. com. that forms the Nat Income) as standard, then the rise of 10% means that the share of wages rises, say, from 50% to 55% of the national income. But the rate of profits will further depends on how the price ratio of the aggregate of those commodities forming the national income to the aggregate of those forming the means of production varies. As to the prices of individual commodities, these will move in all directions with a change of wages + profits. Some will rise and some will fall, some more, some less. Pool of profits [If some rise and some fall, some take and some give to pool of profits, can we say that there will be an intermediate one which has the ‘average’ ratio of profits to wages, which will neither draw from nor contribute to pool? No, because, further, change in price of raw materials]. But again, even two commodities produced by two industries which employ the same quantity of labour and means of production of the same value [and with the same q. of l.] would diverge in price with a change of r; for the prices of their means of production would generally themselves diverge. The change in the relative price of two commodities a and b will be due to partly to the particular circumstances of production of commodity a and partly to those of commodity b. Cannot these two sets of circumstances be separated? This is in effect asking whether a commodity can be found which, if adopted as measure of prices has the property that when, with a change of r, the price of commodity a rises in terms of such standard, the rise is entirely due to the circumstances of production of a; and similar for b. The first property of such a commodity should be that its price is invariable in relation to its own means of production. The standard need not be a simple commodity. It

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could be a composite commodity, which we could put together to suit our requirements, adding one article to compensate for a deviation one way over a certain range of r, or subtracting one to make up for another. But having entered on this path, it soon becomes clear that the ideal standard is a composite commodity made up in such a way to its own means of production are to be identical in composition. We must therefore manipulate the composition of the commodity so as to obtain such a result. As soon as we say this it becomes clear that this composite commodity cannot include among its components all commodities, since some such commodities are not employed in production. For while in the simple reproduction system all commodities inevitably entered dir{ectly] and indir{ectly} into one another’s means of production, this is no longer true of the system with surplus.

In this document Sraffa explores the conditions necessary for the standard of wages and prices and develops this in terms of the concept of the pool of profits. Notice here that: (1) the movements in price will depend on the standard adopted; and given different standards prices may possibly move in opposite directions with variations in distribution; (2) the ideal standard in fact could be a composite of different commodities; (3) Sraffa introduces the idea of the different properties of a standard and explicitly discusses the first, namely that of recurrence in circumstances of production for the standard; and (4) the profits pool remains a significant conceptual apparatus in hypothesizing about price distortions. The second and third points Sraffa would develop into the Standard commodity. At this juncture what is most important for our purposes is the heuristic nature of the pool concept seen through the last point. September 1955: Rise of the Pool In September 1955 Sraffa begins an intensive endeavour in developing to complete fruition the concept of the profits pool. Tied to the concept of the pool is a clear exposition of the important properties of a standard of wages and prices and the corresponding causes of changes in prices when distribution varies. In document D3/12/17/20 we find an outline of Sraffa’s plan: D3/12/17/20 SCHEMA {written in red pencil} If we look at the equation of each product we notice two causes of change in price relatively to any other commodity: a) different proportions of q. of lab. to value of means b) relative change in the value of the agg. means of production of one of the commod. relatively to those of the other.

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SCOTT CARTER The former is well-known straightforward + carries with it a relative fall in the commodity with the larger prop. of labour. But the latter influence may be overwhelming and is capable of reversing the tendency effect of the former [not on the same footing: the second results from first, not conceivable without it] We consider the first effect, assuming the second to be absent (i.e. assuming that the means of the first com. are stable in terms of those of the second with respect of wage variations). Pool of Profits Socialist Pricing23 The second, it should be noticed, could not be considered indep. of the first: for, if we supposed the first absent, the second would ipso facto disappear; it is a complication Consider second effect: seems barren, not so bad; area restricted; like reduction Results from the first; prices are set in motion by first; as soon as prices change this in itself is cause of further change Criss-crossing: up and down Seems barren Not so bad
area restricted; ref to reduction Criss-crossing Difficulty of standard The second criterion not objectionable as criterion for stability; constant ratio of product to means Also, self-contained, wages and profits constant Second effect: a complication of the first [like compound interest: could not exist without interest]

In this document Sraffa identifies the two major conditions that cause prices to change in the face of changes in distribution. The first has to do with the different proportions of labour to means of production involved in the immediate production process of the commodity in question; the second has to do with the change in the value of the means of production with distributional changes. At this juncture Sraffa places his major emphasis on the first condition and in fact argues that the second effect is actually a subsidiary function, or ‘complication’ of the first. With respect to the concept of the profits pool, Sraffa abstracts from the second effect. The profits pool, in other words, belongs to that class of conditions that is primal or logically prior to the subsidiary ‘secondary’ effects. The notion of ‘criss-crossing’ refers to the complex movements of prices that arise from distributional changes such that, no matter the intricacies of

From ‘Pool of Profits’ to Surplus and Deficit Industries

33

such changes, nonetheless restore balance between wages and profits across industries. Sraffa recognized that price movements are much more complex once the second complicating factor comes into play. Indeed, such complications may in fact reverse the expected price movements which would arise with consideration of the first condition alone. Sraffa develops this in the following document: D3/12/17/19 As soon as we leave this position and transfer some of the income from wages to profits we are left without any simple rule as to the resulting prices of commodities. Individual prices will move in all directions in apparently unpredictable ways. The one factor which, on looking at the equations, offered itself as a possible guide is the familiar one of the different proportions of the quantity of labour to the value of the means of production shown by different industries. If this were a reliable guide, the matter would be simple; as wages fell, commodities produced with a higher proportion of labour would steadily fall in price compared with those of a lower proportion. But it is not reliable. The moment prices begin to diverge, the divergence itself becomes a factor of further change, since prices of products and prices of their means of production must keep in step. The relative price change may go so far as to reverse the order of some commodities with regard to the proportion of labour to the value of the means of production, turning higher proportions into lower ones and vice versa
so that what seemed to be the one rock to cling to is upset.

Thus, the one ‘rock to cling to’ with respect to knowing the direction of movements in prices given changes in income distribution
namely that of the proportions of labour to means of production for the immediate production process
is itself ‘upset’ once the secondary complications are taken into account. This idea is echoed in the following document: D3/12/59/69 Thus a tendency is set up, as the wages fall towards a fall in the price of commodities produced by a high proportion of labour relatively to those produced by a low proportion …. But no sooner is a price movement on these lines been set in motion that it is diverted from its course by a secondary influence

On September 9, 1955 Sraffa once again picks up the related idea of the ‘criss-crossing’ of prices: D3/12/50/8 7.9.55 … But as soon as we recognize that prices are moving, the prices of means of production will move creating a most intricate (criss cross) of tracks (path movements) the

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SCOTT CARTER movement of prices itself becomes a source of movement. Deferring consideration of the intermediate, we go directly to the other extreme, where the whole of N.I. goes to profits; r maximum or R … Desirability of distinguishing to whose circumstances due … Pool of profits …

Sraffa’s thoughts are left incomplete although we can discern that concerned here are the secondary or subsidiary effects vis-a`-vis the price of means of production. What is important for our inquiry is that the profits pool concept is used here again as a conceptual device that helps Sraffa work through the logic of price changes. On the same day Sraffa develops the profits pool concept in the context of describing its relation with an invariable standard of value: D3/12/53/2 7.9.55 Approach To say that a commodity is independent of the pool of profits is identical to say that it is invariable in price relatively to its own means of production (for any such change in price ‘releases’ or ‘absorbs’ income on behalf of the pool)… If a commodity falls in price relatively to its means of production, it inevitably contributes to the pool of profits
and there is less of itself to be divided between its own workers and capitalists (and similarly if it rises in price). Also, if a commodity does not change in price relatively to its means, and transfers to wages as much of itself as it removes from profits (or vice versa) it is (at the point where it so behaves) an invariable commodity …

In a document dated September 10, 1955 Sraffa begins to pull much of this stuff together: D3/12/17/16 10.9.55 As a result in an industry which employs a higher proportion of labour to the value of the means of production the given reduction in the wage rate will yield more than is required for the corresponding increase in profits; while in an industry where that proportion is low it will yield too little {marginal note: ‘But, quid if the proportions are reversed by a change of price?’} If the rate of profits is to remain level in the two industries the proceeds of the deduction from the wages of the workers in the first industry cannot pass entirely into the pockets of the capitalists who employ them; part of it must be transferred to the capitalists of the second industry. It is as if there were What is needed is something like a pool of profits into which as wages are reduced and the rate of profits rises, some industries pay their surpluses and others draw upon to make good their deficiencies. To which industries contribute in proportion to the labour they employ and draw in proportion to the

From ‘Pool of Profits’ to Surplus and Deficit Industries

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value of their means of production. (Thus what is deducted from the wages in one industry does not go pass entirely directly into the pockets of their employers). The mechanism through which such a transfer pool is operated is that of price price system. The price of the product of an industry which employs a large high proportion of labour falls relatively to its own means of production, when wages fall {marginal note: ‘Quid, if the means are produced by a still larger prop. of labour and fall faster?’}; thus a larger share of its gross output must go to buy from the other industries the replacement of its means of production, leaving a correspondingly smaller net product to be divided between wages and profits {marginal note: ‘shoes?’} On the other hand, the price of the product of a low proportion of labour would rise relatively to its means of production, thus providing releasing a larger net product from which can be paid a larger increase of profits than the reduction of wages by itself would allow.

We see here how Sraffa gives his argument some polish. The first paragraph deals with first condition that causes price changes in the face of income distribution, namely the different conditions of production across industries. The second paragraph develops the argument in terms of the pool concept and places emphasis on the price system as the mechanism which accomplishes the transfer of profits between industries. Notice that both the reference to ‘pockets’ and that of ‘shoes’ which from the above discussion we now know refers to the transfer of profits between industries and the changing physical size of the net product of an industry, respectively. That the redistribution of the pool of profits is accomplished through the price system itself is even further evidenced in a series of three documents written at the end of September 1955. The first two are drafts of an outline of Sraffa’s plan and the last is but another restatement of the argument advanced: D3/12/53/22 24.9.55 SCHEMA 1. 2. 3. 4.

first w = 1, back to first, not labour value All pos Offers itself
rock cling Profit pool (anti-socialist)

To visualize … REDUCTION the usual method of reducing whole cost to wages and profits

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SCOTT CARTER The TWO EXTREMES 1st, ‘Values’ shown by reduction, this is only level where simple rule … 2nd Misleading impression from reduction that r = ∞, because: a) its amount of profit rises b) Its ‘base’ falls to zero This overlooks, infinite No of terms, i.e. there is always a commodity residue, multiplied by high powered (1 + r) But
R INTERMEDIATE First: ALL POSITIVE [measures ‘labour values but fulfilled by Red{uction} after 1)] Then: POOL OF PROFITS + Anti-socialists Need of inv. comm.: wages and r INVARIABLE COMMOD. and q system Tangible r non-price Unique Linearity: and EXTEND to any system because of unit intersection disappears Where Nat. Income?...(one possible place is after pool of profits, when the appearance of Nat. Income being St. Comm is created) D3/12/53/24 First, Reduction 1st extreme Linear equations with L’s Values proportional to labour
shown by reduction 2nd, Junp to where w = 0 From reduction one might have gotten impression that as w tends to 0 r rises without limit, for not only it increases, but its ‘base’ tends to 0. This impression based on overlooking the infinite no. of L terms, or in other words, that there is always a commodity residue which is multiplied by higher powers of (1 + r): R Intermediate: 1st all positive No cling to: means vary Nor org. comp. in other sense; for while aggregate wages vary proport., interest does not owing to powers which have different gradients as we shall see in detail Pool of profits Anti-Socialist Invariable commodity and q’s

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Tangible that r non-price ?Nat. Income Intersections D3/12/53/25 COPIED Parallel to this criss-crossing of prices there goes an intricate shifting in the quantity and distribution of the net product. From the standpoint of the national income as a whole it is clear that what is taken from wages must go, item by item, to profits. But for a single industry the matter is not so simple. For while the wage and the rate of profits must always be uniform throughout the system, the proportion of aggregate wages to aggregate profits varies from industry to industry and moves in different directions with changes in distribution. As a result, a given reduction in the wage will in some industries yield too little to provide for the requisite increase in their aggregate profits, while in others it will yield too much. If the same rate of profits is to apply to all industries what is deducted from the wage earners of the latter type of industry cannot pass entirely to their own employers, some of it must be transferred to the capitalist of the other group. What is needed is a sort of social pool of profits into which, as wages are reduced and the rate of profits rises, some industries pay their surplus profits while others draw upon to make good their deficiency. Such a pool is in fact operated through the price system

In D3/12/53/22 we have a first draft of the outline that appears in a more developed form in D3/12/53/24. In both of these outlines we notice that the reduction to quantities of dated labour appears early, an indication that Sraffa at this stage intended to put that chapter before that of the development of the Standard system. In both versions of the outline the idea that the ‘rock to cling to’
namely that the direction of price changes can be known simply by knowing the value of the composition of capital
is upset, and after this idea the profits pool logically follows. Both outlines also speak to the idea that the rate of profits is a non-price phenomenon. In the last document Sraffa clearly states his contention that the price system is that through which the necessary redistribution of profits occurs. The last document we consider from the month of September is D3/12/ 17/18 and is a more refined version of D3/12/53/25 (recall that D3/12/53 is in the ‘discard’ folder while D3/12/17 is in the file folder that Sraffa in fact utilized heavily). There we read the following: D3/12/17/18 29.9.55 Parallel to this criss-crossing of prices there is an intricate shifting in the size of the net product of each industry and its distribution between wages + profits. From the point

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SCOTT CARTER of view of the national income as a whole it is clear that what is taken from wages must go, item for item, to profits. But with any one industry we find there is not such balancing. For while the wage rate and the profit rate are uniform throughout the system, the proportion of the sum of wages to the sum of profits varies from industry to industry, and moves in different directions with changes in distribution. As a result, a given reduction in the wage will in some industries yield too little to provide for the requisite increase in their aggregate profits, while in others it will yield too much. Since the same rate of profits is to apply in all industries, what is taken from the wageearners of the latter type of industries cannot go entirely to their own employers; some of it must be transferred to the capitalists of the other group … What is needed for carrying out this transfer is a sort of profits-pool into which as the wage falls and the rate of profits rises some industries pay their surpluses while others draw upon to make good their deficiencies. Such a profit pool is in effect operated through the price-system by means of adjustments in the prices of products relatively to those of their means of production.

This last document provides the most developed version of the profits pool argument that emerged from the month of September. Throughout the month of September the notion of profits pool remained for Sraffa a very important heuristic devise and allowed him to work through the logic of the very complicated subject of price distortions in the face of income distribution. At this stage of the development of Sraffa’s project we remain confident that the concept of the pool of profits was still held in high esteem and that he had every intention of including it in the final version of his book. However when as Sraffa began to evolve further in his thinking through the months of October and November 1955, the profits pool concept was met by increasing uncertainty to the point of its ultimate ‘collapse’. It is to this stage we now turn. October
November 1955: Collapse of the Pool In late October 1955 Sraffa begins to question the efficacy of the profits pool concept. We have already seen that Sraffa develops the numeric example of the ‘shoe industry’ in this month, and that this numeric example was used to illustrate the idea that the net product of industry changes in size simply due to the changes in distribution. The document that immediately precedes the numeric example provides a concise explanation of the logic involved in this question: D3/12/59/73 14.10.55 If the shoe making industry is one with a high proportion of labour to capital the price of shoes will fall with a fall of wages relatively to commodities with a low

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proportion. But shoes will also fall relatively to the raw materials + tools used to make them (+ whose value we have supposed stable at the opening of this section), so that some of the shoes which formerly were part of the net product of the industry must go to pay for the replacement of these means of production: fewer pairs and of lower price will remain to be divided between the workers and the capitalists of the industry. The opposite happens in industries with a low proportion of labour: with the fall of wages more units of their product become available from the same source for distribution. Thus the net product of each industry varies both in value and in quantity with the proportions in which it is distributed.

This idea of a physical change in the net product of industry with changes in distribution occupies much of Sraffa’s attention in October of 1955. Indeed we argue that it was along these lines that he began to question the legitimacy of the pool concept altogether. But at this stage in midOctober it seems that Sraffa was still intent on retaining the pool concept and the logic of the argument that he advanced in September. This is evidenced from two documents which are drafts of each other, dated October 15th and 16th, where the basic line of argumentation from September is retained: D3/12/59/68 nat. inc.? New 15.10.55 P. 10a 3rd para. Whilst the proceeds of the reduction of wages (in any one industry) depend on the number of workers employed, the sum required for the payment of profits at the higher rate depends on the value of the means of production. As a result the two sums will not in general balance within each industry: in some the reduction of wages will yield too little to provide for the required increase in profits, while in others it will yield too much. What is taken from the wage earners in industries with a high proportion of labour cannot therefore go directly into the pockets to swell the profits of their own employers; if the rate of profits is to be uniform, some of it must be transferred to the capitalists of other industries which have a low proportion of labour. To effect this transfer … D3/12/59/67 16.10.55 In industries whose wages fall by more than their profits rise, the difference (excess surplus) will go to redressing the price [10.10.55 price, in terms of what?] of the product: in inds. where the fall of wages is insufficient to provide for the required rise of profits, the shortage (deficiency) will be made good by a rise in the price.

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Although these documents do not make explicit mention of the pool concept, clearly the logic of the September arguments in which the pool concept does appear is retained. The October 15th document breaks off exactly where we would logically expect the pool concept to come into play. In late October we begin to find cracks in Sraffa’s confidence regarding the pool concept. On October 28, 1955 we find the following short statement by Sraffa: D3/12/59/53 28.10.55 Check on St. Comm. Is not the price of means completely independent? (largely also the price of our product may be indep. of it). Is then not the Pool a myth? For how can the price of means absorb or release commod. when we require it to adjust its (the product’s) balance between w and r? Try a comm. with very high and one very low comp. Cannot price of means move contrary to predicted? P.T.O. {on back of page} Test Case: Case of a product which has higher org. comp. than St, Comm but lower than its means.

This is the first document our research has uncovered where Sraffa openly questions the legitimacy of the pool concept. The basic criticism he levies against the ‘myth’ of the pool surrounds its possible tautological character, something that Sraffa will return to on at least two separate occasions in November 1955. Note here that the absorption and releasing of physical net product (‘commodities’) plays a significant role in Sraffa’s questioning of the pool concept. In two drafts of outlines that date from November 1955 Sraffa puts some emphasis on the possible tautological character of the pool concept. D3/12/59/70 Organize Begin with Suppose the prices don’t change …. To see how prices work on redressing balance we consider a simplified case
stable means (and take means as standard) Spectrogram24 Pool Socialism

From ‘Pool of Profits’ to Surplus and Deficit Industries However, as prices change, means change Complications …..tautology, prices det. by prices, But a)….b)… and means a)… and b)… and so on25 The difficulty is standard
on what depends ‘invariable measure’, in terms of what? measure or measured. Now, in the simplified case, as there was unbalances both ways, there was room of one balance which needed no change in price. It would change in rel. prices but not due to its own circs. This would be an invariable standard, but only in the simplified case. As soon as prices of means move, its balance is upset (price example In second case the condition must take the form of an infinite series, as above: If the commodity (at starting point) has such a proportion as gives balance; and its means have such proportions as give balance, and the means of its means, …., and so on. Then it does not need prices to restore balance at any level. D3/12/59/71 1) Make w =1. Revert to origin. Labour value [Proof in cold storage] 2) As we move away from it no simple rule applies and we can say little about them in general a priori. We can however say that for all the values of w between … the equations will have a set of positive solutions for the prices the effect (proof of positive p’s) 3) In the range if variation the factor that stands out (org. comp.). Second factor (source of much complication [and no more?]) 4) First factor in isolation [‘implies St. Comm’ in cold storage; Reserve of Nat. Inc.
not St. Comm] Spectrum (in this simplified case the price curves are straight lines) Extremes Imbalance of w and r Shoemaking example (change in net product) Image of pool (limitations) Reverse movement (ex Socialism) 5) Second factor Not isolatable; mere complication: unsatisfactory but area restricting (cp Reduction) But, consequently if 1 oh’se {?} appears, it disappears 6) Difficulty without invariable standard Ridiculed
stable … in what? Internal stability. Balance of w and r Mixture
tailored to suit 7) Construction: a) in words and num example

41

42

SCOTT CARTER

In the first outline the idea of a tautology comes into play. Here Sraffa questions whether or not the pool concept leads to the determination of prices by prices. In the second outline the term ‘pool’ is accompanied by the term ‘limitations’, and we take this as an indication of a loss of confidence if the concept itself. This loss of confidence is even further indicated in a document dated November 4, 1955. The title of this document is ‘After Pool’ which we take as an effort by Sraffa to move beyond the concept of the profits pool. D3/12/59/55 ‘After Pool The image of a pool is suggestive but not accomplished too far. The simile analogy of a pool should not be taken too literally, for the compensation balancing is not exact. The N.I. even in a rep. syst., is not composed of the same objects as forms the net product of the single indus. (some may produce only replacement for national industry while non-basics only for N.I.). It will be equal in value to their sum, at each level of w- but [values are diff. at diff. levels of w and] the aggregate will not be composed of the same objects at various levels. 4.11.55 From back. More exact than is suggested here. The sum of the industry net products will be always equal in value to the N.I.; and the latter (though of course not the formers) is always composed of the same commodities.

Notice here how Sraffa warns that the ‘image of the pool … should not be taken too literally’ and that the stumbling block, so to speak, has to do with the use-value character of the net product of individual industries and the lack of replacement ‘item-by-item’ when the aggregate net product is necessarily expressed in commensurate value units. He does return on the back of the note to make an attempt to temper the previous tone, but as we shall see the stage is already set for the ultimate abandonment of the pool. Indeed, on the very next day Sraffa speaks on how the pool ‘collapses’. From a document penned 11/5/1955 we read the following: D3/12/59/57 5.11.55 This collapse of the Pool of profits seems ever more disastrous. It is clearly quite possible for a commodity whose profits increase by more than its wages fall, actually fall in price relatively to its means, so that less will be available as net product: so, more goes

From ‘Pool of Profits’ to Surplus and Deficit Industries

43

to replacement more goes to profit, and also more than ever since the value of means (on which profits are a %) rises! Yet it all is possible if the price of the product rises enough relatively to labour even though it may fall relatively to its means. The whole blunder has arisen from having overlooked that the price of means is largely independent of the price of the product (there being so many other variables which may compensate for it) P.T.O. They could even say the ‘unbalance’ in quantity can always be entirely compensated by the product’s change in value (not relatively to means, but to the standard of wages). The change in quantity of net prod. is purely a subsidiary, accidental result, which depends on the composition of means of prod. But is is nonsense to put the main burden on ‘unbalance’ of quantity. N.B. Even for the N.I. the value of what goes to profits may be larger than the value lost by wages, although the items transferred are the self-same. [This can only have a meanng in relation to what happens in terms of St. Comm. In St. C. when wages fall from 50 to 25, profits increase from 50 to 75: but here wages are also halved (but fall much more in quantity of product) while profits rise by much more, both in value and in quantity.

From this point forward Sraffa becomes less and less concerned with the origin of the surplus value a la the concept of the pool of profits and more and more concerned with the isolation of price movements generally with changes in distribution. In this winding down of the concept of the pool of profits, Sraffa erects in its place the dominant role of surplus and deficit industries. Aborted Retrieval of the Pool Two documents from November 1955 specifically evidence this transition, one written November 6 and the other November 17. In the latter document Sraffa explicitly attempts to ‘retrieve the pool’, but as we argue, to no avail: D3/12/59/78 6.11.55 In view of the disproportion between w + p. it is clear that in some the mere transfer within each industry of units of product from wages would be insufficient to provide for the required rise of profits, in others they would be in excess. There must therefore be a transfer from the latter to the former of some share of the national income; as if there were a pool into which as wages fell were contributed by the various industries paid contributions in proportion to the number of workers

44

SCOTT CARTER employed from which they drew, in proportion to the value which what is of their means of production, what was necessary required for the increase of profits is paid out in prop. to value of means. This is effected in one or both, of two ways: 1) A rise in the price of the product relatively to we say rather vaguely at the moment the majority of commodities, which makes fewer units of the product go a longer way in the paying of the wage, thus enabling more units of greater value to be transferred to profits 2) A rise in price relatively to its means of production which a) makes a given number of units go a longer way towards fulfilling the general rate of profits, b) releases some units which previously went to replacement. This last effect (2b) increases the number of shoes in the net product, while the others make them more valuable. a) a rise [or fall] in the price of the product relatively (let us say for the moment) ‘most other commodities’ in terms of (let us say for the moment) ‘commodities in general’ and b) a rise [or fall] in the price relatively to its own means of production The former adds to the value of the n.p. available for distribution; the latter adds to its quantity (since fewer units will have to go pay for the replacement of the means). The resultant of the two (which will move at different rates and possibly in opposite directions) will be the increased value of the n.p. D3/12/59/60 17.11.55 On the retrieve of pool The point of this is that it makes the balance or unbalance of profits and wages truly independent of any price-relations between product and means. We assume that there are no price-changes + show what happens to the balance. Then we shall proceed to show how it can be redressed by price-movements. (The problem will be to settle when first to bring in the second, complicating cause, i.e. variation in price of means). This is a sort of compound interest problem
and, in fact, is the compound interest problem in a different aspect: but is is the same as the problem that we see in Reduction. [But it can be eliminated by an assumption as to price of means being stable in one another. The same assumption (i.e. that price of means is equal to their value at w = 1) would give the same result
linear prices.] We could say: The price of comm.. depends on a) proportions and b) price of means. The price of means depends on a) proportions and b) price of their means. And so on, the area of proportion becoming wider and wider while that that of price of means narrowing down indefinitely, although it can never be completely eliminated

From ‘Pool of Profits’ to Surplus and Deficit Industries

45

Whereas, previously, we were trying to discern the balance or unbalance while prices were moving: for even there there are possibilities of ‘physical balance’ (i.e. when the price of means is constant) but dependence on prices makes it look tautological as a cause of prices. How to get round this?

Notice how Sraffa ends this effort to ‘retrieve the pool’ by once again lamenting over the tautological implication of prices determining prices.

Third Period: Post-November 1955 through March 1956 We now enter into the third period in the evolution of the pool concept. Here we find very few direct references to the pool concept, something which we argue is related to Sraffa’s growing uneasiness vis-a`-vis that concept. In this section we present evidence from only three documents, the first from late December 1955; the second from early January 1956; and the last from early February 1956. The document from December 1955 contains no direct reference to the pool concept, but rather develops the notion of price movements resultant from distributional changes in terms of surpluses and deficits at the level of the industry. Here were have a distancing of the pool concept at the level of the commodity where most of his previous energy had been devoted and a movement toward the idea of surplus and deficits industries. Notice here how Sraffa refers to this conceptualization as a ‘stronghold’ point: D3/12/61/47 20.12.55 We must therefore begin thus: In order to see what are the causes of the rise or fall of individual prices, we shall suppose at first that, as we transfer part of the net product from wages to profits, prices remained unchanged. Suppose that, as we reduce wages from 1 to, say, 4/5, we find from the solution of equations of the particular system in hand, that the corresponding rate of profit is 3%. 21.12.55 NO: It is always necessary to fix a unit, otherwise with n equations and n + 1 variables the system is indeterminate; not in the sense that ratios rather than absolute prices are determined
but r is completely indeterminate and so are the prices and their ratios. It is the constants that constitute the unit. We can either make one of the prices = 1, and then with n variables and n equations all will be determined. But note that we shall get different values of r according to the product whose price is made = 1; and so the

46

SCOTT CARTER prices will differ and their ratios will differ as well (this is due to the effect noted that the real wage is different according as, say w = 1/3 is in wheat or in iron, for the prices of these products will move differently with the fall of the wage.) On the other hand if we replace r with a known number, or with a known R(1-w) we have n equations and n unknowns, and the unit is the unit of the constants, in our case La +…+ Ln = 1; or rather, if w = 1/3 then 3(1/3 [La +…+Ln]) = 1. {back of page} 24.12.55 Points (caposaldi {‘Stronghold}) Transfer part of the net product from wages to profits, by fixing wage in terms of one of the aggregate means, equal in value at w =1, to say 2/3 {of} nat. inc. To see causes we assume that, as we transfer part of the net product prices remain constant. 1) To avoid complication with what we shall deal presently we shall assume at first aggregate means of each product produced by same proportions as others. Commodities produced by different proportions of labour and means of production. Proceeds of wage reduction proportional to no. of workers; but needs for profit proportional to value of means of production. So when we transfer, some will have a surplus and some a deficit. We arrange the commodities in ascending order according to the proportion of labour to means by which they are produced, from the lowest to the highest proportion. 3) to restore the balance it is necessary that products of industries show a deficit should rise in price relatively to their means of production 2) We shall take one of these ‘aggregate means’ as standard of wages and prices; we shall then, from the equations, find what the rate of profits that corresponds to the new wage; but in order to see what brings about the change in individual prices we shall at first suppose prices to remain unchanged. It is clear that in each industry the proceeds of the w reduction are proportional to the no. of workers employed, while the requirements to pay out of profits at the general rate depend on the value of the means of production. The two sums will in the case of most industries not balance. Those with high proportion will have a surplus and those …

The above document represents a significant transition toward the ultimate development of the argument that appears in Sraffa’s book. Although the direct reference to the profits pool has been abandoned and replaced with that of surplus and deficit industries, we can nonetheless see based on the above archival evidence that the latter concepts definitely evolved from the seeds of the former. This becomes especially evident given that the ‘spectrogram’ exercise of December 1955 as regards SI and DI is very similar to that first penned in the ‘Exploitation’ document of 1942 (D3/12/17/2) as regards the ‘pool of profits’. In the next two documents we find the last

From ‘Pool of Profits’ to Surplus and Deficit Industries

47

instance our research has uncovered where Sraffa explicitly used the ‘pool’ concept. D3/12/61/48 The movement of prices would be as described each com.. moving in the simple direction required by its ‘prop’ so long as, according to our simplifying assumption, the aggregate means of production of each industry were themselves produced by the same proportion. But the moment we remove that assumption, all is confusion. For … 1.1.56 I must , early, show the identity of these things: a) ‘the proportion’ of labour to means (or of net product to means, at values) that gives ‘balance’ b) ‘the same proportion in which all products must increase in the St, Comm’ c) The maximum rate of profits The link between the two is that unbalance can only result from (or be connected with) a change in the net income of the industry, which can only happen by more or less of the product being required to pay for the replacement of means of production: this is the inevitable accomplishment of unbalance But then no unbalance of this type can arise when product and means consist of the same composite commodity, for since there can be no change in the relative price, there can be no transfer to, or from, net product to payment of means. N.B. This is also the opportunity to revive the transfer of profits between industries (profit pool). 3.1.56 A proportion of labour to means in the circumstances defined carries with it ‘no change’ in price-ratio of means to product throughout the range of wage variation. And therefore such a proportion … The proportion of labour to means measured at values corresponding to the whole net product going to labour, is the same thing as the proportion of national income (distributable surplus or net product) to means. If the proportion is such as to give ‘balance’ it will remain unchanged throughout the range of wage variation, since ‘balance’ implies no change in the price-ratio of product to means

Notice that Sraffa speaks of the ‘opportunity to revive the pool’. He never did. This leads us to the last document of our research: D3/12/61/42 7.2.56 We shall see how prices move as we transfer part of the wages to profits.

48

SCOTT CARTER The cause of these price movements is a simple one. The wages and the rate of profits at level of distribution must be uniform throughout industry. But in one industry the sum saved by an industry on a given reduction of wages depends on the number of men employed; while the sum required to pay out profits at the corresponding rate depends on the aggregate value of its means of production. These two sums will not generally balance in any one industry. Industries with a high proportion … 3) The balance can be redressed by a change in the price of the product. In the case of a deficit industry a rise in price of the product relatively to the means of production employed will mean that a smaller quantity of product is necessary to achieve the required rate of profits, while a rise relatively to the standard in which wages are fixed will make a given quantity go further towards fulfilling the wage requirement. Besides, the rise relatively to the means of production will reduce the quantity of product required to pay for their replacement and thus increase the net product available for distribution, as wages and profits. The price-movements make it possible for the industry to increase its net product both in value and in quantity so as to enable it to meet its commitment for both wages and profits. And conversely in the case of a surplus industry … Other products, however, besides the one we are considering, are under pressure to change their values. In particular, its means of production. These however are only tendencies arising from the initial conditions of one product; they often are not destined will be unable to be realised, since the products with which it is composed will be under pressures of their own, arising from generated by the same source, and possible in contrary directions 2. Criss-cross
but in the end balance 3. To see more in detail, simplified example Middle class of commodities 4. Survives in general case

Pool?

In this document the idea of surplus and deficit industries is almost completely developed conceptually. Notice how the document itself ends with the word ‘pool?’, circled with the question mark in Sraffa’s hand. This is the last time Sraffa uses the pool concept. Five days after making this last reference to the ‘pool’ we find the second ‘spectrogram’ figure of price movements in the face of changes in distribution referenced in above. Thus, we argue Sraffa has made a full analytical circle from the early ideas of 1942 to the latest development in February 1956. The pool of profits had been abandoned and from this point forward Sraffa would develop and tweak the

From ‘Pool of Profits’ to Surplus and Deficit Industries

49

surplus-deficit industry concept and make several drafts of the relevant section of his book, which appears in notes written after March of 1956.

PART II PRICE MOVEMENTS AS THE WAGE SHARE FALLS Let us attempt to analytically depict this story.26 Following Sraffa the LMP ratio is defined as the value (price) expression of the total living labour of an industry divided by the total means of production used in that industry, where the latter include inputs from all other (heterogeneous) basic industries. Thus:  0 w Lj ðpL ÞLj

 LMPvalue =   ⇀ = ⇀ ð p Þa þ ð p Þa þ ⋯ þ ð p Þa 1 1j 2 2j n nj pi Aj =

value of living labour aggregate value means of production

Lj = unit of direct labour for industry j aij = unit of commodity i necessary for industry j w0 = ‘compete’ wage rate = numeraire/hour pi = homogenous unit ‘price’ of ith commodity = numeraire/uniti The numerator of the LMP ratio represents the overall productivity of labour 
conceived here as what Pasinetti (1977) calls the ‘complete wage rate’27 w0
multiplied by the quantum of living labour of the industry in question Lj . In expressing the concept of surplus and deficit industries, we consider the ‘watershed’ LMP ratio in relation to that of each of the industries. Recalling that surplus industries are labour-intensive and deficit industries ‘capital’-intensive, the general relationship among the LMP ratios is the following: LMPSI > LMPWatershed > LMPDI Consider now a comparison of the jth commodity’s direct  price or price proportional to labour values when wage share is unity p0j versus its price

50

SCOTT CARTER

of production  when the wage share falls below unity and the rate is profit is uniform pj : Direct Prices (ω = 1 : r = 0)

p0j =

 ⇀  ⇀

  p0i Aj þ w0 Lj

Prices of Production (ω < 1 : r > 0)   ⇀ ⇀ pj = pi Aj ð1 þ r Þ þ w Lj    

⇀ ⇀ ⇀ ⇀ pj = pi Aj þ r pi Aj þ w Lj

The relevant term to compare is the form the value of the net product (value added) assumes in each equation. For direct prices, the value of the net is equal to the value bestowed by productive living labour

 0product  w Lj . For prices of production, the value of the net product is equal to the value remunerated to or commanded by both means of production and ⇀

⇀

living labour frðpi Þ Aj þ w Lj g.28 The former is a productivity relation (or a ‘completely remunerative’ wage relation) and the latter is an ‘incompletely remunerative’ wage or distributive relation. Given this framework, it can be shown that as the wage share falls the following relations hold: ðp0 ÞSI > ðp ÞSI ðp0 ÞDI < ðp ÞDI We can express this in Fig. 2, which is inspired by the original spectrogram graph that Sraffa penned in 1942. Fig. 2 shows that as the rate of profit moves from its lower limit of zero to its upper limit of R and the wage share (ω) moves from its upper limit of unity toward its lower limit of zero, value flows out of surplus industries into deficit industries in an effort to redress the imbalance that results from the inequality of each respective industry’s LMP ratio to that of the watershed.

INPUT REMUNERATION AS THE WAGE SHARE FALLS Fig. 2 also has an expression at the level of the ‘prices’ of the inputs labour and ‘capital’. To simplify the exposition here we adopt the assumption of a single capital good. This allows us to conceptually posit the movement in

51

From ‘Pool of Profits’ to Surplus and Deficit Industries

p0

p* (p*)DI

(p*)DI

deficit industry

(p0)DI

LMPDI < LMPwatershed

(p0)SI surplus industry (p*)SI LMPSI > LMPwatershed (p*)SI r=0

rj′

r=R

ω = wage-share = 1

ωj′

ωj = 0

Fig. 2.

Surplus and Deficit Industries.

the ‘prices’ of labour and means-of-production in terms of a simple graph, with means of production now explicitly defined as ‘capital’. Let the following for each input hold: Input ‘Capital’ pA = initial advancement-price of capital input pA = command-price of capital input = pA ð1 þ rÞ = pA þ r pA wherer pA = remuneration to factor ‘capital’

Input ‘Labour’ w = ‘complete’ wage rate = labour productivity w = wage rate = remunerative price of living labour where w Lj = remuneration to factor ‘labour’ 0

The initial advancement price of the capital input represents the initial unit-costs incurred by the capitalists in the purchase of means of production. When the wage share is unity the revenue accrued by the capital input will exactly equal its cost and no profit arises. With a wage share less than unity a profit then arises and the revenue accrued by the capital input will now be greater than its costs. Here the initial advancement accrues a revenue according to the general rates of profit (r) such that by the end of the process the quantity of value per-unit this initial advancement leaves with, or commands, is equal to the initial advancement plus the remunerated revenue. The sum may be thought of as the command-price of the capital input. An opposite scenario occurs for labour. When the wage share is unity the

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SCOTT CARTER

wage rate is ‘complete’ and remuneration is exactly equal to labour’s productivity. When the wage share is reduced, wages are no longer ‘complete’ and the quantity of value the labour input accrues or commands is less than its productivity. We depict the relationship between changes in input remuneration and the wage-profit curve in Fig. 3. Quadrant I shows the linear wage-profit relation given by the well-known equation r = R(1 − ω), where R = maximum rate of profits. Quadrant II shows the movement in factor prices as the wage share falls. Here the quantum of value remunerated to (or commanded by) living labour is of a magnitude smaller than the value of its productivity qua ‘complete’ remuneration. Alternatively the quantum of value remunerated to (or commanded by) capital value is of a magnitude greater than its cost. It is here that the Marxian theory of exploitation becomes explicit: labour exploitation is the source of profits and the ‘redressing’ of variations that is ‘fully achieved’ by price movements given the existence of surplus and deficit industries in fact speaks to the manner in which extracted profit (hence extracted unpaid labour) is distributed from workers to owners. Further we argue that for Sraffa, the price mechanism is precisely that which provides the channel through which unpaid labour is extracted while at the same

(ω) = 1

(ω′)

(pA* j)

(pA)

‘capital’ commands more value as ω↓

Fig. 3.

(w 0)

(w*)

0

(r*)

(r*);R

labour commands less value as ω↓

Wage-Profit Frontier and Non-Distributive and Distributive Prices of Inputs.

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From ‘Pool of Profits’ to Surplus and Deficit Industries

time concealing the distribution of the social booty to the capitalist ruling class. Finally consider how input remuneration is related to surplus and deficit industries. This is seen in Fig. 4. Here we return to the two-commodity labour- versus capital-intensive model in which case each of the industries will be characterized by its own (local) wage-profit curves. This is seen in Quadrant I where the horizontal axes shows the wage share-profit curves for the two industries as well as the aggregate; note here that the LMP ratios for the capital and labourintensive industries corresponds to the maximum profit rates for the deficit and surplus industries, respectively. Notice also that the average LMP ratio (LMP*) is here set equal to the maximum rate of profit for the system (R*) as well as the Standard ratio (ζ).29 Quadrant II shows the remunerative input relations and Quadrant IV the price movements associated with surplus and deficit industries. The need to redress prices clearly relates to the process whereby different quantities of unpaid labour extracted at the

ω ω=1

p*A

w* pA

LMPKI = RDI

w0

LMPLI = RSI r LMP* = R* = ζ SI: Value flows out

DI: Value flows in

p0,p*

Fig. 4.

Wage Share Profit Rate Schedules, Input Remuneration Schedules and Surplus and Deficit Industries: A Diagrammatic Interrelation.

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SCOTT CARTER

industry level must be equitably distributed to the owners of those industries according to the value of the initial advancement of capital. The intercapital convergent processes in the first upper quadrant reflect the processes involved in the formation of a uniform general rate of profit to redress this problem. This is interestingly juxtaposed to the divergent process at work in terms of the price system, seen in Quadrant IV. There prices of production push away from the centre of gravity of labour values (direct prices) as the wage share falls from its initial value of unity. This seeming contradictory movement, convergence in one sense, divergence in another, has led to a tremendous amount of confusion in disquisitions on value and distribution in all types of economic theory.

CONCLUSION This chapter provides archival evidence for the development of an important concept that Sraffa develops in his book, namely that of surplus and deficit industries. We attempted to show that the origin of these concepts which prominently appear in his book belong to the notion of exploitation that Sraffa developed from Marx. Specifically we have attempted to show that contained in the nascent idea of the profits pool are the analytics of the surplus-deficit industry idea. We have also attempted to show that the idea of the profits pool in effect refers to ‘extracted unpaid labour’ or ‘extracted profits’. We further attempted to show that the ‘problem’ of the transformation from labour values to prices of production (the latter being a function of the general rate of profits) can in fact be traced to the extractiondistribution nexus and that the latter lay at the heart of the transformation procedure. From this we advance the idea that the price changes associated with distributional changes given different compositions of capital across industries are merely external expressions in the general case of the processes in capitalistic systems of production, whereby the booty extracted from the working class is distributed to the capitalist class. We concur with Sraffa, if our reading about him can be seen as correct, that these changes in prices at the same time conceal as well as provide the channel through which capitalistic exploitation manifests. Admittedly Sraffa chose not to include the notion of the ‘profits pool’ in drafts of his book and after March 1956 we find no further reference to it. However in the ruins of the ‘pool’ rose the prominence of surplus and deficit industries. Hence in the Marxian reading and reconstruction attempted

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55

in the above pages, herein lies the ‘fossil’ of the pool notion and with it explicit reference to the notion of exploitation; and given that surplus and deficit industries find themselves conceptually in the pages of Sraffa’s book, so too does the implicit foundations of the theory of exploitation upon which they stand.30

NOTES 1. In the analysis here we take this view as our point of departure. In the spirit of full disclosure it must be admitted that acceptance of this view is the source of great debate within the surplus approach. The relation of Sraffa to Marx will remain a source of controversy for some time to come. Bellofiore (2008, 2012, 2014) reviews the important literature that debates the relevance of Marx for Sraffa; in Bellofiore (2014) especially we find a fresh and forward-thinking approach to the relationship of Marx to Sraffa based on heretofore unpublished archival evidence. 2. The Sraffa Papers are housed at the Wren Library, Trinity College, University of Cambridge. 3. In Sraffa’s notation for the general case this is seen in the following: La þ Lb þ … þ Lk ≡ 1 ≡ ½A − ðAa þ Ab þ … þ Ak Þpa þ ½B − ðBa þ Bb þ … þ Bk Þpb þ … þ ½K − ðKa þ Kb þ … þ Kk Þpk The LHS of the unit-normalized identity is the living labour added in §10 and the RHS the value of the net output in §12. See Bellofiore (2008, 2012, 2014) and Carter (2011, 2013, 2014) for discussion on Sraffa’s normalization in §10 and §12 This normalization is in my opinion equally in line with that of the New Interpretation as that of Sraffa, or perhaps better said it is not quite either but contains important elements of both. 4. It would be more appropriate here to say the value of the means of production now serve as capital. Thus, ‘capital’ emerges here as a value-magnitude serving in a specific role in a specific social context. The social context is capitalist commodity production, wherein labour power is completely rendered a commodity and the means of production are completely in the hands of private profitmaximizing capitalists. A magnitude of value serving the role as capital is thus one that enters the process of production with the expectation of a positive return on that value by the time it ‘ripens’. In Marxian terms this involves a social relation of being able to extract or command more from the process of production than initially advanced, and that this is a function of the relations of capitalist private property. 5. In this chapter we do not concern ourselves with the determination of the ‘watershed’ LMP ratio excepting to say that it represents some ‘social average’. And the reason the determination of the watershed LMP is not of a concern here is precisely for the same reason it is not relevant for Sraffa at this stage of the inquiry as well. Indeed all that is occurring here for both us and Sraffa so far is the

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identification of the notions of surplus and deficit industries, and for that all is required is some idea of a relation around some general ‘social average’. In Carter (2014), we show that for Sraffa the ‘watershed’ LMP will come to ‘coincide’ with the Standard ratio as well as the maximum rate of profits. Hence, further research into this question concerns the application of the exploitation-theoretic interpretation of surplus and deficit industries advanced here for Sraffa’s complete model. Certainly one area of research that is ignored in the present study is the implications the ‘pool of profits’ and surplus and deficit industries have on Sraffa’s ‘Hypothesis’ of the constant ratio of net output to social capital. On what Sraffa often called simply his ‘Hypo’ see De Vivo (2003), Gilibert (2003), Bellofiore (2014), and Carter (2014). 6. In March 1955 Sraffa went to the Spanish island of Majorca to pull together notes and write a working draft of his book. For other references to the ‘Majorca draft’ see Carter (2011, 2014). 7. See ‘Majorca draft, March 1955’ D3/12/52/6-8; also see ‘Notes on Agricultural Schemes, August 1942’ D3/12/19/7. Christian Gehrke (2011) through archival research develops the notion of proportional wages especially in Ricardo and the influence this had on Sraffa. 8. As a general rule for all archival documents cited in this study all inserted and cross-out words and paragraphs are Sraffa’s, as are underlined emphases and both round and square parentheses. Curly brackets within archival documents are insertions that we make. 9. These pages are found in D3/12/17/2-5. 10. These pages are found in D3/12/17/6. 11. The majority of archived folders were for the most part compiled by Sraffa, and that the subsequent preparations of the material after his death retained this content. Hence, we can reasonably certain that it was Sraffa who inserted the contents for this (and every other) folder. On the history and structure of the Sraffa Archive see Smith (1998, 2012). See also the Archive Index in Bellofiore and Carter (2014). 12. Trinity Archivist Jonathan Smith (1998) writes that ‘[t]he surviving papers show three distinct periods of work, 1926
29, during which period much was achieved, 1942
48 and 1955
60, from around the period of the ‘Majorca draft’ to final publication’ (Smith, 1998, p. 48). Our interest in the present chapter with respect to the evolution of the ‘pool of profits’ to ‘surplus and deficit industries’ is to show the relationship and connection especially between the second and third periods. 13. Archival evidence suggests that Sraffa first read the French Edition of Capital (the Roy Translation, published as a serial) in the late 1920s and early 1930s. This conclusion is based on the perspective Sraffa’s takes in the Lecture Notes on the Advanced Theory of Value written in 1927 (see D2/4) and by a marginal note on Sraffa’s copy of the Roy Translation dated December 31, 1931 (see Sraffa 4263). On the impact of Sraffa’s re-reading of Marx’s Capital in 1940, see Bellofiore (2008, 2012, 2014). 14. Notice here that Sraffa uses interchangeably the wage share and the rate of surplus value as if they express the same idea
which they do. As Sraffa indicates both are functions of distribution of the net product. In fact the two are monotonically related. Let the rate of surplus value = e = profits/wages and the wage

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share = ω = wages/value added. In this case it is simple to show that: ω = 1 þ1 e or 1 ω = 1 þ e. The latter equation is the labour commanded standard of value, which Sraffa in his book writes as a function of the rate of profits (r) and the Standard 0 ratio (R0 ): ω1 = R0R− r. 15. Note the scribbled line and the word ‘none’ written in the margin; this is written in pencil and dates from September 8, 1955, some thirteen years to the month after he had first penned in ink this set of notes in 1942. Here Sraffa clearly recognizes that ‘straight lines’ are nowhere to be found. The ‘revisiting’ of this document in 1955 corresponds precisely to the time that Sraffa was ‘weakening’ regarding the ‘pool’ notion. Consult (page 21) the third page in this set of notes (D3/12/17/3) where we also find marginal insertions in pencil again indicating a backtracking, so to speak, of the ‘pool’. 16. This folder is a wealth of information surrounding the development of the concepts of surplus and deficit industries. 17. This is the second page of the document ‘Exploitation’ cited above. Inserted phrases and Bo¨hm-Bawerk citation are in pencil and date from Sraffa’s re-reading of this document on September 8, 1955. 18. The document itself (D3/12/2/20) is not dated, but we conjecture that it dates from 1945 for the following reasons: (1) the document that immediately follows (D3/12/2/21) is entitled ‘Rent and Social Revenue’ and dates 1/1/1945; (2) these two documents together constitute the conceptual crux of the above referenced two inserts by Sraffa in the Majorca Draft; as such it is not unreasonable to think that Sraffa developed them in as a logical tandem even as early as 1945; and (3) Sraffa uses language here that is more consistent with his early notes as opposed to his later ones; specifically the use of the term ‘organic composition of capital’ which appears in his early notes versus ‘proportions of labour to means of production’ which he uses rather exclusively in his later developments. 19. The reader must keep in mind that Sraffa’s ‘w’ is the proportionate wage or wage share, which is a monotonic function of the rate of exploitation. Thus once we know the different compositions of capital, we also know the different amounts of unpaid labour extracted at the different levels of the rate of exploitation-qua-wage share. Hence, we know also the contribution of workers in each industry to the total unpaid labour of society (profits pool). 20. Again the document in question (D3/12/59/74) has no date but that which precedes it (D3/12/59/73) is dated October 14, 1955. Both documents deal with the ‘shoe industry’; the latter document contains the actual numeric example. 21. We adopt the notation that Marx uses in his reproduction schemes: Department I = means of production sector and Department II = means of consumption sector. We abstract from the possibility that ‘shoes’ can also be considered a means of production, for example, in the form of work boots, etc., and accordingly regulate the entire output of the shoe industry to consumption. 22. An anonymous referee made some very keen observations out of Sraffa’s example of the ‘shoe industry’; which the present writer cites in full for the benefit of the reader: When Sraffa realised that the prices do not change in a linear way when the rate wage falls because of the changes in the prices of capital goods, the idea of the pool was

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SCOTT CARTER weakened. However Sraffa developed his line of reasoning referring to the surplus of a single industry (the example of the shoe-factory). Here he wants to indicate the surplus (wage plus profits) in terms of a physical quantity of shoes, i.e. the number of shoes that remains after the shoes with the same value of the capital are given in exchange in order to pay their costs of production. The problem arises because the surplus quantity of the shoes varies when the wage falls. In fact in general the price of the shoes varies in relation to their means of production. If the price of shoes falls, then the amount of shoes that can be distributed between capitalists and labourers employed in their production diminishes. Here it seems to me that Sraffa mixes up a problem of determination of physical quantities (and the macro problem of the value of the aggregated surplus), and a problem of prices …. Sraffa … wants to determine the physical quantity of shoes that forms the surplus of a single industry independently from the other industries, but this is obviously impossible, because this can be achieved only after prices are settled. Thus the idea that the shoe industry brings to the NI pool less shoes when the wage rate falls is a deception of the movement of prices. In fact the shoes can be brought to the pool only by the shoe industry, and their amount remains exactly the same before and after the falling of the wage rate. But the amount of shoes equivalent to the surplus that remains in the industry of shoes diminishes, because profits are redistributed proportionally to the new value measured in prices of the capital invested in this industry (emphasis added).

The notion that there is a ‘deception of the movement of prices’ with regards to quantity changes (or lack thereof) of the net output is a very instructive. Such ‘deception’ may even be further evidenced when, instead of the heuristically implicit labour-intensive hence surplus shoe industry, a ‘capital’-intensive hence deficit ‘iron’ industry is considered. In this case (see Fig. 2 below) reduction of wages actually causes the price of the deficit-industry good to increase, even further complicating the relation of the price of the net product to that of capital goods. 23. Space here limits us from discussing the implications Sraffa’s notion of the profits pool has for pricing in a socialist system. Suffice it here to say that one of its implications is the demonstration that the critique of socialist pricing is ‘not well founded.’ 24. The ‘spectrogram’ refers to the diagram that shows changes in price with changes in distribution. 25. Sraffa here refers to the ‘first’ and ‘second’ conditions of stability of a standard, viz.: D3/12/45/5 The general condition of stability thus becomes twofold: a commodity must (a) be produced by the right proportions of means to labour and (b) be produced by means which, as an aggregate, themselves satisfy the conditions of stability (this, in turn, implies that the means of production satisfy the conditions, and so on).

26. It is admitted that the following analytical reconstruction remains that of the author’s only and that throughout Part II our interpretation of Sraffa is at time conflated with our reading of Marx. This is seen especially by the fact that this analytical reconstruction develops only the ‘positive’ aspect of the notion of the ‘pool’ without entering into the difficulties that Sraffa recognized as the pool ‘collapsed’.

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Having said that, and with apologies to the reader for their formal error especially as regards the linearity of the graphs, the analytical model in the following pages is offered as an initial attempt to develop along Marxian lines some of the relations in the original archival material presented in the first part of this chapter. By no means is this approach unequivocal nor is it intended to be a representation of what Sraffa ‘really meant’. However we do deem it instructive and perhaps can contribute to a starting point for a ‘new interpretation’ (lower case) of the analytical relation between Sraffa with Marx. 27. An ‘ideal’ system of prices, as understood, for example, by the ‘Ricardian socialists’ (who has claimed at the beginning of the 19th century that the whole net product of an economic system ought to go to the workers), might be pA + wan = p. This is a linear system of (n − 1) equations. It determines (n − 2) relative prices and a wage rate which absorbs the entire net product per worker of the economic system. This [is] regarded as the ‘maximum’ wage rate… since it corresponds to a profit rate of zero. We may call it the ‘ideal’ wage rate here, or, from a different point of view, the ‘complete’ wage rate (Pasinetti, 1977, p. 122). 28. At first sight it may seem odd to use the notion of ‘command’ for an object of materialized (dead) labour, such as means of production. Certainly most usages of the ‘labour commanded’ concept are limited to that of living labour. However, the idea that materialized labour commands a quantum of value is quite consistent with the development of the theory of value in Marx and, as we argue, Sraffa. In Theories of Surplus-Value, for example, Marx clearly develops a line of argument where materialized labour commands more than its value. Specifically, under capitalistic relations of production, materialized labour commands a quantum of living labour that is greater than its own value-ascapital. Or what is the same, living labour commands less value than itself. This contradiction is the source of confusion in Ricardo’s theory, a fact that was highlighted by Samuel Bailey (1825) and especially Thomas Malthus (1823, 1827, 1836) and it was this above all else which caused the Ricardian school to disintegrate under the watch (and to the dismay!) of Torrens, McCulloch, and J. S. Mill. The one merit Marx gives to Malthus is precisely how he (Malthus) recognizes that capital by its very nature commands more value than its cost. We read in Theories of Surplus Value: The real contribution made by Malthus … is that he places the main emphasis on the unequal exchange between capital and wage-labour, whereas Ricardo does not actually explain how the exchange of commodities according to the law of value … gives rise to the unequal exchange between capital and living labour (Marx 1971, p. 14).

29. See Carter (2014) for further development of the ‘coincident’ character of the equality of these three ratios. 30. An anonymous referee sums up nicely the endeavour this chapter has attempted: Sraffa’s apparently smooth ‘transition’ from ‘pool of profits’ to ‘surplus and deficit industries’ can thus be interpreted as the most tangible sign of [an] effort … having as its ultimate goal that of making ‘exploitation’ logically springing from within the system of production prices, and so rendering it again a socially meaningful notion.

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Here the effort to make exploitation a scientifically legitimate conceptual category in understanding value and distribution in modern capitalist economies becomes explicit.

ACKNOWLEDGEMENT I would like to thank Sraffa’s Literary Executor Lord Eatwell for permission to quote from the Sraffa Papers. I would also like to thank Jonathan Smith from the Wren Library, Trinity College, University of Cambridge and Riccardo Bellofiore from the University of Bergamo for all the support over the years. I would also like to acknowledge The University of Tulsa and my colleagues in the Economics Department for their continuing support of this on-going endeavour and belief in the vision of actualising Sraffa’s archival material. Lastly I would like to thank the Economics Department at Rollins College which in 2005 made this research possible in the first place with an Individual Faculty Development Grant.

REFERENCES Bailey, S. (1825 [1967]). A critical dissertation on the nature, measure, and causes of value. New York, NY: Augustus M. Kelley. Bellofiore, R. (2008). Sraffa after Marx: An open issue. In G. Chiodi & L. Ditta (Eds.), Sraffa or an alternative economics (pp. 68
92). Basingstoke and New York: Palgrave Macmillan. Bellofiore, R. (2012). The ‘tiresome objector’ and old moor: A renewal of the debate on Marx after Sraffa based on the unpublished material at the Wren library. Cambridge Journal of Economics, 36, Special Issue: New Perspectives on the Work of Piero Sraffa, 1385
1399. Bellofiore, R. (2014). The loneliness of the long distance thinker: Sraffa, Marx, and the critique of economic theory. In R. Bellofiore & S. Carter (Eds.), Towards a new understanding of Sraffa: Insights from archival research (pp. 198
240). Basingstoke and New York: Palgrave Macmillan. Carter, S. (2011). A simple model of the surplus approach to value, distribution, and growth, American Journal of Economics and Sociology, 70, Special Issue on Social Provisioning, F. Lee (Ed.), 1117
1146. Carter, S. (2013). Sraffa and the ‘corrected’ organic composition of capital. In S. Levero, A. Palumbo, & A. Stirati (Eds.), Sraffa and the reconstruction of economic theory (Vol. 3). Basingstoke and New York: Palgrave Macmillan.

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Carter, S. (2014). Sraffa and the Standard commodity. In R. Bellofiore & S. Carter (Eds.), Towards a new understanding of Sraffa: Insights from archival research (pp. 47
68). Basingstoke and New York: Palgrave Macmillan. Gehrke, C. (2011). ‘Price of wages’: A curious phrase. In R. Ciccone, C. Gehrke, & G. Mongiovi (Eds.), Sraffa and modern economic (Vol. 1, pp. 406
422). New York: Routledge. Malthus, T. ([1827] 1954). Definitions in political economy. New York, NY: Kelley & Millman. Malthus, T. ([1836] 1951). Principles of political economy considered with a view to their practical application (2nd ed.). New York, NY: Augustus M. Kelley. Malthus, T. R. ([1823] 1992). The measure of value stated and illustrated (Reprinted in Porta, P. L. 1992, David Ricardo’s notes on Malthus’s ‘measure of value stated and illustrated’) (pp. 5–62). Cambridge: Cambridge University Press. Marx, K. (1963, 1968, 1971 [1862
1863]). Theories of surplus value, parts I, II, III. Moscow: Progress Publishers. Marx, K. (1976 [1965]). Capital: A critique of political economy (Vol. 1). New York, NY: Vintage Books. Marx, K., & Engels, F. (1975). Selected correspondence. Moscow: Progress Publishers. Pasinetti, L. (1977). Lectures on the theory of production. New York, NY: Columbia University Press. Perri, S. (2014). The Standard system and the tendency of the (maximum) rate of profit to fall
Marx and Sraffa: There and back. In R. Bellofiore & S. Carter (Eds.), Towards a new understanding of Sraffa: Insights from archival research (pp. 94
120). Basingstoke and New York: Palgrave Macmillan. Smith, J. (1998). An archivist’s apology: The papers of Piero Sraffa at Trinity College. Cambridge’, Il Pensiero Italiano, 6(1), 39–54. Smith, J. (2012). Circuitous processes, Jigsaw puzzles, and indisputable results: Making the best use of the manuscripts of Sraffa’s production of commodities by means of commodities. Cambridge Journal of Economics, 36, 1291–1301. Sraffa, P. (1960). Production of commodities by means of commodities: Prelude to a critique of economic theory. Cambridge, UK: Cambridge University Press. Steedman, I. (1977). Marx after Sraffa. London: New Left Books.

COMMENTS ON SCOTT CARTER Robert M. Solow ABSTRACT Sraffian’s concept or metaphor of a “pool profits” is theoretically pointless and empirically irrelevant. The appropriate calculation is the variation of the equilibrium price vector along the factor price frontier. Keywords: Pool of profits; factor; price; frontier

It is not clear to me how I can make a constructive contribution to this discussion. I am not a Sraffian. I am not particularly an anti-Sraffian either, just a non-Sraffian. I read The Book when it was first published in 1960. My main reactions, as far as I can remember, included (a) some astonishment that Sraffa has managed to learn so much about Simple Leontief Models with such primitive tools (even with help from Besicovich), and (b) the realization that modern work on linear models by Gale, Samuelson, von Neumann, McKenzie, and many others, including even yours truly, had been able to go considerably further, especially with Generalized Leontief Models (that allow for choice of technique within each industry). To which

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I would add (c) that Sraffa’s work did much to convert the two good plus labor circulating capital model into a neat heuristic and teaching device for capital theory, and (d) that all the stuff about the Standard Commodity and measures of Value was at best an antiquarian interest. I remember that I had a couple of conversations with Sraffa at Trinity College, Cambridge in 1963
1964; he was charming in a remote way, but as little interested in my ideas as I was in his. I would never imagine that The Book would become the basis of a whole literature, and that Sraffa’s stray scraps of paper would be pored over and fought over. As you can see, I clearly lacked imagination. I will illustrate some of my lack of imagination
or simple incomprehension
as I discuss Scott Carter’s highly interesting and meticulous paper. The most direct way to do this is to remind you how a run-of-themill late 20th century economist would approach the particular propositions that Professor Carter appears to be talking about. (I say “appears to be” not because he is unclear, but only because I have learned that I sometimes misconceive what the question is, or at least what the subtext of the question is.) So we have a simple Leontief model, a fixed proportions constant returns-to-scale, no joint-production technology, with circulating capital and one primary factor, labor. (Sraffa seems to argue as if he is only concerned with a snapshot of interindustry commodity flows in an economy, with no technological assumptions of any kind, but that cannot be taken seriously. Without the standard technological assumptions there is no point to the various balance conditions he introduces. Sraffa’s remark that one could allow a man from the moon to set prices after production has taken place just misses the point. Why would a man from the moon choose just those prices that eliminate all pure profit? The run-of-the-mill answer is that otherwise, under constant returns-to-scale, there can be no equilibrium.) So we have the prices of n goods, homogeneous labor, and a uniform rate of interest on the capital tied up for one period in production. The assumption of zero pure profit gives n equations in n commodity prices, the wage rate and the interest rate. The choice of a numeraire makes n + 1 equations, leaving one degree of freedom. That allows for the famous factor-price frontier or wage
profit curve connecting the wage (in numeraire) and the rate of interest/profit. Note that particular endogenous magnitudes and even some ratios of magnitudes are not independent of the choice of numeraire, nor should we expect them to be. The wage (or any other price) in terms of gloves is not at all the same thing as a wage or price in terms of cell phones or in terms of some basket of goods. The particular choice of a numeraire, however, has nothing to do with anything “real” that happens; it is an algebraic convenience. Where the last n + 2nd

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equation comes from is a whole different conversation into which Carter’s paper does not enter. Now something changes. In the paper it seems to be a quantity which is something between a loose measure of labor intensity and the share of wages in total income, but not quite that either. This seems unnecessarily complicated: why would that number change exogenously? It is a complex artifact. It seems clearer just to compare the configurations at two different points on the factor-price frontier. No doubt the wage share will differ at the two comparison points, as will the whole configuration of prices. In principle, we could calculate by how much the wage share would change. But the basic question is: what happens to the prices of produced commodities (in numeraire)? Some will be higher and some will be lower, and this outcome can be calculated. (In principle we could calculate the vector functions p(r) or P(w).) The intuition is certainly that, if the wage has increased (and the rate of interest has decreased), it is the more labor-intensive goods that rise in price and the less-labor intensive gods that will fall in price, but the detailed algebra will involve all n(n + 1) technical coefficients and can be very complicated and even non-obvious. In this simple model, that is what “surplus and deficit industries” are all about. You will have noticed that this description of the economic problem under discussion makes no mention of Value or of the zero-profit point on the factor-price frontier, or of exploitation, or of any of that baggage. I do not object to talking about those things, or about “the right of the worker to the whole product of his or her labor,” but that is a different topic, not particularly relevant to price determination or surplus and deficit industries. To compare small things to great, there is a story that Laplace once outlined to Napoleon Bonaparte his description of the universe in terms of positions and velocities of particles, and the way that initial conditions determined the future. Bonaparte asked: “And what role does God play in your system?” To which Laplace is supposed to have replied: “Sir, I have no need of that hypothesis.” Apocryphal or not, the same is true of Sraffa and Carter. In fact I was amazed to read
it may have been in Professor Bellofiore’s paper
that one of Sraffa’s scraps of paper labels these issues as part of the “metaphysics” of Ricardo, or Marx, or Marshall, or Sraffa. At a later time, Sraffa was thoroughly embedded in the Cambridge of Russell, Wittgenstein, and Moore. To call something “metaphysics” in that milieu was certainly not to pay it a compliment. But that is an aside. What about the “pool of profits?” As far as I can see, there is no pool of profits. I suppose that Sraffa deserves the credit Professor Carter gives him for digging himself out of this hole that was dug for him in the first place

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by Marx. On the other hand, he was not very clever to have fallen into it. I am not sure about this, but I think that the whole mess arises because Marx wants to start with the assumption of a uniform rate of surplus value, and then has the embarrassing need to convert into a uniform rate of profit. The best route would be simply to admit that the uniform rate of surplus value is a mistake. There is no mechanism in a capitalist market economy that tends to eliminate discrepancies between industries in the rate of surplus value. There is of course such a mechanism to eliminate discrepancies in the rate of profit; it is called the capital market. Sraffa must at some point have realized this. I find it hard to focus on the path from the pool of profits to surplus and deficit industries because it seems to me to be a non-issue, the use of one superfluous concept to expunge another superfluous concept. But I will try briefly. Carter quotes one of Sraffa’s fragments. (“When general wages fall, what the workers in any one industry lose does not go directly to the owners of the capital that employs them; it goes [later insert in pencil: “as it were”] into a pool, from which it is redistributed to the capitalists, not in proportion to their wage bill, but in proportion to their capital; thus the capitalists in one industry may get more, or less, than the workers they employ have lost in wages.”) Note the “as it were.” A plodding late 20th century economist will say: No, when wages fall, what workers in any industry lose goes, in the short run, precisely to the owners of the capital that employs them. But that situation is not an equilibrium, because it leads to unequal rates of profit on capital. If and when a new equilibrium price vector and rate of profit are established, corresponding to the new wage rate, a new and different distribution of profits across industries will accompany it, even if techniques of production are fixed. It is precisely defined in terms of the new r and p. I do not think that anything is gained by talk about surplus and deficit industries, other than to obscure the problem of finding a new equilibrium. No other “balance” is being redressed. The heavy weather that Professor Carter documents in Sraffa’s successive notes to himself seems to reflect almost entirely the difficulty of grappling with the difference between p(w1) and p(w2) (along with r(w1) and r(w2)) by numerical examples and verbal categories instead of linear algebra. It is striking that the uniform rate of surplus value makes no appearance in these notes. The problem is just that the elements of the relevant Leontief inverse change in a complicated way when r and w change. The wonder is, as I have already said, that Sraffa got as far as he did. I suggested in the first full paragraph of page 63 that the main or only issue of economics here is the behavior of p(r). It appears that Sraffians

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prefer to think about p(r)
p(0), which I suppose is harmless enough by itself. They think of the deviations of p(r) from p(0) as “distortions” in p(r). It probably makes more sense to think of p(0) as the distorted vector, but it has no reality. Capital is scarce to the economy as a whole, and concepts like “abstinence” and “waiting” make some sense at that level. I have sympathy with the cynical view that talk about the abstinence and waiting performed by individual rich capitalists seems excessively solicitous. The important thing is to distinguish carefully between economics and the metaphysics, or what Duncan Foley calls the theology. This is difficult, of course. Suppose that the workers own the stocks of perishable goods that make up circulating capital. It is then a little less satisfying to talk of exploitation, though one could train oneself to think of each person as having a dual personality, with the capitalist personality exploiting the worker personality. But that lacks charm. Suppose instead that circulating capital takes the form of one-period investment to build a valuable skill that obsolesces at the end of the period and has to be created all over again for next time. Workers with elaborate skills earn higher wages than unskilled workers. Are they exploiting the unskilled who haven’t made the investment? The intensive-care nurse will be pissed off if you tell her that she is not “living labor.” Of course that is not the way a modern capitalist economy looks, let alone a 19th century capitalist economy. But that is my point. If you want to say that workers are exploited by the capitalist class in actual capitalism, be my guest. My own guess is that some of them are and some of them aren’t. I don’t think that setting r = 0 is the way to think about this. That just screws up price theory, which is all about p(r).

RESPONSE TO COMMENTS OF ROBERT M. SOLOW Scott Carter ABSTRACT Professor Solow’s original comment from 2007 is addressed seven years later. Here the foundational character of Sraffa’s archival material is stressed and no longer is the search for what Sraffa “really said” or much more nefariously what he “really meant” (especially as regards the relation to Marx) the endeavour pursued. This means rendering unto Sraffa what is his and using the foundations he provides from archival material to re-conceive Marxian income distribution theory and policy as a “positive” aspect of economic science. Keywords: Sraffa; Marx; Solow; exploitation; Sraffa Papers; theory of distribution

The present essay in question was written in 2005 after my first visit to the Sraffa Archive, with minor revisions in 2007 for a presentation made at the Eastern Economics Association in New York City,1 whereupon I had the honour and privilege of having it commented on by Professor Robert Solow. And the fact that a Nobel Prize winner would take the

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time to read and comment upon a paper, and even more remarkably actually show up at a session, of an unknown lowly and at that time newly-minted assistant professor, especially one who is not in agreement with his position, certainly serves as a testament to Professor Solow’s commitment to young scholars asking interesting questions. And since that time I have heard many stories of him doing much of the same over decades for many-a-young-economist. So certainly I want to thank Professor Solow for giving me the opportunity to be included in this long list of grateful junior colleagues who over the years have benefited tremendously from his time, input, and engagement. The essay itself represents an earlier period in my thinking where admittedly my own interpretation of Marx is being read into Sraffa.2 This alone does not render the inquiry as such less valid; indeed in a certain sense the very possibility of being able to read such a full-blown Marxian interpretation out of Sraffa’s unpublished notes is in fact evidence of validation of Sraffa’s theory in the sense of it being, as Pasinetti’s (1988) tells us, foundational. This is to say that, where almost decade ago I would read the possibility of making such Marxian connections from Sraffa’s approach as evidence of him being the “True Marxist” (as Bellofiore, 2012, 2014 categorizes my earlier work), I now take a much less sophomoric approach and render unto Sraffa only what is his and thus do not attribute to him necessarily, from the foundations he provides, the theory of exploitation developed in my original paper (which in the main I stand behind, although now not as a representation of what Sraffa “really meant”). Thus nine years ago I was puzzled that Sraffa ultimately decided to abandon by March 1956 the notion of the “pool of profits”
which I continue to read as quanta of extracted unpaid labour
after having embraced and utilized the concept since 1942; I now see my puzzlement came from trying to equate Sraffa with Marx. Professor Solow recognized this aspect of my quandary in his Comment: What about the “pool of profits”? As far as I can see, there is no pool of profits. I suppose that Sraffa deserves the credit Professor Carter gives him for digging himself out of this hole that was dug for him in the first place by Marx. On the other hand, he was not very clever to have fallen into it.

It has taken me seven years to finally understand what Professor Solow may be driving at here. Now that does not mean I necessarily agree with his overall take on such matters. But where I have attempted to mature is to stop trying to read the archival tea-leaves and otherwise cease with being enthralled by the alchemy of discerning what Sraffa “really said” or, much

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more nefariously, what he “really meant;” especially when in my own mind I had already a priori normalized (and thus constrained) my thinking by setting Sraffa = Marx (with Marx of course serving here as the “general equivalent form”). Pardon the vernacular, but that ain’t no way to do science! But this is a two-way street. That is to say just as I cannot use Sraffa’s foundations as exclusive corroboration of the Marxian theory of value, distribution, and especially exploitation, so too it cannot be used it to exclusively falsify that theory either. And it was to this latter point that within heterodox approaches to Sraffa, the Neo-Ricardian/Sraffian
Marxist debate led to serious and often debilitating acrimony between these two camps (sects?) especially in the 1970s and 1980s; an acrimony that did much damage in discouraging interest in Sraffa beyond the moribund Cambridge Capital Controversies. And it is through this dysfunction that the current and future generations of heterodox economists interested in both Marx and Sraffa have to wade. That coupled with the unconscionable sequestering of Sraffa’s archival material literally since the Italian Economist’s death in 1983 certainly has contributed to making one fine mess out of it all indeed! And here again the foundational character of Sraffa’s inquires must be explicitly articulated. Thus, to a certain degree it becomes moot whether or not Sraffa “really intended” for a Marxian reading (or for that matter an anti-Marxian critique) of his archival material to manifest. The fact of the matter is that such a Marxian reading can be done, and albeit somewhat sophomoric in presentation, in the chapter above that is precisely the endeavour attempted. The conclusion we draw is that irrespective of what Sraffa “really meant” or “really intended,” it remains true that from his foundations we can build upon the Marxian theory of exploitation and of wage labour generally. And in that capacity I think that the notion of the “pool of profits” does in fact matter in the development of Marxian exploitation and wage theory, whether or not Sraffa ultimately “decided” to include it or not in his own analysis and despite the fact that it understandably does not withstand the muster of Professor Solow’s own inclinations. And one reason why the Marxian theory of exploitation still hangs around is because at least within this framework a relatively coherent explanation of the source of profits and its subsequent distribution via the mechanism of the capitalist price-form can be advanced, one that is distinct from the received doctrines, the latter of which many of us feel seriously broach capitalistic apologetics.3

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Professor Solow remarks that determination of an actual rate of exploitation at any given time as well as its supposed uniformity “is a whole different conversation into which Carter’s paper does not enter.” He is right about this. What determines the particular rate of exploitation (or, if one finds that language objectionable, the particular level/regime of functional income distribution) and whether or not this is necessarily uniform is indeed the hundred thousand dollar question; and various theories have already been advanced: Kalecki’s degree of monopoly, Robinson’s worker strength and the “fortune’s of the class war,” Bowley’s Law of a constant wage share, and even what Martin Bronfenbrenner and Professor Solow himself both used to call the “Good Old Theory”4 of marginal productivity immediately come to mind. And Sraffa himself did not answer this question except for the provocative and cryptic comment in §44 that the “money rates of interest” may play a role. Yet in divorcing the concept of surplus and deficit industries from the “baggage … of Value or of the zero-profit point on the factor-price frontier, or of exploitation,” Professor Solow is able to claim that such things are “a different topic, not particularly relevant to price determination or surplus and deficit industries.” And it is here that we fundamentally disagree. Prices in my opinion are the mechanism through which the exploitive character of capitalistic commodity production and exchange itself manifests and at the same time is concealed; and uncovering this is what a Marxian reading of surplus and deficit industries as developed from the notion of the “pool of profits” attempts to accomplish. To his credit Professor Solow acknowledges “sympathy with the cynical view that talk about the abstinence and waiting performed by individual rich capitalists seems excessively solicitous.” Count me as one such cynic. And in a world where the income disparity between them-that’s-got versus them-that’s-not has grown exponentially at an unprecedented pace across, within, and between all countries, while at the same time the overall productivity of labour has been on a secular upward trend, such cynicism seems to be quite warranted, at least among economists who feel that theoretical issues in income distribution
including having on the table the Marxian notion of exploitation, and by extension innovative income distribution policies
including having on the table progressive redistribution of income and wealth, should once again be inserted into the “positive” aspect of economic science and not remain stuck on that of the “normative.” After all, isn’t it supposed to be the theory of value and distribution?

Response to Comments of Robert M. Solow

73

NOTES 1. At the February 2007 Eastern Economics Association Annual Conference in New York City we convened a panel on the relationship between Sraffa and Marx as evidenced in Sraffa’s unpublished papers. The presenters were (in order) Stefano Perri, Riccardo Bellofiore, and myself; and the discussants (also in order) Ed Nell, Gary Mongiovi, and Robert Solow. It is an interesting note that Solow’s review of Duncan Foley’s (2006) Adam’s Fallacy had only a few months earlier appeared in the November 2006 New York Review of Books, and this is the context of the veiled reference to Foley in Solow’s Comment above. Riccardo’s contribution would eventually be published as Bellofiore (2008) and Stefano’s as Perri (2010). 2. Pier Luigi Porta (2014) legitimately makes a similar critique. 3. I remind Professor Solow of something he wrote to C.E. (“Charlie”) Ferguson in February 1971 regarding his (Ferguson’s) debate in the pages of the Canadian Journal of Economics with Joan Robinson on the theory of capital: [S]omething one should distinguish (as Joan never does) is between the logical consistency of neoclassical theory and its empirical relevance or validity. On logical consistency, Joan is simply all wet. On empirical relevance she has less to say than you or I. In fact, years of experience have taught me that Joan’s deepest motive is ideological. She really thinks that we are merely apologists for capitalism, and marginalism is our tool. (Solow to Ferguson, February 22, 1971; cited in Carter, 2012).

Now of course no one can speak for Mrs. Robinson as she spoke (and still speaks) quite ably for herself, but I for one do think that the received approach to marginalism does in fact seriously broach apologetics for capitalism and in that sense contains no less “ideological motives” as those which Professor Solow attribute to her. 4. Martin Bronfenbrenner has often been credited with coining the term “Good Old Theory” to refer to the marginal productivity theory of distribution. Certainly he did use that term, especially prominently in his very well-written 1971 tome on income distribution theory (which is where he often is credited as coining that phrase; see Bronfenbrenner, 1971, p. 407). However, both he and Professor Solow must share in this honour. In separate papers given at the 1964 Palermo Conference on Income Distribution (proceedings published as Marchal & Ducros, 1968), the term “Good Old Theory” appears in Solow’s paper (Solow, 1968, p. 452) as well as Bronfenbrenner’s (Bronfenbrenner, 1968, p. 495).

REFERENCES Bellofiore, R. (2008). Sraffa after Marx: An open issue. In G. Chiodi & L. Ditta (Eds.), Sraffa or an alternative economics (pp. 68–92). New York, NY: Palgrave. Bellofiore, R. (2012). The “tiresome objector” and old moor: A renewal of the debate on Marx after Sraffa based on the unpublished material at the Wren library. Cambridge

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Journal of Economics, 36(Special Issue), New Perspectives on the Work of Piero Sraffa, 1385
1399. Bellofiore, R. (2014). The loneliness of the long distance thinker: Sraffa, Marx, and the critique of economic theory. In R. Bellofiore & S. Carter (Eds.), Towards a new understanding of Sraffa: Insights from archival research. Basingstoke and New York: Palgrave Macmillan. Bronfenbrenner, M. (1968). Neo-classical macro-distribution theory. In J. Marchal & B. Ducros (Eds.), The distribution of national income (pp. 476
501). New York, NY: St. Martin’s Press. Bronfenbrenner, M. (1971). Income distribution theory. New York, NY: Aldine Press. Carter, S. (2012). C.E. Ferguson’s lost reply to Joan Robinson on the theory of capital. Journal of the History of Economic Thought, 34(1), 21
41. Foley, D. (2006). Adam’s fallacy: A guide to economic theology. Cambridge, MA: Harvard University Press. Marchal, & Ducros, B. (Eds.). (1968). The distribution of national income. New York, NY: St. Martin’s Press. Pasinetti, L. L. (1988). Sraffa on income distribution. Cambridge Journal of Economics, 12, 135
138. Perri, S. (2010). From “the Loaf of Bread” to “Commodity Fetishism”: A “New Interpretation” of the Marx–Sraffa connection. History of Economic Ideas, 18, 55–81. Porta, P. L. (2014). Comment: The neoricardian criticism of irrelevance by Dario Preti and Sraffa and the standard commodity by Scott Carter. In R. Bellofiore & S. Carter (Eds.), Towards a new understanding of Sraffa: Insights from archival research. Palgrave Macmillan. Solow, R. (1968). Distribution in the long and short run. In J. Marchal & B. Ducros (Eds.), The distribution of national income (pp. 476
501). New York, NY: St. Martin’s Press.

FIXED CAPITAL AND WAGE-PROFIT CURVES A` LA VON NEUMANN-LEONTIEF: CHINA’S ECONOMY 1987
2000$ Bangxi Li ABSTRACT This chapter aims at making clear growth and distribution of China’s economy 1987
2000 with fixed capital on the input-output table basis. Since fixed capital data are not sufficiently available, one has to estimate fixed capital coefficients. In the outset, this chapter outlines the Sraffa
Fujimori method, which simulates the maximum growth path and estimates the marginal fixed capital coefficients on that path. In the second place, the marginal fixed capital coefficients of China’s economy are estimated. In the third place, the wage-profit curves of China’s

$

This article is a part of the outcome of research performed under the Waseda University Grant for Special Research Projects (Project number: 2012A-809).

Sraffa and Althusser Reconsidered; Neoliberalism Advancing in South Africa, England, and Greece Research in Political Economy, Volume 29, 75
93 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 0161-7230/doi:10.1108/S0161-723020140000029003

75

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BANGXI LI

economy will be drawn, and we discuss some further features obtained by our observations. Keywords: Marginal fixed capital coefficient; wage-profit curve; China’s economy; Marx-Sraffa model; Sraffa-Fujimori method; Von Neumann-Leontief system

INTRODUCTION In this chapter, we aim at investigating growth and distribution of China’s economy on the basis of the input-output tables. The tentative goal is to draw the wage-profit curves of China’s economy, and obtain an overview of the position of the actual situation of growth and distribution of China’s economy. We carry out this investigation focusing on fixed capital. Since the available data on fixed capital are very limited, it is necessary to start the task from estimating the fixed capital coefficients. On the basis of the standard system of Sraffa (1960), Fujimori (1992) developed a novel and original method to estimate the marginal fixed capital coefficient by employing the Japan’s gross investment matrix data of fixed capital. The first part of this chapter will be spent for an outline of the Sraffa
Fujimori method. That is, the method employed in this chapter reallocate all of consumption items of the final demand to investment items proportionally and calculated the marginal fixed capital coefficient in the state of the zero consumption, so that it is the calculation with the standard system of Sraffa. In addition, from the angle of computation, to evaluate the state in which zero consumption is observed can be said either to look for the standard system of the original system concerned, or to evaluate just the potential greatest growth rate. We adhere fundamentally to Fujimori (1992), with minor corrections and improvements, though. Second, we apply this method to input-output tables of China’s economy, and estimate the marginal fixed capital input coefficient for 1987
2000. Third, we draw the wage-profit curves of China’s economy in a von Neumann-Leontief framework, by applying fixed capital coefficients estimated as above.1,2 Fourth, we discuss the short- and long-run features of China’s economy of the period by comparing the short- and long-run wage-profit curves, where the short run indicates the case in which fixed capital is ignored.

Fixed Capital and Wage-Profit Curves a` la von Neumann-Leontief

77

ESTIMATION OF FIXED CAPITAL COEFFICIENTS Basic Framework Okishio and Nakatani (1975) reduced a joint-production system a` la Marx
Sraffa3 with aged fixed capital alone as joint-products to a Leontief production system that consisted of only the brand-new goods. Let A, K, F, L stand for input coefficient matrix, fixed capital input coefficient matrix, bundle of wage goods, labor input vector, and let p and r be the production price vector of only brand-new goods, and uniform profit rate, respectively. p = pMðrÞ MðrÞ = ðψ^ ðrÞ þ rI ÞK þ ð1 þ rÞðA þ FLÞ

ð1Þ ð2Þ

ψ^ ðrÞ is a diagonal matrix with the rate of depreciation ψi (r) in the diagonal, where for durability τi of fixed capital i, !− 1 τX i −1 h ψ i ðrÞ = ð1 þ rÞ ð3Þ h=0

Remark that in the above formulation, one should assume physical durability of fixed capital with constant efficiency.4 If non-productive consumption is disregarded, a Marx
Sraffa activity level system can be similar to the Leontief output system with extra brandnew fixed capital. The equilibrium output system corresponding to the equilibrium production price system (1) is given by the following:5 q = MðgÞq

ð4Þ

where q and g are an output vector of only brand-new goods and the uniform growth rate, respectively, with g = r. Obviously, for an r ≥ 0, M(r) is a non-negative matrix, so it has the Perron
Frobenius eigenvalue 1, and the left (right) eigenvector corresponding to 1. Now, the data of K is not available. Only the data of the gross investment matrix may be available as fixed capital data in the actual inputoutput tables. Therefore, the next subsection will illustrate how the fixed capital input coefficient matrix K in the above-mentioned theoretical model is estimated from the gross investment data of fixed capital.

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BANGXI LI

Sraffa
Fujimori Method The intermediate input Xij, final demand Yi, and total output Xi of an input-output table fulfill the following relations. Xi =

n X

Xij þ Yi

j=1

The input coefficient matrix A = (aij) is given by aij =

Xij Xj

Let x, I, and C stand for the output-, the investment-, and the consumptionvector, respectively, and x = Ax þ I þ C

ð5Þ

will be obtained from the input-output table. Investment I is the sum total of inventory investment and the gross investment of fixed capital. Hereafter, we try to find the growth rate of Sraffa’s standard system obtained by the following simulation, in which C is equally assigned to I in the final-demand item. It is necessary to consider investment of nondurable capital goods and that of fixed capital. Since inventory investment can be regarded as the accumulation of nondurable goods, it is set to gAx, where g denotes the uniform growth rate. On the other hand, since the gross investment of fixed capital is divided into net investment and depreciation (replacement investment), the amount of net investment is gKx and the depreciated part is set to ψ^ ðgÞKx. We try to estimate K from the angle of the marginal ratio. Let ΔK denote the net investment matrix, and ΔX, the incremental vector of output. The marginal capital coefficient Kij will be defined by: kij =

ΔKij ΔXj

ð6Þ

Assume that kij = kij . Further, we can consider the incremental output as ΔX = gX. Since the ratio γi of the net investment to gross investment can be defined as follows: 1 γi = 1 − ð7Þ ð1 þ gÞτi

Fixed Capital and Wage-Profit Curves a` la von Neumann-Leontief

79

we can consider the net investment matrix as γ^ S, where S is the gross investment matrix of fixed capital, and γ^ is the diagonal matrix with γi in the diagonal.6 From this, we can set the marginal capital coefficient kij as follows: kij =

γ i Sij gXj

ð8Þ

In this computation, kij is dependent on the uniform growth rate g. (5) is rewritten as (9) with K  ðgÞ = ðkij Þ. x = MðgÞx

ð9Þ

MðgÞ = ðψ^ ðgÞ þ gIÞK  ðgÞ þ ð1 þ gÞA

ð10Þ

If λM(g) = 1, g at that point gives the maximum growth rate g*. The computational procedure of g* is described as follows: (1) Take a sufficiently small initial value g0 > 0, and M(g) in Eq. (10) is positive. d MðgÞ > 0, M(g) is an (2) For g > 0, we can confirm the following. From dg increasing function of g. Besides, from the Perron
Frobenius theorem, λMðgÞ is an increasing function of elements of M(g). Hence, gt < gt þ 1 ⇔ Mðgt Þ < Mðgt þ 1 Þ ⇔ λMðgt Þ < λMðgt þ 1 Þ Let gmax = λ1A − 1. From jgt j < gmax , gt is bounded.7 Now, if λM(g) < 1, the value of g should be increased; if λM(g) > 1, the value of g will be decreased. A sequence {g0, g1, g2, …} is generated by gt þ 1 = δðgt Þ = gt þ βð1 − λMðgt Þ Þ where β > 0 represents an arbitrary constant. If gt is taken near 0, then gt + 1 will appear above the 45° line. Since the tangent of δ(g) is given by dgt þ 1 d =1−β λMðgt Þ < 1 dgt dgt

ð11Þ

δ(gt) will cross the 45° line from the top to the bottom. The relationship between gt + 1 and gt can be expressed in Fig. 1. In view of the above, gt + 1 = δ(gt) has a fixed point gt + 1 = gt = g*. gt + 1 = gt = g* is

80

BANGXI LI gt + 1

gt + 1 = g t

gmax gt + 1 = δ(gt)

g*

0

Fig. 1.

gt

The Convergence of the Iteration.

equivalent to 1
λM(gt) = 0. Moreover, this fixed point is stable from Eq. (11). This fixed point can be found by the regula falsi method of numerical computation.8 (3) For g*, the marginal fixed capital coefficient matrix can be constructed as follows: K  = ðkij ðg ÞÞ

ð12Þ

The procedure described in the above may look like the one to compute the maximum growth rate in the golden rule of the von Neumann model. Some may argue that the maximum growth rate of the von Neumann growth model is conceptually different from the maximum profit rate of Sraffa’s standard system. Nonetheless, they are formally equivalent. In the same manner to estimate the maximum growth rate we evaluate the wage-profit curve in the next section, the concept of which comes from Sraffa (1960).

Notes on Data In this chapter, the gross investment matrix of each year of China is aggregated to the matrix of the same size with similar sectors: the 33-sector input-output tables for 1987, 1990, 1992, 1995, and the 40-sector inputoutput tables for 1997, 2000 are aggregated to the 24-sector input-output tables. The input-output table data employed were published by the

Fixed Capital and Wage-Profit Curves a` la von Neumann-Leontief

81

National Bureau of Statistics of China (NBSC, 1987, 1990, 1992, 1995, 1997, 2000), and the investment matrix data were estimated by Lu¨ (2007). The durability data of fixed capital were published by Ministry of Finance of China (1992) and State Council of China (2007). The details of the input-output tables and durability of fixed capital are shown in Table 1. The data of the total working population are from the NBSC publication, China Statistical Yearbook 2003 (NBSC, 2003), and the data on the annual working hours per person are from the International Labor Office (ILO, 2005) publication, Yearbook of Labour Statistics 2003. From the input-output tables, the macro marginal capital-output ratio κ of each year can be evaluated by PP γ i Sij i Pj κ= g j Xj Table 1. Code 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Codes and Durabilities of 24 Sectors. Sectors

Durabilities (Years)

Agriculture Mining Foods and tobacco Textiles Pulp and papers Electricity, steam, and hot water Petroleum and coal Coal gas and coal product Chemicals Non-metallic mineral products Metals smelting and processing Metal products General machinery Transportation machinery Electric machinery Precise machinery Other manufactured products Construction Transportation Commercial Services Finance, insurance, and real estate Education, health, and scientific research Public administration

16

12 17 9 17 15 12 40 13 10

Note: Blanks in the durability column indicate that goods concerned are non-durable.

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BANGXI LI

Table 2.

Basic Macro Parameters (1987
2000).

Maximum potential growth rate g* (%) Macro marginal Capital-output ratio κ

1987

1990

1992

1995

1997

2000

40.3 0.873

35.5 1.003

31.9 1.420

30.3 1.587

30.5 1.397

26.6 2.195

The Chinese economy’s maximum potential growth rates g* and the macro marginal capital-output ratios κ are shown in Table 2.

WAGE-PROFIT CURVES A` LA VON NEUMANN-LEONTIEF Basic Concept In the normal production process, many factors are employed, such as raw material and fixed capital with various durabilities and ages. Brand-new fixed capital and aged fixed capital are considered as distinctly different items. Moreover, plural types of commodities are jointly produced by processes. In a von Neumann system, the equilibrium price problem of such an economy can be described as follows:9

1 pB ≤ pA þ L; p ≥ 0 max pFj 1þr

ð13Þ

where A, B, F, L, r, and p represent tentatively a rectangular input matrix, a rectangular output matrix, a bundle of wage goods, a labor input vector, the uniform profit rate, and the production price vector, respectively. This is a linear programming problem in which the wage rate w = pF is maximized.10 Let x stand for the activity level; the dual problem of Eq. (13) is expressed as follows; assuming a uniform growth rate g = r:

1 min Lxj Bx ≥ Ax þ F; x ≥ 0 1þr

ð14Þ

This dual problem minimizes the labor input in the economy. If the above general joint-production system is looked at as a jointproduction system, in which aged fixed capital alone is jointly produced,

Fixed Capital and Wage-Profit Curves a` la von Neumann-Leontief

83

then by applying the same procedure of reduction applied by Sraffa
Okishio
Nakatani, we can obtain systems of inequalities similar to Eqs. (1)
(4), which will be called the von Neumann-Leontief system.11 In short, in a von Neumann-Leontief-type economy, the standard maximum problem (13) is expressed as follows:

  1 r 1 max pFj ð15Þ p ≤ pA þ L þ p Iþ ψ^ ðrÞ K; p ≥ 0m 1þr 1þr 1þr where notations are the ones introduced in the above mentioned section. The relationship between profits and real wages can be expressed as that between the profit rate and the number of units of the bundle of wage goods. Hence, the curves should be expressed as a curve com wage-profit  1 ; r . posed of points pF Similarly, the dual problem of linear programming problem (15) is expressed as follows, assuming g = r, that is, with the capitalist nonconsumption premise:

  1 r 1 m ð16Þ q ≥ Aq þ F þ Iþ min Lqj ψ^ ðrÞ Kq; q ≥ 0 1þr 1þr 1þr where q represents the output vector. A linear programming problem of this kind should be considered from both short- and long-run perspectives. While the replacement and the net investment of fixed capital are generally carried out in the long run, these can be ignored in the short run. Therefore, the short-run version of the linear programming problem (15) can be expressed as follows:

1 max pFj p ≤ pA þ L; p ≥ 0 ð17Þ 1þr The dual problem in the short run will be expressed as follows:

1 min Lqj q ≥ Aq þ F; q ≥ 0 1þr This corresponds to the uniform growth equilibrium with g = r. Computation Procedure with Respect to Input-Output Data (1) Calculate the bundle of wage goods F and the labor input vector L.

ð18Þ

84

BANGXI LI

The product of the annual total working population N0 and annual working hours h per person gives the total working hours in a year; that is, H = N0 h The bundle of wage goods per person is the consumption divided by the total working population. In other words, this is equal to NC0i . As for wage goods per unit of labor, one may write fi =

Ci H

The bundle of wage goods is then given by F = (fi). Further, the total added value V0 is expressed by V0 =

n X j=1

Wj þ

n X j=1

Vj þ

n X

Tj

j=1

where Wj, Vj, and Tj stand for wages, profits, and taxes of an input-output table, respectively. The working hours per unit of value are evaluated by VH0 , and the working hours in sector j is given by ðWj þ Vj þ Tj Þ VH0 . Hence, the labor input necessary for producing one unit of goods becomes lj =

HðWj þ Vj þ Tj Þ V0 X j

The labor input vector is represented by L = (lj). (2) Find the optimum solution for the long-run linear programming problem, and draw the wage-profit curve. For each r in the range 0 ≤ r ≤ g*, solve the long-run standard maximum problem (15), and find the optimum solution p*. The long-run wage-profit curve can be represented by a curve com posed of points

1 p F ;

r .

(3) Find the optimum solution for the short-run linear programming problem, and draw the wage-profit curve. Repeat the same procedure of the long run as in the above with respect to Eq. (17). Similarly, theshort-run  wage-profit curve is given by a curve composed of points

1 p F ;

r .

Fixed Capital and Wage-Profit Curves a` la von Neumann-Leontief

85

(4) Estimate the coordinates of the position of the actual Chinese economy. (i) Since NBSC publishes GDP, total wage amount Θ*, and the total amount of capital formation S*, the amount of total profit can be evaluated by Π = GDP − Θ and the accumulation rate is computed by α =

S Π

(ii) For the economy containing fixed capital, the profit rate is estimated as g r =  α from α* evaluated in (i), and the growth rate g* published by NBSC. (iii) From r*, the optimal solutions for the above-mentioned LP pro blems (15) and (17) can be calculated, and points   1  ; r on the wage-profit curve can be identified.  p F

1 p F ;

r

and

(iv) From consumption Ci* (with government consumption included), the wage goods per unit of labor is computed as fi =

Ci H

where F  = ðfi Þ. The  coordinates of the actual economy are estimated as p1F  ; r  . Computation Results The coordinates data of long- and short-run wage-profit curves a` la von Neumann-Leontief are shown in Table 3 and Table 4, respectively. The wage-profit curves from 1987 to 2000 based on the above-mentioned tables are drawn as in Figs. 2
7. The short-run curve is shown for comparison. Remark that, for computational reasons, some of the maximum profit rate cannot be numerically computed.

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BANGXI LI

Table 3.

The Long-Run Wage-Profit Relationships (1987
2000). 1/pF

R

0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 0.32 0.34 0.36 0.38 0.40

1987

1990

1992

1995

1997

2000

1.790 1.701 1.613 1.526 1.441 1.356 1.272 1.188 1.105 1.022 0.939 0.855 0.771 0.686 0.600 0.511 0.420 0.326 0.228 0.124 0.014

1.849 1.752 1.656 1.561 1.466 1.372 1.278 1.184 1.089 0.993 0.896 0.797 0.695 0.590 0.480 0.364 0.240 0.107

1.935 1.815 1.695 1.577 1.459 1.341 1.224 1.107 0.989 0.872 0.753 0.633 0.511 0.387 0.260 0.130

1.904 1.781 1.658 1.535 1.413 1.291 1.169 1.047 0.925 0.802 0.678 0.552 0.424 0.293 0.158 0.018

1.958 1.836 1.715 1.593 1.472 1.351 1.230 1.108 0.985 0.860 0.734 0.604 0.472 0.334 0.191 0.040

1.889 1.754 1.619 1.482 1.345 1.207 1.068 0.929 0.788 0.645 0.501 0.353 0.201 0.045

Table 4.

The Short-Run Wage-Profit Relationships (1987
2000). 1/pF

r

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 gmax

1987

1990

1992

1995

1997

2000

1.868 1.685 1.518 1.365 1.223 1.093 0.971 0.857 0.750 0.648 0.552 0.460 0.371 0.285 0.201 0.117 0.034 0.820

1.929 1.729 1.546 1.376 1.219 1.071 0.932 0.799 0.672 0.548 0.426 0.304 0.179 0.050

2.103 1.867 1.649 1.447 1.258 1.080 0.911 0.751 0.596 0.445 0.298 0.152 0.006

2.065 1.825 1.604 1.399 1.208 1.028 0.858 0.696 0.540 0.389 0.241 0.095

2.096 1.854 1.631 1.425 1.232 1.051 0.879 0.715 0.557 0.404 0.252 0.102

2.062 1.813 1.582 1.367 1.166 0.976 0.796 0.622 0.454 0.290 0.128

0.668

0.602

0.582

0.583

0.539

Table 5. The Profit Rate and Real Wage Rate in Chinese Economy (1987
2000). *

Profit rate

r

Real wage rate

1 p F 1  p F 1 p F 

1987

1990

1992

1995

1997

2000

0.216 1.182 0.874 0.748

0.119 1.479 1.281 1.116

0.291 0.941 0.190 0.160

0.215 1.152 0.582 0.521

0.203 1.223 0.719 0.634

0.194 1.191 0.546 0.478

Short−run Long−run

Real Wage Rate

2.0

1.5 (0.216, 1.182)

1.0 (0.216, 0.874) (0.216, 0.748)

0.5

0.0 0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Profit Rate

Fig. 2.

The Wage-Profit Curve a` la von Neumann-Leontief (1987).

Short−run Long−run

Real Wage Rate

2.0

(0.119, 1.479)

1.5

(0.119, 1.281) (0.119, 1.116)

1.0

0.5

0.0 0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Profit Rate

Fig. 3.

The Wage-Profit Curve a` la von Neumann-Leontief (1990).

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BANGXI LI

Short−run Long−run

2.0

Real Wage Rate

1.5

1.0

(0.291, 0.941)

0.5 (0.291, 0.190) (0.291, 0.160)

0.0 0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Profit Rate

Fig. 4.

The Wage-Profit Curve a` la von Neumann-Leontief (1992).

Short−run Long−run

Real Wage Rate

2.0

1.5 (0.215, 1.152)

1.0 (0.215, 0.582)

0.5

(0.215, 0.521)

0.0 0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Profit Rate

Fig. 5.

The Wage-Profit Curve a` la von Neumann-Leontief (1995).

The estimated profit rate and real wage rate of the Chinese economy are shown in Table 5. The coordinates of the estimated position of the actual Chinese economy are indicated with “⊕” in the figures of the wage-profit curves.

Short−run Long−run

Real Wage Rate

2.0

1.5 (0.203, 1.223)

1.0 (0.203, 0.719) (0.203, 0.634)

0.5

0.0 0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Profit Rate

Fig. 6.

The Wage-Profit Curve a` la von Neumann-Leontief (1997).

Short−run Long−run

Real Wage Rate

2.0

1.5 (0.194, 1.191)

1.0

(0.194, 0.546)

0.5

(0.194, 0.478)

0.0 0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Profit Rate

Fig. 7.

The Wage-Profit Curve a` la von Neumann-Leontief (2000).

CONCLUDING REMARKS In this chapter, we estimated China’s marginal fixed capital coefficient by means of the Sraffa
Fujimori method and computed the economy’s wageprofit curves in a von Neumann-Leontief system.

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The following points concerning the Chinese economy are clearly seen from the 1980s through the 2000s from our computation of theoretical parameters. (1) The short-run maximum profit rate and the long-run maximum potential growth rate tends to decrease over the period. (2) The maximum real wage rate increased over the period, both shortand long-run, although slight fluctuations are observed. (3) As the rate of profit increases, the long-run wage-profit curves tend to sink faster than the case of short run in each year. (4) The marginal capital-output ratio has increased. In this chapter, various theoretical restrictions, such as physical durabilities of fixed capital with constant efficiency, etc., exist. However, estimating theoretical values by using actual data, and further making simulations revealed significance of fixed capital data for better understanding of the performance of the actual economy. In view of Government’s policy to raise wages during period concerned, it is expected that the real wages have been increasing monotonically. However, Table 5 shows only the rising tendency. This should be investigated further in near future.

NOTES 1. As for Sraffa’s joint-production system with fixed capital and the Leontief system with brand-new fixed capital, see Fujimori (1982) and Li-Fujimori (2013). 2. The analysis frameworks on linear programming of the von Neumann, Marx, Leontief models are pioneered by Morishima (1964, 1973), Fujimoto (1975), Steedman (1976), and Fujimori (1982, 1992). Especially, on a premise to define the depreciation rate by the pension method, Fujimori (1992) expanded the jointproduction model of Morishima (1964) and Fujimoto (1975), and made an abridgement of the linear programming model only consisting of brand-new goods by a kind of rational operation. In addition, for the other empirical contributions, see for example, Han and Schefold (2006). 3. In a linear multisector framework with equilibrium production prices and activity levels (or quantities) including fixed capital, it is like Marx in the sense to analyze the establishment of the uniform profit rate on the premise of the wage payment in advance, and it is like Sraffa in the sense to analyze them in a jointproduction system including aged fixed capital. So we can call this framework as the Marx
Sraffa model in a narrow sense. For a specific joint-production system, see for example, Schefold (1989, Part II, B, §2), and for more general jointproduction systems a` la Marx
Sraffa, see Li-Fujimori (2013).

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4. We can see the same definition of rate of depreciation in Fujimori (1982, p. 39). In fact, Eq. (3) that shows the rate of depreciation is the same as Fujimori (1992, Eq. 5, p. 44) and Sraffa (1960, p. 65). Namely, the following expression of relation is satisfied.

ψ i ðrÞ =

τX i −1 h=0

!−1 ð1 þ rÞh

=

r ð1 þ rÞτi − 1

where τi stands for the durability of the type i of fixed capital. Eq. (3) is the definition of depreciation rate of brand-new (zero-age) fixed capital. 5. For a detailed discussion, which includes fixed capital, see Fujimori (1982), Schefold (1989, Part II), Kurz-Salvadori (1995, chapter 7). 6. It should be noted here that γi(g) = γi(r). In an economy that disregards nonproductive consumption, the uniform profit rate r and the uniform growth rate g are equal. For details, see Fujimori (1982). 7. For details, see Nikaido (1960, chapter 2). 8. For details of the regula falsi method, see for example, Traub (1964) and Ortega-Rheinboldt (2000). 9. See von Neumann (1945/1946[1937]) for details of original von Neumann Model. 10. See Fujimoto (1975). 11. Refer to Fujimori (1992) for the detailed procedure of the abridgement. Fujimori’s (1992) method is related to Sraffa in two ways: in the way to deal with fixed capital, and in other way in the similarity between estimating the marginal fixed capital coefficient and drawing the wage-profit curves. Fujimori (1992) was strongly conscious of Sraffa’s system. Incidentally, Pasinetti (1977, chapter VI) and especially Schefold (1980) mentioned the conceptual difference of von Neumann model, linear programming and Sraffa system, and indeed the concept of the wageprofit curve is closer to Sraffa than to von Neumann.

ACKNOWLEDGMENT An earlier draft of this chapter was presented at the International Seminar, Meiji University on January 21, 2012. The author expresses thanks to Professor Y. Fujimori (Waseda University), Professor C. Bidard (Universite´ de Paris X-Nanterre), and Professor T. Yagi (Meiji University) for their helpful comments on the draft. The author expresses thanks to Professor Paul Zarembka (State University of New York at Buffalo) and two anonymous referees of this book series for their helpful comments. Remaining errors are mine.

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REFERENCES Department of National Accounts National Bureau of Statistics of China. (1987). Input-output tables of China in 1987. Beijing: China Statistics Press. Department of National Accounts National Bureau of Statistics of China. (1990). Input-output tables of China in 1990. Beijing: China Statistics Press. Department of National Accounts National Bureau of Statistics of China. (1992). Input-output tables of China in 1992. Beijing: China Statistics Press. Department of National Accounts National Bureau of Statistics of China. (1995). Input-output tables of China in 1995. Beijing: China Statistics Press. Department of National Accounts National Bureau of Statistics of China. (1997). Input-output tables of China in 1997. Beijing: China Statistics Press. Department of National Accounts National Bureau of Statistics of China. (2000). Input-output tables of China in 2000. Beijing: China Statistics Press. Fujimori, Y. (1982). Modern analysis of value theory. Beijing: Springer-Verlag. Fujimori, Y. (1992). Wage-profit curves in a von Neumann-Leontief model: Theory and computation of Japan’s economy 1970
1980. Journal of Applied Input-Output Analysis, 1(1), 43
54. Fujimoto, T. (1975). Duality and uniqueness of growth equilibrium. International Economic Review, 16(3), 781
791. Han, Z., & Schefold, B. (2006). An empirical investigation of paradoxes: Reswitching and reverse capital deepening in capital theory. Cambridge Journal of Economics, 30, 737
765. International Labour Office. (2005). Yearbook of labour statistics 2003 (62th Issue), The ILO Association of Japan. Kurz, H. D., & Salvadori, N. (1995). Theory of production
A long-period analysis. Cambridge: University Press. Li, B., & Fujimori, Y. (2013). Fixed capital, renewal dynamics and Marx
Sraffa equilibrium. In M. Kasamatsu (Ed.), Macro- and micro foundations of economics (pp. 51
72). Tokyo: Waseda University Press. Lu¨, Z. (2007). Development and application of the China multi-area multisector dynamic model in consideration of the gap between areas. (in Japanese). Graduate School of Frontier Sciences, Tokyo: University of Tokyo. Ministry of Finance of China. (1992). Information concerning promulgation of “the financial institutions for industrical enterprises”, [(92)CaiGongZi No. 574]. Morishima, M. (1964). Equilibrium, stability and growth: A multi-sectoral analysis. Oxford: Oxford University Press. Morishima, M. (1973). Marx’s economics: A dual theory of value and growth. Cambridge: Cambridge University Press. National Bureau of Statistics of China. (2003). China statistical yearbook 2003. Beijing: China Statistics Press. Nikaido, H. (1960). Mathematical methods in contemporary economics. (in Japanese). Tokyo: Iwanami Shoten. Okishio, N., & Nakatani, T. (1975). Profit and surplus labo: Considering the existence of the durable equipments. (in Japanese). Economic Studies Quarterly, 26(2), 90
96. Ortega, J. M., & Rheinboldt, W. C. (2000). Iterative solution of nonlinear equations in several variables. New York: SIAM.

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Pasinetti, L. L. (1977). Lectures on theory of production. London: Macmillan. Schefold, B. (1980). von Neumann and Sraffa: Mathematical equivalence and conceptual difference. Economic Journal, 90, 140
156. Schefold, B. (1989). Mr Sraffa on joint production and other essays. London: Unwin Hyman. Sraffa, P. (1960). Production of commodities by means of commodities: Prelude to a critique of economic theory. Cambridge: Cambridge University Press. State Council of China. (2007). Regulations on the implementation of enterprise income tax law of the people’s republic of China, [Decree No. 512]. Steedman, I. (1976). Positive profits with negative surplus value a reply. Economic Journal, 86, 604
608. Traub, J. F. (1964). Iterative methods for the solution of equations. Englewood Cliffs: Prentice Hall. von Neumann, J. (1945/1946). A model of general economic equilibrium. Review of Economic Studies, 13(1), 1
9.

PART II NEOLIBERALISM IN ACTION

THEORY AND PRACTICE IN CHALLENGING EXTRACTIVEORIENTED INFRASTRUCTURE IN SOUTH AFRICA Patrick Bond ABSTRACT A long period of capitalist crisis has amplified uneven and combined development in most aspects of political economy and political ecology in most parts of the world, with a resulting increase in the eco-social metabolism of profit-seeking firms and their state supporters. This is especially with the revival of extraction-oriented corporations, especially fossil fuel firms, which remain the world’s most profitable. What opportunities arise for as multi-faceted a critique of “extractivism” as the conditions demand? With ongoing paralysis of United Nations climate negotiators, to illustrate, the most critical question for several decades to come is whether citizen activism can forestall further fossil fuel combustion. In many settings, the extractive industries are critical targets of climate activists, for example, where divestment of stocks is one strategy, or refusing access to land for mining is another. Invoking climate justice principles requires investigating the broader socio-ecological and economic costs and benefits of

Sraffa and Althusser Reconsidered; Neoliberalism Advancing in South Africa, England, and Greece Research in Political Economy, Volume 29, 97
132 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 0161-7230/doi:10.1108/S0161-723020140000029004

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capital accumulation associated with fossil fuel use, through forceful questioning both by immediate victims and by all those concerned about GreenHouse Gas emissions. Their solidarity with each other is vital to nurture and to that end, the most powerful anti-corporate tactic developed so far, indeed beginning in South Africa during the anti-apartheid struggle, appears to be financial sanctions. The argumentation for invoking sanctions against the fossil fuel industry (and its enablers such as international shipping) is by itself insufficient. Also required is a solid activist tradition. There are, in 2014, two inter-related cases in which South African environmental justice activists have critiqued multi-billion dollar investments, and thus collided with the state, with two vast parastatal corporations and with their international financiers. Whether these collisions move beyond conflicting visions, and actually halt the fossilintensive projects, is a matter that can only be worked out both through argumentation
for example, in the pages below
and through gaining the solidarity required to halt the financing of climate change. Keywords: Uneven development; infrastructure; energy; transport; climate change; pollution; resistance

INTRODUCTION: UNEVEN DEVELOPMENT, EXTRACTIVISM AND THE INTENSIFIED SOCIAL METABOLISM OF SOUTH AFRICA Uneven and combined development is the process by which capital accumulation proceeds, by centralizing capital in particular spaces, sectors and socio-economic conditions while disinvestment occurs elsewhere
and simultaneously there arises a more exploitative relationship between capitalism and a variety of non-capitalist spheres so that the “combined” character of the modes of production enhance the capitalist system’s reproduction. The amplification of uneven development occurs most spectacularly during capital crisis episodes, including when the displacement of crisis is managed through geopolitical arrangements that exacerbate intercapitalist competition, as accumulation relies more upon financial and commercial circuits of capital than in prior eras, and as neoliberal economic policy becomes more common. Simultaneously, imperialism becomes more important, to permit more efficient systems of extraction.

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It is a process reminiscent of Rosa Luxemburg’s Accumulation of Capital, which in 1913 focused on capitalism’s extra-economic coercive capacities, including the looting of mutual aid systems and commons facilities, families (especially women’s role in social reproduction), the land, all forms of nature, and the shrinking state: The relations between capitalism and the non-capitalist modes of production start making their appearance on the international stage. Its predominant methods are colonial policy, an international loan system
a policy of spheres of interest
and war. Force, fraud, oppression, looting are openly displayed without any attempt at concealment, and it requires an effort to discover within this tangle of political violence and contests of power the stern laws of the economic process. (Luxemburg, 1968/1913, p. 396)

In theorizing imperialism, Luxemburg’s core insight, as distinct from framings by Lenin, Bukharin, Hilferding, Hobson and others of her era, was to show that “Capital cannot accumulate without the aid of non-capitalist” relations and “Only the continuous and progressive disintegration of non-capitalist organization makes accumulation of capital possible.” This process, in which “capital feeds on the ruins” of the non-capitalist relation, amounts to “eating it up. Historically, the accumulation of capital is a kind of metabolism between capitalist economy and those pre-capitalist methods of production without which it cannot go on and which, in this light, it corrodes and assimilates.” The process becomes most extreme during periods of desperation intrinsic to capitalist crisis, Luxemburg observed, drawing on Marx’s classical theory about “perpetual overproduction” what with “the ceaseless flow of capital from one branch of production to another, and finally in the periodical and cyclical swings of reproduction between overproduction and crisis.” At that point, Luxemburg insisted, the core economies would reveal “the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market” (Luxemburg, 1968/1913, pp. 397, 76, 327). This is the stage that crisis-era capitalism witnessed during the 1880s. with the “Scramble for Africa”
a Berlin agreement in 1885 that codified the continent’s colonial borders for the sake of more efficient extraction
just one outcome that Luxemburg’s Accumulation explored in detail (Bond, Chitonge, & Hopfmann, 2007). The challenge for capital then and now, is to intensify what Joan Martinez-Allier terms the “social metabolism, i.e. the flows of energy and materials coming into the economy,” which in turn activates social resistance.1 In the early 21st century, as the commodity

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super-cycle raised prices of extractive industry outputs (albeit with a momentary interruption in late 2008 during the global financial meltdown), the intensity of the social reactions rose. Moreover, uneven development meant that capitalism of the early 21st century witnessed a new geopolitical network of economic powers
the Brazil, Russia, India, China, and South Africa (BRICS) group
which began to contest for inclusion in global managerial functions on the basis of their own rising levels of accumulation (Bond, 2013a). With the current renewal of this process
crisis, extension of the market, and amplified capitalist-non-capitalist super-exploitative relations
serving as the basis for renewed imperialism, David Harvey in 2003 added a new layer to this argument applicable to the BRICS: The opening up of global markets in both commodities and capital created openings for other states to insert themselves into the global economy, first as absorbers but then as producers of surplus capitals. They then became competitors on the world stage. What might be called “sub-imperialisms” arose … Each developing centre of capital accumulation sought out systematic spatio-temporal fixes for its own surplus capital by defining territorial spheres of influence.

South Africa is an exemplary case, for the accumulation process, crisis formation and spatio-temporal fixes (i.e., sites where overaccumulated capital is directed) together rest upon a profound race-gender-ecological-class contradiction. Just as Luxemburg identified, and as was initially explored as “the articulation of modes of production” by Harold Wolpe (1972), the so-called Minerals
Energy Complex that was for many years central to the way apartheid and capitalism interrelated, has subsequently been joined by a corrosive financialization process (Ashman, Fine, & Newman, 2010; Saul & Bond, 2014). That complex consists of the largest multinational mining houses, backed by the parastatal electricity company Eskom, in turn traditionally funded from the Treasury and backed by the state in many other respects. First using the term in their 1996 book The Political Economy of South Africa, Ben Fine and Zav Rustomjee showed throughout the 20th century that mining, petro-chemicals, metals, and related activities, which historically accounted for around a quarter of GDP, typically consumed 40 percent of all electricity, at extremely low prices (Fine & Rustomjee, 2006). The phrase captures the fusion of state, mining houses and heavy industry, especially in beneficiating metallic and mineral products through smelting. David McDonald updated and regionalized the concept a decade onwards in his edited collection, Electric Capitalism, discovering an “MEC-plus”: Mining is South Africa’s largest industry in the primary economic sector and the country has the world’s largest reserves of platinum-group metals (87.7 percent of world

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totals), manganese (80 percent), chromium (72.4 percent), gold (40.1 percent) and alumino-silicates (34.4 percent) … South Africa’s appetite for electricity has created something of a scramble for the continent’s electricity resources, with the transmission lines of today comparable to the colonial railway lines of the late 1800s and early 1900s, physically and symbolically. (McDonald, 2008)

The result is a kind of “Resource Curse” (notwithstanding healthy semantic debate about the merits of the phrase, which was unveiled to the world during a platinum strike against London-based Lonmin in August 2012, where 34 mineworkers were killed by police in what appears to be a premeditated massacre involving a leading politician and Lonmin co-owner Cyril Ramaphosa (Bond, 2014a). The crony-capitalist nexus continues its strong commitment to displacing overaccumulated capital into further opportunities for state-subsidized extractivist profits (in contrast to meeting basic needs), as Samantha Hargreaves describes: The South African government’s National Infrastructure Plan with its 18 Strategic Investment Projects (SIPs) and 645 infrastructure projects will receive $75 billion in support from the national fiscus and state-owned enterprises from 2013 to 2015. All five of the geographic SIPs are principally aimed at “unlocking” and supporting minerals, oil and gas extraction and the energy and water infrastructure required for extraction; extractive metallurgy, processing and beneficiation; and rail, road and port infrastructure for the transportation of raw or partially processed minerals and metals. At least two of the energy SIPs are geared to electricity generation, transmission and distribution to address “historical imbalances, provide access to electricity for all, and support economic development,” even though the extreme price increases for ordinary people to pay for the Medupi and Kusile coal-fired power plants have placed electricity out of reach and resulted in reversion to dirty household energy (with all its adverse local ecological, health and gender impacts). Likewise the 17 regional infrastructure investments are extractives oriented, aimed at water, arable land, energy, and oil, gas and mineral resources. (Hargreaves, 2014)

Yet South Africa also stands as both a central villain and victim in relation to climate change. This article considers analyses, discourses, strategies and tactics emerging about the two main South African mega-projects which are worsening the economy’s fossil-fuel dependence and socio-ecological degradation, and the country’s resource curse. The two largest mega-project cases now underway in SA are considered: first, a coal-fired power plant known as “Medupi,” constructed for the parastatal electricity corporation Eskom’s grid; and second, the transport parastatal corporation Transnet’s expansion of the country’s minerals
energy
petroleum
rail
pipeline
port complex, with a focus on the largest single site, Durban. The latter project is still in its early stages (2005
2040), while Medupi’s first generator is due for completion during 2015 following rather revealing delays of more than three years.

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The two cases are closely related in functional terms, because they will exacerbate SA’s so-far self-defeating reliance upon export-led minerals growth and manufactured imports. Although precise costing estimates are impossible at this stage, each entails large infusions of local and foreign financing (Medupi around $10 billion, and Transnet’s South Durban expansion as much as $25 billion). Indeed in both cases, notwithstanding a sharp and potentially dangerous increase in SA sovereign foreign debt
from $25 billion in 1994 to $135 billion in 2013
the two main parastatal corporations’ recourse to substantial external funding was considered appropriate by their managers and by the national Treasury. In contrast, when contemplating the foreign debt in 2009, Rand Merchant Bank2 (Bond, 2003) predicted SA would soon hit a repayment squeeze similar to 1985s historic debt crisis (Bond, 2014b; Fields, 2010). The two projects have cemented the borrowers’ relations with, respectively, the World Bank and the Chinese Development Bank. Further funding is anticipated via the BRICS bloc, as a BRICS “New Development Bank” is established in July 2014 at the Fortaleza heads-of-state summit, with a strong infrastructure mandate. In both cases, these financing arrangements are proving highly problematic: with Eskom because the World Bank’s largest-ever loan was granted in spite of numerous eco-social, economic and governance shortcomings; and with Transnet because its main place-based expansion
the existing South Durban harbour and a new port 7 kilometers south
is hotly contested by local civil society. In both sites, the most important contradiction is longer-term and global in nature, namely the impact of the projects on climate change. Only in the latter project is the government beginning to recognize this threat, although not on the causality side, but instead as a reflection of the port’s vulnerability to major storms and sea-level rise. Given the importance of innovative development finance within SA, the BRICS, the G20 and the multilateral institutions, and the way representatives of these different blocs have differed publicly over the structures, processes, and protections associated with development finance; this is a good opportunity to assess the priorities of one of the world’s highest-profile national governments. Much can be learned at the two sites, for which details are provided in subsequent sections: • Medupi power plant. In April 2010, the World Bank offered a $3.75 billion multi-tranche credit to the SA government for its parastatal firm Eskom. The main purpose is construction of the Medupi power plant, but one of the conditions was increasing public
private partnerships in

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associated activities, including solar power generation. The project also includes a “fig-leaf” renewable energy project (according to one of the Bank’s external reviewers in 2010),3 and it carries an absurd claim made by Bank president Jim Yong Kim in 2012 that Medupi is a “clean coal” generator (Kim, 2013). The impact on climate change is immense, for Medupi is a 4764 MW power generating station (the world’s third largest, once complete), and two more in exactly the same style will follow. The next plant, Kusile (4800 MW), is already under construction. Local communities, environmentalists (local and global) and workers have regularly contested Medupi. The Bank’s Inspection Panel found six major shortcomings in a 2012 report, and further Bank investigations into Eskom in December 2013 also raised serious questions as to whether future tranches should continue. • Transnet expansion. In March 2013, the Chinese government lent $5 billion to the SA parastatal Transnet mainly for the purpose of extending rail infrastructure further into the northern and eastern coal fields for subsequent coal exports mainly to India and China, as well as for general financing support that will include Durban harbour expansion, since such funding is essentially fungible. In addition to increasing the speed and magnitude of coal freight to the world’s largest coal export terminal, at Richards Bay, Transnet has also been raising funds for an anticipated $25 billion of new port and petrochemical investments in Durban, including a fully privatized port management model at a brand new $10 billion “Dig Out Port.” This will complement the $2.3 billion doubling of Transnet’s Durban
Johannesburg oil pipeline capacity, which was commissioned at a third of that cost in 2007 and is due to be complete in 2014. Durban is also now a site of offshore oil prospecting, not far from the point where Africa’s largest refinery complex stands in hyper-toxic South Durban. There near-universal community opposition has emerged to Transnet’s plans, including on grounds of climate damage. Transnet’s Environmental Impact Assessment (EIA) consultants made a contentious statement in 2013 that larger ships in the new port will result in lower emissions per container carried. In both cases, local activists and a few journalistic and academic allies have disputed the “clean” fiction, although it remains to be seen whether the financiers take these broader problems into consideration, or continue to treat them with mere lip-service. In one encouraging sign, the SA government’s Department of Environmental Affairs decided in October 2013 that the Transnet EIA for the expansion of the old harbor’s berths so as to take

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much larger post-panamax ships was unconvincing. The EIA was temporarily rejected in large part because of Transnet’s climate denialism, as well as the port expansion’s impact on bird and fish life. Secondly, the two projects confirm the need for disclosure, transparency and participation. In both cases, there are substantial problems with the firms’ bona fides, including Eskom’s use of a private intelligence firm against critics, and Transnet’s failure
along with the Durban municipality
to either provide necessary information about the Port expansion (such as notifying stakeholders as to its EIA problems), or engage in meaningful participation. These features will be evident in the financing of Eskom/Medupi and Transnet/Durban fossil fuel and transport projects, in the next two sections, followed by a section that puts these mega-projects into the context of SA’s Minerals
Energy Complex. The concluding section notes the limitations of advocacy given the adverse power relationship that links the SA state and capital. But as was the case in the 1980s against apartheid, the weak link in this relationship between state and capital may well be the vulnerability of the two major firms promoting the mega-projects, Eskom and Transnet, to international financial sanctions.

ESKOM’S MEGA-POWERPLANT AT MEDUPI The most significant challenge to mega-project development finance in SA began in February 2010, when the South Durban Community Environmental Alliance (SDCEA) and the NGOs groundWork and Earthlife Africa launched a multi-faceted civil society campaign
unsuccessful in the short term
against the World Bank’s largest-ever loan. On 8 April 2010, after nearly two months of strenuous activist lobbying against more fossil fuel credits, the Bank Board approved a $3.75 billion loan to Eskom. Its main purpose (for which $3.1 billion was allocated) was construction of Medupi, a power station that will pump 25
30 megatons of CO2 into the atmosphere annually, more than the output of 115 countries. That loan was a last-minute request, as the 2008
2009 global financial turmoil apparently dried up Eskom’s potential private sector financing. In the period 2005
2011, approximately 3.7 billion euro was lent to Eskom by 20 major banks (led by Credit Agricole, MPMorgan Chase and Deutsche Bank) (BankTrack, urgewald, groundwork, & Earthlife Africa, 2011), but liquidity shortages compelled Eskom to seek out the World Bank in 2009 (Figs. 1
4).

Challenging Extractive-Oriented Infrastructure in South Africa

Fig. 1.

105

(a) Eskom’s Two Newest Coal-Fired Power Plants (b) Transnet Investment Strategy.

Percentage increase/decrease

35 30

Annual electricity price increase (%)

25 20 15

GDP growth (%)

10 5

Inflation (CPI)

0 –5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Fig. 2. Eskom’s Price Increases to Pay for Medupi and Kusile Far Outpaced Inflation and GDP. Source: World Bank, Eskom, Statistics South Africa.

Fig. 3.

The 2014
2040 Components of Durban’s Port-Petrochem Expansion. Source: Transnet.

106

PATRICK BOND TOTAL INVESTMENT IN CONSTRUCTION WORKS 1946 - 2012 AT CONSTANT 2009 PRICES

200 180 160

LONG TERM GROWTH 2.5% p.a.

Rand billion

140 FREE STATE GOLDFIELDS

120

LARGE DAMS

SISHEN-SALDANHA MOSSGAS RICHARDS BAY MINES SASOL II & III TELKOM ROADS ESKOM ALUSAF POWER COEGA COLUMBUS STATIONS OILIFANTSVLEI SAFARI FAURE

SOCCER G TRAIN ESKOM, DAMS ROADS

100 80 60 40 20 0

46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Fig. 4.

Investment in South African Mega-Projects, 1946
2012. Source: SA Reserve Bank.

As a result, there was not much time for more than 200 organizations across the world to generate a critique of the loan, in large part based on the obvious threat to world climate (groundWork, 2009). South Durban activists launched the local public campaign with a spirited protest at Eskom’s main local branch.4 To establish a campaign against an obscure World Bank loan so quickly, with the purpose of generating a crisis of confidence at the Bank and in Pretoria, required clarity of message, an explicit demand (stop Medupi financing) and a variety of issue-linkages to pull various constituencies into a coalition. As always, the most fundamental narrative asked the question, who wins and who loses? First, the source areas of the coal for Medupi are highly contaminated by mercury and acid mine drainage, with air, land, vegetables, animals, and people’s health at great risk. Forty new coal mines in impoverished areas of Limpopo, Mpumalanga, and KwaZulu-Natal provinces will be opened to provide inputs to Medupi and its successor, Kusile, as well as for exports. This will create a few thousand coal sector jobs (hence receiving endorsement from the National Union of Mineworkers), but it appears likely that many more jobs in agriculture and tourism will be lost as a result of the invasive mining activity and downstream degradation. Medupi itself will be built in a water-scarce area where communities are already confronting extreme mining pollution. Even though an air-cooled supercritical model (Africa’s first) was chosen, the cost of supplying an additional water-cooling

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supply amounted to hundreds of millions of dollars, given the long transport and pumping costs.5 Environmentalists and local farmers complained about the destruction of the nearby Mokolo River, in spite of a legal requirement that: “Mining cannot impede or divert the flow of water, or alter the bed, banks, course or its characteristics of any watercourse” (Kings, 2013). Because of destruction caused by illegal sand mining, according to local farm leader Francois van den Berg, “farmers could no longer grow winter crops such as pumpkins and tomatoes, which were an important source of income and staples for those in the area” (Kings, 2013). Once the coal is burned and electricity generated, the winners and losers become even more divergent. Medupi’s main beneficiaries are the world’s largest metals and mining corporations, especially BHP Billiton (Melbourne-based) and Anglo American (London-based), which already receive the world’s cheapest electricity thanks to multi-decade deals. During the early 1990s, Eskom had a third too much excess capacity due to the long SA economic decline; its solution was to attract huge aluminum smelters to mop up the excess power. The agreements were finally leaked through an opposition member of parliament in March 2010, and they disclosed that BHP Billiton and Anglo were receiving electricity at less than $0.02/ kilowatt-hour, whereas the overall corporate price was around $0.05/ kilowatt-hour, still the cheapest available anywhere, and the consumer price was around $0.10/kilowatt-hour. In early April 2010, just before the Bank decision, Eskom announced that a small modification was made to BHP Billiton’s contract price but it was reportedly to the firm’s “advantage.”

Affordability, Commercialization and the Privatization Threat Who lost, in terms of bearing the cost burden for Medupi? In terms of financing, the repayment of principal and interest required a 127 percent real price increase from 2008
2012 for household electricity consumers (to nearly $0.12/kilowatt-hour) (SAPA, 2010). The anticipated 2013
2018 annual price rises declined to the 10
15 percent range, but these were still around twice the anticipated annual inflation rate of 6 percent. What is not known is the price elasticity of electricity, and how much less consumers will now consume
and in turn, the adverse implications for public health, gender equity, micro-entrepreneurship, education and so many other positive externalities associated with electricity access.6 Indeed, Eskom had tried to raise its prices by a factor of six over a decade-long period, but after a great deal of civil society pressure in 2013, the National Energy

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Regulator of SA granted only an 8 percent annual increase for the subsequent five years, half what was requested by Eskom, leaving a $19 billion shortfall. Eskom remains committed to its 1998 White Paper mandate of imposing “cost-reflective” pricing, that is, carrying the smallest possible subsidies for ordinary retail consumers. Eskom’s continual justification of the Special Pricing Agreements for BHP Billiton and Anglo is the declining cost of providing large short-term supplies of power, that is, with a declining marginal cost curve, the two huge firms warranted discounts based on economies of scale. For this reason, the claim that expanding electricity supply would be pro-poor fails, since the vast bulk of inexpensive power is guaranteed to the multinational corporations. This reflects Eskom’s “commercialization”
a step along the path to full-fledged privatization. Indeed, another controversial aspect of the loan was the Bank’s insistence on partial privatization: Eskom would offer private renewable energy generating capacity to Independent Power Producers as a condition of the Bank loan. In the process, this advanced Eskom’s previously expressed desire to privatize 30 percent of generating capacity, a move opposed by trade unions
especially the National Union of Metalworkers of SA (Numsa)
and consumers (Ngobese, 2010). Privatization and other forms of commercialization of SA state services have been a failure in every respect, not least because adding a profit incentive of typically 30 percent of capital puts the commodity into a far higher price range than earlier (Bond, 2005). Numsa’s oft-stated ideal would be provision of electricity through non-profit, worker-managed, community controlled and municipally subsidized renewable energy cooperatives (Ngobese, 2012).

Corruption Corruption was another feature that generated critiques of the World Bank by civil society and opposition political parties
especially the liberal Democratic Alliance
and even the influential neoliberal Business Day newspaper (Bruce, 2010). They opposed the loan because contrary to supposed Bank anti-corruption policies, it directly funds ANC ruling party coffers via the party’s in-house investment arm, Chancellor House. Medupi is being built with Hitachi boilers that in turn kick back millions of dollars (the amount is still unclear) due to a 25 percent ANC investment in the local Hitachi subsidiary, as well a 10 percent stake in another Medupi construction subcontractor, Bateman Africa. As the Eskom
Hitachi deal

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was signed under suspicious circumstances, the Eskom chairperson at the time (and former environment minister), Valli Moosa, was also a member of the ANC’s finance committee. A government investigation by the country’s Public Protector released in March 2010 found his conduct in this conflict of interest to be “improper” (Mabuza, 2010). Then in 2013, the country’s main construction companies confessed to widespread collusion on various state-funded projects. Many of the firms involved in Medupi’s construction
including industry giant Murray & Roberts
were found guilty of anti-collusion violations and fined $140 million by the Competition Commission.7

Labor Unrest A wide variety of problems subsequently emerged in the actual construction of Medupi, continuing into early 2014. These include widespread labor unrest that reoccurred on dozens of occasions, featuring periodic mass strikes and extremely militant protests. The strikes that were recorded in mid-2010, for example, related to the fact that 140 workers suffered “running stomachs and stomach ache after consuming what is reported to be food donated by their employer Murray and Roberts,” according to Numsa. From there, worker militancy kept rising, and by September 2012, fully 17,000 workers were affected by wildcat strikes and sabotage of equipment at Medupi. In October 2012, 3,000 workers marched to Eskom’s main office at Medupi, with numerous grievances expressed by Numsa: Medupi Contractors continue to sow divisions between workers on basis of regionalism and provincialism reminiscent to the apartheid era style tactics of fueling tribalism and ethnicity amongst workers … Workers continue to earn poverty wages, in particular general laborers are paid a meagre wages of $1.60
1.70 per hour culminating in their relegation to extreme shadows of impoverishment and inevitably brewing labor unrest in the project … only whites and immediate relatives of the cartel bosses occupy senior positions across various contractors on site, equally previously disadvantaged people are reduced to the lower order of the project value chain system which defeats the spirit of transformation in totality … former rebels of the Congolese war are on site disguising as security personnel … [and] instill fear in our members … Contractors utilize services of labor brokers who fail to pay workers on time … we are witnessing the re-introduction of the compound system, akin to conditions during the eighteenth century discoveries of both gold and diamonds, as black workers are accommodated in crowded hostels, whilst their white counterparts live in houses or posh lodges and hotels in town … Numsa further notes workers from the outlying villages also experience similar challenges owing to long hours of work and long travel to and from work, resulting in unbearable fatigue. (National Union of Metalworkers of SA, 2012).

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After a temporary settlement in early 2013, pay protests resumed, leaving 25 Hitachi and Murray & Roberts employees injured in one incident, and catalyzing a strike of 1,100 workers. Construction was halted for 10 weeks because according to Numsa, “workers have endured all manner of victimization, including a lock-out, which has led to this ongoing strike and violent unrest at the power station” (National Union of Metalworkers of SA, 2013). In January 2014, unrest was sparked when workers suffered another lock-out, just as this report was going to press. According to Numsa’s Stephen Nhlapo, “The workers are angry and other workers might join them. There might be a full-blown strike. The way things are going, we are going to have big disturbances this year” (Mouton & Strydom, 2014).

Construction Incompetence The main internal crisis emerged because of the unsatisfactory work quality by corporate contractors. In December 2012, for example, 9,000 welds on the Hitachi boilers were discovered to have been done without heattreatment, contributing to a six-month delay. The French firm Alstom was another multinational corporate contractor whose Medupi software
the “brain” of the plant that controls the six boilers to ensure safety
failed repeatedly in 2012. Although originally scheduled for application in December 2012, by November 2013 it was still not in working order (Paton, 2013), and Alstom was reportedly replaced by Siemens. Soon thereafter the Eskom chief executive, Brian Dames, resigned “for personal reasons,” although earlier in 2013, Minister of Public Enterprises Malusi Gigaba declared that “heads will roll” if Medupi fell further behind (Buthelezi, 2013). As a result, by March 2013 there were threats of a return to the “loadshedding” (brownout) status that left Eskom a national laughing-stock. As industry analyst Chris Yelland reported, Eskom avoided black-outs by using diesel to power gas turbines and paid BHP Billiton to forego consumption: “Not only does this cost Eskom dearly due to the enormous direct cost of diesel fuel and payments to smelters to shut down, Eskom also loses the electricity sales revenue so desperately needed to meet its burgeoning costs” (Yelland, 2013). By November 2013, an emergency was declared with enforced cut-backs of 10 percent on the largest electricity consumers, and an emergency appeal was made to the Department of Environmental Affairs that air quality standards near other Eskom powerplants be relaxed, at the risk of a repeat of the 2008 crises.

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Surveillance of Critics The combination of structural pressures associated with rising mining and smelting demand, the inability of major corporations to carry out the construction of Medupi, a sense of urgency that bordered on panic, and rising class, community and environmental struggles on the mines, together drove Eskom to desperate measures. In early 2013, a whistleblower revealed that Eskom had hired a private firm
Swartberg Intelligence Support Services
for $1 million to spy on workers, community activists and environmentalists (including Earthlife Africa and Greenpeace chapters). Eight months later, after Eskom’s community and environmental forum had fallen apart, Dames apologized: “The use of private companies to gather intelligence from stakeholders is unacceptable and not how Eskom does business” (SAPA, 2013b). In any case, according to Business Day columnist Simon Reader, “It seems Swartberg wasn’t all that good” (Reader, 2013).

Criticism by the World Bank’s Inspection Panel There was also pressure against Eskom emanating from an unexpected source: the World Bank itself. Based on April 2010 complaints from Medupi-area community groups regarding 15 environmental and social grievances, the Bank’s Inspection Panel assessed 11 of these and in May 2012, seven specific failures were identified and presented to the board of directors: • EIAs were not “undertaken proportional to, among others, cumulative impacts” because of lax SA standards regarding the multi-decade effects of Medupi’s pollution; • “an inadequate assessment by management of capacity at provincial and local authority level,” making municipal regulation of Medupi’s air and water pollution impossible; • insufficient expertise for “preparation and implementation of projects that are highly risky or involve serious environmental and/or social concerns”; • “the operation of the power plant, including the technology for removal of sulphur dioxide from emissions, namely flue gas desulphurization, will place an additional strain on water resources in an area that is already suffering from water scarcity,” and Eskom “did not fully consider the impacts and risks of water supply alternatives” for local users;

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• “considerable risks” regarding “air quality and health issues” because the Bank itself failed to “provide adequate information on alternative sources of water for the plant”; • “the emissions from the Medupi plant pose a health risk to local communities, adding to existing background levels of air pollutants”; and • failure to factor in the “additional strain on public services and infrastructure in the municipality” which “is poorly equipped in terms of financial and human resources” (Hancock, 2013). However, after considering this tough critique, the Bank directors merely slapped its own officials and Eskom on the wrist, recommending “a supervision plan” but a reliance on local “systems as the core means to address these challenges in future.” The biggest loan in the institution’s history had become so politicized, apparently, that instead of stronger persuasion, such as withholding future tranches, the Bank decided that “the outcome of the project relies heavily on a good working partnership between the World Bank and Eskom as well as the country’s national and subnational authorities” (Hancock, 2013). That partnership apparently needed to be nurtured, what with South Africans regularly speaking out against the Bretton Woods Institutions, especially given that both the Bank and International Monetary Fund needed recapitalization.8 As a result, when Jim Yong Kim visited Johannesburg in September 2012, he ignored the obvious site visits for his institution’s two biggest investments. It would not have been too far for Kim to travel (a 20 minute helicopter ride) to either the Medupi site where that very day, 17,000 workers went on a wildcat strike, or to the town of Marikana where exactly two weeks earlier, the Bank’s $150 million investment in the Lonmin platinum mine’s community investment program became the source of extreme embarrassment, as a result of the police massacre of 34 striking mineworkers9 (Bond, 2012a). As disasters at Medupi continued, the Inspection Panel’s insistence on more internal oversight over Medupi compelled staff to issue a December 2013 report to the board, which conceded that “the commissioning date will slip by another 4
5 months and is now anticipated for early 2015.” Moreover, the attempt to save truck petrol and wear and tear on local roads by building a $500 million rail line to move coal to the Majuba power plant was also delayed, requiring the state to “streamline the rest of the tendering processes.” The Bank failed to acknowledge the kinds of corruption in “tenderpreneurship” that allowed the ANC’s deputy president Cyril

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Ramaphosa (owner of the Shanduka coal empire)
a major supplier on this route
to avoid “possible prosecution” for massive water license violations at his coal mines, as a result of alleged interference in license regulation by water minister Edna Molewa. According to two senior whistleblowers in her department, “The minister made it very clear that she did not want the matter to go to court as it would cause an embarrassment for Ramaphosa. She said if the matter went to court it could even cost her her job” (Shamase & Letsoalo, 2012). Finally, the December 2013 Bank report revealed yet more ecological threats, including major new water requirements from the highly vulnerable Crocodile River that crosses the priceless Kruger Park game reserve, as well as desulphurization delays. The Bank was itself disgusted that two months earlier, Eskom filed a “draft application seeking exemption and postponement of Minimum Emission Standards for the Medupi power plant,” asking for an additional four years to desulphur its emissions, something even Bank staff refused to countenance.

Conclusion These are all critical problems for Medupi and its financiers. In a 2010 debate, the Bank’s chief Africa economist at the time, Shanta Devarajan, offered these rebuttals: The benefits are the increased access to power for many people in the sub-region; the costs include some of the points you mention, such as carbon emissions and the financing costs. Our analysis indicated that the benefits outweighed the costs. We included estimates of the shadow price of carbon (based on international estimates) and of course the financing costs in that analysis. If you accept the principle that decisions like these should be based on benefit-cost analysis, then I would encourage you to examine our analysis and its assumptions (all of which are in the public domain), rather than simply list a series of concerns.10

The problem, of course, is that the “increased access to power for many people” ignores the increased cost and diminished affordability, and hence decreased access for poor people. At this stage, without any new power from Medupi and with much higher costs passed to Eskom customers as well as regional electricity purchasers, there is not yet data to show just how far the costs outweigh the benefits. But there is little doubt they do, and will for future generations.

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SOUTH DURBAN’S TRANSNET PORTPETROCHEMICAL EXPANSION By 2040, an estimated $25 billion in new port and petrochemical investments will result in what is already Sub-Saharan Africa’s largest port, in South Durban, handling 20 million containers annually. This is an eightfold increase from 2.5 million containers in 2012. To this end, SA’s National Development Plan named South Durban as its second highestpriority mega-project (after the Waterberg-Richards Bay coal infrastructure expansion) National Planning Commission (2012). Financing could be the most critical element, given that SDCEA has announced it will begin a “financial sanctions” campaign against Transnet if it follows through. This threat became more tangible in April 2014, when the campaign’s leader, SDCEA coordinator Desmond D’Sa, won the Goldman Environmental Prize for Africa, thus earning international attention not only for his work against toxics in the air, water and land of South Durban,11 but also for his next project: halting the port expansion.12 One morning, reporting on D’Sa’s award, The Guardian headlined, “South Africa’s ‘cancer alley’ residents face new threat from port development: Decades of activism have made some gains, but the expansion of Durban port will wreak new devastation for many communities” (Vidal, 2014). The same day, even The Economist sympathetically reported Local communities have an unhappy history. The south Durban basin, which houses 70 percent of the region’s industry, including hundreds of oil and gas refineries, chemical companies and paper mills, was originally populated by indentured servants working in local sugar plantations. The apartheid government forcibly relocated additional residents there to create a pool of cheap labor for the emerging industrial economy. Mr D’Sa and his family were a part of this forced migration. “(The expansion) will cause the biggest social upheaval since apartheid. We already suffered enough trauma under apartheid: we lost our lands, our houses, our communities. We don’t want to go through that again,” says Mr D’Sa, who has vowed to fight the plan at every step. (The Economist, 2014)

Although the project’s earliest investments are a $20 million bridge (2006
2010) linking the port more directly to Durban’s highway system and a $2.4 billion oil pipeline (2007
2014), which both entail Transnet as the main funder using internal financing, the bulk of investment will occur in both petrochemical expansion (so as to take up the new doubling of pipeline-transport capacity) and a new “dig out port” (estimated to cost $10 billion) that will begin in 2016. Hence the 2014
2016 period is the crucial window in which financing will be assembled. That funding will also

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pay for a dramatic increase in existing port capacity, so that the 5,000 + container “post-Panamax” ships can be accommodated in the current harbor (stages 1
3). In 2016, the dig-out port at the old airport site will be excavated, with an anticipated first berthing in 2020 (stage 4). The final growth of the existing port will include an extensive dig-out of the area currently under Transnet railroad siding operations (stages 5
6), although with liberalization of transport in the early 1990s and the move of freight to road-based trucking, this land is mostly unused. The latter stages of the project are in close proximity to the predominantly Indian areas of Isipingo and Merebank in the south and Clairwood in the north, as well as the African township of Umlazi and the colored Wentworth area. Finding the money will be Transnet’s most critical challenge, given the scale of the project and how many aspects are being contested. Transnet acquired the first tranche of financing for this project and $30 billion worth of other mega-projects from a $5 billion loan, apparently without conditions (and with terms not publicly released), made by the Chinese Development Bank in March 2013, at the time of the Durban BRICS summit. There were, in addition, repeated subsequent bond offerings of several hundred million dollars, including in the London markets in November 2013 where the premium paid by Transnet was enormous on its Rand-denominated bonds: 9.5 percent. But the longer-term threat is that the promised BRICS Bank will seek projects like this, as exemplars of export-oriented infrastructure. In July 2013, a high-profile meeting of the Durban Transport Forum heard Transnet’s port expansion director Marc Descoins update his team’s planning: “The fatal flaws analysis yielded many risks but no showstoppers” (Creamer’s Engineering News, 2013). Descoins had not, at that time, factored in resident and labor opposition to the mega-project, its vast environmental implications, or rising disgust about construction-driven White Elephants. Tracing several of the problems with the port-petrochem expansion in South Durban sheds light on the interconnections between social and environmental grievances, as well as a growing economic debate about whether SA’s vulnerability to the world economy should be mitigated, or instead grow worse.

The Doubling of Oil Pipeline Capacity The first part of the expansion, the Khangela Bridge, was a function of trucking company frustration with the delays encountered moving freight

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from ships in the existing port to the highway system through South Durban. Originally announced as a $7 million expenditure, the project costs ballooned by a factor of nearly three by the time the bridge was complete in 2010. One reason was rampant corruption involving three major construction companies (Dardagan, 2013). The second stage was Transnet’s Durban
Johannesburg oil pipeline construction project, lasting from 2007
2014. The mega-project, known as the “new multi-product pipeline,” cost $2.34 billion, a dramatic cost escalation in part because the pipeline was diverted hundreds of kilometers from the traditional route west along the N3 highway. That route ran through mostly-white Durban suburbs (Mariannhill, Hillcrest, Shongweni and Camperdown), and now the pipeline moves double the pre-existing oil volume through (mostly-black) South Durban, Umbumbulu and other former KwaZulu bantustan areas. According to Durban’s leading environmental journalist, Tony Carnie, “The $600 million petrol, diesel and jet fuel pipeline will replace the existing Durban-to-Johannesburg pipeline which was built in 1965. The existing pipeline is believed to have rust defects and cannot cope with the future demand in fuel growth in Gauteng” (Carnie, 2008). By moving the project southwards before turning west, the cost estimate rose by more than 50 percent. But there were many other cost increases, with the total reaching $2.34 billion by 2013, in part because of apparent construction company collusion on tendering by one of the main pipeline construction companies, Group Five Civil Engineering (Venter, 2013). In his own review of the cost overruns, without considering construction company collusion, Public Enterprises Minister Malusi Gigaba uncovered “systemic failings that compromised the intended outcomes” and he admitted that his project managers “lacked sufficient capacity and depth of experience for the client overview of a megaproject of this complexity,” especially related to “analysis of risks.” Nor were EIAs or water and wetland permits “pursued with sufficient foresight and vigour” (Gigaba, 2012). Well before this became public knowledge (Group Five only stepped forward to confess its role in industry collusion in 2009), SDCEA offered several critiques of the pipeline, including the racially biased routing; inadequate public participation; dubious motivations for the pipeline; government’s failure to prevent, detect or manage pipeline leaks and climate change.13 According to SDCEA, the race and class bias were crucial reasons to reject Transnet’s re-routing strategy, because “The pipeline threatens people with potentially severe environmental safety and health problems (well known to refinery victims in South Durban), in a manner

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that is discriminatory along class and racial lines.” The local ecology itself was already saturated with toxins, SDCEA alleged: Durban Bay, in which the harbour is situated, is struggling to cope with the pollution loads from harbour and associated activities, contaminated riverine and storm-water inflows. The expansion will require further removal of aspects of the Bay’s ecosystem, which will in turn further reduce the assimilative capacity of this threatened and fragile estuary. There have been major incidents affecting the harbour, including the September 2007 fire at Island View Storage. Reducing the amount of hazardous material being stored, handled and transported in the harbour is a crucial first step to reducing the risk to people living, traveling and working in the area. Yet the pipeline proposal will do the opposite. The routing of the pipeline south, directly through lowincome black residential areas instead of through areas including farming lands owned by wealthy white South Africans, is suspiciously reminiscent of the environmental racism we in South Durban have become familiar with … The leaks that have occurred in existing petroleum pipelines have been devastating to South Durban, including the 1.3 million liters that spilled from Sapref lines in 2001, that were not detected until residents complained. According to present practices, only a leak of more than 1% will be detected. Incidents leading to a loss of product which is not detectable by the system may continue to pollute the soil and groundwater for a long time. During this period, many people, fauna and flora may be affected by the consequences of the pollution and not understand the cause until it is too late. In this case, the costs will not be borne by the polluter, as our legal framework requires.14

Many of the same complaints arose again four years later, in mid-2012, when the next stage of the port-petrochem complex reached fruition: the proposal for a new dig-out port and expansion of the old port. The most heart-felt of the critiques leveled was against displacement, because for many Indian and African residents of South Durban, their earlier residents during apartheid were in Cato Manor, a well-located residential area, and that meant the white government moved them to South Durban as part of its racial displacement strategy. Now the same appeared imminent, though this time for class reasons.

Displacement and Trucking Company Attacks SDCEA, the Wentworth Development Forum and Merebank Residents Association and the Clairwood Residents and Ratepayers Association are justifiably convinced that the port-petrochem project will generate not just traffic chaos, but residential displacement on a very substantial scale. From the north, the old harbor’s expansion creep will displace residents by the thousands from the culture-rich, 150-year old Indian and African community of Clairwood. That area’s African shack dwellers and long-time Indian

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residents are already being squashed by trucking companies, who are beneficiaries of the rezoning
or simply failure to enforce existing zoning
that facilitates Back-of-Ports creep. In the process of liberalized zoning and lack of residential area zoning enforcement by the municipality, 10 Clairwood and nearby Bluff suburb residents were killed in the decade 2003
2013 by truck accidents. Mostly carrying freight, these drivers killed 70 people in the course of 7,000 accidents in Durban in 2012 alone. The worst single case occurred in September 2013, when 23 people were killed by a runaway freight truck on the Field’s Hill section of the alternative (non-tolled) highway from Johannesburg. That accident was revealing, for one of the world’s three largest shipping companies, Evergreen, hired a local informal truck company which allegedly instructed its driver to avoid tolls to save $4. Police cracked down after the accident and found several of the company’s trucks operating under unsafe conditions. The one that hit two commuter taxis was driven by an unqualified immigrant driver, underpaid; the truck’s brakes failed on one of the steepest highways in the country. A few weeks later, government proposed restricting that particular hill to only 5 ton trucks, banning 16 ton trucks. But the broader problem of rising accidents was not addressed.

Local Ecological Degradation Opposition from local communities will grow even more intense once the largest part of the port expansion begins, in 2016. The proposed dig-out port is where the old airport stood, on the southern border of the Merebank neighborhood. To dig a 1.5 kilometer length of soil 20 meters deep is dangerous, given how many toxic chemicals have come to rest there over the years. Even Descoins conceded, “We have to look at contamination issues. Hydrocarbons have been pumped around this area for decades and we know there have been some leaks.” That soil, water and air pollution will exacerbate the five-year dust cover under which the dig-out port’s construction will suffocate Merebank and Wentworth, the mainly Indian and colored communities of South Durban. These neighborhoods are already coated with regular oil-related sulfur and soot showers from the oil refining complex, as witnessed in their world-leading asthma rates. In addition to damage to human health, BirdLife SA observed that since Durban has one of just three estuarine bays in SA, its “ecosystem services” value of goods and services is vast: as a heat sink and carbon sink, for biodiversity, as a fish nursery, for waste disposal, and for storm protection.

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Moreover, the Bonn Convention’s protections for bird migration should make estuaries and wetlands like South Durban immune from more cementing. In May 2013, Public Enterprises Minister Malusi Gigaba dismissed the worries over “frogs and chameleons” (Gedye, 2013). In contrast, the ecological damage implied in this stage of Transnet’s expansion was so extreme that the Department of Environmental Affairs reviewed the EIA for the build-out of two berths so as to accommodate super-post-Panamax ships of 15,000 containers or more, and rejected the first version in October 2013. One of the two reasons was Transnet’s failure to do more than “monitor” the damage it would do the major sandbank in the middle of the estuarine bay, which hosts so many reproductive processes for fish and birdlife (Abader, 2013).

Global Ecological Implications and Local Climate Adaptation The second reason Transnet suffered an early rejection of its EIA was due to the most important environmental problem of all, climate change. The firm’s consultants had not begun to consider the impact of rising sea levels or extreme storms (Abader, 2013). As oceans warm up, cyclones and hurricanes also intensify, with their impact exacerbated by sea-level rise. “The volume of Arctic sea ice has been reduced by 75 percent in just 30 years,” reported the world’s most respected climate scientist, James Hansen of NASA, to the Cornell University Global Labor Institute in 2012: “There is a danger that the ice sheets will begin to collapse and we could get several meters of rising sea levels in one year” (Cornell University, 2012). Durban recently suffered an early indication, for in March 2007, according to the assessment of local marine expert and municipal official Andrew Mather, “wave run-up heights were measured at twelve beaches along the Durban coastline and these peaked at 10.57 meters above Mean Sea Level.” Nearly a billion dollars’ worth of coast infrastructure was destroyed. In August 2012, the same Durban port berths proposed for expansion in 2014 were severely damaged during heavy winds which bumped a ship up against cranes, resulting in a fortnight-long closure, less than a year after Durban hosted the UN climate summit. What of the mitigation challenge associated with the port-petrochem complex? According to the Academy of Science of SA’s (2011) book about Durban, Towards a Low Carbon City, “The transport sector is pivotal to the transition to a low carbon city … The top priority was identified as the need to reduce the vehicle kilometers travelled in the road freight sector as

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this provided the greatest opportunity to simultaneously reduce emissions of GreenHouse Gases and traditional air pollutants” (Academy of Science of SA, 2011). The Transnet port-petrochem complex will do the opposite, in part because for decades, Transnet sabotaged its own rail freight capacity, allowing road trucking to surge from 20 to 80 percent of container carriage. Yet in addressing the obviously adverse climate implications of their project, Transnet hired Nemai Consulting which in turn hired as a climate specialist the SA Council for Scientific and Industrial Research, whose 2011 report, “Modelling of potential environmental change in the port marine environment,” completely ignored climate. Follow-up with officials of Nemai in 2012 generated this reply: “The project will decrease the ship waiting and turnaround times which will have a lower carbon impact.” The consultants did not factor in the dynamic aspects of the shipping system, meaning that if there is an increase in efficiency by reducing the ships’ offshore wait, the result is to speed up the system as a whole, thus increasing carbon impact.

Economic Irrationalities Ironically, inefficiency may be the way the port-petrochem project is unveiled as being uneconomic and inappropriate for financing. The argument in favor of the port is mainly that jobs will be created and SA will have world-class infrastructure for export-led growth. But rising capital intensity at Transnet along with trade-related deindustrialization will probably result in more net employment loss, which is the norm since 1994 when democracy also ushered in economic liberalization after joining the World Trade Organization. The project only makes sense if one is locked into national boundaries established in Berlin during the colonial “Scramble for Africa” in 1885. As the region’s main port-rail link to the largest market, Gauteng
and from there to the rest of the subcontinent
Durban is facing stiff competition from Maputo in Mozambique for shipments to the huge Johannesburg market, because it is a much less mountainous journey. In addition, there is general container-handling competition from other ports along the coast attempting to set up regional freight hubs and export processing zones. As it stands, at $1,080 per container, Durban’s costs of processing freight are the highest in the world. What port advocates have not been able to do is explain how an additional $25 billion in investments (no doubt much more according to the recent trend of final costs tripling

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original estimates) will cut operating and maintenance costs to competitive levels. Repaying the interest on the capital, the principal and all the new additional costs will force much higher container-handling charges, leaving the real prospect of another white elephant. In Durban, similar projects that were anticipated to earn profits
such as the airport, convention center and marine entertainment complex
all have needed multi-million dollar annual taxpayer bailouts.

Conclusion A very different Strategic Investment Project would recognize the urgent need to detox South Durban and reboot the local economy towards more labor-intensive, low-polluting industry, and add much more public transport, renewable energy, organic agriculture not reliant upon pesticides, a “zero-waste” philosophy and a new ethos of consumption. The South Durban activists and the national Million Climate Jobs campaign who want society to adopt this approach remain on a collision course with Transnet, its financiers, the Treasury and Presidential Infrastructure Coordinating Commission, as well as the municipality. Unlike the Medupi campaign from February to April 2010, there is far more time for mobilization of advocacy pressure to halt Transnet’s access to external financing, and hence the project itself.

CONCLUSION: CLIMATE AND CAMPAIGN STRATEGY What is the future of SA mega-project development strategy, as it is based on fossil fuels, and on extremely dubious approaches such as those we have just examined?15 In October 2012, at a Presidential Infrastructure Investment Conference in Johannesburg, Deputy Public Works Minister Jeremy Cronin confessed what is patently obvious in the neo-colonial SA economy: “Too much of our development has been plantation to port, mine to port.” Instead, we need “social infrastructure, such as water, hospitals, schools, and housing, in order to prevent the kind of protests witnessed recently in the mining sector” (CityPress, 2012). Cronin’s influence notwithstanding, this rhetoric is probably just a case of “talk-left, invest-right”: in mega-projects like Medupi and South Durban’s port sprawl, against the interests of people and planet, and instead on behalf of corporate profits.

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In these respects, there was more continuity than change in the pre-1994 and post-1994 eras. For many years, mega-projects have dominated corporate investment, and have always entailed very generous state-supported subsidies, usually associated with mining (Free State Goldfields), smelters (Alusaf, Columbus), airports, ports (Richards Bay, Saldanha, Coega), mega-dams (Gariep, Lesotho), coal-fired powerplants and other energy projects (Mossgas, Sasol oil-from-coal) and occasional special projects (sports stadiums and the Gautrain). What this means is that there remains a formidable lobby for fossil-fuelbased infrastructure investment in SA, ranging from mining houses to the construction industry. The ruling class mandate is to “mine more and faster and ship what we mine cheaper and faster,” as Business Day editor Peter Bruce ordained just as Gordhan was finalizing his $100 billion infrastructure budget in February 2012 (Bruce, 2012). Behind Bruce’s strategy is a long history of cheap energy supply for transnational capital made possible by the availability of large amounts of poor quality coal and an incestuous relationship between the coal mines, gold industry and Eskom. A history of state intervention in securing the energy needs of the mines, agriculture and industry established the principle of keeping electricity as cheap as possible for big capital. The ANC government did not change this arrangement, which helps explain why its posture at recent climate summits has been in defence of the world emissions status quo. The new government was as co-opted as was the old regime by the Minerals
Energy Complex, and Eskom continued to foster a debilitating dependence on the (declining) mining industry. It left South Africa, according to the University of Cape Town Energy for Development Research Centre, as “the most vulnerable fossil fuel exporting country in the world” if the Kyoto Protocol is fully extended in 2015 at the Paris UN climate summit; “heavily reliant” on energy-intensive industries; “highly dependent” on coal for primary energy; offering “low energy prices to large corporate consumers”; and risking the development of a “competitive disadvantage” by virtue of “continued high energy intensity” which in the event of energy price rises “can increase the cost of production” (Spalding-Fecher, 2000). As a result, when corrected for income and population size, South Africa’s emissions were higher than even the energy sector of the US, by a factor of twenty (International Energy Agency, 2000a, 2000b). To deal with this legacy, the government adopted a Long-Term Mitigation Scenario (LTMS) in mid-2008, to great fanfare. The LTMS plans for absolute cuts in CO2 to start only in the period 2030
2035, after

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a post-2020 plateau. And generally, the 2004 National Climate Change Response Strategy endorsed carbon trading, declaring “up-front that the Climate Development Mechanism (CDM) primarily presents a range of commercial opportunities, both big and small” (Republic of South Africa, 2004). The carbon trading strategy was apparently revived with an offsets proposal in April 2014, even though a carbon tax proposal in 2013 by the national Treasury acknowledged that carbon trading would not work in a market with only a few very large polluters (Bond, 2013b). Yet the South African government’s 2010 National Climate Change Response Green Paper acknowledged local dangers of climate change: “Should multilateral international action not effectively limit the average global temperature increase to below at least 2°C (above pre-industrial levels), the potential impacts on South Africa in the medium- to long-term are significant and potentially catastrophic.” The paper warned that under conservative assumptions, “after 2050, warming is projected to reach around 3
4°C along the coast, and 6
7°C in the interior” (Republic of South Africa, 2010). How would South Africa to address climate change at the global scale? The main negotiation session in the 2009 Copenhagen COP15 was disappointing, with a deal between US president Barack Obama and BRICS (minus Russia, hence “BaSIC”) leaders Lula da Silva, Manhohan Singh, Wen Jiabao and Jacob Zuma leaving the earth’s atmosphere with 770 parts per million of CO2 equivalents (or worse if the promised 15 percent emissions cuts from 1990 levels to 2020 are not achieved, and in reality, these “cuts” could become a 10 percent increase once carbon trading and offset loopholes are factored in). In these and future climate negotiations, Pretoria would be taken more seriously if seen to be honoring its official pledge, made just before the Copenhagen summit: cutting greenhouse gas emissions to a “trajectory that peaks at 34 percent below a Business as Usual trajectory in 2020.” But that highly unlikely promise was contingent on the North paying Pretoria (unspecified) climate funds and transferring low-carbon technology without the usual debilitating royalty requirements, according to Environment Minister Edna Molewa.16 So far the strategy has not paid off in any way, aside from giving South Africans higher-profile roles in the annual UN negotiations, as well as occasional leadership positions in matters such as climate finance. For example, the UN High-Level Advisory Group on Finance which reported to Ban Ki-moon in November 2010 was co-chaired by South African planning minister Trevor Manuel, and in 2011 he co-chaired the Green Climate Fund design committee. His conservative recommendations included financing up

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to half the North
South climate financing with CDM and other carbon trades (United Nations, 2010). What, then, compelled the South African government to such extreme commitments for new projects such as Medupi and the Transnet expansion, which will undeniably exacerbate all these problems? The main reason for the former was a series of electricity generation shortfalls during January
March 2008 which led to consistent surprise “load shedding” in which entire metropolitan areas were taken off the electricity grid. These were due partly to a lack of new capacity built by national power generator Eskom since the early 1990s (when excess capacity had risen to more than 30 percent), the running down of coal supplies and rain damage to incoming coal. But the main reason was the increased electricity consumption of metals smelters due to the 2002
2008 speculative uptick in commodity prices. Indeed, even earlier, the economy’s five-fold increase in CO2 emissions since 1950, and 20 percent increase during the 1990s, can largely be blamed upon supply of the subsidized electricity by Eskom to multinational corporate mining houses and metals smelters. Hence the economics of electricity supply to the mining sector can be questioned. Not only are vast carbon-based profits fleeing to the mining houses’ offshore financial headquarters but, despite consuming huge amounts of electricity, the smelters create very few jobs. Instead of cutting back on these sorts of projects, and turning the subsidies to renewables, the ANC government attempted to augment coal-fired generation with, first, dangerous new pebble bed nuclear technology (rejected by German nuclear producers in the 1990s and finally in 2010 defunded by finance minister Pravin Gordhan in frustration) and then with dangerous existingtechnology nuclear reactors (rumors continue that another $100 billion of investment has been earmarked after 2020 for a new generation of nuclear technology, with assistance from the Russian government, as arranged during the 2013 BRICS summit). Renewable sources like wind, solar, wave, tidal and biomass are the most obvious ways forward for this century’s energy system, but still get only a tiny pittance of government support, and provide less than 5 percent of the grid’s power. Ironically, a March 2014 electricity outage in most of South Africa was due to rain falling on the coal dust used in the Eskom boilers in Mpumalanga, after record precipitation that in turn was caused by higher moisture levels in the air, in turn caused by climate change, in turn caused
more than any other single corporation in Africa
by Eskom. The parastatal corporations’ substantial new investments also reflected growing pressures to maintain infrastructure spending in the wake of

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a major downturn after the completion of the 2010 World Cup stadiums and associated infrastructure (the new Durban airport, the Gautrain fast train in Johannesburg
Pretoria, and some highway extensions in Gauteng Province and Durban). But amidst the infrastructure investment boom, contradictions have become glaringly apparent, not only with the white elephants already constructed but in those still to come, including the Medupi coal-fired power plant and Transnet’s South Durban portpetrochemical expansion. In this context, SA often feels close to exploding, given the extreme dislocations and inequalities, so well exemplified in the mega-projects discussed above. The power relations that create these tensions are being contested with intense vigor, in workplaces and communities. The protests are always local in character, but they also reflect the durable national-level power relations. During the post-apartheid era, most South Africans suffered from neoliberal policies imposed by the governments of Nelson Mandela (1994
1999), Thabo Mbeki (1999
2008), Kgalema Motlanthe (2008
2009) and Jacob Zuma (2009
present). The results included an immediate rise in income inequality, with the Gini coefficient soaring from below 0.6 in 1994 to 0.72 by 2006 (0.8 if welfare spending is excluded) (Joffe, 2008). The official unemployment rate doubled from 16 percent in 1994 to around 32 percent by the early 2000s, falling to 23 percent by the late 2000s when in 2009
2010 another 1.3 million jobs were lost
but by counting those who gave up looking for work, the realistic rate is closer to 40 percent (Kingdon & Knight, 2005). The long-term explanations for the employment massacre were increased imports in labor-intensive sectors
mostly by ship through the Durban port (source of 60 percent of SA-bound cargo)
and imported machines to exacerbate capital-intensive production techniques. In addition, ecological problems became far worse, according to the government’s 2006 Environmental Outlook research report, which noted “a general decline in the state of the environment.”17 By 2012, SA’s “Environmental Performance Index” slipped to 5th worst of 133 countries surveyed by Columbia and Yale University researchers.18 For example, in spite of water scarcity and water table pollution in the country’s main megalopolis, Gauteng, the first two Lesotho mega-dams were built during the late 1990s thanks to World Bank financing, with destructive environmental consequences downriver, and the extremely high costs of water transfer deterring consumption by poor people in Gauteng townships. One result was the world’s highest-profile legal case of Third World development corruption, the Lesotho Highlands Water Project.19 Another

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result was the upsurge of social protest in which Africa’s main “water war”
between Soweto residents and their municipal supplier outsourced to a Paris water company, Suez (whose construction subsidiary was one of the firms prosecuted for corruption in Lesotho) in the early 2000s
can be traced to the higher prices and a commercialized system that protesters objected to. The wealthiest urban (mainly white) families continued to enjoy swimming pools and English gardens, which meant that in some of the most hedonistic water consumption in the suburbs was 30 times greater each day than in low-income townships (some of whose residents continue doing gardening and domestic work for whites). Rural (black) women still stand in line for hours at communal taps in the parched former bantustan areas. This case was an important precedent for electricity, for Medupi’s financing costs have a similar impact on affordability for low-income black South Africans. Similar biases affect health and welfare when it comes to the distribution of electricity. While BHP Billiton gets the world’s cheapest energy for its aluminum smelters, millions of poor people are regularly disconnected from or denied access to the grid due to extreme poverty. Because of dirty household energy, the passage is often rapid from HIV-positive to fullblown AIDS status via respiratory-related opportunistic infections, including the raging TB epidemic. These add to the existing set of occupational health diseases inherited from the MEC. The government’s failure to prevent mining pollution, toxic dumping and incineration led to a nascent but portentous group of mass tort (class action) lawsuits. The victims included asbestos and silicosis sufferers who worked in or lived close to the country’s mines, who in 2013 achieved a landmark victory. Other legal avenues and social activism were pursued by residents who suffered persistent pollution in extremely toxic pockets like South Durban and, just south of Johannesburg, the industrial sites of Sasolburg and Steel Valley. In these efforts, the environmental justice movement almost invariably fought both corporations and Pretoria, which from 1994 downplayed ecological crimes (a Green Scorpions anti-pollution team did finally emerge but with subdued powers that barely pricked). With this level of degradation, it is no surprise that there is such intense labor, social and environmentalist resistance. The 2012 and 2013 World Economic Forum Global Competitiveness Report placed SA in the worldleading position for adverse employee
employer relations out of the 148 countries surveyed (World Economic Forum, 2012). And typically 10,000 protests are recorded by police each year; in 2012
2013, for example, the minister of police reported that of 12,399 protests, “10,517 were peaceful

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and 1,882 were violent public protests, with a total of 693 criminal cases reported”; he expressed pride about having made more than 13,000 arrests at more than 46,000 protests over the prior four years (SAPA, 2013a). Because attempts to change public policy have failed, thus far, one obvious new pressure point will be financing. What is at stake is whether common sense prevails over profits. That calculus has to be swung in the favor of the former, by reducing the latter, perhaps through non-violent civil disobedience of the sort pioneered in Durban in 1913 by Mahatma Gandhi; that is, of the sort international anti-apartheid activists used to assist in ending apartheid. The most powerful weapon was financial sanctions. Whether the World Bank and international lenders
including China and the coming BRICS Bank
can be forced to stop new tranches for Medupi and new Transnet financing, is a matter of organizing prowess. It is the financing weaknesses of the two parastatal corporations that might, if organizing does intensify, make the mega-projects more difficult to bring to fruition, given SA’s vulnerabilities and excessive foreign debt. Weakening capital along these lines is a prerequisite to fighting for and winning climate justice more generally, as part of the historic resistance to uneven and combined capitalist development amplified by capitalist crisis and manifest in the heightened social metabolism of extractivist economics (Bond, 2012b; Klein, 2014). But that will be a matter for struggle.

NOTES 1. Martinez-Allier’s work is profiled, along with a network in which author is an associate, at the Environmental Justice Organizations, Liabilities and Trade project: http://www.ejolt.org 2. Rand Merchant Bank Financial Markets Research, ‘Monthly ZAR outlook’, Johannesburg, March 5, 2009, p. 2. What makes this debt worse is the interest rate; amongst SA’s largest trading partners, only Greece’s has been higher, according to the Department of Trade and Industry. One reason interest rates have been so high in relative terms, is to guard against capital flight which periodically crashes the currency. SA’s liberalized exchange control system initially compelled a massive interest rate increase in 1995
1996 to mitigate the exchange control deregulation of March 1995 (see Bond, 2003). 3. This was confessed by William Moomaw of Tufts University, an outside evaluator of the Medupi loan; http://ia600307.us.archive.org/7/items/PatrickBond WilliamMoomawDiscussClimateJusticeSouthAfricaAndThe/PatrickBond.wmv. In any case, Eskom’s commitment to renewable energy and integrated demand management was erratic, as in early 2014 it simply halted crucial renewable energy

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subsidies: http://simbalism.co.za/index.php?page=press_Africa_and_Eskom&ownerid= press_Africa_and_Eskom.php&contentid=492 4. South Durban was already known as a prolific site of protest against fossil fuels, given that it hosted amongst the largest and least responsible petro-chemical firms south of the Niger Delta. With electricity prices soaring, many more residents in South Durban were being disconnected. They often reconnected illegally, and Eskom and the municipality clamped down, generating more local anger. 5. http://ia600307.us.archive.org/7/items/PatrickBondWilliamMoomawDiscuss ClimateJusticeSouthAfricaAndThe/PatrickBond.wmv 6. The literature on multipliers is reviewed in Bond (2002). 7. Ironically, in February 2010, the World Bank had issued a major statement alongside its annual African Development Indicators, entitled ‘Quiet Corruption’, in which it blamed African teachers and healthcare workers for moonlighting (a result of Bank structural adjustment policies (World Bank, 2010). 8. In 2012, for example, the IMF began raising $75 billion from the BRICS countries, even though SA’s finance minister Pravin Gordhan had recently attacked the IMF for not giving African countries more voting power, and not being sufficiently ‘nasty’ to European borrowers. Gordhan told Moneyweb that SA’s contribution was based on the IMF becoming more ‘nasty’ (sic) to desperate southern European borrowers. The result was that China gained dramatically more IMF voting power, while Africa lost a substantial fraction of its share. Moneyweb (2011) and Gordhan (2012). 9. Kim preferred to instead visit a different World Bank investment: a Johannesburg junk mail company (Bond, 2012a). 10. Shanta Davarajan and Patrick Bond, http://blogs.worldbank.org/africacan/ patrick-v-shanta-round-2 11. Goldman Foundation, ‘Q&A with Desmond D’Sa’, San Francisco, http:// www.goldmanprize.org/blog/qa-desmond-dsa; see also http://www.youtube.com/ watch?v=_erEf4zI0BI 12. South Durban Community Environmental Alliance, http://sdcea.co.za; Hanekom (2013). 13. SDCEA (2008) suggested a variety of alternatives: ‘Refurbishing the existing pipeline in an incremental manner (instead of doubling capacity), as maintenance is required, replacing the sections with a larger pipeline, using the existing route and servitudes, and installing additional pump stations, as and when required. Accelerating the upgrade of railways and public transport in Gauteng, so as to get more people and product off the roads to minimize transport-related congestion, fuel burning, emissions and associated health effects, by establishing urban transport networks to enable safe and affordable rail transport, linked to park and ride centers with connections to bus and taxi routes. Working with municipalities to encourage sustainable transport solutions and thereby accelerating growth, by enabling more people to access opportunities (e.g., in many countries, transport in the city center is free)’. 14. On the biggest environmental issue, climate, Transnet was silent (SDCEA, 2008). According to SDCEA, The Draft Scoping Report summary notes in ‘TABLE 5
1: Summary of legal requirements that apply to the project and the EIA process’ that the Kyoto Protocol is relevant, as it ‘Commits a country to quantified

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emissions limitations and reductions’… the rise of CO2 emissions that will be facilitated by the pipeline is immense, and is only referred to in the Draft Scoping Report as a potential legal problem, with no details provided. 15. Pretoria’s other multi-billion rand carbon-intensive investments in recent years include SA Airways plane purchases
and subsequent multi-billion rand annual bailouts
along with sports stadia widely acknowledged as ‘White Elephants’ by even Danny Jordaan, local host of the Fifa World Cup in 2010. Meanwhile, renewable energy is being rolled out very slowly
with some high visibility townships getting a few solar geysers but the country’s world-class sunshine, wind and tidal potential going to waste (providing less than 5 percent of the country’s power). In contrast, Shell received permission in 2013 to drill and frack the Karoo’s fragile ecosystems. 16. For more on Pretoria’s positioning in the run-up to its own Durban COP17 hosting; see Bond (2011). 17. http://www.info.gov.za/speeches/2007/07062911151001.htm 18. Environmental Performance Index, http://epi.yale.edu/ 19. See Bond (2002).

ACKNOWLEDGMENTS This research was made possible only through the activist-sourced knowledge generated by repeated contestations against both Eskom and Transnet by tireless colleagues at the South Durban Community Environmental Alliance, groundWork and the Centre for Civil Society. This chapter was presented to the Gyeongsang National University Institute for Social Science, supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2013S1A5B8A01055117).

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Hogan. SAPA. (2013a). Cops handled 12,399 protests, IOL News. SAPA. (2013b). Eskom apologises for spying on Greenpeace, Earthlife. Saul, J., & Bond, P. (2014). South Africa
The Present as History. Oxford: James Currey. Shamase, N., & Letsoalo, M. (2012). Saving Cyril: Molewa accused of meddling. Mail & Guardian, November 9. South Durban Community Environmental Alliance. (2008, July 7). Comments on the Transnet Multi Product Pipeline Proposal, Durban. Spalding-Fecher, A. (2000). The sustainable energy watch indicators 2001. Energy for Development Research Centre. Cape Town: University of Cape Town. The Economist. (2014, April 28). Durban port expansion South African campaigner wins environmental prize. Retrieved from http://www.economist.com/blogs/baobab/2014/04/durban-port-expansion United Nations. (2010, November 5). Report of the Secretary-General’s high-level advisory group on climate change financing. New York, NY. Retrieved from http://www.un.org/ wcm/webdav/site/climatechange/shared/Documents/AGF_reports/AGF_Final_Report. pdf Venter, I. (2013). Construction industry must deal with “great anger” over collusion, says Upton. Engineering News, August 12. Retrieved from http://www.engineeringnews.co. za/article/construction-industry-must-deal-with-great-anger-over-collusion-says-upton2013-08-12 Vidal, J. (2014). South Africa’s “cancer alley” residents face new threat from port development. The Guardian, April 28. Retrieved from http://www.theguardian.com/globaldevelopment/2014/apr/28/south-africa-cancer-alley-port-development Wolpe, H. (1972). Capitalism and cheap labour-power in South Africa: From segregation to apartheid. Economy and Society, 1(4), 425–456. World Bank. (2010). Silent and lethal: How quiet corruption undermines Africa’s development efforts. Washington, DC: World Bank. World Economic Forum. (2012). Global competitiveness report 2012
2013. Davos. Retrieved from http://www.weforum.org/reports/global-competitiveness-report. 2012
2013 and same document for 2013
2014. Yelland, C. (2013). A company in distress. Daily Maverick, March 4.

MARKETISATION, COMMODIFICATION AND THE IMPLICATIONS FOR TEACHERS’ AUTONOMY IN ENGLAND Martin Upchurch, Phoebe Moore and Aylin Kunter ABSTRACT This chapter reviews the ongoing processes of marketisation in secondary school teaching and its further embedment through commodification of teachers’ performance. We track developments through documentary evidence from Government statements and other agency reports and unstructured interviews with teachers’ union representatives in the South West of England. Following Carter and Stevenson (2012) we begin by introducing the labour process debate concerning teachers’ productive labour to provide the backdrop for the argument that teachers’ work is increasingly commodified and judged along neoliberalised requirements. Commodification has taken place through measurement of abstract standards constructed by associating individual teachers with their pupils’ achievements, as well as subjective assessment of teacher behaviour judged against newly introduced ‘Teacher Standards’. We argue that this attempted quantification of teacher output is constructed, in Marxist

Sraffa and Althusser Reconsidered; Neoliberalism Advancing in South Africa, England, and Greece Research in Political Economy, Volume 29, 133
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terms, to accommodate to the ‘socially necessary labour time’ and to indirectly maximise work ‘output’ for individual teachers through a process of standardisation of processes involved in task completion. We attempt to define new ways of measuring teachers’ work through the lens of abstract labour and link such processes to workplace alienation. In such fashion, teachers are subject to work intensification, increased monitoring and surveillance, further standardisation of work and weakening of creative autonomy leading to intensified alienation from the professional nature of the job. Keywords: Education; teachers; commodification

INTRODUCTION Neo-liberal restructuring of public services has been an ongoing feature of UK Government policy since the 1980s. The processes involved have included wholesale privatisation, varying forms of contracting-out and outsourcing, flexibilisation of the workforce, prioritising of price and cost and consideration of charges at the point of use. Newly formed and spin-off companies have engendered competition and marketisation. Service providers remaining within the public sector have been forced to compete through tendering with new rivals in private sector services. In this way the constraints of profitability and the need to ensure a satisfactory return on capital investment have acted to impose a financial discipline not only in privately provided services, but also in the public sector. The crossover of market discipline is enforced in the public sector by a longer term intensification (Green, 2001), and quantification of work and workloads. This has been driven by continued constraints on labour costs, as a major fragment of total costs, and transference of private sector cost accounting into the public sector. Budget and cost centres, and the associated budgetary responsibility, are increasingly devolved to line managers and have become normal organisational practice. The increasingly embedded market disciplines associated with ‘new public management’ have accompanied a drift towards assessing value added of individual staff, measured wherever possible through performance targets and enacted through individual appraisal and related capability assessment. This chapter reviews the ongoing impact of processes of marketisation on secondary school teachers and its further embedment through

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commodification of teachers’ performance. We track developments through documentary evidence from Government statements and other agency reports and unstructured interviews with a small sample of teachers’ union representatives in the South West of England.1 Following Carter and Stevenson (2012) we begin by introducing the labour process debate concerning teachers’ productive labour to provide the backdrop for the argument that teachers’ work is increasingly commodified and judged along neoliberalised requirements. Commodification has taken place through measurement of abstract standards constructed by associating individual teachers with their pupils’ achievements, as well as subjective assessment of teacher behaviour judged against newly introduced ‘Teacher Standards’. We suggest that quantification of teacher output is constructed, in Marxist terms, to accommodate to the ‘socially necessary labour time’ and to indirectly maximise work ‘output’ for individual teachers through a process of standardisation of processes involved in task completion. We attempt to define new ways of measuring teachers’ work through the lens of abstract labour. In such fashion, teachers are subject to work intensification, increased monitoring and surveillance, further standardisation of work and weakening of creative autonomy leading to intensified alienation from the professional nature of the job.

TEACHING AND PERFORMANCE Attempts to reform teaching have a long history, and processes of globalisation have renewed frameworks for change first attempted in earlier epochs of market liberalism. There is a pre-history of failure with respect to performance related pay (PRP), for example, in teaching. A scheme run for nearly 30 years at the end of the nineteenth century, but rather than resulting in the improvements it was intended for, the scheme resulted in the significant reduction in people interested in entering the profession; in the rise in students’ learning without understanding; and was understood to be the reason for the suicide of demoralised school teacher Elizabeth Forshaw in Parliament in 1885. Indeed, the nineteenth century changes to policy look familiar to anyone with an eye for erstwhile Education Secretary Gove’s reforms. The revised Teaching Code of 1862, which introduced PRP, introduced three changes. The first was that there would no longer be a guarantee of teacher salaries or retirement pensions, meaning that schools would be responsible for deciding teachers’ salaries. The second changes were that

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funding for schools’ buildings and furniture would no longer be direct but would become reliant on inspectors’ reports. A third change was to place focus on the three R’s in education. This is curiously reminiscent of Gove’s recent drive to change the General Certificate of Secondary Education (GCSC) systems to mirror baccalaureate certificates and change testing in core subjects. Gove abandoned these final proposals in February 2013 after a range of incredulous responses from education providers and trade unions. However, the first two changes reflect some of the rationale given for the current coalition government’s legally binding policy on implanting the PPR system. Going back to the future we also note that The Cross Report was commissioned to reinvestigate English education in 1888 after Ms Forshaw’s suicide. Based on a range of interviews with school teachers and other research, this chapter reported that the PBR scheme had resulted in extreme demoralisation of teachers, cheating on score reporting, and in several cases to have resulted in school’s implementation of a fixed pay system and the failure to result in raised salaries while schools used funds received simply to purchase much needed teaching resources. So, on its own terms, the system failed. The effect on teachers themselves should not, of course, be underestimated. Aside from the tragedy of Ms Forshaw, it is also the case that the pressure felt by teachers led to a wave of collective responses in opposition, culminating in the foundation of the National Union of Elementary Teachers (later the National Union of Teachers (NUT)) in 1888. The pressure to open up contemporary education provision to market forces has taken place within a global dimension of global ‘edu-business’, fed by the policy frameworks of international financial institutions and the US model of ‘charter’ schools (Ball, 2012). The Conservative Governments of Thatcher and Major initiated a widespread attack on nationally agreed terms and conditions for teachers when it abolished national collective bargaining under the terms of the 1987 Teachers’ Pay and Conditions Act not major then. The agenda was to shift (albeit gradually) to consolidate a form of individual PRP for teachers, presaged by the establishment in 1991 of a Pay Review Body.2 Marketisation of schools, primarily in England, was encouraged through discourse and agendas of ‘parental choice’, and the ensuing introduction of league tables in which student performance was published school by school and LMS and per capita funding. In 1992 secondary school league tables were introduced based on GCSE results. These tables were unadjusted for post code intake. The election of a Labour Government in 1997 did not halt the process, and league tables were continued albeit revised in 2006 to present Contextual Value Added (CVA) scores, which took account of the intake of achievement of students moving from

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primary to secondary education, modified for deprivation indicators. (see Leckie & Goldstein, 2009). The 2010 Coalition government abandoned CVA in preference for a more straightforward measure of performance increase, with recognition of data for children in the school with special educational needs. Academy schools were introduced by the Blair government in 2000, allowing private and indirect commercial and philanthropic sponsorship of state schools. As Ball (2008) explain, within the rubric of modernisation the New Labour government also strengthened processes of performance management and financial accountability.

TEACHERS AND THE LABOUR PROCESS Elements of standardisation of work practice through curriculum delivery, as well as re-organisation of roles and the introduction of teaching assistants, have all acted to further intensify work through Taylorisation and division of labour. These changes have not taken place without resistance. Teachers’ pay disputes thread through both the Conservative and New Labour years of government, focused not just on pay and conditions, but also by concerns of workload and associated stress. The Coalition Government formed in 2010 has intensified the reform of teaching, with proposals to widen the market with free schools, standardise the curriculum and methods of teaching, and to link capability and pay to student grade assessments and new ‘standards’ of teacher behaviour. These latter proposals, alongside attacks on teacher pension arrangements, have sparked a new wave of disputes in 2013/2014 conducted by the NUT and the NASUWT.3 Carter and Stevenson (2012) have outlined debates concerning both the ‘proletarianisation’ of teachers as members of the ‘white collar’ working class and also the post-Braverman (1974) debate of productive versus unproductive labour in public sector work including teaching. The ‘proletarianisation’ thesis is connected with the increasing intensification of white collar and professional work, the application of a division of labour, and an associated de-skilling and de-professionalisation of the job. These processes, prevalent from the 1960s on, it is argued, acted to shift teachers from their social position as relatively autonomous middle class professionals to one in which they had become controlled and supervised white collar workers (e.g., Lawn & Grace, 1987, p. x). The shift was accompanied with a turn towards a more conventional trade union orientation of the main teaching unions, away from the previous dominant agendas of

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preserving professional identity. The associated debate on productive/ reproductive labour has focused on the contention that teachers, in so far as they do not directly produce surplus value or profit, cannot be considered to be productive workers. However, as Harvie (2006, p. 2) has highlighted teachers can indeed be considered to produce a commodity if we consider skills and educational attainment of the workforce to be an indirect input into labour power. In other words teachers’ labour must be considered productive in a wider sense, in that it contributes to value by enhancing societal labour power. Following the original contentions of Bowles and Gintis (1976) on socialisation in schools in terms of race and class (and gender), we may also observe that such socialisation within the state school system also acts to structure childrens’ attitudes towards acceptance of the discipline of the workplace, creating a consciousness of compliance within the capitalist workplace regime. The grading and sifting of pupils through exams and assessments also enables employers to make judgements when recruiting and selecting. Of course, such brutally deterministic views of the police-like nature of teachers’ work must be moderated by the highly contested nature of education within political economy. As Comeliau (2002, p. 45) has observed: … wherever market rationality acquires dominance, it transforms social relations in their entirety. Resting as it does upon private appropriation and competition, it entails individualist rivalry far more than mutual support as the basis for relations among the members of a society. It thus has a destructive impact on the social fabric itself.

Teachers may resist regimented forms of teaching and learning in state schools precisely because it restrains the creative potential of working class children and re-enforces/produces race, class and gender stereotypes and the consequent reproduction of inequality. The ability of teachers themselves to challenge the ‘norms’ of ‘education for capitalism’ therefore suggests to us that teaching work must be considered at both the material and political level. Only then we can fully understand the tensions within the system and the potential for alienative processes of control, monitoring and surveillance of teachers to create workplace dissent. We must probe further to understand how teachers’ concrete labour, which we identify as classroom teaching, assessing and marking pupils’ work, is converted into a commodified form that can be measured. Such measurement is needed to assess teacher ‘performance’ against the socially necessary labour time for all teachers both within the same school and in comparison with teachers in other schools. Marx did not provide a rigid definition of socially necessary labour time, intending it to be a guide to understanding the internal dynamics of the labour process rather than a

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formulaic certainty. His formulation was such that he linked the market for socially produced outputs to the necessity of equalising individual value (added), thus: …the different individual values must be equalized at one social value, the abovementioned market-value, and this implies competition among producers of the same kind of commodities and, likewise, the existence of a common market in which they offer their articles for sale (Marx (1966) in Capital volume III, p. 180).

It is here that Marx’s concept of abstract labour is important. Marx proposed that all labour has a dual character and exists simultaneously in both concrete and abstract form. Concrete or useful labour is the act of working itself to produce ‘things’, whereas abstract labour is the process whereby value is created through the equalisation of concrete acts of labour under the discipline of competition (Marx, 1975; Saad-Filho, 2002, pp. 26
29). Abstract labour is ‘non-self-determining labour in which all quality is reduced to quantity’ (Holloway, 2010a, p. 913). It can be considered in Marxist terms as alienated labour, whereby the process of exchange central to the abstract quantification of labour strips the product of work away from the worker. In doing so the product of an individual’s activity becomes simply a commodity divorced from the human aspect of work as a creative social act ‘devoid of concrete specificities, an activity that is to be quantified and measured against other activities in the exchange of commodities’ (ibid.). It is within this rubric of labour as both concrete and abstract and the conversion of concrete activity to abstract labour in commodified form as league table data, that we can a further assess the reconstitution (both ideological and real) of teaching through the processes of marketisation and commodification. This is not only apparent in successive government policy and diktak, but also in the rehearsed discourse of ‘parental choice’, ‘free’ schools and excessive testing of children themselves while at school. In particular we examine new processes of measuring teacher ‘performance’, monitoring and surveillance, and assessment of teacher behaviour both inside and outside the workplace as part of the imposition of new behaviour-based Teacher Standards.

THE MEASUREMENT OF EVERYTHING For commodification to occur the products of our labour have to be recognisable as a ‘thing’, and once recognisable then capable of being measured

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and recorded. As Marx and Engels described in the 1848 Communist Manifesto, The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It has pitilessly torn asunder the motley feudal ties that bound man to his ‘natural superiors’, and has left no other nexus between man and man than naked self-interest, than callous ‘cash payment’…. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms …. it has substituted naked, shameless, direct, brutal exploitation …. The bourgeoisie has stripped of its halo every occupation hitherto honoured and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage labourers.

For teaching work this may at first glance be problematic, given that the ‘thing’ produced by teachers is obscure in terms of physical output, but only realised in terms of indirect construction of societal labour power. Neither, for teachers nor other public service workers such as social workers or nurses, is it appropriate to measure as outputs, for example, the number of children taught per teacher, patients seen by individual nurses or clients served by a social worker, simply because this may say nothing of quality of education, healthcare or social outcome. The direct product of manual labour might be easily recognisable as a thing with potential exchange value in the marketplace. For service work, measurement is clearly more difficult, but it may be possible to construct measurements of less tangible mental labour or affective (emotional and aesthetic) labour simply be measuring the input by such labour into work itself by other means. The inputs of labour, observed against a set of criteria, may then be abstracted as a proxy measure for exchange value. Thus we can measure the labour or ‘customer service’ of a waiter or waitress by spot visits of ‘mystery diners’, or that of nurses by measuring ‘compassion’ through constructed techniques of real time observation. Hochschild (1983) classified such ‘emotional’ labour in two ways. First, emotions become commodities, and are bought and sold. Second, the measurement and recording of emotional labour takes place through rules and regulations in the workplace such as selection criteria, training, surveillance and then performance appraisal. Case study evidence confirms this rubric of emotional categorisation and measurement (see Sturdy & Fineman, 2001 for a review). Indeed, a range of subjective and personal criteria dominate employer recruitment in the knowledge and service industries and employability rhetoric in late capitalism. For waitresses at the high end of the restaurant market, for example, the training manual requirements are such that she should be ‘… concerned and dependable and maybe a little provocative. I am myself,

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the self I most want to be. I am committed to you and I will delight you. This is how we coproduce the product of my labor: your dining experience’ (Dowling, 2012, p. 111). Of course, such measurements are highly subjective, but this should not matter, as the subjectivity can be standardised, and through that a measurement can be constructed, however non-scientific that measurement might be. The construction of measurable indices of employee ‘value added’ has consequently become an industry in itself. There is a long history. In the 1860s, for example, Education Minister Robert Lowe saw teachers’ work as akin to piece-rate work (Jabber, 2013). Efforts to standardise times and tasks follow practices first established in the interwar years such as the application of the Bedaux system of measuring work and time, and Gilbreth’s time and motion study. Both systems deepened and extended F. W. Taylor’s system of ‘scientific management’ whereby an ultimate division of labour was constructed under full management control. The effects on the labour process were enormous, by intensifying work effort, de-skilling and establishing norms of output they acted to create standards of working by which capital could adjust to the socially necessary labour time in the production of manufactured goods. In the post-war period such forms of measurement rapidly expanded into service and clerical work, whereby even the simplest work tasks were time measured against banks of photographs for the task created under the Methods Times Measurement system established in the United States in 1948.4 The shift towards measuring standardised requirements in technical, administrative and professional work has been reinforced greatly in recent decades (as any HRM textbook will tell you) by the measurement of softer competencies such as ‘attitude’, ‘leadership’, ‘working with others’, ‘innovation’, etc. that are built into appraisal scheme ratings and increasingly linked to PRP and capability assessment. Not only has work intensified, but there has also occurred a corresponding increase in the intensity of individual ‘value added’ made respectable by the rhetoric of human ‘resource’ management and financial accounting method. Parallel to this trend has been increasing use of new technology linked to computer tracking software developments to monitor workplace performance, even to the extent of personal tracking (RFID) devices and social media scanning. One final aspect to complete our understanding is that concerning the measurement of ‘creative’ or intellectual labour. One strand of thought has suggested that intellectual and associated affective labour is a special form of abstract labour that exists over and beyond what might be classified as production labour. When examining the labour of teachers we might think

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that such distinctions could be important. For Hardt and Negri (2000) in Empire, ‘immaterial labour’ is labour which ‘creates immaterial products, such as knowledge, information, communication, a relationship or an emotional response’ (ibid., p. 108). Immaterial labour, they suggest, is also a social thing, it is outside the control of the capitalist and so has a ‘potential for a kind of spontaneous and elementary communism’ (ibid., p. 294). More importantly they claim that such immaterial labour has become the dominant form of labour, replacing ‘industrial’ labour in its ever-expanding wake. We might, however, question the very concept of ‘immateriality’ as a form of labour. Its theoretical base is one in which we are judged to live in a weightless world made possible by new technologies which compress and evaporate the constraints of time and distance. Knowledge, or intellectual labour, is thus presented as a form of labour unfettered by the constraints of the capitalist point of production. Yet, as Doogan (2009, p. 50) has suggested, the salient fact is that ‘the production and consumption of knowledge remains materialist even if its circulation is immaterial’. Holloway (2010b) from an open Marxist perspective in Crack Capitalism makes a similar separation of concrete and abstract labour (or material and immaterial labour) and argues that non-alienated ‘doing’, or concrete labour, must be contrasted with alienated or abstract labour that is judged in the market. Thus it would be possible, in Holloway’s vision, to transform society by ‘doing against’ abstract labour, perhaps by the construction of non-marketised co-operatives, etc. However, both formulations of abstract labour are problematic in that they arguably make a false and impossible separation between concrete and abstract labour. As Marx postulated we must see labour with dual character, expressed simultaneously as both concrete and abstract, with a tendency to formulate abstract labour through forms of standardisation and measurement. As Bolton (2000) and Thompson (2005, p. 85) have suggested forms of emotional or affective labour, which Hardt and Negri would judge as immaterial, rather than being liberated forms of labour are in fact highly contested in the workplace and cannot be separated from the yoke of the capitalist mode of production. In teaching it may be possible to make a distinction between the concrete way an individual teaches and the way that teaching is abstractly compared with other forms of labour. However, we cannot separate out the concrete act of teaching from the way it exists within the totality of workplace relations. In other words, it may be possible to imagine ways (vis Holloway) in which teaching is structured without testing and assessment and so forth, but in reality, within capitalism, the act of teaching is determined by the demands of the job, and cannot be

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separated from the alienated relations engendered by abstract labour formation. For teachers and the job of teaching this inability to separate the concrete from the abstract is central to our understanding of the potential for pressures of alienation to accumulate as abstract labour is forced further into units of measurement subject to head teacher or state control. Teachers may wish to liberate their childrens’ creativity, but are constantly placed in a position where they have to discipline and control. As Grant (2013, p. 133) describes: ‘Historically, schools have balanced training with social control, curiosity with fear, the encyclopaedia with the cane …’ The alienation felt by teachers thus becomes inextricably linked to their inability to express their own creative autonomy, weighed down as they are by the constant pressures to record, monitor and assess their students, and to be recorded, monitored and assessed themselves in their acts of labour. Indeed, workload stress appears inextricably linked to new recording of assessment linked to league tables which, in a YouGov survey for the NUT, was given as the reason by 71 per cent of respondents for feelings of increased stress. Similar results were recorded in a survey of classroom teachers conducted by Nottingham City branch of the NUT which found in a survey of 351 from 1,053 teachers (with a 40 per cent response of 139 completed surveys).5 The survey recorded 8 out of 10 teachers reporting anxiety over Ofsted inspections and 8 out of 10 also feeling that increased classroom monitoring was a major cause of stress. The survey was triggered by reports from branch representatives of increased numbers of stress related personal cases, a ‘dramatic’ increase in calls about stress to the Teacher’s Helpline, and reports from local mental health practitioners of increased service requirement from teachers.6 Having rehearsed some key aspects of the labour process debates as they apply to teaching, we now move on to catalogue and analyse contemporary developments within secondary schools in the United Kingdom. In doing so we record ways in which teaching work has been subject to evermore intensive methods of work intensification, monitoring, surveillance, measurement and standardisation. As stated in the introduction we focus especially on the search for abstract standards from which teachers’ work can be assessed within the rubric of socially necessary labour time.

TEACHERS UNDER GOVE The UK Coalition Government since 2010 has sought to increase the use of target setting and standard setting in schools in England beyond that

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already established by previous New Labour and Conservative governments. As we have already indicated, such intensified target setting and league table fetishisation is driven by policy discourse and ideology which seeks to encourage ‘choice’ in the sector and to intensify teacher workloads as a cost-saving exercise. We can identify four ways (monitoring, measurement, surveillance and discipline) by which changes to the working regime of teachers have acted not only to increase workload stress, but also to accentuate feelings of alienation by stripping away teachers’ autonomy both in and out of the classroom.7 The new regime is designed not only to enforce discipline within the schools through performance regimes (and hence fulfil requirements of socially necessary labour time), but also to develop a method by which performance can be judged against a generalised ‘rule of thumb’ set by Michael Gove in his role as the Coalition’s Education Secretary. The Education Secretary’s programme of change embraces not only the ‘free choice’ agenda (including the funding of ‘free schools’), but also efforts to refocus the school curriculum on ‘traditional subjects’, to revisit syllabuses such as History and English Literature, to train ‘Troops to Teachers’ (ostensibly to encourage classroom discipline), and to make it easier to dismiss teachers on capability assessment.

Monitoring Targets and scores are now openly published thus acting to commodify both the school and with it each individual teacher’s ‘output’ in terms of value added per pupil. In terms of target setting an information technology system (most commonly SIMS software) is used to monitor student performance throughout the school system. SIMS monitors student behaviour and attendance (linked to automatic text messages to parents and carers if a student is absent); creates a Schools Workforce Census of teachers’ professional qualifications and training; and records students marks and achievements throughout the school year (giving the teacher an ‘alert’ if not filled in on time). In such fashion information held on the teaching staff and their individual class students is universal. Most importantly SIMS acts to ‘colour code’ the achievement marks of the students set against expected grades based on past achievement primarily at Key Stage 2 of the education curriculum. These ‘expected’ grades are outside the control of the individual teacher as they are set at line manager level and measured for consistency across schools by external advisors. In this way students falling behind their ‘expected’ grades, or not demonstrating sufficient

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progression up the grades, are immediately identified, as are the teachers who are teaching the below expectation students. Should an individual teacher record too many codes of the ‘wrong’ colour this will be made apparent to the head teacher through monitoring of the system. This information is then fed through to the performance objectives and targets set in the appraisal system, and can be used as a disciplinary tool.

Measuring However, the appraisal objectives are not simply confined to student records constructed through SIMS or other similar systems. The Coalition Government have also sought to reconstruct the ‘standards of behaviour’ expected of teachers by introducing a revised version of the ‘Teachers Standards’. The new Government issued standards, effective from September 2012, will ‘assess qualified teachers against the standards of a level that is consistent with what should reasonably be expected of a teacher in the relevant role and at the relevant stage of their career’ (DE, 2012, p. 1). Head teachers are expected to refer to the standards when making their judgements and implement those judgements through the appraisal system. This is not a statutory requirement, but rather a practical arrangement utilised by teachers in constructing appraisal judgements. Pressure exists to follow such a practice simply because the schools inspection agency, Ofsted, under the Education (School Teachers’ Appraisal) (England) Regulations 2012, now has to consider the extent to which the Teachers’ Standards are being met when assessing the quality of teaching in schools (including Academies). The colour coded SIMS information forms part of the performance assessment alongside a range of 25 competencies, which include a section on personal and professional conduct. It is this latter clause which affects the private sphere of teachers’ lives beyond the boundaries of the school gate and which focuses on ‘not undermining fundamental British values, including democracy, the rule of law, individual liberty and mutual respect, and tolerance of those with different faiths and beliefs’. There is no further definition of ‘fundamental British values’ given but the inference is that any action outside the political mainstream might fall foul of an individual head teachers’ judgement. The measurement of standards and competencies is now further translated into pay. This follows the independent School Teachers Review Body (STRB) which published its 22nd Report on June 2013. The government had indicated interest in moving from the national framework for pay, to

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case-by-case salary schemes and market-facing pay. However, only in limited areas in the United Kingdom was there seen to be competition for salaries across the private and public sectors, so this is not seen to be a defensible move. The next point the government wanted comments on in this report was the idea of linking pay to performance. The system is seen as one that can reward teachers who add the most value to pupil performance and specifically who can demonstrate the following in annual appraisals and via an increased number of teaching observations:
Impact on pupil progress Impact on wider outcomes for pupils, Improvements in specific elements of practice such as behaviour management or lesson planning, Impact on effectiveness of teachers or other staff and Their wider contribution to the school. Furthermore, according to the Teachers’ Standards, teachers must ‘establish a safe and stimulating environment for pupils, rooted in mutual respect’. In order to promote good progress and outcomes by pupils, teachers will be ‘accountable’ for ‘pupils’ ‘attainment, progress and outcomes’ and will demonstrate a ‘correct use of standard English’. The accountability clause has the direct consequence of individualising teacher responsibility for student scores. These pressures have no basis in education research or social scientific rationale and could feasibly result in the types of failures resulting from the PBR system of the 1900s.

Pay Head Teachers are now solely responsible for determining teachers’ pay after annual appraisals are held from 2013 to 2014, giving increased responsibilities to and promoting increased expectations for integrity in Head Teachers’ roles. The Teachers’ Standards document states that ‘teachers must uphold public trust in the profession and maintain high standards of ethics and behaviour within and outside of the school by … not undermining fundamental British values, including democracy, the rule of law, individual liberty and mutual respect, and tolerance of those with different faiths and beliefs’. As we discuss below, this raises possibilities for surveillance outside of the classroom. The next expectation is stated, that teachers must uphold public trust by ‘ensuring that personal beliefs are not expressed in ways which exploit pupils’ vulnerability or might lead them to

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break the law’ (Teachers’ Standards, p. 10). Despite such invective the OECD report ‘Does performance-based pay improve teaching?’ published in May 2012 (OECD, 2012) indicates that there is little evidence that this employment relationship results in better student results in all cases. The report notes that while the system might promote public support for spending on schools, those who do not support it point out that ‘fair and accurate evaluations are difficult to achieve because performance cannot be determined objectively, cooperation among teachers is reduced or teaching becomes narrowly focused on the criteria being used’. While neither Lowe nor Gove has stated that these changes are designed to cut costs on spending in education, the report notes that governments who believe they cannot afford to pay teachers often have attempted these schemes and in these cases there have some improvements in pupil’s scores. After recent attempts to reverse what had been seen as grade inflation in the United Kingdom, it is not clear how PRP would immunise an already disrupted system. This often cited OECD report notes overall that there is ‘no relationship between average student performance in a country and the use of performance-based pay schemes’ (ibid.).

Surveillance The third part of the teachers’ new appraisal and performance regime lies with the number of observations conducted on each teacher while teaching. Up until 2012 the ‘norm’ was that a teacher might receive three observations per year, but new guidance in 2012 cleared the ground for the number of observations to increase to six, to be carried out by head teachers, deputy heads or heads of department. This increased observation target coincides with Government edicts to ‘standardise’ teaching and learning with the aid of web-based teaching aids and the pre-submission of teaching plans. Individual teachers subject to observation are graded after their observation, adding to the range of measurements feeding into performance appraisal. This process of observation has intensified work requirements, increased stress and severely restricted the autonomy of the individual teacher to design and deliver their own way of teaching.8 However, a regime of surveillance can also be constructed to spy on teachers while outside the school gates. In such fashion the whole of teachers’ lives can be subjected to the discipline of commodification. Most trenchantly, the issue of teachers engaging with social media such as Facebook and Twitter is now very much to the fore. Argyll and Bute Council in

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Scotland has already banned its employed teachers from blogging about work after an incident when one head of department in a school blogged about three boys with Aspbergers’ in her class.9 The case sits alongside other more high profile dismissals of bloggers or internet-based social networkers that have already occurred in the United Kingdom, with employees of Waterstone’s bookstore, Argos retailers, the Prison Service and Virgin Airways to name a few. Such ‘inappropriate’ use has usually involved alleged abusive remarks by employees directed at clients, customers or service users. However, for teachers and lecturers the problem of separating the public from the private is particularly severe. A US based Sociology professor, for example, perhaps naively, allowed ‘friends of friends’ to see her Facebook musings about students, leading to complaints from students. The professor was suspended, and, as her university policy document correctly if not sympathetically stated, social media sites ‘blur the lines between personal voice and institutional voice …. Privacy does not exist in the world of social media’.10 In similar vein, we were told by one of our interviewees in south west England that the school head ‘had issued an email stating that employed teachers should not mention the name of the school on Facebook, and should restrict privacy settings to “friends” only’. Such an invasion of the private sphere by the employer is justified by reverse logic, that in mentioning workplace issues the employee was entering the public sphere and running the risk of ‘bringing the school into disrepute’. Such an edict, of course, may clash with legal considerations associated with disclosure for public interest. What we observe, however, is a corporate rather than public service ethos, whereby concerns of commercial confidentiality have become the universal consideration.

Discipline The Chancellor, George Osborne, announced in his November 2012 Budget Statement that the existing national pay arrangements for teachers would be replaced by PRP schemes and the abandonment of incremental progression. Head teachers will have near enough total control over teacher’s pay as it is difficult to imagine what would categorically fall beyond the scope of this intensified scrutiny and its direct linkage to individual appraisal scores. To further increase management control in schools the Government has reviewed the disciplinary processes for teaching staffs. Discipline on basis of capability can now be issued as a first stage in the process, meaning the likelihood of dismissal for ‘failing’ in any of the three

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main measured areas is greatly increased. So while the union ‘work-to-rule’ and other internal sanctions (not attending meetings, not completing form filling, etc.) encapsulated in the 2013/2014 workload dispute is focussed on increasing stress and workload, we can see how alienating processes of atomisation and progressive removal of autonomy and control have fuelled anger within the teaching workforce as well. The new disciplinary regime, according to a survey conducted by the NUT, has highlighted an increase in the number of capability assessments and disciplinary dismissals currently taking place in state schools. Most notable, is a sharp increase in the number of women teachers aged over 50 who are being targeted for alleged lack of capability. The union claims that one reason for their targeting may simply be that often they have over 30 years teaching experience and are at the top end of the teacher pay scale, making them more ‘expensive’ as employees in a new era of decentralised cost and budget control.11 Having reviewed the evidence of change within the teaching labour process, we now move on to consider the implications of change, not only for the individual teachers but also for the political economy of education.

CONCLUSION: FROM PRINCIPLED ABANDONMENT TO RESISTANCE! Our model of enforced division of labour, ever deepening measurement of abstract standards and intensified disciplinary procedures would predict an increase in workload stress and alienation for the teaching workforce. Indeed, the 2013/2014 teachers’ dispute conducted jointly by the NUT and NASUWT has focussed not only on the issue of pensions (against proposals to extend the qualifying age from 60 to 65), but also on workload stress and on the increase in the number of recommended classroom-based teacher observations linked to the new appraisal regime. Aside from the problems of increasing workload the system of monitoring through SIMS and other similar types of software has had consequences for the organisation of work and the professional autonomy of teachers. The commodification of school pupils’ assessment results means that to move ‘upwards’ in the league tables an individual school must score more highly than ‘competitor’ schools on the proportion of its pupils attaining grades A
C in five GCSE subjects including English and Maths. This is simply because the Department for Education chooses to present its tables in such a fashion. For teachers, this means that there is an incentive to focus maximum

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attention on those children on borderline D/C grades at the possible expense of other children, both at the higher and lower ends of expected achievement. One secondary education teacher told us what this meant in practice: As a department we have a meeting round a big table with all the childrens’ photographs in one year scattered over the table. We then arrange the photographs and construct a group out of those children who are borderline D/C. We record their names and put them down for extra revision classes on Saturday mornings and so on. The rest are subject to a process of ‘principled abandonment’ and not offered the same facilities or officially expected to receive the same attention from us.

The deficiencies of such a process are not just recognised by concerned teachers or their trade unions. The Confederation of British Industry, have also criticised the league tables by calling for ‘A shift away from exam league tables to new Ofsted reports which assess academic rigour and the broader behaviours and attitudes that young people need to get on in life’. The CBI call for such an approach because they consider that ‘much of the 35 years of education reform has focused on narrow measures of performance, such as exams and league tables, which has allowed too many young people to fall behind’ (CBI, 2012). What is clear, whether the critique emanates from the teachers’ unions or the CBI, is that the rush to performance measurement and standardisation has by-passed concerns for the educational well-being of children, many of whom are left behind and subject to the whim of ‘principled abandonment’. The third factor which has exacerbated feelings of discontent and added fuel to the industrial dispute has been the forcible approach of the Coalition government towards introducing individual PRP at the expense of nationally agreed incremental scale progression. The system of incremental grades based on service is now replaced with a system of minimum and maximum spot rates that schools can pay their staff. Ostensibly the rate given to each teacher is dependent on their performance score, but as expected teachers’ unions are fearful of the power head teachers have to make decisions based on other factors such as personal likes and dislikes, as well as the school’s financial position. Irrespective of whether or not ‘performance’ is directly linked to pay the implementation of individual pay rates will run counter to the ethos of creative autonomy capable of being expressed by good teachers through team work, and teaching styles that are ‘outside’ the prescribed box. In summary, we have suggested that the onward push towards the marketisation of education would have a deleterious effect not only on

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teachers’ pay and conditions but also their creative autonomy and ability to exercise professional judgement. Marketisation has led to more entrenched division of labour and has been accompanied with intensified and extensified measurement of teachers both in terms of their personal ‘performance’ and that of their pupils. The measurement is directly related to the commodification of individual schools within the ‘market’, and driven by the dynamic of calculating abstract labour such that value is created through the equalisation of concrete acts of labour under the discipline of competition. We have also argued that the concrete labour of the act of teaching cannot be separated from the way that abstract labour is compared to other forms of labour for the purposes of judgement against socially necessary labour time. In this we reject notions that teachers’ intellectual labour is either somehow ‘immaterial’ or divorced from the production of societal surplus value. Teachers are also torn between creative autonomy, and the need to impose discipline and control as part of the job of teaching within capitalism. The measurement of abstract labour, in this context, is thus highly alienating, leading not only to increased feelings of stress and loss of control, but also potentially to the development of collective resistance. Such a pattern was observed with the formation of one of the main teaching unions at the end of the nineteenth century, and can be observed today with the renewed willingness of teachers to take industrial action to defend themselves and their livelihoods.

NOTES 1. The authors are currently engaged in a deeper research project including larger surveys and more widespread interviews with teachers in England. 2. We later refer to the failure of earlier attempts to introduce PRP in the midnineteenth century. 3. Formerly the National Association of Schoolmasters/Union of Women Teachers. 4. For a contemporary version see the handbook of MOST Work Measurement Systems (http://www.amazon.com/MOST-Work-Measurement-Systems-Edition/dp/ 0824709535). 5. See http://www.teachers.org.uk/files/active/0/11-2-07-H%26S-ATT1.pdf (Accessed on 17 November 2013). 6. See, for example, a teacher’s testimony in http://teachingbattleground.word press.com/2013/12/17/the-darkest-term-teacher-stress-and-depression/ (Accessed on 30 December 2013). 7. Mather and Seifert (2013) have recently written on similar processes within Further Education colleges.

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8. Similar processes have been observed in the field of social work (see Ferguson & Lavalette, 2004). 9. ‘Teachers banned from Twitter after indiscreet tweet’, Guardian, 10 June 2009. 10. See http://usatoday30.usatoday.com/news/education/2010-03-02-facebookprofessors_N.htm (Accessed on 10 October 2012). 11. See http://www.teachers.org.uk/node/19732 (Accessed on 15 November 2013).

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171. Bowles, S., & Gintis, H. (1976). Schooling in capitalist America: Educational reform and the contradictions of economic life. New York, NY: Basic Books. Braverman, H. (1974). Labor and monopoly capital, the degradation of work in the twentieth century. New York, NY: Monthly Review Press. Carter, B., & Stevenson, H. (2012). Teachers, workforce remodelling and the challenge to labour process analysis. Work, Employment and Society, 26(3), 481
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Jabber, H. (2013). The case of payment by results: Re-examining the effects of an incentive programme in nineteenth century English schools. Journal of Educational Administration and History, 45(3), 220
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111. OECD. (2012). Does performance-based pay improve teaching? PISA in Focus. Retrieved from http://www.oecd.org/pisa/pisaproducts/pisainfocus/50328990.pdf. Accessed on May 5. Saad-Filho, A. (2002). The value of Marx. London: Routledge. Sturdy, A., & Fineman, S. (2001). Struggles for the control of affect
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STRANGER THAN FICTION: FICTITIOUS CAPITAL AND CREDIT BUBBLES IN POST-EMU GREECE Jesse Hembruff ABSTRACT Austerity in Greece has produced the ostensibly counterproductive effect of throwing the country into a deeper depression and rendering it more difficult to repay its debts. I address this apparent paradox by examining both the integration of Greece into the European Monetary Union and post-crisis austerity measures with a particular focus on the Greek credit system. I do so by employing a historical materialist framework focusing on Marx’s concept of ‘fictitious capital’, capital not backed by a commodity transaction, but by a claim on future value. I argue that, while the crisis is overdetermined, one hitherto unexplored dimension is the rapid expansion of the Greek credit system in the 1990s and 2000s. More specifically, Greek banks expanded to neighbouring countries, and borrowing by households and firmed spiked dramatically after Greece adopted the Euro, but a number of domestic political-economic factors acted as drags to this process. In this context, I argue that the crisis has served as an opportunity to impose a radically accelerated restructuring of the Greek economy in line with the ideal neoliberal utopia. This can be

Sraffa and Althusser Reconsidered; Neoliberalism Advancing in South Africa, England, and Greece Research in Political Economy, Volume 29, 155
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understood as one of the three responses to a crisis of fictitious capital: internal devaluation, asset devaluation or upward. However, the success of this project is far from guaranteed, so far the austerity project pursued by the troika has failed to replace the old Greek balance of social forces that have dominated the post-junta political economy of Greece. Keywords: Greece; credit; banking; sovereign debt; European Monetary Union; financial crises

INTRODUCTION From October 2009 onwards, the Greek economy has been in a nearconstant state of crisis. In May 2013, Greece entered its sixth recession and remained reliant on external loans from the ‘troika’ of the International Monetary Fund (IMF), the European Commission (EC) and the European Central Bank (ECB) to service its public debt. Measures aimed at reducing this debt, imposed by the troika as a condition for extending loans to Greece, have not produced the predicted ‘expansionary austerity’, but instead have produced the ostensibly counterproductive effect of throwing crisis-hit countries into deep depressions and rendering it more difficult to repay their debts. I address this apparent paradox by examining both the integration of Greece into the European Monetary Union (EMU) and post-crisis austerity measures with a particular focus on the Greek credit system. I do so by employing a historical materialist framework focusing on Marx’s concept of ‘fictitious capital’, capital not backed by a commodity transaction, but by a claim on future value. I argue that, while the crisis is overdetermined, one hitherto unexplored dimension is the rapid expansion of the Greek credit system in the 1990s and 2000s. More specifically, Greek banks expanded to neighbouring countries, and borrowing by households and firmed spiked dramatically after Greece adopted the Euro, but a number of domestic political-economic factors acted as drags to this process. These include: (1) Greece’s dependent development associated with its outwardoriented bourgeoisie; (2) the dependence on foreign funds from financial capital, emigrants, tourism and EU transfers; and (3) the highly fragmented nature of Greece’s welfare and taxation systems, which have created one highly protected strata and one highly unprotected one.

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In this context, I argue that the crisis has served as an opportunity to impose a radically accelerated restructuring of the Greek economy in line with the ideal neoliberal utopia. This can be understood as one of the three responses to a crisis of fictitious capital: internal devaluation (i.e., austerity) aimed at restoring balanced accumulation, asset devaluation or upward socialization (e.g., through the issue of Eurobonds or more aggressive ECB intervention). However, the success of this project is far from guaranteed, so far the austerity project pursued by the troika has failed to replace the old Greek class compromise, and has not yet successfully undermined either the strong public sector unions or the entrenched political, economic and media elites which have dominated the Greek political economy. The rest of the chapter is organized as follows. I begin by constructing a historical materialist theoretical framework based on Marx’s concept of fictitious capital. I then review several of the causal strains that have led to the (overdetermined) Greek debt crisis. These primarily include the institutionalized asymmetries within the EMU between the exporting North and the importing South, creating permanent balance-of-payment problems, as well as the dysfunctional Greek political-economic system which emerged from the military junta, arguing that neither of these explanations can capture the whole story. I then apply my theoretical framework to pre-crisis Greece, focusing primarily on the role of the Greek credit system after the adoption of the Euro. Finally, I place the austerity project undertaken in Greece within the context of this framework, and conclude with a discussion of the possibilities for resistance and change in the future.

THEORETICAL FRAMEWORK As Marx (and much later, Keynes) argued, the credit system is necessary for the reproduction and expansion of capitalism as it can help to overcome the ‘natural’ limits of capitalism which are imposed by the limited consumption of households. The value in a commodity can only be realized when that commodity is purchased with wages, but because of the tendency to push down wage costs to increase profits and the tendency (associated with technological growth) to replace workers with machines over time creates more products, but without the corresponding wage base to purchase them, and thus realize their value. Credit helps to circumvent this limit by allowing industrial capitalists to produce more goods as well as allowing workers to consume more goods, thereby valorizing capital. In other

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words, credit speeds up problems of overaccumulation, but also helps to displace them forward in time (Harvey, 2003; Marx, 1991, pp. 613
614). This limit imposed by the declining wage base helps to explain why credit always returns, expands and increases in complexity after each crisis. Finally, because of the credit system, idle money located anywhere becomes potential interest-bearing capital. For instance, the savings account of a household, the excess cash of an industrial capitalist who cannot expand production, or a merchant with excess cash after selling goods can all be put into the credit system to earn interest (Marx, 1991, p. 638). As the credit system increases in size and complexity, it becomes easier to use excess money as interest-bearing capital. For instance, risk-weighting and the proliferation of derivatives products allow any idle money to be converted into interest-bearing capital which suits nearly any need. This leads us to the concept of fictitious capital, which is defined as capital backed not by any commodity transaction, but which represents a claim on future value (Harvey, 2006, pp. 266
267). This concept is related to the concept of net present value in modern accounting, as fictitious capital implies that any regular periodic income can be thought of as the interest on a sum lent out at the going rate of interest (Marx, 1991, p. 597). For instance, a $100 regular payment (say of wages) with a prevailing interest rate of 5% can be capitalized as $2,000, which represents the exchangevalue of possessing this $100 regular payment. In the case of sovereign debt, which is fictitious capital backed by the state’s ability to tax future production, a $2,000 loan to the state provides the lender with a legal title to $100 annual interest payment. However, turning idle money into interest-bearing capital produces only the superficial circuit M
M’, rather than the valorization produced by capital invested in production, M
C
M’. Yet the independent fluctuation in fictitious capital, independent of the underlying value, strengthens the illusion that these claims constitute real capital, rather than ownership titles (Marx, 1991, p. 598). By its very nature, fictitious capital must always be created ahead of real production, as it simply represents a claim on future value, and is thus prima facie free from the limit imposed by consumption. In times of overaccumulation, where a glut of commodities exists unsold, credit can displace this crisis and lubricate accumulation. However, fictitious capital is fundamentally linked to the nature of money as both a medium of circulation and measure of values. As Harvey (2006) notes, this creates a tension between the need to sustain accumulation through credit creation and the need to preserve the quality of money. If the former is inhibited, we end up with an overaccumulation of

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commodities and specific devaluation. If the quality of money is allowed to go to the dogs, we have generalized devaluation through chronic inflation. Thus are the dilemmas of modern times neatly presented. (p. 280)

During expansionary phases, this tension is unproblematic. The fictitious capital represented by legal titles circulates easily, and can often be used in place of money as a medium of circulation to a degree depending on the liquidity of the title. Similarly, fictitious capital can be easily created and sold, as expectations regarding the future state of the economy are positive. The demand for money-capital to speed up both production and consumption ‘calls forth its own supply since faith in the system is sufficiently strong to allow even debt claims to circulate as a form of money capital’ (Harvey, 2006, p. 303). Yet while fictitious capital can be created out of thin air, it is worth ultimately rests on the monetary base defined by commodity production. When the creation of fictitious capital gets too far ahead of the monetary base, even a small shock to credit markets can trigger a crisis of confidence in various fictitious capitals
and often the credit system itself. The interlinked nature of fictitious capital means that when the value of one set of assets is thrown into doubt, there are knock-on effects to the balance sheets of lenders, which may themselves then have the value of their own fictitious capital thrown into doubt, and so on. A crisis of fictitious capital can be resolved (or more accurately, displaced into the future) through some combination of three means: upward socialization, asset devaluation and internal devaluation. By upward socialization I refer to the ability of states and their central banks to purchase assets and so realize fictitious values at their going (or inflated price). Ideally, this ends the ‘credit crunch’ and allows accumulation (as well as the creation of fictitious capital) to restart anew. Two problems are immediately obvious. First, the central bank now holds fictitious commodities whose actual value is in doubt; these commodities must either be held with the hope to sell later and realize a positive return, or the central bank can acknowledge a loss on the bad asset, a move which has the potential to trigger a new crisis of confidence in the state’s capacity to borrow. Second, with the central bank printing money to realize fictitious values, there is a risk (much like with the creation of fictitious value itself) of money overcreation. This of course can result in generalized inflation or localized asset bubbles, both of which have the potential to cause new crises of fictitious capital or threaten the creditworthiness of the state. Asset devaluation, on the other hand, refers to processes such as debt restructuring, exemplified by the Greek Private Section Initiative

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(or PSI, discussed in more depth later). Here, a quantity of fictitious capital is subject to a carefully managed devaluation, rather than sticking to the pretence that the fictitious values will be realized in full. This of course can have particularly devastating consequences if not managed correctly; a deal such as the Greek PSI wiped out a great deal of (supposedly risk-free) capital in the Greek banking system and necessitated a larger recapitalization of the sector. This vicious cycle between sovereigns propping up their banking system, which in turn threatened the ratings of their sovereign bonds, which domestic banks hold and so need further propping up, and so forth, has been a major concern in the European sovereign debt crisis. Finally, internal devaluation, popularly now called austerity measures, refers broadly to a set of policies aimed at devaluing commodities, especially labour-power. The overall goal of these measures is to rationalize and restructure production and subject all aspects of social life to more stringent capitalist discipline and, in doing so, hope to restore confidence in fictitious capital (Harvey, 2006, p. 326). This devaluation is undertaken with the hope to drive down wage and commodity prices in order to enhance so-called ‘competitiveness’ vis-a`-vis the rest of the world and, when taken with the rationalization and restructuring of a state’s political economy hopes to create ‘a “controlled recession” that will have the long-run effect of putting accumulation back on track’ (Harvey, 2006, p. 328). To theorize how the relative mix of these three choices is determined, we can turn to Jessop’s (2008) Strategic-Relational Approach, as the capitalist state is generally the central actor in determining this mix, and supranational institutions such as the IMF and ECB can be theorized with the same framework. Jessop offers a powerful theory of the state, which considers the state not as a reified subject, but as an institutional apparatus comprising various power capabilities and which is responsible for reproducing the (capitalist) social structure, of which it is merely a part. State action, then, is not predetermining, but is strategically selected on the basis of these various power capabilities and interests. In other words, the capitalist system introduces certain pressures on agents, but the outcome is never predetermined, instead being strategically selected based on this configuration of forces. In the case of Greece, then, we can understand the fragmented tax system on the basis of the political power of the professional classes, which have largely been able to escape taxation. Similarly, Greece’s compliance with austerity demands in the face of widespread social unrest can be understood as resulting from the historically

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outward-oriented bourgeoisie. This approach helps conceptualize how costs of devaluation are distributed, both within Greece and within the EMU. When fictitious capital takes the form of sovereign debt, this choice is also influenced to a large degree by the primary contradiction at work in the operation of sovereign bond markets (Hembruff, 2013). Put simply, this is the need for creditors to pursue two contradictory goals: (1) keeping indebted sovereigns within the lending game by ensuring that the imposed austerity and privatization policies are not so severe that they cause a default or social collapse in the indebted state and (2) facilitating expanded accumulation in the debtor state with privatizations, bureaucratic reforms, spending cutbacks and capital-friendly policies. Soederberg (2005) has termed this the ‘golden noose’ of neoliberalism, as the noose must be loose enough to prevent a debtor delinking from the global lending game, while tight enough to ensure debtor governments follow through on privatizations and austerity measures. Debtors are pressured both by conditions attached to loans and by the hegemonic development orthodoxy which posits that development should be financed by debt (so that an enticing climate for capital can be created with low taxes and few barriers to investment), with the debt being repaid when the state has fully ‘developed’. Political elites in debtor states, then, also have a vested interest in staying within the golden noose, given that economic and social stability is dependent on the continual refinancing of maturing loans. This highlights an important power imbalance between lenders and debtors that is often obscured in dominant interpretations of sovereign debt; debtor states need to follow the prevailing development orthodoxy (generally prescribed by the IMF and World Bank) because to deviate is to risk losing access to new loans, leading to default. This then gives creditors, and the political elites to which they are allied, control over space and time in the developing state, since they have the power to set up repayment schedules, dates and sizes of emergency funding, privatization schedules and so on.

DOMINANT INTERPRETATIONS OF GREECE’S SOVEREIGN DEBT CRISIS The first of the approaches to the European sovereign debt crises has been to blame the indebted state for its own woes. In this narrative, Greece has long been plagued by a dysfunctional, patrimonial political system,

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out-of-control spending and a weak social safety net (Mitsopoulos & Pelagidis, 2011). Greece promised European leaders it would fix these problems if it were allowed into the European Union, and was granted transitional loans that would allow it to undertake the macroeconomic reforms necessary reduce patrimonial corruption, reform the state administrative capacity and improve tax collection. Private investors flooded the country with money, believing that reforms would be carried out and that the European Union as a whole would take responsibility for any potential problems. German economist Hans-Werner Sinn, as quoted by Young and Semmler (2011), has claimed that these capital outflows to peripheral states such as Greece ‘deprived Germany of necessary investments and led to the lowest growth rates-second only to Italy-between 1995 and 2005’ (p. 4). Peripheral countries such as Greece experienced a demand-driven boom, with a current account deficit financed by cheap core-provided credit. As the story goes, Greece abused the ‘privilege’ of EMU membership and deserves to be punished for its profligacy in order to be put back on track. The reverse of the above argument blames Germany for its artificially competitive labour productivity and pathological obsession with maintaining a current account surplus at the expense of the Eurozone periphery. According to this narrative, Germany (and to a lesser extent, other ‘core’ states such as France) has been the main beneficiary of the EMU at the expense of the Eurozone periphery. Germany took a lead role in designing the institutional structure of the EMU, aiming for the ‘sound money’ and ‘sound finance’ principles exemplified by the German Bundesbank. ‘The problems of imbalances had been disguised, in part by the design of the EMU and in part by the elimination of the risk of exchange-rate shocks with currency union … As long as debtor states complied … imbalances were assumed not to be a problem’ (Dyson, 2010, p. 604). According to this perspective, the root of the problem lies within divergent labour competitiveness, compounded by differences in the real rate of inflation. Germany achieved its export boom (and associated current account surpluses) through a policy of wage moderation. These reforms focused largely on reducing nonwage labour costs and increasing flexibility in labour markets in order to achieve fiscal consolidation (Young & Semmler, 2011, p. 10). Because the member states of the EMU share the same monetary policy
one aimed at inflation targeting and price stability, with Maastricht criteria limiting the freedom of fiscal policy
pressure is forced onto labour markets as a lever for increasing competitiveness (Lapavitsas et al., 2010). Germany maintained structural current account

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surpluses through labour cost repression and technological excellence, while in the periphery of the EMU the scope for relative gains via labour repression was much smaller. Germany, then, induced peripheral states such as Greece to join the EMU as quickly as possible in order to recycle these surpluses profitably in the booming periphery. While both of these perspectives highlight important aspects of the Greek sovereign debt crisis, particularly structural Balance-of-Payments problems between the North and South and a dysfunctional Greek bureaucracy, they fail to capture the whole story. Most notably, both of these theories predict a long-term secular increase in Greece’s debt-to-GDP ratio after joining the EMU, whether from cheap borrowing costs (which converged to German levels, see Blythe, 2013, p. 80), structural balance-ofpayments imbalances, and/or a dysfunctional government’s profligate spending. However, Greece’s debt-to-GDP remains nearly constant from 1993 to 2007 at around 100% (see Fig. 1). This flatness, despite debt servicing costs, chronic balance-of-payments deficits, and public infrastructure investments related to the 2004 Athens games would actually seem to imply that Greece actually consolidated its fiscal position during this period, although not to the degree that would actually drive down the debt-toGDP ratio to Maastricht levels. True, Greece’s debt-to-GDP ratio is still much higher than the prescribed Stability and Growth Pact limit of 60%, but Greece’s fiscal position pre-crisis was nowhere near as dire as most of the mainstream theories predict.

180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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Fig. 1.

Debt/GDP in Greece (%). Source: IMF Public Debt Database.

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THE POLITICAL ECONOMY OF GREECE As noted above, both these dominant theories fail to capture the whole story with respect to the Greek sovereign debt crisis. In particular, they obscure the story of the Greek domestic financial system, precisely the area to which the study of fictitious capital draws our eye towards. In this section and section ‘Fictitious Capital and the Credit System in Pre-Crisis Greece’, I apply the theoretical framework developed in section two to the incomplete and patchy expansion of the domestic credit system that took place between Greece joining the EMU in 2001, and the onset of the crisis in 2008. More specifically, while Greek banks expanded to neighbouring countries, and borrowing by households and firmed spiked dramatically after Greece adopted the Euro, a number of domestic political-economic factors acted as drags to this process. These include: (1) Greece’s dependent development associated with its outward-oriented bourgeoisie; (2) the dependence on foreign funds from financial capital, emigrants, tourism and EU transfers; and (3) the highly fragmented nature of Greece’s welfare and taxation systems, which have created one highly protected strata and one highly unprotected one. Greece has always remained a middle-of-the-road country in terms of its development, and these factors have acted as drags on the expansion of credit markets during the 2000s. The bulk of manufacturing is also concentrated in low-to-medium technology sectors, focusing largely on processing agricultural products and textiles. This pattern has persisted even today, with FDI in manufacturing accounting for only 33% of total stock, 2/3 of which was in sectors producing consumer goods, with only 0.8% devoted to the manufacture of capital goods (Monastiriotis & Jordaan, 2011). Furthermore, much of Greece’s agricultural sector is dependent on the EU’s Common Agricultural Policy (CAP), which largely provides market price support and has only recently begun focusing on rural development policies (farm income support makes up 75% of CAP spending in Greece, mostly direct payments to vine growers and subsidies for olive oil
see Psaltopoulos, Balamou, & Thomson, 2006). Initially, Greece possessed a comparative advantage in agriculture and manufacturing due to its low labour costs, however now Greece is still less productive than technologyintensive producers in core EMU states, but has higher labour costs than developing states such as China. This has been compounded by the removal of tariff barriers, which devastated traditional manufacturing sectors (primarily food & drinks, tobacco and textiles). Since 2004, there has been a steady drop in most manufacturing exports, with only food and beverages

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remaining constant, and only tobacco and plastics growing (Athanasoglou, Backinezos, & Georgiou, 2010). Import penetration from the EEC quadrupled during the 1980s, and during the 1990s capital from the core of the EEC began to take over the few remaining viable firms. Despite the devastation of its fleet during World War Two, shipping has long been an integral component of Greek capitalism. Greece has been the international leader in shipping since the 1970s and in 2011, Greek owners controlled a record 16.2% of the world’s deadweight tonnage (UNCTAD, 2011, p. 41). Many of these owners however, live in the United States or the United Kingdom, these ships are registered under flags of convenience such as those of Cyprus or Liberia. During the early post-war period, it was hoped that shipping capital would be reinvested in Greece itself, driving the development of manufacturing within the country. However, ship-owners did not show any interest in undertaking the country’s industrialization. Shipping capital was either siphoned out of the country, or invested in stock markets or the tourism sector (Serafetinidis, Serafetinidis, Lambrinides, & Demathas, 1981). Despite this, the state has continued to take a highly permissive approach (particularly with respect to taxation and legal requirements) to shipping capital in order to keep Greek shipping from moving elsewhere, and in the hopes that it can drive development. Ship-owners pay a tonnage tax, but are exempt from income taxes, and there are no restrictions on the reexporting of funds made through by ship-owners. Since the accession to the EMU, the movement of shipping capital outside of the country has been made much easier with the liberalization of the financial sector and the removal of capital barriers (Featherstone, 2008; Fotopoulos, 1992; Serafetinidis et al., 1981; UNCTAD, 2011). The Greek shipping sector is highly dependent on foreign funding through the international financial market for its operation. Currently, loans booked in Greece and worldwide amounted to just over $66 billion USD in 2011, 96.5% of which originate from banks within the Eurozone (Petropoulos, 2012, p. 3). While Greek banks have been historically important in ship finance, enjoying a symbiotic relationship with ship
capital, the sector has rapidly been penetrated by foreign capital, owing to the liberalization of financial markets; 2011 marked the first year in which no Greek bank was among one of the top five lenders to the Greek shipping industry. Far and away the biggest lender is RBS with Commerzbank
Deutsche Schiffsbank, and Credit Suisse also key players (Petropoulos, 2012, p. 4). Indeed, it is not simply from lenders that Greece has been reliant on an inflow of foreign funding. Following World War Two, Greece encouraged

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emigration, and many Greeks abroad still send funds back home, which are an important source of funds for Greek families. Emigration was encouraged in the immediate post-war period both to create a stable source of foreign funds via remittances, and to defuse the massive unemployment problem, which threatened the survival of post-war Greece. Remittances peaked in the 1970s, when they covered over one quarter of the balance-ofpayments deficit, but have steady declined since (Fotopoulos, 1992). The tight monetarist policies pursued by the advanced economies following the stagflation of the 1970s, however, meant that opportunities were much more limited in these countries, drastically reducing the usefulness of emigration. The EU is also an important source of funds for the Greek economy; as mentioned earlier, price supports from the CAP make up most of the income for Greek farmers. Other transfers include cohesion policy funds for infrastructure development and administrative reform. Greece is reliant on foreign funds via (mostly European) tourists, which has steadily increased in importance since the 1970s, and replaced the declining share of remittances. The tourist sector is also highly spatially concentrated, with tourism (and related services) largely concentrated around Athens and the Greek islands. In terms of welfare provision and the tax system, Greece also exhibits a clear core and periphery, or perhaps more correctly, one highly protected strata, and one unprotected one. Taxation in Greece is largely based on indirect taxation, which constitutes 2/3 of tax receipts, and in particular consumption taxes. Direct taxes, such as income taxes, are paid only by waged and salaried workers, whom constitute a much smaller portion of the population than most European states given the small size and familialnature of most firms as well as the large black market economy. Most business activity is exempt from anything more than symbolic taxation, including banks, commercial firms and professions such as lawyers, engineers and doctors, and various forms of legal tax evasion are used to conceal income revealed through consumption of expensive luxuries. In effect, legal tax evasion is the norm, as no party has been willing to go up against these powerful groups. This has added up to a regressive tax system with no redistributive effect, and meant the inability of Greece to cover government spending with taxation (Featherstone, 2008). Similarly, the welfare system in Greece is highly fragmented and weak, and in effect, almost nonexistent. ‘Welfare’ in the broadest sense of the term is generally provided directly by the Greek state in the form of protected, public sector jobs and high pensions. The state then relies on the informal links (such as family and community ties) to distribute these funds to those in need, as the state lacks the capacity to carry out direct welfare

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policies (Leontidou, 1993). Like the emigration policy noted earlier, this has been undertaken to control the unemployment problem in Greece and reduce social unrest. This has been done through the provision of public sector jobs with generous pensions and high job security. The state began to expand under the conservative New Democracy (ND) party immediately after the collapse of the junta. ND nationalized Greek companies which were under stress due to the international economic crises in the late 1970s. When the socialist PASOK party took power in 1980, it did not expand the nationalization programme, but focused on developing the welfare state through public funding of healthcare, education and pensions. However, Greece is somewhat of an anomaly compared to most advanced industrial countries, in that money spend on families is low, while the cost to the state of pensions is high (Stathakis, 2010). The construction of the welfare state helped to bring in the disenfranchised left (which had been persecuted heavily both before and during the junta) and accounts for the large rise in public debt over this period. For those not lucky enough to work in the public sector, there is an extremely thin and patchy institutional apparatus for unemployment relief. The family has taken up many tasks of the public sector and the welfare state, including the support of unemployed members and their placement into jobs. The mobilization of the extended family network often creates an intricate, self-help network of unemployment relief based on personal acquaintances. They place the unemployed in jobs without contacting formal agencies, which leads to a chronic underestimation of unemployment. Income-sharing in many communities is customary. Younger and older women within the family take up roles such as child-rearer, nurse for the sick and the old, teacher, etc., alongside their domestic tasks. (Leontidou, 1993, p. 63)

The large influx of foreign funding has created a type of rentier capitalism, and a highly sophisticated and demanding consumer society, without the productive base to match. This foreign-oriented, comprador bourgeoisie directed capital towards activities such as banking, commerce and shipping. A large agrarian and service sector, alongside a limited manufacturing base and an economy structured on small and medium-sized enterprises that were predominantly family-owned, shaped the economy.

FICTITIOUS CAPITAL AND THE CREDIT SYSTEM IN PRE-CRISIS GREECE Greece’s insertion into the integrated market created by the EMU was driven by consumption and credit, both of which had been relatively muted in

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the pre-EMU years. Prior to the mid-1980s, the Greek banking system was characterized by a high degree of state interference. These controls were gradually relaxed, with capital controls removed during the late 1980s and early 1990s in preparation for the EMU ascension process (Hondroyiannis, Lolos, & Papapetrou, 1999). By the time the country joined the EMU in 2001, its banking system was fully liberalized in line with the other Eurozone members. The 1990s and early 2000 also saw a wave of mergers and acquisitions, and by 2006, the six largest banks controlled more than 80% of the market and were witnessing nearly double-digit annual profit growth (Alexiou & Sofoklis, 2009, p. 98). As late as 2006, Eurobank predicted that ‘the Greek banking system has significant growth potential’ due to the seemingly limitless demand for credit (Eurobank Research, 2006, p. 4). The strong performance of the banking and financial sector can be seen in Fig. 2. Between 2001 and 2007, bank stocks doubled, while stock prices of financial services corporations tripled. In many ways, the period from Greece’s entry to the EMU to the global financial crisis was the country’s first experience with a domestic credit bubble based on the creation of vast amounts of fictitious capital, which is shown in Figs. 3 and 4. As Fig. 3 shows, outstanding loans to households grew nearly 600%, from approximately h17 billion in September 2001 to h119 billion in October 2009. Over the same period, outstanding loans to corporations increased a more muted, but still strong, 207%, from approximately h43 to

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Household Savings. Source: Bank of Greece.

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Billion USD

h133 billion. Similarly, as Fig. 4 shows, new credit issuance to consumers per month increased 180%, from approximately h10 billion in September 2002 to a peak of h28 billion in October 2007. However, as Fig. 5 shows, household savings over this period only increased by 1/3, from h60 billion, to a relatively stable pre-crisis level of h80 billion. These figures point to a working class that was becoming rapidly integrated into, and dependent upon, the financial system to meet consumption demands and facilitate social reproduction. The fact that most new consumer loans took the form of either overdraft credit or credit cards (Fig. 4) implies that this excess credit was being spent on current consumption in an attempt to ‘catch-up’ to the living standards of the Eurozone core. At the same time consumer credit was exploding, there was an increasing amount of foreign penetration into the Greek banking sector (particularly among French and Germany banks, see Fig. 6), even as financing for the Greek public debt continued to be provided largely by domestic banks (see Fig. 7). At the same time, Greek banks were engaging in rapid expansion into southeastern Europe by opening branches and purchasing local financial institutions. Much like Greece in the early 2000, southeastern Europe was seen as an untapped market, due to extensive privatizations, low access to credit and rising household demand. By 2006, Greek banks controlled 14.3% of banking assets in Romania, 16.3% in Serbia, 28.3% in Bulgaria and 32% in Albania (Eurobank Research, 2006, p. 27). ‘From 17% of the total foreign claims on southeastern Europe at the end of 2004, it rose to 57% in 2007, 49% in 2008 and 44% at the end of June 2009. In terms of total

Fig. 6.

International Bank Claims on Greek Banks. Source: BIS.

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Bank Exposure to Greek Bonds by Country (as of June 2011). Source: The Guardian/IBS.

assets, the presence of the Greek banks in emerging Europe has increased to 43% at the end of 2008’ (Kapopoulos & Lazaretou, 2011, p. 13). To recall our discussion of fictitious capital, we can see how the vast creation of credit facilitated the ‘obstacle’ posed by low domestic demand and production. Although the stock of fictitious capital represented by the Greek sovereign debt remained relatively constant, consumer and corporate credit exploded during this period, and Greek bank even began providing credit in neighbouring countries, hoping to facilitate the same ‘miracle’ that Greece was experiencing. Yet, recall that fictitious capital must always be created ahead of real production, as it simply represents a claim on future value, and that different types of fictitious capital are highly susceptible to contagion
a decline in confidence in one fictitious value can easily and quickly turn into a lack of confidence in other fictitious values, or even fictitious capital as a whole.

THE CRISIS IN GREECE AND FINANCIALIZED SHOCK THERAPY It is impossible to overstate the degree to which the 2007
2008 US subprime crisis sent shockwaves through the global financial system. States borrowed to fund automatic stabilizers, recapitalize their banking systems, and launch stimulus programme. In the EMU, where monetary policy is shared, fiscal policy was the first available tool to smooth out the

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recessionary shock caused by the aftermath of the subprime crisis. While the subprime motion set in motion the events that would trigger the Greek sovereign debt crisis, the crisis itself can be said to have begun in October 2009, when the incoming PASOK government revised the estimated government budget deficit from 6.7% to 12.7% of GDP (Nelson, Belkin, & Mix, 2010, p. 3). However, between the subprime crisis and this triggering event, there were several processes which worked to morph the deflation of Greece’s domestic credit bubble into a generalized sovereign debt crisis. In the banking system, the worldwide recession made loan repayments for not only Greek firms and households, but for those in Southeastern Europe where Greek banks had aggressively expanded during the boom years. Nonperforming loans in Greece rose from a low of 4.5% in 2007 to 17.2% of total gross loans in 2012 (Fig. 8). Secondly, Greek banks were affected by the global ‘credit crunch’ that restricted liquidity in the global financial system. The Greek state responded with an upward socialization of fictitious capital through the recapitalization of its banking system; in October 2008, Greece pledged h28 billion (or 11.4% of GDP) in support for its banking system (Papadimas & Georgiopoulos, 2008). At the same time, the government was witnessing a deteriorating fiscal position due to falling tax revenues associated with the recession. Two of the most important sectors in the Greek economy, tourism and shipping, were hit particularly hard by the worldwide recession, with travel spending dropping 24.2% between 20 18 16 14 12 10 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Fig. 8.

Bank Nonperforming Loans to Total Gross Loans (%). Source: World Bank.

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2008 and 2009 (Maltezou & Melander, 2009). Finally, the booming construction sector, fuelled by the domestic credit bubble, also collapsed in the wake of the subprime crisis, as demand for new homes collapsed. Between 2007 and 2008, fixed investment in the construction sector fell by a staggering 19.1% (Greek Ministry of Finance, 2010, p. 6). From 2008 to 2009, GDP fell by 1.7% and ‘gross fixed capital formation at constant prices declined by 18.6% on a year-to-year basis in the third quarter, which comprised a 22.5% contraction in investments in the housing sector, 21.3% in machinery, and 19.1% in transportation equipment’ (Greek Ministry of Finance, 2010, p. 7). Through these processes, the crisis in fictitious capital at the level of the domestic credit system (triggered by the global subprime recession) was transformed into a crisis of fictitious capital at the level of sovereign debt. After the sovereign debt crisis was triggered by PASOK’s announcement, Greek banks were hurt by falling prices, and diminished creditworthiness of Greek Government Bonds (GGBs). While government bonds are normally considered risk-free for the purposes of collateral swaps and balance sheet accounting, the credit downgrade of GGBs in February 2012 rendered them ineligible for use in repo transactions with the ECB (Blackstone & Buell, 2012). The ECB did not accept GGBs as collateral again until December 2012, after Standards & Poor increased Greece’s credit rating in the wake of the successful PSI and years of austerity measures (Wiggglesworth, 2012). However, the PSI seriously compromised the GGB-laden Greek banking system even further, as existing bonds were swapped for new ones with 31.5% of the initial face value (Petrakis & Christie, 2012). Finally, the Greek banking system saw widespread deposit flight after the onset of the crisis, as Greeks feared a banking collapse or a return to the drachma (see Fig. 5). This was especially significant as Greek banks were more reliant on deposits than large banks in the North, and the vicious cycle between GGB credit downgrades and bank downgrades made tapping international capital difficult (see Bank of Greece, 2012). The crisis is, at its heart, a result of the contradiction between fictitious capital and its monetary base. While fictitious capital creation in Greece was dramatically accelerated owing to EMU integration, which was based primarily on financial integration at the expense of other aspects, actual production lagged far behind. The crisis demonstrates the ease of contagion between forms of fictitious capital, particularly between Greek banks and the GGBs, but also between Greece and other Southern European states which were facing similar issues, and of course between fictitious capital represented by subprime mortgages in the United States and the world.

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The need to manage this crisis of fictitious capital has become the overriding priority for the troika, as it has the potential to spread even to the core states, via the PIIGS, thereby threatening the existence of the monetary union. The current tack in response to the crisis has been to impose reforms on crisis-hit states and centralize control, while building up funds which can be used to assist distressed banks and states. On 10 May 2010 the EU announced the creation of a Special Purpose Vehicle (SPV) called the European Financial Stability Fund (EFSF). This fund, totalling h750 billion and to include h440 billion from the European Council and h250 billion from the IMF, was to assist distressed Eurozone countries by buying up government bonds. The EFSF was replaced by a permanent institution, the European Stability Mechanism (ESM), in 2013. The ESM is based on the EFSF, and is set to provide over h800 billion when brought into being as the so-called ‘firewall’ against the debt crisis (Smith, 2012). Both the EFSF and the ESM will provide assistance to distressed Eurozone economies on the condition of stringent economic and fiscal adjustment. These so-called ‘austerity’ conditions follow a neoliberal logic similar to that of the IMF’s structural adjustment programs in the 1990s and include the privatization of public assets, social spending cutbacks and a shift to more flexible employment. Austerity reforms have been portrayed with an air of inevitabilityimplying submission to the logic of capital is both beneficial and necessaryechoing the ‘Eurosclerosis’ discourse surrounding the creation of the EMU itself. The involvement of the IMF has served to reinforce the illusion that these reforms are necessary, technocratically developed, and politically neutral. Financial markets are portrayed as testing the strength and resilience of the Euro area as well as the willingness and ability of EU authorities to preserve the integrity, stability and competitiveness (as a destination for capital) of the EMU. A recently released EC Task Force report recommended an enhanced surveillance framework aimed at preventing the emergence of (and combating existing) macroeconomic imbalances (ECB, 2011, pp. 100
101). Responding to this, the ECB has noted that, while the proposals are a step in the right direction, there needs to be a ‘quantum leap’ in economic governance to consolidate the functioning of the EMU (ECB, 2011, p. 101). The ECB argues that there needs to be stricter penalties applied for noncompliance; less discretion and more automaticity in discipline and better data collecting and reporting on the macroeconomic conditions of member states (ECB, 2011, p. 108). The report focuses heavily on the themes of ‘competitiveness’, ‘confidence’ and the ‘proper incentives’ for

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member states, reusing the neoliberal discourse of the EMU’s initial construction and justification. Heavily emphasized is the need to recognize joint responsibility for stability in the Euro area, and the need to ‘take the historic opportunity offered by the reform process to fully exploit the current Treaty framework to strength Euro area economic governance’ (ECB, 2011, p. 102). Here, we can see all three strategies for managing fictitious capital crises at work. The first, upward socialization can be seen first in the recapitalization of the Greek banking system by the Greek state (Bank of Greece, 2012) and second in the actions of the troika. Through the Securities Markets Programme (SMP), the ECB purchased h33.9 billion in GGBs (ECB, 2013), and the troika has provided hundreds of billions in loans to the Greek state. Both of these now represent liabilities which are borne by the entire Eurosystem. The second, asset devaluation, can be seen in the PSI, wherein private bondholders would agree to write down some of their holdings. On 9th March 2012, Greece activated collective action clauses (CACs), which enforced losses on investors who refused to participate in an exchange that swapped existing bonds for Greek bonds at 31.5% of the initial value, and notes of the European Financial Stability Facility at 15% of the face value. This swap reduced the h206 billion of privately held Greek debt by 53.5%, making it the largest debt swap in history (Argentina’s debt swap in 2005, previously the largest, was US $81.8 billion) (Petrakis & Christie, 2012). The third, internal devaluation, can be seen in the austerity and privatization measures which have been imposed as part of the conditionalities attached to troika loans. Euphemistically, the goal of internal devaluation is to restore ‘competitiveness’ in order to reconnect the monetary base with fictitious capital, and reignite confidence in future repayments. This is down by aggressively driving down the price of commodities, including labour. Wages in Greece have decreased by an average of 40
50%, and private sector minimum wages have been driven down to around h700 per month, with public sector wages slightly higher (Woestman, 2012, p. 383). According to the EC, The extensive labour market reforms, implemented as a prior action for the second programme, have already led to a substantial improvement in competitiveness in terms of unit labour cost, and to a slowdown in inflation … But much more needs to be done to create the basis for renewed growth, which will have to rely more than in the past on private investment and exports. An acceleration of product and service market reforms is crucial to bring about investment, innovation and competition. A stronger focus on microeconomic reforms is, therefore, imperative to ensure sustained productivity

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growth and a reduction in prices to increase disposable income. (European Commission, 2012, p. 2)

The so-called ‘Memorandum of Understanding’ signed on to by Greece as a condition of receiving loans emphasizes ‘rationalizing and reducing expenditures’, ‘tax reform and rationalization’ and extensive privatizations of government holdings (European Commission, 2012, pp. 3
4). These remarks echo Harvey’s argument that the overall goal of internal devaluation is to rationalize and restructure production and subject all aspects of social life to capitalist discipline and in doing so, hope to restore confidence in fictitious capital (Harvey, 2006, p. 326). Internal devaluation however, is contradictory particularly when it is applied with such speed and vigour, as it undermines the social basis of production. Greece has seen near-constant unrest since the onset of the crisis, which has seriously compromised its ability to carry out the reforms required by the troika. There is also serious political opposition presented by privileged groups who have benefitted from the skewed tax and welfare regime, such as the professional classes and public sector employees. More worryingly is the recent meteoric rise of the neo-Nazi party, Golden Dawn. Despite being linked to a variety of racially motivated assaults, Golden Dawn is the third most popular party in Greece, commanding around 10% popular support, and is widely supported by the police forces, which often overlook attacks carried out by members (Boitard, 2012; Phillips, 2012). With the ruling coalition beginning to fracture over the revelation of tax evader cover-ups, the possibility that Golden Dawn might become a part of a new coalition government is a very real one. Despite the scope of unrest, German Chancellor Angela Merkel has continued to take a hard-line on an ‘austerity-only’ approach, and has clashed with the ECB, who favour a gentler approach. This has largely been attributed to the effects of German domestic politics, where the most of the voting populace considers the profligate Greeks responsible for their own fate, and that Germany is simply throwing ‘good money after bad’. These responses have been the main, almost exclusive topic in the 2011 and 2012 regional elections in Berlin, and will feature much more importantly in the upcoming federal elections scheduled for September 2013. Neither of the two main political parties that in the past have supported EU integration can hope to accrue 40% of the vote. With this in mind, they are reflecting on the extent to which people in Germany can be expected to accept EU integration. (Mahnkoph, 2012, p. 480)

These trends are worrying signs that there may be limited possibilities for progressive change in Greece, as much of the discourse has devolved

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into reactionary extremism. One option that has been floated by much of the Left in Europe is an orderly exit from the EMU and a return to the drachma, which could then be devalued to restore competitiveness. However, there is much to be skeptical about this plan. For one, European elites have demonstrated a strong desire to maintain the integrity of the EMU, and it is hard to believe that they would allow an orderly Greek exist without putting up a strong fight. In particular, the amount of GGBs held by the ECB means that they would take a serious hit to their balance sheet if the Greek government were to return to a devalued drachma, or to default on its debts entirely. Similarly, the ease of contagion between forms of fictitious capital would likely invite speculative attacks on the other PIIGS countries, forcing the troika into another crisis of fictitious capital. Comparisons with other countries in similar situations are difficult to make. Argentina successfully defaulted on its debt, but has remained mired in legal issues. As well, Greece’s integration into the Eurozone would make imposing capital controls extremely difficult. The Latin American debt crises in the 1980s also do not provide optimistic examples. Here, the script of the crises reads very much the same as the Greek crisis, as debtor states were blamed for their internal failings, granted loans with harsh conditionalities and later granted partial debt write-downs when default looked imminent. These countries have then remained mired in debt and economic dysfunction and arguable never escaped from the shadow cast by their debt crises (on this topic, see Corbridge, 1993).

CONCLUSION In this chapter, I have argued that the Greek crisis can be best understood as a crisis of fictitious capital. Greece experienced a domestic credit-driven boom in the 2000s, which was shattered as the world was affected by the aftermath of the 2007
2008 subprime crisis. Subsequent actions carried out by the troika and the Greek state are then attempts to manage this crisis of fictitious capital through a combination of three means: upward socialization, asset devaluation and internal devaluation. However, the success of this management is far from guaranteed, in the best case scenario from the perspective of capital, Greece muddles through years of economic stagnation as a neoliberal, ‘balanced accumulation’ regime is restored. In worse scenarios, the upward socialization extends Greece’s problems across the whole Eurozone, ultimately undermining the monetary union itself.

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Similarly, the extreme social unrest caused by internal devaluation has the very real possibility to undermine its implementation. These are tragic consequences to capitalism’s attempt to circumvent the limits to consumption and valorization through the use of the credit system. The only possible positive outcome of this crisis is a shift to an economic system where the lives and health of the body politic is prioritized ahead of maintaining vague confidence in fictitious capital.

ACKNOWLEDGEMENTS This research was made possible by support from the Social Sciences and Humanities Research Council.

REFERENCES Alexiou, C., & Sofoklis, V. (2009). Determinants of bank profitability: Evidence from the Greek banking sector. Economic Annals, 54(182), 93
118. Athanasoglou, P. P., Backinezos, C., & Georgiou, E. A. (2010). Export performance, competitiveness and commodity composition. Working Paper No. 114. Bank of Greece. Retrieved from http://www.bankofgreece.gr/BogEkdoseis/Paper2010114.pdf Bank of Greece. (2012). Report on the recapitalisation and restructuring of the Greek banking system. Retrieved from http://www.bankofgreece.gr/BogEkdoseis/Report_on_the_ recapitalisation_and_restructuring.pdf Blackstone, B., & Buell, T. (2012, February 29). Greece feels collateral damage from bank. Retrieved from http://online.wsj.com/article/SB1000142405297020452020457725077160 6659952.html Blythe, M. (2013). Austerity: The history of a dangerous idea. Oxford: Oxford University Press. Boitard, C. (2012). Greek schools ‘fertile ground for neo-Nazis.’ AFP, December 6. Retrieved from http://www.google.com/hostednews/afp/article/ALeqM5h8HpMSyePW9dk5zTP7 CrX71Birsg?docId=CNG.951f61976fb8599e510020f99ba80f78.a81 Corbridge, C. (1993). Debt and development. Oxford: Blackwell Publishers. Dyson, K. (2010). Norman’s lament: The Greek and Euro area crisis in historical perspective. New Political Economy, 15(4), 604. Eurobank Research. (2006). The Greek Banking System in 2006: Comparative perspective. Retrieved from http://www.eurobank.gr/Uploads/PDF/Greek_Banking_Review.pdf European Central Bank. (2011). Monthly bulletin. Retrieved from http://www.ecb.int/pub/pdf/ mobu/mb201103en.pdf. Accessed in March. European Central Bank. (2013). Press release: Details on securities holdings acquired under the Securities Markets Programme. Retrieved from http://www.ecb.int/press/pr/date/2013/ html/pr130221_1.en.html. Accessed on February 21.

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European Commission. (2012). The second economic adjustment programme for Greece
First review (draft). Retrieved from http://blogs.r.ftdata.co.uk/brusselsblog/files/2012/11/ Greece_MoU2.pdf Featherstone, K. (2008). ‘Varieties of Capitalism’ and the Greek case: Explaining the constraints on domestic reform? Hellenic observatory papers on Greece and Southern Europe GreeSE paper 11. Retrieved from http://www2.lse.ac.uk/europeanInstitute/research/ hellenicObservatory/pdf/GreeSE/GreeSE11.pdf Fotopoulos, T. (1992). Economic restructuring and the debt problem: The Greek case. International Review of Applied Economics, 6(1), 38
64. Greek Ministry of Finance. (2010). Update of the Hellenic stability and growth program. Retrieved from http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/ 20_scps/2009-10/01_programme/el_2010-01-15_sp_en.pdf Harvey, D. (2003). The new imperialism. Oxford: Oxford University Press. Harvey, D. (2006). The limits to capital. London: Verso Press. Hembruff, J. (2013). Critical review: The politics of sovereign debt. Third World Quarterly, 34(4), 710
725. Hondroyiannis, G., Lolos, S., & Papapetrou, E. (1999). Assessing competitive conditions in the Greek banking system. Journal of International Financial Markets, Institutions and Money, 9, 377
391. Jessop, B. (2008). State power. Cambridge: Polity Press. Kapopoulos, P., & Lazaretou, S. (2011). International banking and sovereign risk calculus: The experience of the Greek banks in SEE. Bank of Greece special conference paper. Retrieved from http://www.bankofgreece.gr/BogEkdoseis/SCP201106.pdf Lapavitsas, C., Kaltenbrunner, A., Lindo, D., Michell, J., Painceira, J. P., Pires, E., … Teles, N. (2010). Eurozone crisis: Beggar thyself and beggar thy neighbour. RMF Occasional Report. Retrieved from http://researchonmoneyandfinance.org/media/ reports/eurocrisis/fullreport.pdf. Accessed in March. Leontidou, L. (1993). Informal strategies of unemployment relief in Greek cities: The relevance of family, locality and housing. European Planning Studies, 1(1), 43
68. Mahnkoph, B. (2012). The Euro crisis: German politics of blame and austerity
A neoliberal nightmare. International Critical Thought, 2(4), 472
485. Maltezou, R., & Melander, I. (2009). Greek tourism hit hard as visitor numbers dive. Reuters. Retrieved from http://www.reuters.com/article/2009/07/22/us-greece-tourism-idUSTRE 56L4O920090722 Marx, K. (1991). Capital (Vol. 3). London: Penguin Books. Mitsopoulos, M., & Pelagidis, T. (2011). Understanding the crisis in Greece: From boom to Bust. Hampshire: Palgrave Macmillan. Monastiriotis, V., & Jordaan, J. A. (2011). Regional distribution and spatial impact of FDI in Greece: Evidence from firm-level data. Hellenic observatory papers on Greece and Southern Europe GreeSE Paper 44. Retrieved from http://www2.lse.ac.uk/ europeanInstitute/research/hellenicObservatory/pdf/GreeSE/GreeSE44.pdf Nelson, R. M., Belkin, P., & Mix, D. E. (2010). Greece’s debt crisis: Overview, policy responses, and implications. CRS Report R41167. Retrieved From http://www.cfr.org/content/ publications/attachments/CRS%20-%20Greece%20Debt%20Crisis.pdf Papadimas, L., & Georgiopoulos, G. (2008). Greece to spend 11 pct of GDP to shield banks. Reuters. Retrieved from http://uk.reuters.com/article/2008/10/15/idUKLF32529820081015

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Petrakis, M., & Christie, R. (2012). Greece pushes bondholders into record debt swap. Bloomberg. Retrieved from http://www.bloomberg.com/news/2012-03-09/greece-debtswap-tops-95-level-to-trigger-forced-bondholder-participation.html Petropoulos, T. (2012). Key developments and growth in Greek ship-finance: Petrofin Bank Research. Retrieved from http://www.petrofin.gr/Upload/PetrofinBankResearchend2011.pdf Phillips, B. (2012). High police support for Greece’s Golden Dawn. Al Jazeera, December 1. Retrieved from http://blogs.aljazeera.com/blog/europe/high-police-support-greeces-goldendawn Psaltopoulos, D., Balamou, E., & Thomson, K. (2006). Rural-Urban impacts of CAP measures in Greece: An inter-regional SAM approach. Journal of Agricultural Economics, 57(3), 441
458. Serafetinidis, M., Serafetinidis, G., Lambrinides, M., & Demathas, Z. (1981). The development of Greek shipping capital and its implications for the political economy of Greece. Cambridge Journal of Economics, 5, 289
310. Smith, D. G. (2012). The World from Berlin: ‘Even a 1-Trillion Euro Firewall Wouldn’t Be Enough.’ Der Spiegel, March 30. Retrieved from http://www.spiegel.de/international/ europe/german-press-review-on-boosting-euro-firewall-a-824808.html Soederberg, S. (2005). The transnational debt architecture and emerging markets: The politics of paradoxes and punishment. Third World Quarterly, 26(6), 927
949. Stathakis, G. (2010). The fiscal crisis of the Greek economy. Retrieved from http://www.iippe. org/wiki/images/d/db/CONF_GREEKCRISIS_Stathakis.pdf United National Conference on Trade and Development. (2011). UNCTAD Review of Maritime Transport 2011. Retrieved from http://archive.unctad.org/Templates/ Download.asp?docid=15876&lang=1&intItemID=6134 Wiggglesworth, R. (2012). Greek bonds boosted by ECB eligibility. Financial Times, December 19. Retrieved from http://www.ft.com/intl/cms/s/0/92790bf2-49c3-11e2-a62500144feab49a.html#axzz2eEDM5WB8 Woestman, L. (2012). Economic shock therapy in the Eurozone: The Greek case. Development, 55(3), 382
389. Young, B., & Semmler, W. (2011). The European sovereign debt crisis: Is Germany to blame? German Politics and Society, 97(1), 1
24.

PART III RETROSPECTIVE ON ALTHUSSER

EPISTEMOLOGICAL PROBLEMS AND ONTOLOGICAL SOLUTIONS: A CRITICAL REALIST RETROSPECTIVE ON ALTHUSSER Brian O’ Boyle and Terrence McDonough ABSTRACT This chapter undertakes one re-evaluation of Louis Althusser’s philosophical legacy for modern Marxism. While Althusser self-consciously undertook to defend the scientific character of Marxism and so permanently establish it on a firm footing, many of his closest followers eventually exited the Marxian paradigm for a post-structuralism postMarxism. We will argue that this development was rooted in Althusser’s initial procedure as he attempted to ground Marxism’s scientificity in an epistemological argument whose main referent was Marxism itself. This initiated a circularity which was ultimately to prove fatal to Althusser’s project. Less remarked upon, however, is a further legacy of the Althusserian oeuvre, the critical realist conception of Marxism initiated by Roy Bhaskar. Bhaskar found part of his inspiration in Althusser’s successful posing of the question of Marx’s science. On the one hand, Althusser’s work can legitimately be seen as a bridge into the post-

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modern challenge to Marxism. On the other hand, it can be seen as clearing the ground and establishing some of the foundation for critical realism’s successful recuperation of the scientific character of Marxism. Keywords: Marxism; philosophy; science; ontology; epistemology; ideology Whatever its internal weaknesses and susceptibility to critical realist critique, in recasting Marx’s thinking about itself science and society, Louis Althusser made a contribution of decisive importance. The Althusserian legacy demands nothing less than the most thorough-going critical reappraisal today. (Bhaskar, 1991, p. 183)

INTRODUCTION Louis Althusser saw himself as perhaps the most political of the Marxist philosophers. Starting with an analysis of Marx’s theoretical practices, Althusser aimed to liberate Marxism from the twin dangers of Stalinist ‘Diamat’ and Hegelian historicism.1 The nature of Marx’s great theoretical breakthrough was the centre point of Althusser’s investigations and his lasting achievement was to repose the question of Marx’s scientificity. By rejecting Hegelianism, Althusser helped to recover the importance of objective structures and ontological complexity for the Marxist framework.2 These contributions are brought together in the concept of ‘overdetermination’ and this along with his critique of the Hegelian totality is of lasting importance. Yet despite asking many of the right questions, Althusser’s intervention ultimately failed
both in terms of its own aims and in terms of its chief legacy. Althusser never succeeded in providing Marxism with a general philosophical foundation, and one of the implications was the slide of many of his erstwhile followers from structural Marxism into post-structural idealism. This of course is well known. However there is a second legacy, which is much more favourable to the original intentions of the Althusserian project. Bhaskar (1991) has highlighted Althusser’s insistence on a scientific Marxism as an important theoretical antecedent for his own development of a realist philosophy of science. Bhaskar’s intervention was made as part of a wider attempt to excavate the realist basis of Marx’s (mature) scientific practice, and according to his estimation, Althusser’s re-emphasis on structural

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determination led to a ‘great flowering of social scientific and historical research in the tradition inaugurated by Marx’ (Bhaskar, 1991, p. 183). Andrew Collier
another prominent member of the realist project
is even more definitive, suggesting that Althusser’s structural theses actually ‘opened up the possibility of a new realist approach to social science and to [a] “scientific socialism”… that … would aim to discover real social structures which operate independently of our conscious intentions’ (Collier, 1989, pp. ix
x).3 Seen in this light the Althusserian interlude is less damaging than is regularly argued.4 There are significant weaknesses however, and elaborating these is a useful way to bring out the contribution of realist philosophy to Marxist science. Whilst Althusser professed to excavate Marxist philosophy from within the pages of Marx’s Capital, Bhaskar insists that being/existence has primacy over thought before insisting that ontological enquiry come before any form of epistemology. Bhaskar consequently develops many of his path-breaking insights by unearthing the ontological implications of natural scientific practices. Some have viewed this procedure as a liability. We believe that it was absolutely decisive for Bhaskar’s later aspiration to secure ‘a philosophical basis for Marxism consistent with Marx’s own underdeveloped methodological insights’ (Bhaskar in Archer et al., 1998, p. xvi).5 As a science, Marxism is merely one among many, and understanding this allows Bhaskar to sidestep any debilitating circularity through the establishment of realist criteria for scientificity, gleaned from analysis of scientific practices. Instead of starting within an existing philosophy of science, Bhaskar works transcendentally from the necessity of experiments to the nature of enduring structures residing in material reality. Experimentation is the most important method humans have for appropriating the ‘real in thought’ and like Marx, Bhaskar has to assume the existence of hidden mechanisms in order to make sense of the object he is investigating. This then leads to a more materialist grounding for Marxist science. The world simply must be composed of underlying (structural) relationships with Bhaskar moving seamlessly towards a doubly fortuitous methodological result. On the one hand, Bhaskar has formalised the ‘scientific method’ which consists paradigmatically in the (retroductive) move from surface to underlying (causal) relations. On the other hand, he has shown that this is absolutely congruent with Marx’s analysis in Capital. Moreover, by drawing on the successes of the natural sciences, Bhaskar also provides important legitimation for the methods that Marx develops in his substantive enquiries.

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One last introductory point is important. As is well known, Althusser initially set out to demarcate Marxism from its theoretical competitors through a form of ideology critique. This aspiration was never fulfilled, but Althusser did leave important clues for his potential successors. Throughout his writings Bhaskar accepts the importance of ‘ideology critique’ as part of a holistic analysis of scientific practices (Bhaskar, 1991). In this context he distinguishes the epistemological aspects of the sciences from the sites of their production.6 Bhaskar investigates the ability of a science to explain the nature of its object of investigation through his philosophy of science. Alongside this he explains the site of their social production through a form of ‘critical sociology’. This latter analysis allows Bhaskar to investigate the extra theoretical influences impacting on the development of a science. Althusser is never directly referenced in the context, however his posing of the questions of science and ideology undoubtedly sharpened Bhaskar’s analysis of these issues.

THE ALTHUSSERIAN CIRCLE Despite his official image as a Communist philosopher, dedicated to reorienting Marxism towards its materialist foundations, Louis Althusser’s most enduring legacy to date is that of a principal bridgehead into poststructuralist idealism.7 Not only were many of his erstwhile followers in the vanguard of the ‘postist turn’ in social theory, but there are readily discernible reasons for this in his overly epistemological defence of Marxism. Althusser worked to give a cast iron defence of Marxism from within itself. Yet when this proved impossible to achieve he was forced to rely on bourgeois imports, each of which brought specific difficulties that Althusser was subsequently forced to grapple with. To borrow one of his own metaphors, this left many of Althusser’s difficulties overdetermined as he grappled with one idealist problem only to see idealism rear its head under a different guise in a subsequent issue. We will argue that Althusser’s starting point actually condemned his project from the outset. Despite his defence of scientific Marxism, Althusser never managed to develop a truly effective position in the philosophy of science.8 Specifically, Althusser never succeeded in effecting the shift in theoretical problematic that he so-needed. As all of his questions were posed from within an epistemological problematic, it was inevitable that his solutions would remain unsatisfactory.

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At the beginning of For Marx, Althusser announces that his intervention is a theoretical one with important political consequences. Marxist theory, indispensable to the revolutionary class struggle, faces constant attack from ‘dangerous tendencies’ which threaten to undermine its authenticity. To prevent this, Althusser aims to reassert the scientificity of Marxist theory through a double intervention
designed to, on the one hand, draw a line of demarcation between Marxist science and subjectivist ideologies (confronting Hegel with Marx); and on the other hand, between the true theoretical basis of Marxist science, and its prehistory in an essentially Feuerbachian problematic (1996, pp. 12
13).9 Taken together, these two interventions point towards a major opposition between science and ideology. Marx, Engels and Lenin each had to struggle against ‘ideological interpretations of an idealist, humanist type’ and for Althusser these same bourgeois philosophies were responsible for the Hegelian distortion of Marxist science into humanist ideology (1996, p. 11). The Economic and Philosophical Manuscripts provide the canonical source for this distortion, as ‘Man’ is alienated under capitalism only to become fully human in the transcendence of this alienation.10 Althusser marks this process as ‘the alienation of the labourer, his emancipation and the humanism which is his promised future’ (1996, p. 158). ‘Man’ affirms his essence through free creative labour, and so in place of the Hegelian unfolding of ‘Reason’ towards ‘Absolute Spirit’, the Manuscripts register the inexorable movement of ‘Man’ towards his species being (in communist society).11 To challenge this interpretation, Althusser reads Marx as a philosopher, taking his texts as the object of investigation, and posing philosophical questions about the nature of the Marxist theoretical formation (1996, p. 38). The nature of Marx’s scientific practice is the object to be explicated, and yet this is also the indispensable starting point, as Marxist science will be validated by a Marxist philosophy, which itself relies on aspects of Marxist science. From Althusser’s perspective, the precondition of a reading of Marx is a Marxist theory of the differential nature of theoretical formations and their history, that is, a theory of epistemological history, which is Marxist philosophy itself; that this operation in itself constitutes an indispensable circle in which the application of Marxist theory to Marx himself appears to be the absolute precondition of an understanding of Marx and at the same time as the precondition even of the constitution and development of Marxist philosophy so much is clear. (1996, p. 38)

In effect, Althusser is caught in a vicious circularity, as the philosophy necessary to validate the scientificity of Marxism is unavailable until that

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science has been developed, whilst the very act of invoking this philosophy assumes the existence of that which needs to be demonstrated (Benton, 1984). Unlike the bourgeois economists, Marx makes a categorical distinction between the immediacy of appearances and the opacity of reality. Althusser writes that for Marx ‘the economic cannot have the qualities of a given (of the immediately visible and observable, etc.) because its identification requires the concept of the structure of the economic’ (Althusser & Balibar, 2006, p. 18). Marx’s theoretical revolution relies on rejecting empiricist epistemology (equating reality with the immediately visible) for an understanding of science as the active construction of concepts (thought objects) adequate to the task of grasping the ‘real in thought’. To understand the texts which announce this great revolution it is necessary to make this same manoeuvre, and so in place of an empiricist reading of Marx’s works, Althusser proposes to ‘activate a number of provisional Marxist theoretical concepts bearing on the nature of theoretical formations and their history’ (1996, p. 38). Here we find the first major breach in the Althusserian circle, as by far the most important epistemological concepts come not from Marx, but from the philosophy of science of Gaston Bachelard.12 For Bachelard science is an active process of theory construction on the basis of a complex of concepts or a problematic.13 Unlike the empiricist idea of incrementally adding to knowledge through patient observation, Bachelard sees science as a revolutionary process, marked by the rejection of outmoded problematics and their replacement by new theoretical constructs (Bachelard, 1968; Benton, 1984). The structure of the problematic largely determines the types of questions a thinker can ask, and it relates the concepts of a thinker in such a way as to determine their specific meanings. According to Althusser a philosopher thinks in it, rather than of it (1996, p. 69), and this consideration is decisive in moving beyond the express intentions of a given author, to the theoretical structure that determines the sorts of questions that can be asked; the way specific problems must be posed; the types of solutions that will be forthcoming, and the problems that remain insoluble no matter how rigorously a thinker applies him or herself.14 Drawing on Freudian psychoanalysis, Althusser argues that a literal (empiricist) reading is liable to miss this underlying problematic in the immediacy of the text. This is the decisive weakness of Hegelian Marxists who have read continuity in Marx’s work on the basis of conceptual similarities, without considering whether the logic and structure of the underlying

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problematic had changed.15 Once again Marx’s scientific practice is the paradigm of Althusser’s investigations, and he argues that it is only through a ‘symptomatic reading’ from the absences and lapses on the surface of a text that one can unearth the underlying structure of its problematic. This is exactly the practice that Marx engaged in when assessing the work of the Classical economists, and Althusser claims some important discoveries of his own when he applies this theory of reading to Marx’s theoretical practice.

Intervention One: Confronting Marx’s Prehistory (The ‘Epistemological Break’) To explicate Marx’s use of the symptomatic method, Althusser notes that while the Classical economists had moved beyond the oscillations of the market to the scientific study of economic value, they had unwittingly borrowed from everyday life the category ‘price of labour’ and so were confounded by the problem of whether the ‘law of value’ applied to the exchange between capital and labour (Althusser & Balibar, 2006, pp. 20
25). Solving this anomaly was impossible on the basis of their empiricist categories, as the Classical economists had given an answer
the value of the subsistence goods necessary for the maintenance and reproduction of the labourer
to a question they could never have asked
what is the value of labour-power? To have posed the question in soluble form, bourgeois political economy would have had to have definitively pierced the surface of capitalist relations. Yet this was impossible to achieve within a framework designed to support the interests of the bourgeoisie. Unencumbered by this class position, Marx was free to interrogate the links between bourgeois thought and bourgeois society. Moreover, because he was working in an alternative theoretic problematic (historical materialism), he could seize on the absences and contradictory silences in the ways that Smith and Ricardo had posed their questions (Callinicos, 1976). Marx’s ‘theoretical revolution lay not in his change of answers, but in his change of questions’ (Althusser & Balibar, 2006, p. 29), and ‘it was only by shifting to a new terrain, outside the prison of the given economic categories that Marx was able to see and answer the questions that bourgeois economy could not’ (Callinicos, 1976, p. 37).16 If a decisive shift in problematic is discernible from Marx’s scientific practice, it remained to be adequately theorised. Historical materialism was

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a decisive move away from bourgeois economy, but was this achieved merely by taking up a socialist class perspective, or was there a determinate moment when Marx moved from his own ideological problematic into the scientific problematic underpinning Capital? Althusser claims to answer this question with his own symptomatic reading of Marx’s texts, relying on an epistemological concept from Bachelardian philosophy of science. We saw earlier that Bachelard accounts for scientific change by arguing for revolutionary transitions from one problematic to the next. The initial ‘break’ that is absolutely crucial, as this signifies that a science is born in an epistemological rupture that leads to a transformation in cognitive status. Science emerges from a ‘web of error’, and in its fledgling state it must be protected from all manner of ‘epistemological obstacles’ that seek to impede its progress. This entails an important role for philosophy, which emerges as an aspect of the self-same rupture, and is uniquely equipped to distinguish what is truly scientific within a post-revolutionary science (Benton, 1984; Lecourt, 1975). All of this has the most important significance for Althusser, as he claims to unearth just this sort of ‘epistemological break’ in Marx’s texts of 1845 (The German Ideology and the Theses on Feuerbach). This break
necessarily opaque on an empiricist reading
is absolutely fundamental, as it is not merely a shift in problematic, it is a revolution in the cognitive status of Marxist science. These works constitute a theoretical rupture, in as much as they play witness to a decisive shift in the nature of Marx’s theoretical object. The formation of a new science depends on the emergence of radically new concepts, and in order to develop the scientific concepts of historical materialism (forces and relations of production, etc.), Marx had to decisively reject the Feuerbachian problematic of his youth. Althusser writes that ‘this rupture with every philosophical anthropology … is no secondary detail; it is Marx’s scientific discovery’ (1996, p. 227), with the central feature being the rejection of all vestiges of human essences, for a problematic based on structural complexity (ibid). If Bachelard has provided the conceptual wherewithal for Althusser’s intervention, he has also provided its relevance; arguing that it is only after the ‘epistemological break’ has taken place, that the prehistory of a science can be properly described (Bhaskar, 1975, p. 50). Once again we are back in the Althusserian circle as the founding of historical materialism was only possible on the condition that Marx ‘broke with his erstwhile ideological prehistory and established a new philosophy (dialectical materialism)’ (Althusser, 1996, p. 33). As in the Bachelardian schema, the birth of a science signifies the simultaneous emergence of a new philosophy, and in

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the case of Marxism, the latter remained in promissory form without a theoretical job of labour (Althusser’s) designed to bring it to light.17 Thus it is that dialectical materialism is charged with retrospectively pinpointing the moment in which a science emerges from its ideological prehistory, and with constructing novel philosophical concepts adequate to thinking this rupture in truly scientific terms (Althusser & Balibar, 2006, p. 75). Once active, dialectical materialism becomes indispensable, as it provides the formal conditions for satisfactory theoretical elaboration (second order knowledge), and the epistemological criteria to distinguish the scientific from the ideological (ibid., p. 170). The philosophy needed to authenticate the ‘break’ emerges within the break itself, and, as far as Althusser is concerned, his own intervention is proof that there is non-trivial knowledge emerging from within this (dialectical) circle. Althusser has successfully completed his first intervention (confronting Marx’s prehistory with Marxist science) by setting the scene for his second (confronting Hegel with Marx).

Intervention Two: Confronting Hegel (The Theory of Overdetermination) In Althusser’s intervention against humanist Marxism, we found a clear result in the claim that Marx rejected the problematic of individuals’/ human essences for one of structural complexity. This point is made in order to delegitimise those interpretations of Marx that had wrongly inferred theoretical continuity on the basis of (isolated) conceptual similarity, with the main target being the Hegelian Marxism of Luka´cs and Korsch (Althusser & Balibar, 2006). If Bachelard supplied the conceptual means to achieve this first result, Althusser’s second result is his most important contribution to Marxist theory, and it came from his insistence on the specificity (and scientificity) of the Marxist dialectic (Bhaskar, 1991; Callinicos, 1976). Here the confrontation is with Hegel, with Althusser’s starting point being an examination of the contradictions implied in Marx’s famous (mixed) metaphor of inversion and extraction: The mystification which dialectic suffers in Hegel’s hands, by no means prevents him from being the first to present its general form …. With him it is standing on its head. It must be turned right side up if you would discover the rational kernel inside the mystical shell. (Marx, in Althusser, 1996, p. 89)18

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The dominant (Engelsian) interpretation of this aphorism was the need to invert the (idealist) system, before extracting the (dialectical) method. But as Althusser quite rightly points out, ‘it is inconceivable that the place of the dialectic in Hegel’s work could not be contaminated by Hegelian ideology, or … that the Hegelian dialectic could cease to be Hegelian and become Marxist by a simple miraculous “extraction”’ (1996, p. 91). In the Hegelian system there is an essential unity between teleological object (Absolute Knowledge) and dialectic method. The two are literally indistinguishable, and this dictates that the mystical shell refers not only to the system to be inverted (and rejected), but also to the method to be (supposedly) extracted. Because of this, the whole idea of extraction becomes impossible, and Althusser’s great insight is to use the result from his ‘Bachelardian intervention’ as the basis for a radical shift in the way this problem is posed. The science of history was born on the basis of a novel ‘object’ (complex of social structures), and if the ‘object’ of Marxist science has changed, so must the dialectic that relates to it. To change the nature of the object is to change the nature of its dialectic (Callinicos, 1976) as the problem of understanding the Marxist dialectic immediately shifts from the inversion/extraction metaphor, to the identification of its specific structures: Let us say … that if the Marxist dialectic is ‘in principle’ the opposite of the Hegelian dialectic, if it is rational and not mystical-mystified-mystificatory, this radical distinction must be manifest in its essence, that is, in its characteristic determinations and structures. (1996, pp. 93
94)

In Hegel’s hands, the dialectic seems to motor dynamic interrelations between diverse phenomena. However the real source of this change is not inherent in the interrelations themselves, but only moves through them in-so-far as they are expressions of some internal essence (Spirit) determined within the whole (Ruben, 1979, p. 46). Despite appearing complex and differentiated, each social totality is ultimately homogeneous, with every element being the externalisation of some ‘unique internal principle which is the truth of all their concrete determinations’ (Althusser, 1996, p. 102). Althusser argues that this leaves Hegel’s totality both simple and expressive
as the spiritual whole is necessarily present within each of the parts, which in turn express the whole as it moves towards ‘Self-Knowledge’. Historical formations are but individual moments in this grand unfolding of ‘Universal History’, and historical time is little more than a linear continuum driven incessantly forward by ‘the simple play of a … simple contradiction’ (ibid., p. 103).

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To invert this system would be to retain this underlying teleology, and so Althusser argues that Marxism breaks with Hegelian essentialism not only by inverting its terms (subject and predicate), but also by insisting on complexity, viz ‘where reality is concerned, we are never dealing with the pure existence of simplicity … but with the existence of “concretes” of complex and structured beings and processes’ (Althusser, 1996, p. 197). The social totality is composed by various structured practices, which are irreducibly heterogeneous and yet exist in a form of hierarchical articulation. Against all forms of economism, Althusser argues that the Marxist totality is not made up of a determining base and a series of epiphenomenal superstructures, for that would be to slide back into essentialism. The non-economic elements of the social totality each exhibit their own degree of effectivity and specificity. Indeed causal influence is necessarily reciprocal, with economic and non-economic structures being both determined and determining elements of the overall totality. Althusser captures this idea in the concept of overdetermination, but this is never to suggest a causal pluralism or a sociological eclecticism. The social totality is structured in dominance, and the causal influence between the structures is therefore asymmetrical, with the economy playing the determining role if only in the last instance: Marx has at least given us the ‘two ends of the chain’, and has told us to find out what goes on between them: on the one hand determination in the last instance by the (economic) mode of production; on the other, the relative autonomy of the superstructures and their specific effectivity. (1996, p. 111, original emphasis)

To capture this seemingly paradoxical idea, Althusser argues that while it is perfectly possible for any structure to play the dominant role within a given totality, the specific economic conditions within these societies will ultimately explain why it is that these non-economic structures are dominating. This means that while the economy is not always the dominant structure, it is always determinant of the structure in dominance
allocating the other structures to their given positions and determining for the noneconomic structures their respective degrees of effectivity (Geras, 1972).19 This allows Althusser to sustain determinacy without slipping into ‘regularity determinism’, as necessity resides within the myriad causal interactions within the complex whole.20 Against the strictures of both the Second International and the Hegelians who opposed them, Althusser has established a decentred totality characterised by the mutual conditioning of (1) parts on parts, (2) parts on whole and (3) whole on parts
within an overall determinate

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structure with a hierarchical ordering. This was no mean feat given the hegemony of these rival interpretations and to demarcate his position fully, Althusser developed a novel theory of structural causation (Darstellung). Prior to Marxist philosophy, Althusser argues that there were only two concepts of causation
the mechanistic (or transitive) concept of positivist philosophy, and the expressive concept of Hegelian philosophy. Mechanistic causation presupposes an atomistic ontology and contingent relations of cause and effect. The causal connection is one of exteriority and there is no conceptualisation of the effect of the whole on its parts. Expressive causation presupposes just this form of effectivity
but the Hegelian condition is the complete reduction of the parts to the spiritual whole. According to Althusser ‘the proposal to think the determination of the elements of a whole by the structure of the whole posed an absolutely new problem in the most embarrassing circumstances, for there were no philosophical concepts available for its resolution’ (Althusser & Balibar, 2006, p. 187). As usual, Marx’s scientific practice had presupposed this form of structural causation, but it remained in a practical state (in Capital) without its adequate elaboration in a philosophical concept. This problem of conceptualising the determination of one (subordinate) structure by another (dominant structure), and of ‘the phenomena of a region by the structure of that region’ was particularly difficult given the fact that capitalist social structures necessarily appear as other than they are. In Marx’s theory of commodity fetishism, social relations between producers are mediated by causally efficacious relations between things (commodities), and this is an objective material reality not a mere subjective illusion (ibid., p. 191).21 Value relations have a two-sided reality, as they are both production relations between persons and exchange relations between ‘things’. However the specific nature of capitalism ensures that the second (commodity) relation is more visible, rendering the underlying human dimension (social relation) mystified and necessarily so. Marx writes that ‘value can only manifest itself in the social relation commodity to commodity’ (1972, p. 47), with this one-sided manifestation being absolutely essential to the functioning of the capitalist mode of production. The problem for Althusser is thus particularly acute as he has to ‘construct a concept of causality which can express the relation between a structure which is a “hidden mystery,” and its effects, which serve to conceal it’ (Callinicos, 1976, p. 50). His solution is to conceive the ‘whole existence of the structure (in dominance) as consisting in its effects’, and to see these

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effects as assigning the agents of production to their places, and functions in structural reproduction. For Althusser, humans are the mere bearers (Tra¨ger) of their structural positions, and the causal effects of the structure in dominance are such as to ‘form, transform and equip human beings to respond to the demands of their conditions of existence’ (1996, p. 235). Causality is nothing more than a relation between structures and this helps to consign the problematic of the bourgeois ‘Subject’ to the ‘prescientific dustbin’. Having utilised his ‘Bachelardian intervention’ as an entry point for his confrontation with Hegel, Althusser now had a causal criterion to define the Marxist problematic as scientific, whilst definitively demarcating it from its humanist/empiricist distortion. Althusser’s second intervention has thus helped to bolster his first, and the process of confronting Hegel has led to a rich harvest in terms of (1) the specification and refinement of the Marxist dialectic, (2) important results for the Marxist conception of the complex totality and (3) a novel concept of structural causation.22 These positive achievements also mark important critical salvos against the historicist teleology implicit within Hegelian Marxism, as Althusser rejects the (deterministic) theory of universal time for a complex theory of differential temporalities (Althusser & Balibar, 2006, pp. 99
101). If the levels of the social totality are relatively autonomous then each of them must have its own particular rhythm
and the conception of time as linear (and homogeneous) is thoroughly redundant. This radically separates Althusser from any conception of teleological necessity, and the results of this can be found in his theory of the conjuncture as a rupture point that represents an amalgamation of contradictions flowing from the different levels within an overdetermined totality. Despite their differences, the empiricism of the Second International shares with historicism an implicit teleology born of the collapse of Marxist science into Hegelian philosophy. For Althusser, however, the outcome of any particular conjuncture is relatively uncertain, suggesting that Marxist politics (tactics) must be oriented to understanding these conjunctures in order to intervene in them more effectively. By reasserting the importance of Marxist science, Althusser has spared his system from the worst excesses of philosophical reductionism and in-so-doing, has fashioned a defence of Marxism which is rigorous and often persuasive. Overall, the intervention seems to have been largely successful. Yet right at the heart of the Althusserian system there is a massive contradiction
as the price of defending the scientificity of Marxist theory has been the radical separation of Marxist science from everything empirical.

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ALTHUSSER’S EPISTEMOLOGICAL PROBLEMS Deferring the ‘Problem of Knowledge’ Althusser’s original intervention was clear in its objectives. The entire project was motivated by the ultimate aims of revolutionary socialism, its proximate aim was to defend the scientificity of revolutionary theory, and the means for achieving this was a philosophical exercise designed to demarcate Marxist science from all forms of bourgeois ideology. Althusser promised to use philosophy to defend science in order to improve its validity for socialist revolution and it is a measure of his project’s failings that in each of these areas, Althusserianism became mired in contradictions from which there was no escape. Earlier we suggested the symbiotic relations between Althusser’s two interventions, as the initial (Bachelardian) ‘reading’ set the scene for ‘confrontations’ that among other things delivered a causal criterion for scientificity. Unlike the bourgeois ideologies, Althusser claims that Marxism works with a theory of causation that is scientifically adequate. Causation is a property that emerges within the relations of the structured totality, and in order to understand these relations, one needs to develop concepts (both philosophical and scientific) that are adequate to the task of appropriating the ‘real in thought’. That there is a relation between actively created concepts and the concrete reality of causal relations is clear enough. But the exact nature of this relationship remains to be addressed, and dialectical materialism cannot claim to give sufficient grounds for Marxist scientificity until it has specified the relations between science and the rest of the social formation. Althusser’s starting point in addressing this question is a firm rejection of empiricist and/or idealist solutions to the so-called ‘problem of knowledge’. Knowledge of the real cannot simply be gained through ‘empiricist abstraction’, as there is never an unmediated relation between thought and reality (Althusser & Balibar, 2006, pp. 36
40). Reality must always be approached via the construction of concepts, but it is only within an idealist problematic that this mediation could cause any problems: that the concrete in thought … is the knowledge of its object (the concrete real) is only a ‘difficulty’ for the ideology which transforms this reality into a so-called ‘problem’ and which therefore thinks as problematic what has been produced precisely as a nonproblematic solution to a real problem by scientific practice itself: the nonproblematicity of the relation between an object and the knowledge of it. (1996, p. 186)23

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With the epistemological relation of thought to reality rendered little more than an idealist ‘pseudo-problem’, Althusser shifts his concerns away from a discussion of cognitive adequacy per se, towards the differential relations of science and ideology to the social formation. Taking his cue from Marx’s theory of commodity fetishism, Althusser argues that theoretical ideologies differ from the sciences, as their primary function is not the production of knowledge, but the reproduction of the social formation. Ideology is pervasive in the lived experiences of the masses, and theoretical ideologies merely reflect and systematise this (mystified) experience without ever attempting to move beyond it. Unlike science, ideologies are theoretically closed as ‘they take their meaning from the interests in whose service they are subjected’ (Althusser & Balibar, 2006, p. 141). Moreover, as their practical function governs the nature of their problematics, ideologies help to secure the basis for social reproduction by concealing exploitation from exploiters and exploited alike (Althusser & Balibar, 2006, p. 141; Geras, 1972). A case in point is the empiricism/humanism couplet that allows bourgeois economics to argue that the world must be amenable to direct observation at the same time as it systematically conceals the nature of class-based exploitation. The immediacy of appearances is an important ideological component of empiricist methodology, and this suggests that there is a non-contingent relation between empirical methods and the economic problematic that represents the dominant classes.24 By moving his discussion towards the differential natures of scientific and ideological problematics, Althusser has come up with methodological criteria for Marxist scientificity and
although he has merely deferred the question of cognitive adequacy
it is indicative of his Bachelardian inheritance that the validity of a science lies less in its particular results, than in the way in which they are arrived at (Callinicos, 1976). If bourgeois theory is paradigmatically characterised by its dependence on outside interests, then the fundamental starting point for authentic (Marxist) science must be its insulation from all such external influence. Marxism has to be an autonomous practice with its own site in the social formation, and given the omnipotence of ideological manipulation, it must also be above the taint of empiricist philosophy. Because of their intrinsic reductionisms, historicism and Stalinism each undermine the scientificity of Marxist theory by subsuming its theoretical function to the wider considerations of a political agent. In the case of historicism, Marxism reduces to an expression of the revolutionary proletariat, with Althusser and Balibar adamant that this decisively undermines its ability to work scientifically (2006, pp. 119
144). Marxist science simply must sustain a degree of autonomy, and in his

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Essay’s in Self-Criticism Althusser also challenges Stalinism on the basis that it has made Marxism a ‘slave of tactical political decisions’ (1976, p. 169). Refusing to allow the requisite space for theory to develop is a fundamental weakness of all ideological positions, and to reassert the scientificity of Marxist theory, Althusser insists on the specificity of Marxist theoretical practice within a general theory of social practice.

Dismissing the ‘Problem of Knowledge’ (The Primacy of Autonomous Practices) The novelty of Althusser’s intervention stems from the importance he attaches to the different problematics underpinning Marx’s work. Unlike his works ‘before the break’ Marx’s scientific results (in Capital) exhibit the influence of a novel problematic that enables him to pose questions in an innovative way. Using historical materialism as his (theoretical) means of production, Marx transformed bourgeois concepts into more adequately scientific ones, and Althusser argues that this form of transformative praxis is paradigmatic of social practice generally: By practice in general I shall mean any process of transformation of a given raw material into a determinate product, a transformation effected by a determinate human labour, using determinate means (of production). (1996, p. 166)

We saw earlier that Althusser conceives the social totality as a ‘system of structures’, and he asserts the primacy of praxis by arguing that each of these structures is the site for a distinctive social practice (Althusser & Balibar, 2006, p. 58). Together with the economic, political and ideological levels within the social formation, Althusser argues that there is a distinctive site for scientific practice (although no level). Being relatively autonomous, each of these practices is causally significant. Moreover, each of them is structured around a specific means of production that can be distinguished by the nature of their objects: ‘we think the content of these different structures by thinking … the different natures of the objects to which they apply’ (2006, p. 58). Economic practice produces use-values, whilst political practice is aimed at the transformation of social relations
but whatever their specific content
every practice transforms a given raw material, into a novel product, using a determinate means of production. Science too is a ‘produced means of theoretical production’ and Althusser captures the specificities of this process using his triadic notion of Generalities. Contra empiricism, the raw materials of a science are never

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found in ‘concrete reality’ as this is not amenable to the immediacy of observation. Science is necessarily a process of transformation, and so the starting point is not the ‘real concrete’ (which remains unaltered) but a number of existing concepts that are partly scientific (being the outcomes of previous iterations) and partly ideological (Generalities I) (1996, p. 184).25 In the case of scientific transformation, Generalities I are transformed into Generalities III (scientific concepts embodying knowledge), using a theoretical means of production (Generalities II) (1996, p. 185).26 As the scientific means of production, Generalities II is crucial in determining the ways in which a problem can be posed, and the nature of the resulting knowledge. If science is an autonomous practice utilising concepts from previous rounds of theoretical enquiry, the question of the relations between science and the rest of the social formation remerges sharply. Althusser had previously dismissed the search for guarantees as an idealist ‘pseudo-problem’, and now he faces the implications of his insistence on scientific autonomy head on
insisting that ‘it is perfectly legitimate to say that the production of knowledge … takes place entirely within thought, just as we can say mutatis mutandis, that the process of economic production takes place entirely within the economy’ (2006, p. 42). Theory is separated from reality by an ‘impassable frontier’ and this renders the search for external guarantees into a non-sequitur (ibid., p. 190). Althusser asserts his allegiance to the materialist thesis of the primacy of the real over thought, ‘since thought about the real presupposes the existence of the real independent of that thought’ (2006, p. 87). Knowledge is a system of concepts that are established on and articulated to the real (ibid., p. 42), but the search to legitimate this relation cannot be done through any form of external arbitration: theoretical practice is … its own criterion, and contains in itself definite protocols with which to validate the quality of its product … once they are truly constituted and developed they have no need for validation from external practices to declare the knowledges they produce to be ‘true’… they themselves provide the criterion of validity of their knowledges
this criterion coinciding with the strict forms of exercise of the scientific practice considered … (Althusser & Balibar, 2006, p. 59)

The autonomy of scientific practice means that it cannot be legitimated from practices outside itself, and so Althusser addresses the ‘problem of knowledge’ by summarily dismissing it. Marx too had dismissed this problem.27 However as we shall soon see, Marx’s materialist route out of idealism is not strictly open to Althusser, given his radical separation of authentic science from the world of real experience.28

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Succumbing to the ‘Problem of Knowledge’ Althusser has succeeded in sustaining both the (relative) autonomy of Marxist science and its irreducibility to empirical methods. Marxism is not ‘historicist’ as it develops on the basis of its own internal criteria. Neither is it ‘empiricist’, as it relies on the active construction of theoretical concepts. But has it now become ‘idealist’ given the underlying separation of the real from thought? And what are the implications for the philosophical endeavour at the heart of Althusser’s original intervention? Recall the intention was to use philosophy to defend science in order to improve its validity for socialist revolution. The entire project has been about establishing the authority of one particular reading of Marx, in order to establish Marxism as the unique science of social formations. This necessitates utilising Marxist philosophy to elaborate definitive epistemological criteria, and yet it is just this sort of philosophical intervention that Althusser now associates with the bourgeois hunt for guarantees (Callinicos, 1976). Against the spirit of his entire philosophical exercise, Althusser’s concern to stress the scientificity of Marxism has forced him into a positivistic insistence on the self-sufficiency of the established sciences.29 Althusser’s philosophical practice has therefore caught him in a ‘performative contradiction’, with the logic of his intervention leaving him with the choice of either (1) reducing philosophy to scientific practice or (2) sustaining a role for dialectical materialism whilst conceding that he has been unable to define the epistemological criteria needed to fulfil it. Neither choice is very palatable. And it is the contradictory character of the second option that explains Althusser’s preference for the first. His failure to deliver epistemological grounds for demarcation meant that he was forced to differentiate the sciences on the basis of their radical autonomy. This procedure seemed to deliver socio-historical grounds for differentiation. But by forcing the sciences into a space beyond real world influence, Althusser has severed the essential links between theory and reality
leaving his position irretrievably ‘theoreticist’.30 For Althusser, the autonomy of the sciences also means that the relation between Marxist theory and the working class movement must be one of exteriority (Geras, 1972). Historical materialism had reached its apogee in the Russian revolution and Althusser instinctively understood that the politics underpinning this process had been born in the theoretical revolution initiated in the epistemological break. His problem was that this could barely be theorised within his then existing philosophical categories. To remain consistent, Althusser argued that one must, with Lenin (and

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Kautsky) affirm that ‘Marxist theory is produced by a specific practice outside the proletariat, and … must be imported into the proletariat’ (2006, p. 141).31 Marxism is no longer developed within the working class movement, but by an autonomous scientific practice for later use in the struggle for emancipation. The rational kernel in the Althusserian formulation is the necessity for Marxist concepts to remain scientific. But what he consistently forgets is that immersion in the class struggle is an absolute prerequisite for achieving this very scientificity. Experiencing the class struggle is the most important means by which working people come to understand the nature of the system. This is why Geras rightly argues that Marxism can ‘only teach the masses because it always knows how to learn from them’ (Geras, 1972). Scientific theory can undoubtedly help to uncover hidden or distorted relations, but only resistance by working people can provide the crucial orientation for Marxist theory to grow and develop (Geras, 1971, p. 83). Althusser’s original intentions are now in ruins as the entire enterprise was designed to achieve a political result that has subsequently been rendered impossible. To make matters worse, Althusser’s assertion that each of the sciences contains exclusively internal criteria is radically susceptible to a conventionalist ‘reading’ and an ideological distortion much like the ones he has been trying to prevent. Smith notes that Althusser’s notion of a ‘symptomatic reading’ is ‘exceedingly obscure’ in formulating criteria for interpretative accuracy. Because Althusser relies exclusively on the deductive/conceptual component of theory formation neither empirical observations nor retroductive inferences can subsequently be appealed to. In consequence, there can only ever be readings of Marx, with the ultimate arbiter of accuracy depending on the theoretical conventions of the reader’s community.32 This would not be so bad if Althusser had at least referenced the importance of on-going empirical engagement. However once the criteria become exclusively internal the problems for Althusser become insurmountable. After all, even the most apologetic problematics can lay claim to being scientific once the criteria become internal. Neoclassical economics has, for example, regularly argued that its founding axioms are self-evident enough to authenticate its subsequent deductions with or without empirical conformation.33 So long as Althusser argues that ‘ideas … are the object of knowledge’ (2006, p. 40), he is therefore unable to fend off the claims to scientificity of rival problematics. Rather than solving the ‘problem of knowledge’ Althusserianism has become impaled upon it. To find out exactly why this is the case, it is necessary to return to our starting point within the Althusserian circle.

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ANTINOMIES IN ALTHUSSERIAN SCIENCE Science and Philosophy The central claim of this chapter is that Althusser’s most significant problems stem from his failure to develop an effective position in the philosophy of science. Much has been written about the circularity of the Althusserian intervention. However, the reality is that Althusserianism was more a grafting of Bachelardian epistemology onto historical materialism, than an attempt to extract ‘Marxist philosophy from Marx’s work by applying it to Marxist philosophy itself’ (Callinicos, 1976).34 It is precisely because the ‘tissue of error’ can only be described after the ‘epistemological break’, that Althusser argues that the ‘birth of a new philosophy is simultaneous with the foundation of a new science’ (1996, p. 33), and so the very basis of the Althusserian circle is the uncritical importation of Bachelardian philosophy into Marxist theory. Althusser’s reliance on an ‘epistemological break’ immediately establishes ‘a major opposition between science and ideology’, at the same time as it challenges him to erect philosophy as the ultimate arbiter of Marxism’s scientificity. Bachelardian philosophy is thus responsible for foregrounding the search for epistemological criteria, at the same time as it robs Althusser of the vantage point to deliver them. For Bachelard the established sciences were so evidently successful that they stood in little need of external verification. However this uncritical respect for the ‘knowledge effects’ of the sciences was likely to prove debilitating in any form of contestation. It was, after all, the very nature of Marx’s ‘knowledge effects’ that were being disputed. We saw earlier how Althusser’s procedure ultimately forced him into a ‘performative contradiction’ as philosophy loses its ‘right to existence’ in the very moment that it emerges to defend the science of society.35 For Geras ‘this represents a substantial failing’ on Althusser’s part, as ‘the account of science he ends up producing is not the one he wants to produce’ (1972, p. 81). Somehow a project that began in materialism has slipped irrevocably towards idealism, with the mechanism responsible for this to be found in a second inheritance from Bachelardian philosophy.

Science against Experience According to Bhaskar, Bachelard’s Nouvel Esprit Scientifique was revolutionary in its challenge to positivism, as it insisted on scientific

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discontinuity alongside a categorical break between scientific knowledge and real world experience (1975, p. 48). Against the dogma of monistic progress and unmediated observation, Bachelard championed Einstein’s achievements as proof that science develops in a radically discontinuous fashion, on the basis of thinking that is radically discontinuous with everyday experience. Once science is conceived as a revolutionary process, it becomes all but impossible to discount the role of human creativity. In spite of this, positivism presupposes a privileged link between the passive observer and the active reality, wherein thought is little more than a mechanical function of the reality it encounters. Against this Bachelard posits an active epistemology in which the sciences are born by breaking with experience and actively constructing concepts that have no reality outside their own domain, viz. ‘we have reached a level of knowledge at which scientific objects are what we make of them, no more no less’ (Bachelard, 1936, p. 51). Epistemologically, Bhaskar argues that this marks an important advance over the strictures of positivism. However the break (with positivism) is not a clean one. Every epistemology presupposes a corresponding ontology and Bachelard’s crucial mistake is to work with an unacknowledged acceptance of empirical realism (1975, p. 51). According to Bhaskar the hegemony of positivism is such that Bachelard unwittingly equates experience with reality and so ‘fails to conceive the possibility, implied by the progressive character of science of a realism that does not identify the real with the field of experience’ (ibid.). Once experience is equated with a world that remains radically continuous in the face of scientific discontinuity, Bachelard has no option but to erect an impassable frontier between the real experiential realm and the scientific city (ibid.). Conceptual development becomes a process that takes place ‘entirely within thought’ and Bachelard ends up with a theory of secondary objects with no external referent. Taking the example of the tetrahedral structure of carbon as ‘a concept without a direct referent in ordinary experience’, Bhaskar argues that Bachelard’s key mistake is to illegitimately elide the distinctions between the (transitive) concept of the ‘tetrahedral structure’ and the real world object it is trying to illuminate: Failing to distinguish between the transitive and intransitive dimensions of science, it becomes clear why Bachelard feels that this theory (of secondary objects) is necessitated by his discovery of a rupture between scientific and ordinary knowledge. For as empirical realism identifies experience with the world in as much as an object posited in scientific investigation does not correspond to anything in experience, change can only be conceived as a construction in thought and not as work in thought (on thought objects)

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with an intransitive object outside thought. Or, if the latter concept is sustained then it can only be thought as a simple correction of experience and not as a movement (in thought) to an object unavailable in experience. (1975, p. 52)

With this, all of the epistemological advances are lost, as the objectivity of scientific knowledge can only be grounded intersubjectivity, whilst scientific change becomes a series of reorganisations (or ‘recastings’) rather than a progressive deepening of our understanding. Despite having ‘a continual regard for the sciences of his day’ (ibid.), Bachelard is now faced with a conventionalist account of scientific development
and the implications for Althusser are particularly acute, given that his aspiration to find definitive criteria for scientificity is now rooted within a wholly conventionalist epistemology. This is Althusser’s ultimate ‘Achilles Heel’ as his insistence on the primacy of the ‘real’ is radically undermined by an inability to adequately theorise it.

Science and Reality (Althusser’s Active Idealism) Given the consternation that Althusser has caused with his assertion that theoretical practice takes place ‘entirely within thought’ (2006, pp. 40
42), it is perhaps appropriate to register the things that are actually right in this formulation. In one sense the idea that ‘theory takes place entirely within thought’ is little more than a truism, for as Pierre Vilar quite rightly points out, ‘where else would it take place’ (1980, p. 74). Theoretical construction is necessarily a cognitive process, and so the ‘real world’ obviously ‘survives in its independence, after as before, outside the head’ (2006, p. 41).36 A second important insight turns on the idea that scientific knowledge necessitates the construction of concepts that are adequate to appropriating the ‘real in thought’ (ibid., p. 184). Scientific knowledge is never reached by immediate contact with ‘concrete reality’ and Althusser has done us a service in highlighting this against the conservative pretensions of empiricism. Finally, by foregrounding the importance of cognitive labour, Althusser has alerted us to the fact that theory construction takes place as a produced means of theoretical production. In Althusserian terminology, the determinate moment is Generalities II as this enables the scientist to transform raw materials into scientific concepts that are adequate to unpacking the real. The problems, however, start from here, as having developed these important insights, Althusser proceeds to reify the Generalities, effectively turning them into a priori concepts. Working from what he takes to be the logic of Capital, Althusser asserts that science ‘always works on existing

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concepts … [never] on a purely objective given’, and that this entails that the object of knowledge is ‘absolutely distinct from the real concrete’ (1996, p. 184, 2006, p. 40). Althusser quite rightly insists on the active role of thought objects in scientific discovery. However, his general mistrust of empiricism means that his theorisation of real objects is left severely underdeveloped. According to Bhaskar Roy Scientific Realism and Human Emancipation Verso London ‘an account that cannot think the necessity for both and the irreducibility of, the concepts of thought and being … must lapse into idealism where concepts are part of being’. The consequence is a debilitating asymmetry between ‘thought objects’ and the under-theorised ‘real object’ which helps to undo the Althusserian epistemology. In much the same way as Bachelard does, Althusser loses empirical reality as a consequence of his rejection of empiricism. The rational kernel is the need to construct concepts to appropriate the real in scientific thought. But without this real appropriation, concepts themselves become the objects of knowledge as Althusser slips unwittingly into idealism. Taking empiricism at face value, Althusser argues that its chief failing is to see knowledge as inextricably part of reality. According to the empiricists, knowledge never resides ‘within thought’ but is always a process taking place ‘entirely within reality’. All reality is ultimately composed of an inner essence that must be extracted and an outer dross that must be discarded (2006, p. 36). Knowledge therefore lacks all autonomy and Althusser believes that empiricism is the Janus face of Hegelian idealism, with empiricism collapsing knowledge into the real and Hegelianism committing the same infraction in the opposite direction (ibid.). Against this, Althusser is quite right to insist on the radical separation of thought and reality. But he is quite wrong to assume that because empiricism claims to extract knowledge from the real, that it thereby collapses knowledge into reality. Indeed the opposite is the case, as empiricism actually secretes an implicit ontology based on sense experience, thereby equating reality with our knowledge of it (Bhaskar, 2008, p. 28). Empiricism fundamentally negates the real under an illicit anthropocentricity, and so it is not its claims to extract knowledge from the real that is the problem, but the fact that it actually extracts knowledge from uncritical experience. Failing to understand this, Althusser counterposes a process that ‘takes place entirely within thought’ to a process that ‘takes place entirely within reality’, when in fact science is best conceived as a ‘movement in thought to an object that is [partly] unavailable in experience’ (Bhaskar, 1975). Retroduction from phenomenal forms (of reality) to the mechanisms that are responsible for generating them is the paradigmatic move in all of the

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sciences. This process undoubtedly necessitates the construction of concepts, but observation and empirical testing must also take place throughout the process. In the end all scientific concepts must be constructed a posteriori from a range of materials that must include empirical data. This is why Marx must initially take his leave from empirical reality, only to come back with concepts that are capable of unearthing the ‘real’ from within the forms in which it is experienced (Sayer, 1979). In his theory of commodity fetishism, Marx is arguing not only that there is a rupture between the interior of capitalist society and the way it is experienced, but that this is absolutely fundamental to the functioning of this structure (Geras, 1971). Capitalism necessarily appears as ‘other than it is’ and so the categories of experience are directly related to the deceptive selfpresentation of the material relations. Given this materialist foundation, Marx must employ a distinction between essence/appearance in order to move beyond the surface of capitalist society. Indeed, Sayer is right when he argues that this is ‘the only way to reconcile his assertion of the falsity of ideology with his materialist theory of consciousness’ (Sayer, 1979, p. 31). Marx’s procedure undoubtedly requires the construction of concepts (labour-power, surplus value) that allow him to complete his scientific analysis. However in the end we must necessarily ‘leave the concept’ as the process is one of elucidating one form of (phenomenal) reality by disclosing its ‘foundation in, and determination by another’ (Geras, 1971, p. 77). Against this Althusser argues that ‘leaving the concept’ is precisely what we cannot do, and when he is faced with accounting for Marx’s insistence on a depth ontology, he shows the extent of his idealism. In his search for a concept with which to think the remarkable reality of the effectivity of a structure on its elements, Marx often slipped into the really almost inevitable use of the classical opposition between essence and phenomenon, adopting its ambiguities by force rather than merit, and transposing the epistemological difference between the knowledge of a reality and that reality itself into reality in the form of the ‘inside and the outside’ of the real …. In … truth interiority is nothing but the ‘concept’… not the real interior, but knowledge of it. If this is true, the reality that Marx studies can no longer be presented as a two-level reality, inside and outside …. If the inside is the concept, the outside can only be the specification of the concept, exactly as the effects of the structure … can only be the existence of the structure itself. (2006, pp. 190
191, original emphasis)

Here we find all of the epistemological errors on full display, as Althusser’s (mis)specification of empiricism has left him arguing that the ‘outside of the concept’ is the ‘concept itself’. Taken literally, Althusser’s assertion that any ‘depth’ is restricted to epistemology is obviously correct.

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There is no real sense of looking behind the nature of actually existing social relations. However, for Marx it is also true, that it is the ontological reality of capitalism that necessitates his depth epistemology. In Capital Volume III, he writes that ‘all science would be superfluous if the outward appearance and the essence of things directly coincided’ (1981a, p. 956). This is due to the fact that there is a disjuncture in the way that actually existing social relations present themselves from the way that they actually function under capitalism. The object of knowledge is a result because it is mediated by human theoretical practice, but the real is, for all this, the only authentic object of scientific knowledge (Larrain, 1979, p. 198). In other words the conceptual object of knowledge is merely the vehicle to take us to a deeper understanding of the real object of knowledge and Marx was explicit in arguing that concept formation must be done a posteriori on the basis of real world social relations: I do not start from ‘concepts’… what I start from is the simplest social form in which the labour product is represented in contemporary society, and this is the commodity. I analyze this, and indeed, first in the form in which it appears […] thus it is not I who divide ‘value’ into use-value and exchange value as oppositions into which the abstraction value divides itself, but the concrete social form of the labour product. (Marx in Sayer, 1979, p. 32)

Returning finally to the ‘problem of knowledge’, we can now see that Marx must presuppose a relation of adequacy (correspondence) between his scientific categories and the mechanisms of the real world (without this his theory of commodity fetishism is unintelligible) and so his is a materialist solution to the problem of cognitive adequacy. With this general epistemological criterion in place, Althusser’s assertion that scientificity is determined within each science becomes permissible, as the specificity of the objects of investigation entails the specificity of its methods of validation. There is no single criterion of scientific truth. But the real world remains the ultimate arbiter of scientificity, with cognitive adequacy always relating to the ability of internal criteria to appropriate the ‘real in thought’ (Collier, 1979). Failing to sufficiently theorise the ‘real concrete’, this option is no longer open to Althusser, and because he (rightly) insists on the active construction of scientific knowledge, the procedures of this practice are all that are ultimately left to validate it. Like Bachelard, Althusser is in danger of registering a conventional account of scientific development, in which ‘problematics’ become little more than human constructs, reproduced on the basis of antecedent knowledge in a never ending cycle. That he never quite succumbs to this can be seen in his discussion of the

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limitations of historical epistemology, and yet without continuous empirical observations, Althusser is left with theoretical difficulties that become insurmountable.37

Science and the Social Formation (Althusser’s Lack of a Critical Sociology) The primary advance made by post-empiricist philosophy was not associated with its epistemology, but with its sociology. Once the reality of scientific discontinuity seeped into the philosophical consciousness, change became inextricably linked with the human creativity of knowledgeable scientists. Given its epistemological assumptions, positivism implicitly works with a pre-critical and individualistic sociology (the isolated observer), which, in turn, is responsible for its axiological distinction between ‘objective facts’ and ‘subjective values’.38 Against this, postempiricism argued that science was a practice like any other, with activities that should be properly investigated. Bachelard was in the vanguard of this ‘post-empiricist turn’ and Althusserianism was, as we have seen, decisively influenced by his notion that science is constructed in the midst of a revolutionary rupture. One would have thought that this inheritance would have left Althusser well placed to have elaborated the socio-historical conditions of the ‘epistemological break’, and yet it is the adoption of the Bachelardian epistemology that means he struggles to adopt the attendant historicity. Without an adequate theorisation of the ‘real concrete’, the foregrounding of the historicity of knowledge can only be interpreted in conventionalist terms. According to Collier (1989) this represents a ‘category mistake’, as the creation of knowledge becomes elided with the creation of the object of knowledge. Paradigm shifts are thus a sign of a general shift in the conventions of the scientific community, and the ‘epistemological break’ becomes just that
a break exclusively within knowledge precipitated by a recasting of the secondary objects of the discipline itself (Generalities II). To avoid this, Althusser must limit his borrowings to the programmatic elements of Bachelardian philosophy, with the principle benefit of historical epistemology
its critical sociology
being left behind.39 We saw earlier that Althusser mishandles the relations of experience and reality on the basis of a failure to adequately ground the rationality of the sciences. In the tradition of positivist analysis, science must be above the taint of all extraneous influence, and so the ability to theorise the links to non-theoretical influences

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becomes all but impossible. If Althusser had adopted a realist criterion for scientificity, the recasting of knowledge could have been theorised as a move, however uneven, towards reality. Once this was appreciated extra-theoretical influences would immediately shift from threats into important markers in the account of scientific progress and development. As it was however, the emergence of Marxism could only be theorised as a break within the epistemological status of its problematic (i.e., idealistically), whilst any analysis of class struggle or the shifts in Marx’s political perspective were pushed into the background.40 Having lost the ability to theorise the links between the sciences, Althusser now loses the ability to theorise what separates them, as an anxiety to secure the scientific status of Marxism means that he actually misses what makes it unique. Like practitioners in the other sciences, Marx works from observations to underlying structural relationships, using inductive analysis, retroductive inference and deductive concept development. Scientificity is reached in this way across the sciences. However the nature of the structures that Marx uncovers means that his analysis has explosive consequences that makes it unique. Geras captures this well when writing that ‘Marxist science cannot be like any of the others, as its knowledges are anathema to the class positions of the bourgeoisie?’ (1972, p. 85). By disclosing the mechanisms of class exploitation, Marx’s concepts have both a cognitive function in exposing this reality, and a critical one in condemning it. If ‘they fail in their cognitive function, they are useless in their critical ones’ (Geras, 1971, p. 85), and yet it is precisely because they are constructed from a critical perspective that their cognitive function can be developed. Marxism emerged from the unique conjunction of scientific training and proletarian politics. Marx and Engels actually had to abandon their class origins in order to develop their scientific analysis, as it was only from the perspective of the proletariat (exploited) that capitalist society could be truly understood.41 Unfortunately much of this is lost on Althusser as a form of positivist theoreticism takes centre stage in the early writings.

Science and the ‘Structured Totality’ (Althusser’s Ahistorical Structuralism) Earlier we suggested that of the two interventions made by Althusser, the confrontation with Hegel was by far the most successful. Althusser’s conception of the ‘structured totality’ was delivered through a critical

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contrast with Hegelian expressivism, and the results of this enquiry were of lasting value in reclaiming for Marxism the vital importance of structural complexity. According to Lipietz, the essays collected in For Marx ‘helped to disengage French Marxism from the … determinism … inherited from the Stalinist period’ (1993, p. 99), as almost the entire generation of May 68 came to Marxism through the Althusserian school. Conceiving historical processes as contradictory and overdetermined was particularly fecund in moving towards a more nuanced understanding of capitalist social relations and the conception of the conjuncture provided these newly converted activists with theoretical tools to ‘think’ the interventions that would help to facilitate socialist revolution. Yet however much For Marx delivered for these activists, the complexity of the current conjuncture was soon to be absent in Althusser’s writings. In Reading Capital Althusser argues that Marx’s analysis of bourgeois society is paradoxical, as it is both an historical account of the development of capitalism and a scientific analysis of its underlying structure. Commentators have generally seized on the first of the analyses, but this elides the reality that Marx illuminates society in two discrete senses; viz. society as historical result and society as society (2006, p. 65). Althusser accepts that capitalism is the result of a determinate historical sequence. However his insistence on the a priori nature of the central concepts of historical materialism means that this historical analysis cannot be the source of Marx’s scientificity. Behind every form of social formation there are a limited number of structural relations articulated in a determinate arrangement. Once we pierce the veil of empiricism we find that society actually ‘hangs together’ due to the casual relations of its component elements. Marx discovered the ‘continent of history’, but key to its scientificity is the concept of structure, and in consequence, architectonic function rather than historical evolution becomes paramount (Glucksmann, 1972). Althusser writes that society is not merely a ‘heap of sand’ as it persists as an ‘articulated combination’ (Gliederung) through its society effect. Underlying the surface contingencies of everyday life, Marx has exposed that capitalism (like every mode of production) is a relatively fixed system of production, and according to Althusser this is the real scientific achievement: .

Marxism is not a historicism: since the Marxist concept of history depends on the principle of the variation of forms of ‘combination’…. By combining or inter-relating different elements
labour power, direct labourers, object of production, instruments of production etc
we shall reach a definition of the different modes of production which have existed and can exist in human history. (Althusser & Balibar, 2006, pp. 176
77)

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The ‘society effect’ exists within the causal relations that sustain this combination of structural components and Capital is the only theoretical object that can adequately theorise this mechanism in the capitalist mode of production (ibid., p. 66). In Marx’s Capital, the logic of presentation is undoubtedly deductive. The systematicity of the narrative is paramount, with internal consistency being crucially important. Indeed Marx himself accepts that from a certain vantage point the analysis can often seem little more than a priori concept building. However, the process of discovery involved a monumental amount of observational effort. In order to develop concepts that can move from the surface of capitalism to its underlying causal relations, Marx had to rely on the initial work of Smith and Ricardo alongside persistent observation and empirical evidence. The central relation between capital and wage labour is deduced on the basis of an analysis of the property relations of bourgeois society. This is predominately a work of theory. However once the central conflict has been developed, Marx works tirelessly to defend his position. The length of the working day, the factory inspections and the methods that capitalists will adopt to sustain profitable exploitation are a series of empirical checks which help to corroborate the theoretical innovation. This is how Marx goes about reaching his aim of scientificity. Yet much of this is lost to Althusser as he isolates the productive process of concept development. Without a sufficient sense of empirical discovery, Althusser can do little beyond gesturing at the systematicity of the respective systems, whilst rejecting all forms of empiricist grounding. Marx’s theory of commodity fetishism is supposedly paradigmatic of an analysis that ‘mercilessly distinguishes’ the ‘society effect’ from the ‘historical result’ as it hones in on the ‘very effects that constitute the concrete … relation of the individuals to society as a society’ (ibid.). The effects of a structure are dispersed through its combinatory elements as the mechanism of cognitive appropriation is merely a special case of the appropriation of the real world by the different practices within the social totality (ibid.). Like all social practices, knowledge is a structured process that ‘hangs together’ through an effect born of the structural relations of the problematic. Every practice sustains its specific effect through the causal relations of its component parts. This gives us the first glimpse of our elusive mechanism, as the articulation of thought to the other social practices rests exclusively on their common structures (Glucksmann, 1972). Glucksmann writes that we are effectively obliged to posit a ‘correspondence of knowledge’, as the ‘society effect’ can only be known in the ‘knowledge effect’ and, reciprocally, the ‘knowledge effect’ can only be known in the knowledge of the ‘society effect’ (Glucksmann, 1972, p. 69).42

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As before, the relationship cannot be direct, as the one is not (strictly speaking) the object of the other, and so in order to understand the real as the ‘absolute reference point’ for theory without it actually being its object, Glucksmann contends, that we are invited to presuppose some secret correspondence that is everywhere present but never theorised (ibid.). Specifically, this entails a form of Kantianism in which the kinship of thought and being is sustained on the basis of a transcendental correlation between the categories of thought and the elements of reality (ibid.). In other words, the elementary categories of all productions (real and theoretical) are isomorphic, and the articulation of production determines both the order of knowledge and the order of the ‘real’. According to Glucksmann: If the logic of all productions can be read ‘through’ theoretical productions, it is because a kinship is supposed to exist between them which should be visible in theoretical production. Conversely, if the reality of all production can be determined ‘in the last instance’ by material (economic) production, this is again because of the kinship of all productions, this time in their material aspect. (Glucksmann, 1972, p. 74)

Theoretical practice can appropriate the ‘real in thought’ because ‘thought’ and ‘reality’ have identical structures. Moreover, as the ‘Theory’ of theoretical structures, Marxist philosophy can now lay out ‘the essence of theoretical practice in general, through it the essence of practice in general, and through it the essence of the transformations, of the development of things in general’ (1996, p. 169). Dialectical materialism is thus massively extended from an underlabourer for a single science to the master key for all reality
as Althusser posits a ‘single theoretical activity … whose generality can be traced in every domain’ (Glucksmann, 1972, p. 71). This takes Althusser into the realms of ‘metaphysical speculation’, for as Callinicos quite rightly points out ‘there is no earthly reason why the structures of any social practice should tell us anything about the structures of the natural world, beyond its amenability to being worked upon by human labour’ (1976, p. 76). Moreover, by positing a homology between ‘conceptual structures’ and the ‘structures of the real’, Althusser falls into idealism, as reality becomes identified with the thought objects that are constructed to unpack it. According to Collier, Althusser is guilty of illegitimately separating the practices within the social totality, when in fact most practices are complex and irreducible. Specifically, he argues that social practices are multiply determined and that in attempting to decompose them into discrete levels, Althusser falls foul of a fallacy of misplaced concreteness as epistemological concepts are being fallaciously used to stand in for ontological reality (1989,

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p. 27). Economic production, to take one example, is not merely the transformation of raw materials into use-values, but actually presupposes all manner of ideological and political relations such as the family, the education system, and the legal framework to even get off the ground (Joseph & Kennedy, 2000). Similarly, scientific practices are related to the empirical world through observations and empirical validation
and any attempt to isolate these component structures is a recipe for disaster (as concepts inevitably become elided with external reality). This solution to the ‘problem of knowledge’ is therefore every bit as idealist as Althusser’s earlier one43 and
as a means to making sense of this
it is useful to retrace our steps back into the Althusserian circle. Rejecting the relativism of historical epistemology, Althusser was once again forced to ‘pose the epistemological question from within the Marxist problematic’ (1996, p. 38), and he once again found this question insoluble without the importation of a bourgeois ideology. According to Lipietz, the Althusserian school was resolutely inscribed in what was to them a purely scientific movement corresponding to the emergence in the French university, of a ‘new scientific continent’, dominated by structuralism (1993, p. 102).44 Having relied so heavily on French epistemology for its programmatic elements, Althusserianism was ultimately to rely on linguistic structuralism for its scientificity, and as we shall soon see, it was this reliance that eventually routed the project from the inside out (Anderson, 1984).

Science and Non-Science (Althusser’s Slide into Post-Structuralism) It is one of the peculiarities of the emergence of ‘structuralism’ that most of its leading exponents quickly dissociated themselves from its influence. Be that as it may, the influence of structuralism on Reading Capital is undeniable, and the reasons for this are readily discernible. Incorporating historicity had led (without an adequate theorisation of the real) to the problem of epistemological relativism. By contrast, structuralism promised to ground the projects scientificity in a move away from history completely. Structuralism provided Althusser with the perfect ahistorical counterweight in the form of a synchronic architectonics. Opting for synchronic analysis foregrounds the sets of structural invariants at the heart of every social totality, and like his linguistic counterparts, Althusser is staking his analysis on relationality as the ultimate arbiter of systematic order (Smith, 1984). Moreover, just as langue supersedes parole in linguistic analysis, so

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synchronicity must predominate in any scientific analysis of structural complexity: The synchronic is … nothing but the conception of the specific relations that exist between the different elements and the different structures of the structure of the whole; it is the knowledge of the relations of dependence and articulation which make it an organic whole, a system. The synchronic is eternity in Spinoza’s sense, or the adequate knowledge of a complex object by the adequate knowledge of its complexity. (2006, p. 107) (emphasis in original)

This allows the transcendental correlation noted earlier, as the complexity of the conceptual totality is isomorphic with
and can therefore know
the complexity of reality. According to Althusser and Balibar, Marx’s real genius lay in discovering that social formations contain their own unique combinatory articulation (Verbindung); and under the influence of linguistic structuralism they believed that a programme could be initiated to bring the promise of Marxism to fruition.45 However, as Anderson (1984) quite rightly points out, it was just this structuralist reliance that eventually routed French Marxism from the inside out, as a system of signs replaced the materialist emphasis on structural complexity. Structural linguistics argues that all meaning is given within a system of signs that can be decomposed into signifier (sound) and signified (concept). There is no necessary reason why a given sound should refer to a given concept, and so the whole analysis moves from the arbitrary nature of linguistic identity (between signifier and signified) to the overarching system that makes this intelligible. Linguistic identity is solely intelligible within a system of difference and because of this the external referents are generally bracketed or discarded completely. Having imported this structuralist infrastructure into Marxism, it was incumbent on the Althusserians to give a coherent account of the ‘mechanism of appropriation’, as without this it was a short step into the ‘postist world’46 of unrestrained discourse. Starting in epistemology immediately foregrounds the need to ensure some correspondence with external reality, and having failed to deliver this, many of Althusser’s erstwhile followers took this as a ‘sign’ to abandon ‘objective knowledge’ as a legitimate intellectual pursuit (Benton, 1984, p. 179). Benton writes that ‘almost universally Althusser’s one time followers have taken the … conventionalist route out of Althusser’s epistemological dilemma’, and it is not hard to see why given that ‘both structuralism and historical epistemology, when rendered self-consistent, generate pressure towards relativism’ (ibid.). Althusser had argued for a relation of articulation between the respective systems of

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knowledge and the world, and in the hands of the post-structuralists, it became all too easy to disarticulate such knowledge into a free floating realm of discourse. Eagleton represents this as the complete imperialisation of social structure by discourse analysis (1985), as an ambiguity towards ‘reality’ allowed the post-structuralists to immerse themselves in any number of ‘language games’ replete with relativistic signifiers and ‘epistemological breaks’
mostly from Marxism. Taking stock, we can see that all of Althusserianism’s most pressing problems stem from the original failure to develop an effective position in the philosophy of science. Althusser attempted to give a cast iron defence of Marxism from within itself, and when this proved impossible, he turned to bourgeois frameworks that were inimical to the idea of objective knowledge. This left the Althusserian project ill-fated from the outset, and it remains to highlight one last issue relating to the ‘ideological field’ in which the problematic was developed. Althusser has claimed that Understanding an ideological argument implies … knowledge of the ideological field … [And] knowledge of the ideological field itself presupposes knowledge of the problematics compounded or opposed in it. (1996, p. 70 emphases in original)

As a Marxism born in the French University system, Althusserianism developed against the backdrop of an ideological field that was centrally preoccupied with epistemological questions. According to Anderson (1976), Althusserianism was one species of a ‘Western Marxism’ that developed in the wake of a series of defeats for the Western working class. As the fortunes of the class deteriorated, ‘Western Marxism’ ‘developed within an ever increasing scission between socialist theory and working class practice’, becoming distinctly academic and preoccupied with philosophical questions (1976, p. 55). Being dominated by professional philosophers it was perhaps inevitable that epistemology would predominate, and Althusserianism was both a reaction against humanist (and historicist) variants of the ‘philosophical turn’, and a continuation of it. Althusser too dwelt exclusively on epistemological terrain, and while there were certainly advances in terms of the re-appropriation of the importance of science, this could never be substantiated without a realist philosophy of science, and a shift in conceptual framework from epistemology to ontology. This is exactly the strategy adopted by Roy Bhaskar and Andrew Collier, and it is a central claim of this chapter that it was only by shifting the terrain from epistemology to ontology that the proper role for philosophy could be elaborated. Marx and Engels famously wrote that ‘when reality is depicted philosophy as an independent body of knowledge loses its

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medium of existence’ (1972, p. 48, our emphasis). Science is the only practice that can accurately capture the ‘real in thought’ and so abstract philosophical schemas must be replaced by sciences that are underpinned by a dependent philosophy. To see how critical realism can fulfil the two interventions that Althusser originally set himself, we turn now to the ontological interventions of Roy Bhaskar and Andrew Collier.

BHASKAR’S ONTOLOGICAL SOLUTIONS Bhaskar’s Ontological Interrogation of the Sciences At the outset of this chapter we argued that Althusserianism never developed a novel position within the philosophy of science. Instead, Bachelardian philosophy was uncritically incorporated as the programmatic starting point. Bachelard provides Althusser with his central organising concepts, his orientation and his theoretical relevance. However the costs were debilitating as the promise of a defence of Marxist materialism slide irrevocably into idealism. This is Althusserianism’s failure and it is the failure embodied in the ‘postist turn’ in social criticism. This unfortunate legacy should not, however, blind us to the remaining successes of the Althusserian intervention. Althusser’s critique moved Western Marxism beyond an unfruitful dichotomy between the simplistic dogmatism of the Third International (based on a legacy from the Second International) on the one hand, and a largely Hegelian and humanistic historicism on the other. This cleared the ground to repose the question of the scientific status of the Marxian tradition. This question has been taken up and carried forward by critical realism. In this context Althusser’s structuralism has proved to have an ambiguous legacy. Linguistic structuralism is structural precisely because the arbitrary relation of signifier and the signified means that intelligibility can only be found in the interrelation of the signifiers. This could only reinforce the slide into an ungrounded and conventionally arbitrary post-structuralism. Nevertheless the Althusserian structured totality is also a precursor of critical realism’s ontologically grounded concept of underlying social structures. As a scientific practice, Marxism is merely one among others, and the philosophy that helps to legitimate it must take its starting point from the general contours of the physical world. It is the great merit of Roy Bhaskar to have recognised this in his seminal work in the philosophy of natural science.47 His ‘critical realist’ project starts from

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the same premises as Althusserianism in as much as it seeks to utilise philosophy to defend the sciences in order to aid in the self-emancipation of the working class.48 However unlike those philosophers who self-consciously begin within the Marxist framework, Bhaskar recognises the importance of establishing general criteria for scientificity by virtue of a philosophical ontology.49 Rather than starting within the confines of one particular science, Bhaskar starts from the history of the sciences more generally, and this allows him some crucial advantages when it comes to developing his position. In the first place, Bhaskar can draw lessons from those sciences that have been most successful at appropriating the ‘real in thought’. Natural science has been spectacularly successful in uncovering knowledge that can be used to change the world, and Bhaskar is sufficiently impressed by the application of natural scientific knowledge to take these sciences as his point of departure. Bhaskar accordingly grounds his argument in the history and practices of the experimental sciences.50 Having witnessed the idealist tendencies of starting within epistemology, Bhaskar is careful to ensure that his own position is resolutely materialist, with being taking precedence over thought. From this proposition he derives the argument that ontological enquiry must therefore come before epistemology. This leads immediately towards more ‘realist’ ground, as Bhaskar is adamant that scientific knowledge must be premised on how the world actually is if its (scientific) results are be successful in subsequently transforming this reality.51 Someone who denies the achievements of the sciences will be unconvinced by the Bhaskarian procedure. However once one accepts these premises, Bhaskar argues that the world must be a certain way, and a first (transcendental) defence of the adequacy of science has therefore been established: The status of propositions in ontology may be described by the following formula: It is not necessary that science occurs. But given that it does, it is necessary that the world is a certain way. It is contingent that the world is such that science is possible. And, given that it is possible, it is contingent upon the satisfaction of certain social conditions that science in fact occurs. But given that science does or could occur, the world must be a certain way. Thus, the transcendental realist asserts, that the world is structured and differentiated can be established by philosophical argument. (Bhaskar, 2008, p. 29)

With science as his premise Bhaskar can hardly establish his ontology independently of the latter’s history. However he is adamant that this reverses the real order of dependency, as it is obviously the structure of the world that makes
at least the possibility of
science possible (ibid., p. 30). In line with the Althusserian strategy, Bhaskar moves from science

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to philosophy and back again. However, the crucial distinction comes in the foregrounding of ontology, as Bhaskar moves from the existence of the sciences in general to a philosophical ontology of a complexly structured reality and back to a conception of just how it is that human beings are able to appropriate this complex reality in thought and in action. Marx famously writes that all ‘mysticism finds its rational solution in human practice’52 and it is in the analysis of experimental practice that Bhaskar’s most important insights are developed. Bhaskar’s ‘Bachelardian’ Intervention
(1) Scientific Discontinuity A striking feature of the past 250 years has been the rate of increase in our understanding of the natural environment. Under the impetus of capitalist competition, human beings have transformed the face of the planet. Propelled by technical knowledge paradigmatically gleaned from scientific experiments, capitalism has changed the nature of every aspect of human living. In this applied respect science and technology have been monistically progressive, and yet in its pure form, the history of science has exhibited significant discontinuity punctuated by periods of revolutionary transformation. We saw earlier how an entire tradition emerged within the philosophy of science which (mis)took this discontinuity as a sign that science was exhausted by the creative interventions of the scientists themselves. On this reading, mass changes or paradigm shifts were driven by the conventions of the scientific community and the shift in problematic meant that the resulting knowledge was literally incommensurable with that which had gone before. This narrative, most closely associated with Kuhn’s (1996) The Structure of Scientific Revolutions was an important source for Bhaskar’s work, in-so-far as it helped to recover the human element within scientific discovery. However Bhaskar married this ‘sociological literature’ with Harre´’s (1970) anti-deductivist ontology, to give an account of scientific discovery that incorporated the creativity of the scientist without presupposing that the resulting knowledge was merely conventional. Bhaskar’s genius was to rigorously interrogate the dominant interpretations of scientific experiment and scientific discontinuity before joining the results in a ‘realist theory of science’. From the conventionalists, Bhaskar accepts that science is a ‘produced means of production’, as sets of theories and conceptual frameworks are developed on the basis of antecedent material causes. This recognises that science is a human practice and allows the conceptual space to accept that knowledge is fallible and revisable. Yet it is

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surely only revisable on the basis that something exists outside its borders. After all, how are we to understand the need for change without such an intransitive benchmark? Bhaskar argues that scientific discontinuity can only be rendered intelligible, if we carefully distinguish between the unchanging objects that exist independently of science, and the changing cognitive objects that are produced within the process itself (Bhaskar, 1975, p. 32). These are termed respectively the intransitive and transitive elements of a science, with Bhaskar referring to their absolute irreducibility in the following terms: Scientists try to discover the reasons for things and events patterns and processes, sequences and structures. To understand how they do so one needs both a concept of the transitive process of knowledge production and a concept of the intransitive objects of the knowledge they produce: the real mechanisms that generate the actual phenomena of the world. (Bhaskar, 2008, p. 62)

Taking the Kuhnian example, Bhaskar argues that ‘paradigm shifts’ cannot literally be incommensurable, as historically they occur as resolutions to conflicts over adequacy (they replace each other) and this implies a real domain over which they clash (Bhaskar, 1975, p. 38). Einstein is most closely associated with Newton (as opposed to say Darwin) precisely because he was challenging the former’s interpretations of real world mechanisms. This is also true in the case of Marx and Ricardo
and so it is only by foregrounding the ‘real’ that the historical development of the sciences can be sustained in a rationalistic/materialistic way. Specifically this means understanding the historical trajectory of the sciences as punctuated by upheavals which are necessitated in order to attain an ever deeper awareness of the contours of the real material world (ibid., p. 47). Knowledge develops historically, but not in ad hoc fashion. Rather, its historical development signifies an ever deeper appropriation of the ‘real in thought’ as science moves asymptotically towards the essential structures of its domain of enquiry.

Bhaskar’s ‘Bachelardian’ Intervention
(2) The Interrogation of Experimentation Turning next to the dominant interpretation of experimentation, Bhaskar argues that the ‘Humean’ legacy is doubly pernicious, as its hegemony within positivism means that science is generally viewed as the unproblematic observing and recording of empirical events
with experiments

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being seen as rare situations in which empirical laws are put into effect (Lawson, 1999). Bhaskar argues that positivist philosophy is woefully inadequate as it can ‘sustain neither the idea of an independent reality nor the idea of a socially produced science’ (1989, p. 51). It was the latter element that was seized upon by the historical epistemologists. Yet for Bhaskar, the former issue is the bigger problem which he roots in the radical scepticism of Humean empiricism.53 For David Hume the ‘problem of knowledge’ could only be resolved by expunging all metaphysics from the lexicon of knowledge (Hume, 1978). Individual sense perceptions were all that escaped his reductionist programme with the ‘problem of knowledge’ ultimately transcended by fusing the world with knowledge, before collapsing this knowledge into sensory perceptions. From this perspective the world becomes conflated with whatever we can experience. Bhaskar argues that this leads Hume into an ‘epistemic fallacy’ as experience can only become ‘certain’ by being one with the reality it observes. The desired effect is the de-problematisation of ‘empirical knowledge’, but the results of this are severely debilitating, as Hume is forced to work with an atomistic ontology completely exhausted by contingently related events. In line with his scepticism, Hume banishes causation from the ‘way of acting of things’ into the experiential realm of the observer. One simply cannot experience the causal connection, and so Hume’s phenomenalism dictates that the world must be made up of events that are contingently related, at the same time as his positivism dictates that there is absolute regularity in the way that these events are experienced. Scientific universality is thus equated with constant conjunctions of empirical events and science becomes preoccupied with finding and recording these conjunctions in every area of human experience. This is clearly problematic however. For once we juxtapose such a weak ontology with such a strict criterion for scientificity, we would be entitled to ask why contingent connections should ever be constant. This, in turn, leads to all manner of difficulties as one is never sure exactly whether scientific laws are spontaneously available
in which case there is literally no need for experimentation. Or, alternatively, whether they are rarely (if ever) available
in which case the need for experimentation is upheld, but only under the absurd assumption that casual laws are actually generated by human interventions. In order to make sense of the need for experimentation, Bhaskar argues that we must reject the positivist identity of causal laws with event regularities, as this is to illegitimately collapse two levels of reality onto the same ontological plane. The fact that constant conjunctions are almost never

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spontaneously available, is illustrated by the very need for, and historical significance of, experimentation (for what is an experiment, but the artificial creation of a rare situation wherein a constant conjunction is made to occur). In the open environment (outside experimental control) there is a whole host of reasons (countervailing tendencies, potentials unrealised, etc.) why we will not be able to experience events that are constantly conjoined. And yet it is absolutely central to the intelligibility of scientific experiment that ‘experimental knowledge’ is useful in the outside world. If scientific knowledge was radically altered when controlled conditions were relaxed, experimentation would become less than trivial. However as Bhaskar points out, not only do we frequently apply this scientific knowledge, but the whole basis of experimentation presupposes that we will do so (Bhaskar, 1998, p. 9, 2008, p. 3). Despite the rarity of constant conjunctions, the intelligibility of experiments shows that there are laws governing the behaviour of ‘things’ (generative mechanisms, structures, social relations), but it is only under the closed conditions of experimentation that there will be a one to one relationship between these causal laws and the sequence of events that they conjointly determine (ibid.). Bhaskar thus argues that the world is characterised by ontological depth and that the scientific experiment is a human intervention to produce the conditions for a correspondence between causal laws and sequences of events. Necessity resides not in the events on the surface of society, but in the underlying structures of complex entities, and it follows that science is not primarily concerned with empirical regularities (this would only frustrate the entire exercise), but with moving retroductively from the flux of the surface to the relative uniformity of the underlying structures. According to Bhaskar: Only if causal laws persist … can the idea of universality of a known law be sustained. And only if they have a reality distinct from that of events can the assumption of a natural necessity be justified. On this view laws are not empirical statements, but statements about the forms of activity characteristic of the things of the world. And their necessity is that of a natural connection, not that of a human rule. There is a distinction between the real structures and mechanisms of the world and the actual patterns of events that they generate. And this distinction in turn justifies the more familiar one between necessary and accidental sequences. (2008, p. 46)

Science is dedicated to uncovering necessity in the ‘way of acting of things’ and experimentation is absolutely central in allowing us to identify a world of proclivity (at the level of structure) underlying the contingency in the flux of experience. Experimentation is not merely central to scientificity; it is the central mechanism of cognitive appropriation. This

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explains why Bhaskar spent so much energy deciphering experimental practices as this is the surest route towards a coherent epistemology in line with the ‘materialist thesis of objectivity’ (Collier, 1979). Criteria for scientificity must be developed, and so Bhaskar begins his analysis within the most important practices of the natural sciences. Once one accepts that non-trivial knowledge can be gleaned from these investigations, provisional criteria for scientificity begin to emerge, as any (natural) science worthy of the name must remain faithful to a depth ontology of structural complexity. Theoretical practices that eschew these elements must be looked upon with suspicion and so critical realism now has the minimum epistemological requirements for defining scientificity. With this, Bhaskar has begun to address the second of Althusser’s two interventions (against encroaching ideologies) as ideologies paradigmatically fail to adequately theorise the proper methods of cognitive appropriation. This is true of both conventionalist and positivist epistemologies, and having unearthed important insights on the natural sciences, Bhaskar’s next move is to investigate whether his philosophical ontology is applicable in the social domain. Like every other level of reality Bhaskar argues that society is characterised by (objective) structured relations that make it amenable to a naturalist investigation. Social science works retroductively to uncover the structures in its object of enquiry. And so long as the proper qualifications are made for the existence of ‘intentionality’, Bhaskar believes that his realist philosophy can be made to cover the sciences in the social and the psychological domains (Bhaskar, 1998).

Ontological Stratification and Social Scientific Practices So far we have argued that it is the superiority of Bhaskar’s starting point that allowed him to deliver important results for a philosophy of natural science. Triangulating from the most important practices of the sciences to their general history, Bhaskar has developed a cogent account of scientific discovery. Meanwhile, his analysis of experimentation has also delivered a coherent understanding of a definitive mechanism of cognitive appropriation. To sustain the intelligibility of experiment the world must be stratified and the paradigmatic move within the (natural) sciences is necessarily from manifest phenomena to the underlying causal structures that are responsible for their generation (retroduction). Science is never content to ‘rest on its laurels’ and Bhaskar claims that historically, progress has always taken place in a retroductive spiral,

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wherein as soon as a specific mechanism is uncovered, the search for further explanation immediately commences (2008, p. 169). This is clearly evident in the continual discovery of ever smaller sub-atomic particles, and for Bhaskar this implies an important level of material continuity running from the structures of the physico-chemical right the way through to the structures of society (Craven, 2002). Physical reality is temporally and ontologically prior to society, as the latter is made up of (biological) organisms that can exist only as complex matter. As material entities (cells, molecules, etc.), humans do not cease to obey natural laws once they are (partly) governed by social ones, and this suggests that the laws of physics will partly explain the laws of society (Collier, 1989). Yet having established this ontological hierarchy, science has been unable to establish the redundancy of the higher levels in favour of the lower ones (Craven, 2002). Moreover, there has never been a route from even the most developed lower stratum science into a higher one (e.g., one could never have made Freud’s discoveries merely by understanding the make-up of our biological need to reproduce) (Collier, 1989). Higher level sciences are necessary precisely because they investigate ontological layers irreducible to their component elements, and the proper investigation of any entity will only be achieved when the full extent of its specificity is pursued at whatever level it is discovered (Soper, 1979). The plurality of the sciences is not a function of our cognitive abilities, but an ontological necessity to uncover the essential structures of our world. For realists it is this interaction of ontological continuity and discontinuity that renders the need for a number of sciences intelligible. Working on the basis that we need to know the ‘nature of a thing’ in order to know whether it can be studied scientifically, Bhaskar next inquires as to the possibility of naturalism, asking what kind of a thing ‘society’ is, and whether it has any properties (analogous to natural ones), that will allow it to become a possible object of knowledge for us (1998, p. 13). Bhaskar argues that the proper scientific distinction is not between human beings and everything else, but between the different types of structures making up the specific objects under investigation. Like other complex entities, societies are ensembles of powers and tendencies (rooted in social relations) with the ability to bring about changes in the real material world. According to Bhaskar society pre-exists the individual and provides him/her with all of the conditions (material causes) for their intentional actions. Society is therefore ‘real’ on the basis of its causal efficacy, with the relationship between the structures of society and those of the individual being conceptualised along the lines of

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the Aristotelian sculptress who fashions products out of pre-existing materials (ibid., p. 34). Society is articulated as a complex ‘structure of structures’ and the job of the social scientist is to move retroductively from the flux of everyday activity to the underlying social relations that give it form and developmental potential. Scientific explanation is possible precisely because we have relatively enduring (and discoverable) social structures which represent appropriate analogues for the natural material causes analysed in experimentation. Bhaskar has now argued forcefully that while the social sciences differ from the natural sciences in the nature of their object, each of these practices can maintain a level of scientificity by invoking a critical realist ontology and working retroductively from given phenomena to underlying structured relationships. Being differentiated in their objects, the sciences are essentially unified in their methods (1998, p. 18) and so Bhaskar’s realist criteria for scientificity can now be tentatively extended to those practices that lack their own method of cognitive appropriation. In the social realm, Marx’s mature work in political economy is taken by Bhaskar as paradigmatic of scientific endeavour. Value relations between commodity owners hold the keys to the relations on the surface of capitalism. This much Marx takes from the work of Smith and Ricardo. However, he works creatively from the observations of capitalism to the sorts of relations that must be in operation. Smith’s great achievement was to root his theory in the self-interested relations between commodity producers. His great weakness was to fail to apply this analysis consistently to the central relation between capital and wage labour. Ricardo is much better in this regard and yet the radical nature of his economic deductions left his categories unfit to explain the actual workings/observations of a capitalist economy. Marx takes these observations extremely seriously, working to transform the concepts of bourgeois political economy into more scientifically adequate ones. At the start of his analysis, Marx works in what seems like an overwhelmingly deductive paradigm. Concepts seem to flow in a sequence with little pause for empirical reflection. Retroduction from all disturbing influences allows Marx to commence his investigations, but over the course of his analysis (particularly in Volume III) concepts are made to fit more readily with empirical observations/categories. Through the power of abstraction Marx moves into the depths of capitalism in order to lay out the nature of its mechanisms. However once he establishes these relations in their pure/essential form, he moves back to the surfaces of capitalist society.

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All of this is not only commensurate with the scientific method in critical realism; it was Marx’s practice that actually helped Bhaskar to develop it. Like the natural scientists, Marx is effectively controlling his environment (through the powers of abstraction) before allowing the messiness of the world to come back in gradually. This is partly why Bhaskar is so complementary of Marx’s analysis of the value form in the context of his own development of the conceptual errors in the positivistic fact form. Marx’s analysis of the wage form also helped Bhaskar to think about the ideological/mystificatory nature of the causal relations (constant conjunctions) within positivist strictures.54 Both of these conceptual supports were invaluable in the building of Bhaskar’s realist analysis, as he makes abundantly clear in Reclaiming Reality. Starting in the history of the sciences has thus been advantageous for Bhaskar as his need for conceptual supports is fulfilled by importing concepts from both the natural and the social sciences. As opposed to Althusser’s starting point within Marxism, Bhaskar starts in the sciences more generally. This ensures that when it comes to importation, he has the requisite vantage point to trawl the sciences (rather than the bourgeois philosophers) for his conceptual supports. Against the triangulation of Marxism, Bachelardianism, and (post)structuralism, Bhaskar works from realist ontology to an analysis that includes Marxism alongside the sciences of nature. Bhaskar’s Critical Sociology
The History and Practices of the Sciences Revisited In an earlier section we highlighted some of the essential ontological features of Bhaskar’s discussion of experiment: (1) that the world must be independent of our knowledge of it and (2) that it must be structured and ordered in its underlying make-up. From these premises, Bhaskar goes on to elaborate an impressive philosophical ontology that links the paradigmatic method of scientific discovery to the ontological basis of material reality. Bhaskar’s insights are not however, restricted to these ontological presuppositions, as he also draws important sociological insights from the nature of scientific experiments. In line with its passive epistemology, positivism conceptualises the scientist’s role in experimentation as that of a ‘passive observer of empirical laws’. Against this, Bhaskar argues that scientists must actively produce the required ‘conjunctions’ and that science is therefore first and foremost ‘hard

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work’
consisting of the transformation of given products into a determinate result (1979, p. 57). Like Althusser, Bhaskar argues that scientific knowledge can only be produced using a produced means of production, suggesting an Aristotelian conception of scientific activity, wherein the scientist fashions knowledge out of pre-existing cognitive and/or physical materials (ibid.).55 In order to be successful one needs both theoretical and practical training, and so unlike positivism, Bhaskar sees science as a social process. Before scientists can even begin to contemplate carrying out experiments, they must work to change themselves through a training that always takes place via the mediation of social relations. Eddington could never have taken his fateful trip to the west coast of Africa, had he not previously assimilated (and understood) Einstein’s ‘General Theory of Relativity’, Newton’s ‘Theory of Classical Mechanics’, the anomalous rate of precision of the perihelion of Mercury’s orbit, and the ability to operate the photographic equipment that eventually confirmed Einstein’s predictions (for the gravitational shift) (Eddington, 1995). It was this real world confirmation that ultimately led to the paradigm shift from Newton to Einstein, and so within the logic of scientific discontinuity there is always a complex mixture of theoretical continuity, scientific experimentation and conceptual revolution. Einstein himself had to be aware of Maxwell’s work on ‘electro-dynamics’, Minkowski’s ‘four dimensional space-time’, Riemannian geometry, etc. and so the process of scientific discovery is always one of continuity and discontinuity, ultimately premised on the adequacy of our conceptual frameworks to appropriate the ‘real in thought’ (Einstein, 2004). Having started with the importance of real world experiment, Bhaskar is better able to hold on to the extra-theoretical referents within the process of scientific discovery, and so once again it is the superiority of his starting point that differentiates critical realism as a philosophy of science. Althusser’s analysis was restricted to the theoretical trajectory of the Marxist framework and his reliance on Bachelard meant that the broader analysis of scientific discontinuity was disabled by association with a conventionalist epistemology. Working from a more general perspective, Bhaskar avoids any such reliance, and his analysis of the twosided nature of experiments has left him with the ability to develop both a coherent epistemology and a critical sociology. On the one hand, conceiving science as humanly constructed allows one to examine the site of its production primarily under the banner of ‘sociology of knowledge’. On the other hand, there must be some form of real world adequacy

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(if scientific results are to be significant), and so we must also have recourse to a philosophical benchmark. Extrinsic considerations account for the historicity of a science, intrinsic ones account for its scientificity (Bhaskar, 1991, p. 69) and together they do justice to the fact that while science is committed to investigating some region of the real, it is also a product of historical process, and must be explicable on the basis of its relations to other social structures. Taking this on, Collier (1989) usefully suggests that science must therefore have ‘two outsides’ roughly corresponding to the ‘two sides’ outlined by Bhaskar. One ‘outside’ is the (rather obvious) object of investigation. But there is another that emerges when one considers that transitive productions are not solely reliant on antecedent theoretical materials, but on funding and institutional mechanisms that control the dissemination of knowledge. Funding bodies often bestow knowledge with a level of authority, meaning that while (social) science takes the real as its object of investigation, reality (both physical and social) inevitably impacts on it in numerous ways. Having carefully established his threefold distinction (ontology/epistemology; intransitive/transitive; intrinsic/extrinsic), Bhaskar is now suitably well placed to elaborate a philosophical position that selfconsciously avoids many of the pitfalls mentioned in relation to Althusser. Rather than there being two separate practices
one scientific, the other ideological
realism argues that every theoretical practice has an ideological component, but that not all of them are scientific. According to Collier (1989) the ideological relations of a theoretical practice are its ‘social conditions of existence’, whereas its scientificity always relates to its object of investigation
and it follows that in so far as mechanisms are set up which allow the mechanisms present in the intransitive object to determine the result, it is science; in so far as mechanisms are set up which allow power in society to determine the result it is ideology … scientific conclusions are not necessarily true, nor ideological ones false. But scientific conclusions are arrived at by truth-seeking procedures, ideological ones (in a very broad sense) social functionality procedures. (Collier, 1989, p. 28)

This in many ways mirrors Althusser’s assertion that ideologies ‘are governed by interests beyond the necessity of knowledge alone’ (2006, p. 141). However the key difference is that Althusser never delivered on his aspiration to give epistemological criteria. Rather than their ability to appropriate ‘the real in thought’, sciences are distinguished on the basis of their radical autonomy, and this leads to the difficulties referred to above.

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A Realist Philosophy of Science for Marxism One of the themes of our chapter is the necessity to jettison all notions of starting within ‘Marxist philosophy’ in favour of a realist philosophy that can underpin each of the sciences. Rather than developing a philosophy of science, Althusser attempted to unearth a philosophy within a science and so long as he relied on an ‘epistemological break’ it became extremely difficult to separate the two practices. In contrast, the proper relations between science and philosophy are implied in Bhaskar’s methods from the outset, as philosophy is a ‘second order’ discipline that relies exclusively on the ‘first order’ practices of the established sciences. As a dedicated underlabourer, realist philosophy cannot act as an overarching ‘master-key’. It can, however, glean important knowledge from the practices of the sciences and in-so-doing help to point the way towards scientificity by virtue of a philosophical ontology. Science and philosophy do separate jobs, and Joseph (1998) is therefore right to insist that we must have a philosophy that comes at Marxism from the outside, but in a scientific way. Bhaskar’s original intervention was designed to work as just this sort of ‘external appraiser’ and it is a central argument of this chapter that it was only by starting here that all of the other benefits could be delivered. It was Bhaskar’s ability to deliver epistemological criteria that ultimately distinguished his intervention, and it was only because he had theorised these ‘intrinsic conditions’ that he could subsequently handle the historicity of the sciences (not to mention their relations to other practices).56 Once we differentiate epistemological from ideological questions, we can see that science is both a human product and an objective means of appropriating reality. Earlier we saw that Althusser had to jettison all notions of the social conditions of the ‘epistemological break’ as part of a wider strategy to differentiate the scientific from the ideological. Against this residual positivism, critical realism has consistently argued that every practice (including science) only makes sense as part of a wider social milieu and that one must expose the extrinsic conditions of scientific development in order to fully appreciate its historical trajectory. In the case of Marxist science, critical realism recognises all of the conditions that impinged on the development of Marx’s ‘scientific revolution’, chief among them his taking up of proletarian class positions as part of his rejection of bourgeois society. Rather than limiting itself to re-interpreting Marx’s scattered methodological ideas, critical realism offers a full blown philosophy of science, replete with a wide-range of categories (ontology, epistemology, modes of

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inference, nature of causality, natural necessity, nature of laws and tendencies and so on) that are compatible with (and partly taken from) Marxist science (Brown, Fleetwood, & Roberts, 2002, p. 3). This is crucial for engaging in the job of internal housekeeping originally initiated by Althusser, for it is only when Marxism has a fully developed philosophy of science that it can assess the scientificity of the different strands within its own problematic and engage in a coherent critique of those (full blown) philosophies that are ranged against it. According to Fleetwood ‘the absence of a full blown Marxist philosophy has allowed a vacuum to develop in the Marxist canon, which is often filled by Marxists borrowing topics from non-Marxist philosophies of science
with damaging consequences’ (ibid., pp. 3
4).57 Althusser is surely a case in point.

CONCLUSION Throughout this work we have been working on the premise that exposing the paradoxes within Althusserianism would lead to an important result for ‘Marxist philosophy’. Althusser opted to begin his enquiries from within the Marxist problematic, only to turn to non-Marxist theory when faced with the need for conceptual support. Ostensibly, Marxist philosophy was to legitimate Marxist science, with results that were to set the scene for an analysis of the differences between the mature Marxist problematic and a Hegelian problematic based on teleological simplicity. In the event, Althusser’s reliance on Bachelardian philosophy greatly hampered his intervention against humanism and eventually undermined the advances in his intervention against historicism. In essence, Althusser posed questions that were irresolvable within an epistemological problematic and as he searched for the answers he ran into insurmountable theoretical difficulties. Be that as it may, Althusser must be given credit for having ‘asked the right questions’, as it is undoubtedly the case that without the Althusserian intervention, critical realism would have lacked one of its most important theoretical antecedents. Knowledge is produced via ‘a produced means of production’ and Bhaskar has explicitly credited Althusser with making a decisive contribution in ‘recasting Marxism’s thinking about itself, science and society’ (1991, p. 183). Indeed, much of what Althusser argued about the ‘epistemological break’ is defensible once it is divested on its Bachelardian inheritance. Unfortunately his intervention never delivered a coherent (Marxist) philosophy of science, and it was this failure that

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pushed the ‘realists’ to develop their intervention from the 1970s. According to Bhaskar, the delivery of a philosophy for Marxism was always at the forefront of the realist project even though this is nowhere apparent in the original investigations (Archer et al., 1998). It may appear strange that a philosophy for Marxism must begin within the natural sciences. And yet, in hindsight it is obvious that Bhaskar’s starting point made all the difference in delivering criteria for scientificity. Shifting from an epistemological to an ontological problematic, Bhaskar worked (transcendentally) from the significance of experiments to the nature of scientific discovery. This allowed the development of a coherent epistemology alongside a critical sociology. Without directly addressing the problems that Althusser originally set himself, critical realism developed the ability to definitively resolve them, as Marxism only becomes scientific once it engages in the retroductive search for underlying structure, and this itself only becomes possible on the basis of a complex totality of stratified casual mechanisms. Marx’s prehistory was premised on a problematic of human essences and the Hegelian totality is woefully inadequate as a basis for Marxist science. However it is only by shifting to an ontological problematic (a real epistemological break as it were) that these important insights can be properly defended. In the final analysis, it was Bhaskar not Althusser who succeeded in providing Marxism with a coherent philosophy of science, and it was only by relinquishing the aspirations towards a self-consciously Marxist philosophy that Bhaskar became one of the most important philosophers for Marxism since Marx himself.

NOTES 1. Hegel’s historicism flows from his insistence that social formations are but individual moments in the grand unfolding of Universal History. Althusser sees the Hegelian Marxists’ as simply taking this framework and replacing the unfolding of Absolute Knowledge with a teleological march towards socialism. See Althusser and Balibar (2006, chapter 5) for Althusser’s critique of historicism. 2. This work deals almost exclusively with Althusser’s original intention to excavate Marxist philosophy from within the pages of Marx mature scientific works. See Althusser (1996) and Althusser and Balibar (2006) for the definitive statements of this early phase in Althusser’s work. As we also deal overwhelmingly with Bhaskar’s pre-dialectical critical realism, we believe that there is a firm basis for comparison. 3. See also Bhaskar (1989, 1991, 1998, 2008), Collier (1979) and Brown, Fleetwood, and Roberts (2002).

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4. See Thompson (1978) for the most celebrated attack on Althusserianism. 5. See Sprinker (1992) for a Marxist position which challenges the superiority of Bhaskar’s general ontological intervention. 6. Andrew Collier actually coined the term, but it is used concretely by Bhaskar throughout his early writings. 7. See Ellen Meiksins-Wood (1986) for a general discussion of the postAlthusserian slide into idealism. See also, Hindess and Hirst (1975), and Laclau and Mouffe (1985) for specific examples of this, and Collier (1979) for a useful critique from the realist perspective. 8. We thank an anonymous reviewer for improving our exposition of this point. 9. For a succinct account of the Feuerbachian problematic, see Marx’s Theses on Feuerbach (in Marx & Engels, 1972, pp. 121
123). 10. For Marx the key category in the manuscripts is ‘estranged labour’ and at this stage he was convinced that every category of political economy could be derived from this starting point. See Marx (1981b). 11. See Luka´cs’ (1971) for the definitive statement of Hegelian Marxism. See Althusser and Balibar (2006, chapter 5) for a critique of the general tendency to reduce Marxism to an expression of the working class, and Smith (1984, chapter 2) for an interesting account of the ‘humanist context’ of Althusser’s intervention. 12. Bachelard was Althusser’s PhD supervisor and his influence on the epistemological concepts of Althusserianism is extremely important. In this context, it is noteworthy that one of Bhaskar’s earliest published works is a critical analysis of Bachelardian philosophy of science (see Bhaskar, 1975). 13. The concept of a problematic actually comes from Jacques Martin, but its use in Althusser’s system is thoroughly Bachelardian. See Althusser’s letter to the translator for a contextualisation of his use of Bachelardian concepts (in Althusser, 1996, p. 257). 14. See Althusser (1996, pp. 66
70), and Althusser and Balibar (2006, pp. 20
28). 15. Althusser writes that ‘one must be careful with philosophical categories taken one by one: for it is less their name than their function in the theoretical apparatus in which they operate that decides their nature’ (2008, p. 108, n37). The classical example here is the role of the concept of alienation in Marx’s work. This concept is widespread in the Economic and Philosophical Manuscripts, and it also makes an appearance in Marx’s later writings, most notably in the Grundrisse. However as Geras points out, the earlier concept is founded on an essentialist (anthropological) problematic, whereas alienation in the later works is a concept to expose the reality that the specific social relations under capitalism entail the extraction of surplus value from the working class and the subsequent redeployment of this value as a hostile force that dominates them. See Geras (1971, pp. 72
73). 16. Althusser makes much of the comments by Engels in the Preface to the second edition of Capital, wherein he describes how economists had ‘remained in thrall to the economic categories as they found them’, thus making it impossible to understand surplus value, whereas Marx revolutionised his concepts in order to solve this very problem. See Althusser and Balibar (2006, p. 29, 10n). 17. According to Althusser, ‘the new philosophy was only implicit in the new science’ (1996, p. 33).

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18. This is taken from the Afterword to the second edition of Capital. See Marx (1972, pp. 19
20). 19. See Marx (1972, p. 82, n1) for the classic exposition of this point. See also Godelier’s example of the role of kinship in ‘primitive society’ as the dominant structure, determined in the last instance by the low level of the productive forces (in Resch, 1989, pp. 524
525). 20. According to Collier regularity determinism is that form of cause and effect relation that one usually only finds in the closed conditions of experimentation. Paradigmatically operationalised as the constant conjunction of discrete events (whenever x then y) this form of determinism is most closely associated with the positivism of David Hume. Against this form of ‘regularity determinism’ Althusser is arguing merely that every real world change must have a cause (ubiquitous determinism), without saying anything about how this cause
effect relation will become manifest (see Collier, 1989, p. 182). 21. Also see Geras (1971) and Mepham (1979) for two excellent discussions of commodity fetishism. 22. Althusser also made some important contributions to the Marxist understanding of ‘contradiction’ that we have not had the time to develop here. For more information see his essay on ‘Contradiction and Overdetermination’ in For Marx. 23. Also see Althusser and Balibar (2006, pp. 52
55). 24. See O’ Boyle and McDonough (2011) for more details on this relationship. 25. ‘In the development of an already constituted science, the latter works on a raw material (Generality I) constituted either of still ideological concepts or of scientific facts … which belong to an earlier phase of the science (an ex Generality III)’ (FM: 184). 26. In his Essays in Self-Criticism Althusser highlights the fact that he takes his inspiration for the generalities (among other things) from Althusser (1976, p. 190). Outside of the ‘philosophy of science’, Spinoza was profoundly influential for Althusser, and in light of our neglect of this influence it is worth reading Althusser’s Elements of Self-Criticism (pp. 132
142). 27. See the Theses on Feuerbach (in Marx & Engels, 1972). 28. This separation is discussed in detail later. For now it is sufficient to realise that for Althusser science must break definitively with experience rather than starting in experience before moving beyond it with the help of theoretical concepts. 29. Larrain (1979) argues that in positing internal criteria for scientificity, Althusser (following Bachelard) is succumbing to a form of a priori positivism wherein scientific truth imposes ‘itself by itself’ viz. ‘one of the features of positivism is precisely its postulate that scientific knowledge is the paradigm of valid knowledge, a postulate that indeed is never proved nor intended to be proved. So what Bachelard and Althusser consciously propound, in the sense that scientific truth imposes itself by itself, is precisely and nothing less than the a priori of positivism’ (Larrain, 1979, p. 197). See also Smith (1984) for an extensive account of the positivistic elements of the Althusserian problematic. 30. Althusser later accepted this criticism of his early works. 31. Lenin put forward this view in What is to be Done? However, as Geras (1972) points out, Lenin’s conception of this relation differed considerably from this in

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later works. See, for example, Lenin’s (1907) preface to the collection Twelve Years. In Collected works (Vol. 13, pp. 100
108). 32. Conventionalism is a philosophical doctrine that foregrounds the role of decision-making in science as it argues that what appears to be fixed by virtue of the nature of an ‘entity’, is really fixed (decided) by the human conventions of a given community. In this account there is no reason to believe that Althusser’s symptomatic reading is any closer to the ‘truth’ of Marx’s Capital than any of the alternative readings. 33. See Robbins (1946) for the definitive statement on this position. 34. Indeed if anything it is more a triangulation of Bachelardian philosophy, Freudian psychoanalysis and structural linguistics, all grafted on to Marx’s scientific practice. However, it remains the case that Bachelard provided Althusser with his most important theoretical supports. 35. At the beginning of For Marx Althusser argues that his intervention is centrally concerned with answering the questions of (1) What is Marxist philosophy and (2) Has it any right to existence. Althusser’s practice presupposes a positive answer to the second question, whilst his methodological strictures seem to rule this out (see Althusser, 1996, p. 31). 36. From a Marxist perspective this is the source of the need for ‘theory’ to be inextricably linked to ‘practice’. Althusser himself picks up on this issue in his Essay’s in Self-Criticism see (Althusser, 1976, n8). 37. Historical epistemology is essentially ‘sociology of knowledge’, regarded by Althusser as important in unearthing the different ways that knowledges can be produced. We have seen that in his development of Marxist philosophy, Althusser draws upon Bachelardian ideas about the emergence of knowledge (from a web of errors, etc.), but as we shall see in the following section, Althusser stops short of attributing to historical epistemology the ability to deliver criteria that can ensure that the knowledges produced are scientific. 38. Althusser not only agrees with this separation of facts and values, he insists on expunging all normative elements from Marxist science. See Althusser and Balibar (2006, p. 139) and Althusser (1976, p. 187). See also Davis (1990) for an account of the place of ethics in Althusser’s Marxism. 39. The programmatic elements referred to are the ‘epistemological break’ that sciences experience on their way to maturity, the ‘web of errors’ that remains, and the ‘latent philosophy’ that can eventually describe this process in adequate terms. By foregrounding these aspects of Bachelard’s work, Althusser minimises the historical emergence of particular sciences in favour of a set of (ahistorical) concepts that seem to apply to all of the sciences. 40. This was true of Althusser’s early ‘theoreticist’ writing. In Althusser’s later writings socio-historical conditions in the emergence of Marxist science are taken into account. 41. According to Edgley, Marx’s science is revolutionary ‘chiefly because its relation not only to other theories but also to its object is critical, and therefore requires from its own scientific standpoint the revolutionary transformation both of other theories and of their common object, society itself’ (1979, p. 18 original emphasis). 42. This rather enigmatic statement is made clearer if we understand that the underlying structure (‘knowledge effect’) of Marx’s Capital mirrors absolutely the

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underlying structure (‘society effect’) of capitalist society and it is only because they have identical structures that Althusser can be sure that Marx’s writings have exposed the architectonic relations of capitalism in a scientific way. 43. The theory of autonomous sciences with internal criteria. 44. See Balibar (2009) for a detailed account of the ‘Rue D’Ulm’ on Althusser’s life and work, and Ross (1990) for a more general discussion of the intellectual milieu in France during Althusser’s career. 45. This is Balibar’s contribution to Reading Capital. See Part Three ‘The Basic Concepts of Historical Materialism’. 46. This concept is shorthand for the post-modernist, post-structuralist and postMarxist theoretical positions that emerged in the 1970s as a radical reaction to the realist-naturalism of (Enlightenment) modernism in general and of Classical Marxism in particular. See Norris (1990) for a useful discussion of these issues. 47. See Bhaskar (2008) for the definitive statement of Bhaskar’s philosophy of natural science and (1998) for the application of the principles of transcendental realism to the social realm. 48. Bhaskar’s later works have moved considerably from this starting point. However, see Bhaskar (1989, chapter 1) for an explicit account of the relationship between critical realism and socialist revolution. 49. According to Bhaskar ‘a philosophical ontology is developed by reflection upon what must be the case for science to be possible’ (2008, p. 38). This is a central concept for critical realism, and it will be elaborated in more detail below. 50. Like Althusser, Bhaskar is interested in gleaning philosophical insights from the practices of the sciences, and this leaves him susceptible to the same charge of ‘circularity’, given his intention to defend the validity of scientific knowledge. Unsurprisingly, this is a charge that has been put by the post-Althusserians. Cutler, Hindess, Hirst and Hussain argue that Bhaskar’s transcendental analysis reduces to the idea that ‘the epistemological project is a viable one because it is viable, and if it were not viable, it would not be viable’ (1979, p. 32). This suggests that Bhaskar has merely engaged in trivial tautology. However, even the conclusion that the world is such as to support beings that can gain scientific knowledge of its parameters is enough to tell us something important about the nature of reality. Moreover, Bhaskar is not merely arguing from the existence of knowledge in general, but from the very specific scientific practices that have decisively transformed the nature of the world around us (Collier, 1989, p. 22). 51. He therefore moves from philosophical enquiry, through the physical sciences to the social sciences (Marxism)
provisionally anchoring each in a structural ontology gleaned from his philosophical analysis. 52. Theses on Feuerbach
thesis seven. 53. For Bhaskar’s analysis of Humean empiricism, see Bhaskar (1975, pp. 33
37). 54. For Bhaskar’s reliance on Marx’s scientific practices see Bhaskar (1998, pp. 66
71). 55. For an interesting analysis that locates the genesis of the realist intervention in Aristotle’s idea of Ousia, see Meilke (1979, p. 27). 56. Although we are arguing that a ‘philosophy of science’ stands or falls on its ability to deliver epistemological criteria, it is important to remember that every

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epistemology presupposes an attendant ontology and that it was only by foregrounding ontological investigation that Bhaskar was able to deliver his epistemological criteria. The ‘intrinsic conditions’ of a science are therefore ontological and epistemological. 57. Although Fleetwood refers to ‘Marxist philosophy’ he actually means ‘a full blown philosophy of science compatible with Marxism’ (Brown, Fleetwood, & Roberts, 2002, p. 3).

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140). London: Verso. Althusser, L., & Balibar, E. (2006). Reading capital. London: Verso. Anderson, P. (1976). Considerations on Western Marxism. London: New Left Books. Anderson, P. (1984). In the tracks of historical materialism. Chicago, IL: University of Chicago Press. Archer, M. Bhaskar, R., Collier, A., Lawson, T., & Norrie, A. (1998). Critical realism: Essential readings. London: Routledge. Bachelard, G. (1936). La Dialectique de la Dure´e. Paris: Boivin. Bachelard, G. (1968). The philosophy of no: A philosophy of the new scientific mind. New York, NY: Orion Press. Balibar, E. (2009). Althusser and the Rue D’Ulm. New Left Review, 58(March
April), 91
107. Benton, T. (1984). The rise and fall of structural Marxism. London: MacMillan. Bhaskar, R. (1975). Feyerabend and bachelard: Two philosophies of science. New Left Review, I/94(November
December), 31
55. Bhaskar, R. (1979). On the possibility of social scientific knowledge and the limits of naturalism. In J. Mepham & D.-H. Ruben (Eds.), Epistemology science ideology (Vol. 3, pp. 107
140). Issues in Marxist Philosophy. Brighton: The Harvester Press. Bhaskar, R. (1989). Reclaiming reality: A critical introduction to contemporary philosophy. London: Verso. Bhaskar, R. (1991). Philosophy and the idea of freedom. Oxford, UK: Blackwell. Bhaskar, R. (1998). The possibility of naturalism: A philosophical critique of the contemporary human sciences (3rd ed.). Brighton: Harvester Press. Bhaskar, R. (2008). A realist theory of science. London: Verso. Brown, A., Fleetwood, S., & Roberts, J. M. (2002). The marriage of critical realism and Marxism: Happy, unhappy or on the rocks? In A. Brown, S. Fleetwood, & J. M. Roberts (Eds.), Critical realism and Marxism (pp. 1
22). London: Routledge. Callinicos, A. (1976). Althusser’s Marxism. London: Pluto Press. Collier, A. (1979). In defence of epistemology. In J. Mepham & D.-H. Ruben (Eds.), Epistemology Science Ideology (Vol. 3, pp. 55
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Collier, A. (1989). Scientific realism and socialist thought. Hertfordshire: Harvester Wheatsheaf. Craven, S. (2002). Materialism, realism and dialectics. In A. Brown, S. Fleetwood, & J. M. Roberts (Eds.), Critical realism and Marxism (pp. 131
154). London: Routledge. Cutler, A., Hindess, B., Hirst, P., & Hussain, A. (1979). An imaginary orthodoxy
A reply to Laurence Harris. Economy and Society, 8(3), 308
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86. Glucksmann, A. (1972). A ventriloquist structuralism. New Left Review, I/72(March
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92. Harre´, R. (1970). Principles of scientific thinking. London: Macmillan. Hindess, B., & Hirst, P. (1975). Pre-capitalist modes of production. London: Routledge. Hume, D. (1978). A treatise of human nature (2nd ed.). Oxford: Oxford University Press. Joseph, J. (1998). In defense of critical realism. Capital and Class, 65, 73
107. Joseph, J., & Kennedy, S. (2000). The structure of the social. Philosophy of the Social Sciences, 30(4), 508
527. Kuhn, T. (1996). The structure of scientific revolutions (3rd ed.). Chicago, IL: The University of Chicago Press. Laclau, E., & Mouffe, C. (1985). Hegemony and socialist strategy: Towards a radical and democratic politics. London: Verso. Larrain, J. (1979). The concept of ideology. London: Hutchison. Lawson, T. (1999). Developments in economics as realist social theory. In S. Fleetwood (Ed.), Critical realism in economics, development and debate (pp. 3
20). London: Routledge. Lecourt, D. (1975). Marxism and epistemology: Bachelard, Canguilheim and Foucault. London: New Left Books. Lenin, V. I. (1907). Twelve years. In B. Isaacs (Ed.), Collected works. Moscow: Progress Publishers. Lipietz, A. (1993). From Althusserianism to regulation theory. In E. Kaplan & M. Sprinker (Eds.), The Althusserian legacy (pp. 99
138). London: Verso. Luka´cs, G. (1971). History and class consciousness. London: Merlin Press. Marx, K. (1972). Capital: A critique of political economy, Volume 1. The process of capitalist production. New York, NY: International Publishers. Marx, K. (1981a). Capital, Volume III. London: Penguin classics.

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Marx, K. (1981b). Economic and philosophic manuscripts of 1844. London: Lawrence and Wishart. Marx, K., & Engels, F. (1972). The German ideology. New York, NY: International Publishers. Meilke, S. (1979). Dialectical contradiction and necessity. In J. Mepham & D.-H. Ruben (Eds.), Dialectics and method (Vol. 1, pp. 5
36). Issues in Marxist Philosophy. Brighton: The Harvester Press. Meiskins Wood, E. (1986). The retreat from class: A new ‘True’ socialism. London: Verso. Mepham, J. (1979). The theory of ideology in capital. In J. Mepham & D.-H. Ruben (Eds.), Epistemology science ideology (Vol. 3, pp. 141
174). Issues in Marxist Philosophy. Brighton: The Harvester Press. Norris, C. (1990). What’s wrong with postmodernism; Critical theory and the ends of philosophy. Baltimore: The John Hopkins University Press. O’ Boyle, B., & McDonough, T. (2011). Critical realism, Marxism and the critique of neoclassical economics. Capital and Class, 35(1), 3
22. Resch, R. P. (1989). Modernism, postmodernism, and social theory: A comparison of Althusser and Foucault. Poetics Today, 10(3), 522
549. Robbins, L. (1946). An essay on the nature and significance of economic science. London: Macmillan. Ross, G. (1990). Intellectuals against the left: The case of France. Socialist Register, 26, 201
227. Ruben, D.-H. (1979). Marxism and dialectics. In J. Mepham & D.-H. Ruben (Eds.), Dialectics and method (Vol. 1, pp. 37
86). Issues in Marxist Philosophy. Brighton: The Harvester Press. Sayer, D. (1979). Science as critique: Marx versus Althusser. In J. Mepham & D.-H. Ruben (Eds.), Epistemology science ideology (Vol. 3, pp. 27
54). Issues in Marxist Philosophy. Brighton: The Harvester Press. Smith, S. (1984). Reading Althusser: An essay on structural Marxism. London: Cornell University Press. Soper, K. (1979). Marxism, materialism and biology. In J. Mepham & D.-H. Ruben (Eds.), Materialism (Vol. 2, pp. 61
100). Issues in Marxist Philosophy. Brighton: The Harvester Press. Sprinker, M. (1992). The royal road: Marxism and the philosophy of science. New Left Review, I/191(January
February), 122
144. Thompson, E. P. (1978). The poverty of theory and other essay’s. New York, NY: Monthly Review Press. Vilar, P. (1980). Marxist history, a history in the making: Towards a dialogue with Althusser. New Left Review, I/80(July
August), 65
106.

PART IV FOLLOW-UP: DEBATING LABOR ARISTOCRACY

THE ROOTS OF WORKING CLASS REFORMISM AND CONSERVATISM: A RESPONSE TO ZAK COPE’S DEFENSE OF THE “LABOR ARISTOCRACY” THESIS Charles Post ABSTRACT This essay is a response to Zak Cope’s defense of the “labor aristocracy” theory of working class reformism and conservatism. Specifically, the essay engages Cope’s claims that British colonialism, imperialist investment, and transnational “monopoly” corporations have accrued “surplus-profits” that have underwritten the existence of a “labor aristocracy” historically, and that “unequal exchange” today has transformed almost the entirety of the working classes of the global North into a labor aristocracy. We conclude with a presentation of an alternative explanation of working class reformism and conservatism. Keywords: Labor aristocracy; reformism; conservatism; monopoly; capitalist competition; wage differentials and class consciousness

Sraffa and Althusser Reconsidered; Neoliberalism Advancing in South Africa, England, and Greece Research in Political Economy, Volume 29, 241
260 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 0161-7230/doi:10.1108/S0161-723020140000029008

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Cope’s critique focuses on four specific elements of my argument. First, Cope defends Engels’ (1845) argument that super-profits from Britain’s mid-nineteenth century industrial dominance and its colonial empire were used to “corrupt” the skilled section of the British working class. Second, he attempts to demonstrate the validity of Lenin (1915, 1916) and Zinoviev’s (1983
1984/1916) claims that “super-profits” from imperialist investment in the global South “bribed” a section of the working class in the global North before 1914. Cope, in an expansion of Elbaum and Selzter’s (1982a, 1982b) claims that higher than average profits earned by “monopoly capital” were shared with the unionized sectors of the working class in the global North after World War II, analyzes the impact of oligopolistic transnational corporations on wage differentials between the contemporary global North and South. Finally, Cope challenges my claim that well-paid and skilled industrial workers were often the social base of the radical and revolutionary left in the twentieth century. In addition to these objections to specific aspects of my critique of the labor aristocracy theory, Cope also makes two over-arching criticisms of my argument. First, Cope (2013, p. 91) argues that my “narrow concern with wage differentials inside the imperialist countries misses the most significant economic and political repercussions of global labor stratification.” Second, Cope claims that I deny or downplay the dominance of reformism and forms of social conservatism (racism, xenophobia, sexism, homophobia, etc.) in the northern working class. Cope is correct that I focus on explanations of wage differentials within the working class of the global North. The reason is simple
Engels, Lenin and Zinoviev, and Elbaum and Seltzer were all attempting to explain that differential. In all of the classical formulations of the labor aristocracy thesis, the labor aristocracy is portrayed, in Lenin’s (1916) words, as the “upper stratum” of the working class in the imperialist social formations. Because I was responding to these arguments, I focused on wage differentials in the global North. Cope, in his Divided World, Divided Class (2012), significantly radicalizes the labor aristocracy thesis, claiming that the entire working class of the global North forms a hopelessly conservative labor aristocracy. After responding to his specific criticisms of my assessment of the classical theories of the labor aristocracy, I will evaluate the validity of Cope’s attempt to argue that almost all workers in the global North share in imperialist super-profits primarily through the mechanism of “unequal exchange.” Cope’s assertion that I ignore the dominance of reformism among the working classes of the global North is simply not true. I have argued that in

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most situations, most workers
in both the global South and North
embrace reformist politics at best, and conservative politics at worst. Cope and I differ not on the reality of the dominance of reformism and conservatism among most workers in capitalist societies
north and south
but on the explanation of this phenomenon. In my conclusion, I will summarize my analysis of working class reformism and conservatism.

IN DEFENSE OF ENGELS ON THE VICTORIAN LABOR ARISTOCRACY IN BRITAIN Cope’s defense of Engels’ arguments about the British labor aristocracy in mid-nineteenth century is a bit scatter-shot. He challenges three of my specific criticisms of Engels. First, Cope (2013, p. 95) denies that periodic unemployment “make it impossible to identify a body of relatively privileged workers.” Second, Cope (2013, p. 98) argues that my claim of “falling wages for the entire British working class in the last quarter of the nineteenth century is fallacious.” Finally, he defends the claim that Britain’s imperial and industrial dominance accounts for wage differentials within Britain. Specifically, he analyzes the impact of British colonial trade on the absolute level of consumption of British workers. Clearly, periodic unemployment did not eliminate stratification within the British working class. My point, however, was that the relative “privilege” of skilled industrial workers was not as secure and stable in the nineteenth century as advocates of the labor aristocracy claimed (Post, 2010, pp. 16
17). The notion that “a very large body … [came] into existence among the British proletariat, able to keep up a standard of living almost identical with middle class” (Halevy, 1968, p. 212) cannot be sustained in light of the evidence of widespread seasonal and long-term unemployment even among relatively well-paid, skilled workers. In sum, a stable layer of “labor aristocrats” that providing a durable basis for reformism in the British working class is questionable. Nor did I claim that the entire British working class experienced “increasing immiseration” (Cope, 2013, p. 96) in the late nineteenth century. Instead, following Linder (1985, pp. 61
62), I pointed out that average real wages adjusted for inflation were dropping for both unskilled and skilled workers in Britain. More importantly, I argued that wage differentials among British workers were declining as a result of the spread of mechanization and the decline of married female and juvenile labor (Linder, 1985,

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pp. 89
93). Combined with growing insecurity of employment among, and the capitalist offensive against skilled workers’ control of the labor process undermined their position as a labor aristocracy. In an attempt to rescue Engel’s original thesis, Cope (2013, p. 96) claims that the best paid British workers were “closely connected to Empire: textiles, iron and steel, engineering, and coal.” (96) He supports this claim with data on the growing importance of British, French, German, and US foreign direct investment (FDI) in the global South in the late nineteenth and early twentieth centuries. Unfortunately, the source he cites (Elsenhaus, 1983, p. 19, n. 70), provides data on the growing importance of the global South in imperial FDI
but gives no indication of the relative weight of FDI in the total economies of Britain, France, Germany, or the US. We have no sense of how much investment or profit these ruling classes derived from their investments abroad generally or from investments in the global South specifically. His specific claim of a correlation between imperial profits and the higher than average wages of works in textiles, iron and steel, engineering, and mining remains unfounded. Cope would have to provide data demonstrating how higher than average profits in these “imperial” branches of production account for the higher than average wages of skilled workers in these branches. He does not, and Linder (1985, pp. 80
81) provides convincing evidence that such a claim could not be made for the engineering industry. Cope’s attempts to resuscitate Engels by claiming that British colonial trade in the late nineteenth century provided cheap consumer goods, increasing absolute levels of working class consumption. While recognizing that increased productivity of labor in Britain as a result of mechanization may have accounted for some of the fall in consumer good prices, Cope (2013, pp. 99
103) asserts “rising British wages … were, in fact, afforded by an increase in the proportion of workers’ consumption goods produced by colonial labor:” to better compete with its imperialist rivals, Britain escalated its extraction of surplus labor embodied in colonial foods and raw materials but, crucially, never paid for in colonial wages. In doing so, Britain was able to supplement the consumption of its own workforces, still at that time exploited in the main, at the expense of that in the colonized nations.

This argument, however, suffers from a number of problems. While Cope (2013, pp. 98
99) cites data on increasing volume of colonial imports to Britain between 1870 and 1913, he does not assess the relative weight of industrial raw materials and consumer goods in the colonial trade. Put

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another way, Cope fails to analyze the relative benefits of the colonial trade to capital (cheap raw materials) and labor (cheap consumer goods). More importantly, Cope fails to demonstrate that the benefits of empire and colonialism accrued primarily to the minoritarian “labor aristocracy” of skilled workers in late nineteenth century Britain. First, he relies on Halevy’s (1968, pp. 212
213) impressions, based on no systematic data, that falling prices for consumer goods primarily benefited a small proportion of wage workers. Second, Cope (2013, p. 104) argues that the British trade deficit/import surplus from the colonies of £158 million in 1913 represented “pure profit,” (p. 104) and more than accounts for the £52 million wage differential between skilled and unskilled workers in 1892. There are two problems with this argument. First, the notion that the British trade deficit represented “pure profit” that could be used to bribe workers in Britain assumes that the British owners of the colonial plantations and mines that produced these imports would forego their profits to bribe workers half a planet away. Second, how can gross profits in 1913 explain wage differentials almost 20 years earlier? Cope would have to provide more refined data on colonial profits for 1892 or on wage differentials in 1913 to begin to make his case. Ultimately, Cope is correct that relatively inexpensive consumer goods produced in the colonies (like the falling price of domestically producer consumer goods) raised the absolute level of consumption of the British working class in the late nineteenth and early twentieth century. However, he has not demonstrated either that this increased absolute consumption was restricted to a privileged minority of British workers; or that the wages and working conditions of British workers was not declining relative to British capital.

LENIN AND ZINOVIEV ON IMPERIALIST “SUPER-PROFITS” Cope’s response to my critique of the Lenin
Zinoviev version of the labor aristocracy thesis is more focused. Essentially, he challenges my use of data to demonstrate that FDI to the global south is a very small percentage of total global investment, and thus cannot account for wage differentials within the US working class.1 Cope never contests my fundamental point
some 90% or more of total world investment remains within its country of origin. Put another way, global capitals headquartered in the

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“Triad” (US, Western Europe, and Japan) invest the vast majority of their capital in the society where they are located. His criticism focuses, instead, on the relative distribution of the 10% of global investment that takes the form of FDI between the global South and global North. Specifically, he contests data that indicates that between 60% and 80% of global FDI flow from one part of the Triad to another
from one imperialist power to another. First, he (Cope, 2013, p. 109) argues that “nearly 50% of manufacturing foreign direct investment is received by the developing countries.” Second, he points out that “… FDI within the developed world is hugely inflated by non-productive ‘finance and business’ activities.” Finally, he argues that “intra-OECD manufacturing (particularly in those Transnational Corporations (TNCs) which have offshored or outsourced much of their productive processes to low-wage nations) is heavily dependent upon capital infusion from the Third World.” I had, in fact, taken into consideration these (and other) problems with the data on FDI and profits earned by US corporations abroad when I estimated that 50% of US corporate profits earned abroad were earned in the global South
approximately the same figure Cope uses for manufacturing FDI to the developing countries. Despite this relatively generous assumption, I found that profits from imperialist investment in the global South could not account for wage differentials within the imperialist countries. (Post, 2010, Tables 1 and 2, pp. 20
22; Graph I, p. 21) Total profits earned abroad
from investments in both the developed and developing countries
were in the range of 2
6% of total US wages since 1948. Even if we were to assume, following Cope, that the rate of profit in the global South is so much higher than in the global North and that all of US corporate profits earned abroad came from the labor of workers in the developing country, those profits could not account for the wage differentials within the US or other imperialist countries. Based on my assumption that 50% of profits on FDI come from the global South, these profits would account for 1
3% of total US wages. Clearly, profits derived from investment in the global South are a crucial counter-tendency to the decline of the rate of profit. From a low of approximately 5% in the 1950s, the share of total US corporate profits earned abroad has jumped to 30% in the twenty-first century. Clearly, profits earned in the global south
at least 15% of total US corporate profits
are a crucial counter-tendency to falling profits in the US and the rest of the global North. Cope, unfortunately, falls back on an even weaker argument. He claims that my focus on FDI “ensures that obscured from view are the tens of thousands of Third World-owned factories whose hundreds of millions of

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The Roots of Working Class Reformism and Conservatism

Table 1.

Shares of Market-Based Income, 1959
2003 (Mishel et al., 2005, p. 93).

Year

1959 (%)

1979 (%)

1989 (%)

2003 (%)

13.3 73.5 13.3

15.1 75.8 9.1

20.8 71.0 8.2

18.1 72.1 9.8

Capitala Laborb Proprietors a

Rent, dividends, and interest. Wages, salaries, and fringe benefits.

b

Table 2. 1973 2000 2003

Family Income Shares from 1973 to 2003.

Bottom 5th (%)

2nd 5th (%)

3rd 5th (%)

4th 5th (%)

Top 5th (%)

5.5 4.3 4.1

11.9 9.8 9.6

17.5 15.5 15.5

24.0 22.8 23.3

41.1 47.4 47.6

workers supply inexpensive intermediate inputs and cheap consumer goods to the imperialist countries via the vertical integration of production” (Cope, 2013, p. 111). He further argues that “a dollar invested in the Third World Country typically buys much more resources than a dollar invested in the First World.” Specifically, he asserts it purchases many more hours of labor than in the global North. These claims are fundamentally uncontroversial. The low cost of labor in the global South explains why capital, in constructing global production chains, has been moving much of its most labor-intensive operations
those most sensitive to wage costs
to the global South since the 1980s (Moody, 1997, Part I). However, just as cheap colonial imports benefited all British workers in the late nineteenth century, higher profits for transnational capital benefits all workers in the global North through increased employment and wages, not the “small minority” of labor aristocrats that Lenin and Zinoviev identified.2 Contrary to Cope, there is clear evidence that benefits of imperialist investment abroad (and the rising rates of exploitation of workers “at home” in the global North) has not been “evenly distributed” across the US population.3 Clearly, the “super-profits” of imperialism and the reorganization of production in the developed countries have not been accruing to any sector of the US working class (or the traditional middle class of the selfemployed “proprietors”) since the 1970s. The only segments of the US

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population whose share of total income has increased are capital and the professional-managerial middle class that makes up the top quintile of households. Cope acknowledges growing inequality of income
growing profits for capital and salaries for managers and professionals at the expense of workers’ wages. However, he adopts the essentially neo-conservative argument that growing income inequality is irrelevant. By arguing that imperialism has increased the absolute consumption of the working class in the developed countries, Cope (2013, p. 100) can assert that workers in the Triad “were better off in 1999 than they were in 1975.” He relies on a study by the right-wing American Enterprise Institute (Meyer & Sullivan, 2011) that justifies social service austerity on the grounds that poverty is not increasing in the US and other industrialized societies because absolute consumption is rising. This notion has little in common with both the Marxian analysis of exploitation
the division of the social product between capital and labor
and most sociological analysis of relative poverty under capitalism.

MONOPOLY SUPER-PROFITS AND WAGE DIFFERENTIALS Cope, in his defense of Elbaum and Seltzer, does not engage my discussion of the empirical and theoretical problems with the notion of “monopoly” or “oligopoly”
that profit rate and wage differentials do not correlate with degrees of concentration of industry, but with capital intensity of production; and that notions of “monopoly/oligopoly” are the ghostly mirror-images of the thoroughly ideological idea of “perfect competition.” Instead, he essentially globalizes these problematic notions to explain global uneven and combined development. Following Samir Amin, Cope claims that global oligopolies (transnational corporations) extract “monopoly super-profits” from the global South through a combination of technological monopolies enforced by the capitalist state, global financial control which siphons savings from global South to North, monopolistic access to natural resources, control of media to manipulate political events, and global North’s military dominance that “ensure that Third World states are literally forced to comply with imperialist diktat” (Cope, 2013, p. 113). While some of the phenomena Cope cites, in particular, the global North’s technical dominance, are quite real, they are the product of real capitalist

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competition
not monopoly or oligopoly. As Shaikh (2004, p. 46) argues, capitalist competition
within and between nations
“favors the comparatively strong over the comparatively weak.” Put another way, competition and not its absence constantly reproduces the global North’s technical and productive dominance over the global South. The use of non-market coercion
military power, monopoly power, etc.
is the distinguishing characteristic of pre-capitalist, not capitalist imperialism (Wood, 2004). The distinguishing feature of capitalist social relations is the absence of non-market coercion in the exploitation of direct producers. Rather than relying on legal, juridical, and other non-market forms of coercion to ensure that producers perform surplus labor for their exploiters, capital relies solely on the operation of the market in laborpower to ensure the production of surplus-value. Just as capitalist production dispenses with non-market coercion in the exploitation of labor; capitalist imperialism
the internationalization of capitalist social relations (“the export of capital”)
does not rely on exactly the sort of mechanisms that Cope identifies. Thus, while capitalism requires a state (or a system of states in the case of capitalist imperialism) to create the general conditions of capitalist production (separating laborers from the means of production, organizing the legal framework for market competition, suppressing challenges from below, etc.), it does not require direct political or military interference in the production of goods and services to ensure exploitation at home or abroad. Put simply, capitalist imperialism does not require the use of either political or “monopoly” power to artificially depress or raise prices to generate profits.

THE RADICALIZATION OF THE LABOR ARISTOCRACY Cope (2013, p. 115) begins his critique of my historical account of the politics of skilled workers by acknowledging that: there is some sociological truth in the idea that is has been mostly skilled works and intellectuals who have been members of the Communist parties in Europe. That does not, however, change the reality that these have been small in numbers or that the main policy they have pursued has been narrowly economistic and at least tacitly socialimperialist.

While only a small percentage of the total working class in any country joined the Communist Party, my point was that the purported labor

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aristocracy
skilled industrial workers
were over-represented in both the revolutionary wing of pre-war European social-democracy (in particular the Russian Bolsheviks) and in the post-war Communist Parties. Whatever criticisms of the theory and practice one can make of the Bolsheviks before 1917 or the mass communist parties in France, Italy, and Germany in the 1920s, the notion they were “economistic” or “social-imperialist” in political orientation has little empirical basis. Perhaps these parties fail to live up to Cope’s concept of revolutionary organizations because they did not embrace the politics of the Comintern’s “third period” (1928
1934), where immanent revolution made social democracy the “left-wing” of fascism, requiring revolutionaries to reject of any united action with nonrevolutionary workers and their leaders. Unfortunately, these politics led to the greatest defeat of the working class in world history in Germany in 1933 (Claudin, 1975, pp. 127
166).4 Cope (2013, p. 116) goes further arguing that “Western “workers” are today fascism’s major constituency.” (116) Citing Oesch’s (2008) research, Cope found that wage workers (office clerks, service workers, production workers) are over-represented among right-wing voters in Austria, Flanders, France, and Switzerland. Workers actually make up a majority of right-wing voters in Austria, Flanders. and France. However, workers are under-represented in the total electorate
making up around 50% of voters in all of these countries. Oesch provides no evidence that a majority of workers vote for the populist far right. In fact, his evidence indicates that most workers either still vote for the remnants of the social-democratic left or abstain.5 Cope (2013, p. 116) recognizes that the attractions of some workers to the populist far right is the result of the collapse of collective class organization
particularly “trade union vehicles” (p. 116). As we will argue below, conservatism
like reformism
is in some-ways the “default” consciousness of workers in all societies in the absence of effective class organization
including the global South.

UNEQUAL EXCHANGE AND THE GLOBAL “LABOR ARISTOCRACY” In his recent book, Divided World, Divided Class (2012), Cope attempts to overcome the empirical limitations of previous defenses of the labor aristocracy argument, by radicalizing the argument. No longer is the labor aristocracy restricted to a minority of workers in the global North, but now

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encompasses the majority of workers in the developed capitalist world. While immigrant and non-white workers in the global North are subject to super-exploitation (through mechanisms which are never specified), Cope claims that the vast majority of workers in these regions are not exploited. They are the equivalent of the original proletariat of the Ancient Roman world
a layer of parasites who live off the exploitation of workers in the global South. Any militancy on the part of these workers
like the strikes and demonstrations against employers and the state during the current global crisis
are merely a defense of their privilege. Put another way, militant actions by well-paid workers in the global North seek to renegotiate the “division of spoils”
the division of super-profits pumped out of the global South
with their capitalist classes. At the heart of Cope’s empirical defense of the labor aristocracy, thesis is an innovative attempt to measure the effects of unequal exchange between the global South and North. Although he attempts to produce data showing that profits repatriated from FDI in the global South are greater than previous estimates, he primarily relies on unequal exchange as the main mechanism for transferring surplus-value (profits) produced in the global South to the pockets of workers and capitalists in the global North. Cope bases his analysis on that of the Greek Marxist, Arghiri Emmanuel’s Unequal Exchange: A Study of the Imperialism of Trade (Monthly Review Press, 1972). For Emmanuel, unequal exchange is not the result of market manipulation, but of the operation of Marx’s law of value
that socially average necessary labor time regulates the production and exchange of commodities
on a global scale. Marx (1981, Part II) argues that the tendency to equalize profit rates between industries results in commodities not being exchanged according to their value (the socially average necessary labor time required for their production). Rather, commodities are exchanged according to their prices of production (the cost of means of production, raw materials and labor-power for each unit of output). If commodities were exchanged at their value, more labor-intensive (low organic composition of capital) producers would earn higher rates of profit
despite their less efficient use of labor
than more capitalintensive (higher organic composition of capital) producers. In other words, according to Marx’s law of value, less mechanized industries such as cocoa bean growers in Guatemala would generate a higher rate of return on investment than more technologically advanced industries such as car manufacturers in Detroit. Marx resolves this problem by insisting that competition between branches of industry transforms values into prices of production. As a result, there is a transfer of value from low organic

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composition of capital (labor-intensive) producers to high organic composition of capital (capital-intensive) producers, equalizing profit rates between industries. Emmanuel’s theory is an elaboration of Grossman’s (1992) insight about the equalization of profit rates across national boundaries. As the mobility of capital across the world creates a global profit rate, goods are exchanged on the world market according to their prices of production, not their value. The result is unequal exchange
the transfer of value from low to high organic composition of capital producers internationally. Emmanuel believed that production in the global South has a uniformly lower organic composition of capital than production in the global North. As a result, there is a systematic transfer of value from the less to more developed parts of the capitalist world. Unequal exchange explains both the persistent underdevelopment of capitalist production in the global South, and the emergence of a reformist and conservative labor aristocracy in the global North. Cope, following Emmanuel, assumes that production in the global South has a uniformly lower organic composition of capital than production in the North. He then estimates the transfer of value from South to North through a fairly rigorous comparison of the value added (his proxy for surplus-value) to exports from the South to the North, and that added to the exports from the North to the South. Cope concludes that approximately $20 trillion of surplus-value was transferred from the South to the North through unequal exchange in 2010. This transfer accounts, according to Cope’s calculations, for the vast majority of the value of labor-power (wages) and surplus-value (profits) earned by workers and capitalists in the global North. Despite the sophistication of his estimation of value transfers from the global South to the North, Cope’s argument and evidence does not withstand critical examination. Clearly, the transformation of values into prices of production through the equalization of profit rates does involve a transfer of value, creating a potential for unequal exchange between low and high organic composition of capital producers. However, as Shaikh (1979, 1980) pointed out, production in the global South does not have a uniformly lower organic composition of capital than production in the North. In fact, the global South is the site of some of the most capital-intensive production in the world, in particular in natural resource extraction (oil, natural gas, mining, etc.). Put simply, unequal exchange between the global South and North does not simply produce a one-way transfer of value from the South to the North. It also produces transfers of value from lower

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organic composition of capital producers in the North to higher organic composition of capital producers in the South. Without a rigorous disaggregation of the relative weight of labor- and capital-intensive exports from and to the global South, there is no evidence that workers in the global North benefit from unequal exchange and are, thus, a necessarily conservative or reformist social force.

ALTERNATIVE THESIS ON WORKING CLASS REFORMISM AND CONSERVATISM There is little or no question that: the effective parties of the left in the imperialist countries have functioned as vehicles to enforce the partial regulation and socialization of capitalism, as opposed to having posed any serious threats to its replacement … It is demonstrably absurd to meekly attribute the reformism of the working bourgeoisie to “false consciousness,” job insecurity (“precarity”) or Stalinist or social democratic “betrayal” as is typical amongst Western Marxists. (Cope, 2013, p. 115)

The question is how do we explain why the parties of the left and most workers, most of the time, in most societies
including those of the global South
embrace either reformism or conservatism.6 I start from Marx’s materialism, where social practice (the real relationships between humans and between humans and nature) determine the possible range of social consciousness. From this view point, ideology is not propaganda or false ideas poured into people’s heads, but the mental road map we create of the lived experience of social relations. Thus, working class consciousness, in all of its unevenness, must be understood in relationship to the real experience of capitalist social relations. The contradictory character of working class’ relationship with capital determines the contradictions of working class consciousness. Workers are both collective producers and competing sellers of labor-power. It is as collective producers, engaged in collective organization and struggle with capital, that workers are capable of viewing themselves as part of a social class. Put another way, only by acting in a class manner against capital, do workers experience their collective social power and experience themselves as a class opposed to capital. Thus, it the experience of collective, class action that produces radical and potentially revolutionary radical class consciousness among significant minorities of workers. It is as competing sellers of labor-power, attempting to improve their wages/working at the expense of other workers, that leads workers to

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identify themselves along the lines of race/nationality, gender, sexual preference, citizenship, and the like. Put another way, when workers act as competing sellers of labor-power, engaged in a war of “all against all,” that different strata of the class embrace sectional identities and ideologies
racism, nationalism, xenophobia, sexism, homophobia, etc. Put simply, when workers have no experience of successful collective action against capital that sections of the working class are attracted to right-wing politics. This is not only true in the global North, but the global South as well, as evident in sharpening “ethnic” tensions among workers in southern Africa in the last decade, as “resident-citizen” workers in South Africa physically attacked migratory non-citizen workers from Zimbabwe and Mozambique. For Marx, the foundation of capitalist social relations of production is the necessity of both capital and labor to reproduce themselves through the market
through competition. Labor-power becomes a commodity only when workers are effectively separated from the means of production and subsistence, compelling workers to sell their labor-power to capital in order to survive. The separation of workers from the means of production/ subsistence produces the necessarily uneven character of working class collective activity and class consciousness. Put simply, most workers cannot be permanently engaged in strikes and other forms of radicalizing social disruption because they would starve. Thus, mass working class struggle is necessarily episodic. As a result, the working class is divided, most of the time under capitalism, into three strata, distinguished by their level of class organization, activity, and consciousness. In “normal periods” (not the exceptional periods of mass strikes or revolutionary upheavals) most workers are engaged in the day-to-day struggle to survive under capitalism
working under despotic supervision of capital, attempting to keep their jobs, and trying to reproduce themselves and household members. This passive majority of workers will tend to look to “others” to defend and advance their interests. At best, they will embrace a conditional reformism
the hope that routine bargaining, the grievance procedure and electoral politics will defend and improve their conditions of life under capitalism. Put another way, they will want union and party officials union to “take care” of their problems at work and beyond, rather than engage in job actions and street protests. At worst, especially when unions are weak, the passive majority will become open to sectoral identities and ideologies
to the appeals of racism, nationalism, sexism, and the like. The position of the labor officialdom
the small minority of workers who assume responsibility for union or party organization
is quite

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different from the passive majority of workers. They are semi-professionals, who organize their own work (not under the supervision of capital) and possess specialized knowledge (contracts, grievance procedures, labor law, electoral campaigns, parliamentary maneuvering, etc.), which allows them to envision themselves as equals to, and potential partners of capital. Their distinctive social conditions of life do not rest on the success of the struggle with the employer or the state. Instead, it is based on the continued existence/stability of the union or party as a formal organization, which bargains with employers, collects dues, and holds positions in the capitalist state. If the union or party as a formal organization is destroyed
loses bargaining rights, the capacity to collect dues, or seats in parliament or local government
then the union or party official will fall back into the working class. The union and party officialdom develops a distinctive world-view
unconditional reformism. They remain wedded
unless compelled by an independent mobilization of the ranks
to routine bargaining, grievance procedures, electoral politics, all of which promise to advance the interests of their members without the risks associated with mass struggle. The paradox of reformism is that party-union officialdom remains wedded to increasingly ineffective methods of reformism. Put another way, they will hold onto routine bargaining and electoral politics whether or not they produce reforms
or even, as we have seen throughout the capitalist world since 1980, produce continuous concessions to capital
because they have no alternative. The union officials, unless compelled by independent movements from below, will not risk their social position through militant and illegal actions. Thus, it is not surprising that in periods of declining mass struggle, the mass industrial unions, and political parties of the Brazilian (CUT and PT) and South African (COSATU) working classes have become bureaucratized and their leaderships embraced reformist
and ultimately neo-liberal
politics in the same manner as the labor officialdom in the global North. The third layer of the working class is the militant minority or workers’ vanguard
that minority of workers who “remain active during the lulls of the class struggle.” Historically they are the lay union officials
stewards and the like
who organize job actions over working conditions and push for broader and more militant struggles. They find themselves bucking heads with the union officialdom, while trying to engage broader layers of the usually passive working class. Usually the most radical and class conscious sections of the working class
the social basis for left-socialism and communism in the working class in the pre-World War II era.

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The relative strength, militancy and radicalism of workers movements are the product of the relationship of forces between these three sectors. Since the 1930s we have seen the disorganization and decline of the workers’ vanguard across the capitalist world as the main organizations of the militant minority
the Communist Parties
embraced the strategy of the “popular front” and became, politically and sociologically, socialdemocratic parties (Post, 2012). The resulting weakening of the layer of workers most likely to organize resistance to capital left the passive majority of the working class to rely solely on the increasingly ineffective methods of the party-union officialdom across the capitalist world. As the unions and social-democratic parties gave up the struggle for reforms after circa 1980, often embracing anti-working class neo-liberal policies, the passivity of the majority of workers deepened. In the past decade, renewed struggles against neo-liberalism and austerity, in both the global North and South, have created the possibility of the renewal of the workers’ vanguard and the revival of radical, anti-capitalist working class politics. Ultimately, the future of working class radicalism across the world depends upon the success or failures of these struggles. Cope’s critique of my work on the labor aristocracy and his own book are important contributions to much needed discussions among Marxists on the problems of international political economy and the determinants of working class consciousness and activity. Unfortunately, Cope’s approach relies on highly problematic theoretical notions and methodological approaches. His account of the global transfers of value starts from the highly problematic notion of monopoly and tends to greatly simplify the empirical realities of global capitalist production. Cope’s tendency to reduce the complex problems of class formation to one of income differences among workers ends up reproducing the caricatures of Marxism that sees impoverization as the key to working class radicalism. I hope my response clarifies some of these issues and will open the way to more productive theoretical and empirical discussions.

NOTES 1. Cope argues that “monopoly capitalists” (oligopolies) require a labor aristocracy to provide “those few giant firms dominating key industries
with the secure and thriving consumer markets necessary to capital’s expanded reproduction” (p. 107). This under-consumptionist argument is both theoretically problematic and has little or no empirical basis. See Shaikh (1978, 1989, 2010).

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2. Cope (2013, p. 111) revives the notion that the uneven and combined development of capitalism on a world scale
the successful capitalist industrialization of the global North
was the result of “massive infusions of capital which result from global surplus-value transfer and the all too obvious facts of Northern working class consumption goods being the product of super-exploited Third World labor.” While the notion that plunder, mercantile fraud, unequal exchange, and other forms of imperialist super-exploitation over the last five centuries is a “significant” source of capital invested in the global North is a common argument on the left, it has little historical foundation. If outright plunder in the sixteenth and seventeenth centuries were a significant source of capital accumulation, then Spain and Portugal
the most effective early modern pre-capitalist empires
should have experienced the breakthrough to industrial capitalism well before England in the eighteenth century. Similarly, if profits from slave-based plantation agriculture in the Caribbean and the transatlantic slave trade in the seventeenth and eighteenth centuries were decisive to the capitalist industrialization, then France
which possessed the most lucrative plantation island, St. Domingue, now Haiti
should have preceded England in the industrial revolution. Ellen Wood (1999, p. 101) provides an alternative explanation of the relationship of colonial plunder to the breakthrough to industrial capitalism based on Blackburn’s (1997, chapter XII) analysis of plantation slavery in the New World: Marxist historians have persuasively demonstrated, against many arguments to the contrary, that the greatest crime of European empire, slavery, made a major contribution to the development of industrial capitalism. But here, too, we have to keep in mind that Britain was not alone in exploiting colonial slavery and that elsewhere it had different effects. Other major European powers
France, Spain, Portugal
amassed great wealth from slavery and from the trade in addictive goods like tobacco which, it has been argued, fueled the trade in living human beings. But, again, only in Britain was that wealth converted into industrial capital
and here again the difference lies in the new capitalist dynamic which had already transformed the logic of the British economy, setting in train the imperatives of competitive production, capital accumulation, and self-sustaining growth.

Put simply, the breakthrough to capitalist industrialization in Britain in the eighteenth century
and the continued accumulation of capital in the global North today
is primarily the result of the specific economic dynamism of capitalist social relations of production. The breakthrough to capitalist class relations in English agriculture in the sixteenth century was the result of a unique series of struggles between peasant farmers and landlords (Brenner, 1985a). These struggles unleashed a dynamic that compelled farmers to “sell to survive”
to specialize, accumulate, and innovate in order to survive in the competitive market place. The development of agrarian capitalism in the English countryside paved the way for industrial capitalism
through the creation of both a mass of property-less wage workers from the ranks of “failed” capitalist farmers, and a “home market” for capitalist produced consumer and capital goods. 3. Thanks to Kim Moody for compiling these tables.

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4. Equally problematic is Cope’s (2013, p. 115) claim that white workers in South Africa constituted a “labor aristocracy” concerned solely with defending their privileges vis-a`-vis African workers. In fact, “white workers” were actually a new middle class of supervisors, not workers. 5. A similar pattern was evident in Germany in the late 1920s and early 1930s. Steadily employed workers, mostly older and skilled, either voted SocialDemocratic or abstained from voting. The Nazis main electoral support came from the traditional (self-employed) and new middle classes (professionals, managers) and the unemployed
the latter also tended to vote for Communists during the “Third Period” when the Communists tended to equate social-democracy and fascism. See Allen (1965), Part I. 6. This section, which summarizes Post (2006b), is based on Mandel (1970), Brenner (1985b, 1993), and Brenner and Brenner (1981).

ACKNOWLEDGMENT I want to thank the editors of Research in Political Economy for the opportunity to response to Cope’s (2013) critique of my work on the labor aristocracy (Post, 2006a, 2006b, 2010). The question of the roots of working class reformism and conservatism is a crucial one for the global anti-capitalist and Marxist left. The debate on whether or not higher than average (“super” or “surplus”) profits derived from colonialism, imperialist investment, or global monopoly-oligopoly is the basis for the higher standards of living of workers in the developed capitalist countries is not simply a “theoretical” issue. At stake is whether or not workers in the global North are potentially anti-capitalist and revolutionary or are materially tied to their own ruling classes.

REFERENCES Allen, W. S. (1965). The Nazi seizure of power: The experience of a single German town, 1930
1935. Chicago, IL: Quadrangle Books. Blackburn, R. (1997). The making of new world slavery. London: Verso. Brenner, J., & Brenner, R. (1981). Reagan, the right and the working class. Against the Current, (Old Series) 1, 2(Winter), 28
35. Brenner, R. (1985a). Agrarian class structure and economic development in pre-industrial Europe. In T. H. Aston & C. H. E. Philpin (Eds.), The Brenner debate: Agrarian class structure and economic development in pre-industrial Europe. New York, NY: Cambridge University Press. Brenner, R. (1985b). The paradox of reformism: The American case. In M. Davis, F. Pfeil, & M. Sprinker (Eds.), The year left: An American socialist yearbook. London: Verso.

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Brenner, R. (1993). The problem of reformism. Against the Current, 43(March
April), 42
45. Claudin, F. (1975). The communist movement: From comintern to cominform, Part I: The crisis of the communist international. New York, NY: Monthly Review Press. Cope, Z. (2012). Divided world, divided class: Global political economy and the stratification of labor under capitalism. Montreal: Kersplebedeb. Cope, Z. (2013). Global wage scaling and left ideology: A critique of Charles Post on the “labor aristocracy”. Research in Political Economy, 28, 89
129. Elbaum, M., & Seltzer, R. (1982a). The labor aristocracy: The material basis for opportunism in the labor movement, Part I: The theory of the labor aristocracy. Line of March, 11. Retrieved from http://readingfromtheleft.com/PDF/LaborAristocracy.pdf Elbaum, M., & Seltzer, R. (1982b). The labor aristocracy, Part II: The U.S. labor movement since world war II. Line of March, 12, pp. 69
118. Elsenhaus, H. (1983). Rising mass incomes as a condition of capitalist growth: Implications for the world economy. International Organization, 37(1), 1
39. Emmanuel, A. (1972). Unequal exchange: A study of the imperialism of trade. New York, NY: Monthly Review Press. Engels, F. (1845). The conditions of the working class in England. Retrieved from http://www. marxists.org/archive/marx/works/1845/condition
working
class/index.htm Grossman, H. (1992). The law of accumulation and breakdown of the capitalist system: Being also a theory of crisis. London: Pluto Press. Halevy, E. (1968). History of the English people (Vol. 5). Imperialism and the Rise of Labour. London: Ernest Benn, Ltd. Lenin, V. I. (1915). The collapse of the second international. Retrieved from http://www. marxists.org/archive/lenin/works/1915/jun/x01.htm Lenin, V. I. (1916). Imperialism: The highest state of capitalism. Retrieved from http://www. marxists.org/archive/lenin/works/1916/imp
hsc/pref02.htm Linder, M. (1985). European labor aristocracies: Trade unionism, the hierarchy of skill and the stratification of the manual working class before the first world war. Frankfurt: Campus Verlag. Mandel, E. (1970). The Leninist theory of organization: Its relevance for today. International Socialist Review, 31(9). (December). Retrieved from https://www.marxists.org/archive/ mandel/196x/leninism/index.htm Marx, K. (1981). Capital (Vol. 3). Harmondworth, England: Penguin Books. Meyer, B. D. & Sullivan, J. (2011). The material well-being of the poor and middle class since 1980. American Enterprise Institute. Retrieved from http://www.aei.org/files/2011/10/ 25/Material-Well-Being-Poor-Middle-Class.pdf Mishel, J., Bernstein, J., & Allegreto, S. (2005). The state of working America 2004/2005. New York, NY: Economic Policy Institute. Moody, K. (1997). Workers in a lean world: Unions in the international economy. London: Verso. Oesch, H. (2008). Explaining workers’ support for right-wing populist parties in Western Europe: Evidence from Austria, Belgium, France, Norway, and Switzerland. International Political Science Review, 29(3), 349
373. Post, C. (2006a). The Myth of the labor aristocracy, Part I. Against the Current, 123(July
August). Retrieved from http:/www.solidarity-us.org/node/128 Post, C. (2006b). The “Labor Aristocracy” and working-class struggles: Consciousness in flux, Part II. Against the Current, 124(September
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Post, C. (2010). Exploring working-class consciousness: A critique of the “Labor Aristocracy”. Historical Materialism, 18, 3
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241). New York, NY: Union of Radical Political Economics. Retrieved from https://docs.google.com/file/d/0BxvNb6ewL7kOYXBISHBTLUZvekU/edit Shaikh, A. (1979). Foreign trade and the law of value: Part I. Science & Society, 43(Fall 1979), 3. Retrieved from https://docs.google.com/file/d/0BxvNb6ewL7kOSzZlVHU5M1QwZFU/ edit?pli=1 Shaikh, A. (1980). Foreign trade and the law of value: Part II. Science & Society, 43(Spring 1980), 4. Retrieved from https://docs.google.com/file/d/0BxvNb6ewL7kOSmE5Wj VmaXFQdFk/edit?pli=1 Shaikh, A. (1989). The current economic crisis: Causes and implications. Detroit: Against the Current. Retrieved from https://docs.google.com/file/d/0BxvNb6ewL7kOVUlPdDdm LUNTMHM/edit Shaikh, A. (2004). The economic mythology of neoliberalism. In A. Saad-Filho (Ed.), Neo-liberalism: A critical reader. London: Pluto Press. Retrieved from https://docs. google.com/file/d/0BxvNb6ewL7kOTWd1Y29IbWVWbjQ/edit Shaikh, A. (2010). The first great depression of the 21st century in socialist register 2011: The crisis this time (pp. 44
63). London: Merlin Books. Retrieved from https://docs.google. com/file/d/0BxvNb6ewL7kOVkd6OTFPcF96ZlU/edit Wood, E. M. (1999). The origins of capitalism. New York, NY: Monthly Review Press. Wood, E. M. (2004). Empire of capital. London: Verso. Zinoviev, G. (1983
1984/1916). The social roots of opportunism. New International, 2, 135
199.

A COMMENT ON THE POST
COPE DEBATE ON LABOUR ARISTOCRACY AND COLONIALISM Amiya Kumar Bagchi ABSTRACT The issue of the existence and persistence of a labour aristocracy in advanced capitalist countries is connected with the emergence and persistence of an extremely unequal international economic order. The emergence of that order is the direct result of capitalist colonialism. That colonialism helped garner and control resources for the pioneering capitalist countries, which also emerged as the top imperialist countries of the world. The colonial resources were used to support and augment the profits of the capitalist class, but after the immiserizing phase of industrialization had passed, they also helped increase the incomes of workers in the advanced capitalist countries. Workers’ struggles and the threat of such struggles in some phases of development of capitalism led to increases in their incomes. However, there are instances in which the ruling class in the USA and UK deliberately used the lure of private property or acquisition of colonies to try and get their support. Thus, the debate

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between Post and Cope can only be resolved by invoking the complexities of the patterns of exploitation and governance under actually existing capitalism. Keywords: Colonialism; colonies of exploitation; international economic order; undocumented immigrants; unions; persistent wage gap

There are several different levels at which the debate between Charles Post and Zak Cope has been conducted. At one level, it is a discourse about exactly what the different authorities cited by the two authors meant by labour aristocracy. Cope has cited authorities from Engels (1845) through Lenin (1916, 1918), and Elbaum and Seltzer (1982, 2004).1 A second level of debate is about the nature of capitalist colonialism and its significance for the performance of actually existing capitalism. Another level of discourse is the influence of colonialism, imperialism and the inequitable international economic order in structuring a permanent gap between the wages of workers in the advanced capitalist countries and of the workers in the world outside those countries. Finally, there is also a fourth level of debate, namely, the circumstances under which these just-mentioned groups of workers can put up a joint fight against the depredations of capital. I will not spend much time on the fourth level of debate. Post (2013, p. 3) states: ‘Cope and I differ not on the reality of the dominance of reformism and conservatism among most workers in capitalist societies
north and south
but on the explanation of this phenomenon’ (italics in the original). This statement may be contested by Cope, because he may not accept the narrow way Post defines the nature of the ‘bribe’ paid by the ruling classes to the workers, in order to obtain their passive or, on occasion, active acquiescence in the existing order. I would, however, agree that the workers’ militancy or passivity depends on the context defined by the preparedness of the workers to mount a struggle, the kind of crisis faced by the capitalist order, and the power of the weapons of coercion and propaganda wielded by the ruling classes. These points can be illustrated with the history of US labour since World War II. The highest percentages of unionization of the total labour force in the USA were recorded from the 1950s to around 1960; work stoppages also peaked just after the war, and then they declined until around 1965
1966 and then peaked again in the early 1970s (Goldfield, 1987,

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table 1 and figure 6). In 1959, US steel workers went on what may have been the longest and costliest strike in US history, causing a severe decline not only in the output of steel, but also in that of automobiles (Takeaway, 2013). Until the middle of the 1960s, the United States was the dominant power in practically all major areas of high-technology production, including steel and automobiles. There was also a very low level of unemployment in the country. All that strengthened the bargaining power of the workers and their unions. But already from the 1960s, Japan and Germany were beginning to challenge US domination of exports of several of these major products. Monopolistic control and inertia, for example, had led the US steel producers to invest on a large scale in the obsolete open-hearth furnace technology for reduction of iron ore, whereas by adopting and improving the Austrian innovation of direct oxygen reduction of iron ore, Japan was emerging as the lowest-cost steel producer and soon the largest exporter of steel in the world (Adams & Dirlam, 1966; Adams & Mueller, 1982). Moreover, the increasing involvement of the USA in the Vietnam War took a toll of the macroeconomic fundamentals of the US economy. By 1971, the USA was forced to give up the link of the dollar to a fixed amount of gold. After that the ruling class went on a warpath against the workers, in order to restore the fast eroding profitability of investments by big capital. The intensity of workers’ strikes also reached a peak. Take another area in which the position of the capitalist country in the global capitalist order and that of the workers in that country influences both workers’ militancy and the response of the ruling classes. That is the issue of immigration. Partly as a result of the earlier, essentially racist laws severely restricting immigration and partly because of the dominance of the post-World War II global economy by the USA, capitalists in the latter country were quite happy to deal with a labour force, without a significant supplement of a permanent reserve army of labour. The unions were also satisfied with the situation and generally opposed immigration for fear that it would lower their bargaining power (Briggs, 2001). However, after the US authorities had successfully broken the power of the unions, there was a flood of immigration into the USA, especially from the neighbouring countries of Mexico, Central America, the Caribbean and South America. Not only the governments of the USA, but also of the large-immigration European countries dealt with the situation by keeping a very large fraction of them as ‘undocumented’ or more bluntly, as ‘illegal’ immigrants. In the process, they often thereby violated international conventions on human rights and also their own laws (Bagchi, 2008). This gave a handle to the employers who used that illegal status as a threat against them, while

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threatening the enfranchised workers with replacement by immigrants. The government in the USA needed the immigrants for work on reconstruction at sites of disasters such as that caused by Hurricane Katrina and Hurricane Sandy (Fletcher, Pham, Stover, & Vinck, 2006; Sanchez, 2013). They are also used extensively for fighting forest fires (Johnson, 2006). Fletcher et al. (2006) found that undocumented workers constituted a quarter of the workforce in New Orleans and that 45 per cent of construction workers were of Latin American origin, of whom 54 per cent were undocumented immigrants. They also found that ‘Documented and undocumented workers were vulnerable to exploitation by their employers because of inadequate legal protection and the failure on the part of federal and local authorities to monitor construction sites’ and that the wages of many workers were so low that they could not buy enough food for themselves. Immigrant workers in the USA took out a huge a rally on 10 April 2006, demanding a legal status for all (Swarns, 2006). Gradually, the attitude of the unions including the biggest of them, AFL-CIO, has changed, and they now often express solidarity with striking immigrant workers, and new initiatives are afoot to organize the workers who do not have unions (Davis, 2012; Greenhouse & Yaccino, 2012; Takeaway, 2013). I would also argue that until now, in most periods of history, the workers of advanced capitalist countries have supported the existing order, but they have also demanded better wages, working conditions, security at the workplace and public services such as publicly funded education, health care and protection of the old and the disabled. It is necessary to recognize this constant, although often suppressed demand and go on struggling for involving them fully in the fight for a more just international and internal social and political order. It is by now evident that the workers of the advanced capitalist countries will benefit immensely if a more equal international economic order creates better conditions of work for the struggling poor of the developing countries. The only group that will lose out is the global predatory capitalist class. I would also not spend much time on the exegesis of exactly who said what when, with regard to the existence of a labour aristocracy in the advanced capitalist countries. I believe that the foundational texts are those of Engels (1858, 1882) and Marx (1869), and his further comment on the necessity of linking the struggle for socialism in Britain to the liberation of Ireland, as quoted by Cope (2013, p. 93). Basically, the argument is that the British trade unions were built on the basis of the dominance of the unions by the leaders of skilled craft workers, and as the working class gradually became more bourgeoisfied through propaganda and gradual

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improvement of the living conditions of those workers, the power of that aristocracy of labour extended over the whole working class. The issue of the liberation of Ireland was linked to that of the fight for socialism in three different ways. Ireland, as England’s oldest colony, continued to yield a surplus to the absentee English landlords. It served as a reservoir of cheap labour for the factories of England. Its domination by the English was used as a chauvinist handle of propaganda by the British ruling class to influence the workers to support its tenacious hold on the empire, and the extension of the latter. Mutatis mutandis, much of that analysis would apply to the use of the informal colonies by US-led imperialism today. Some of the leading examples of such neo-colonies are Saudi Arabia and Egypt after the aborted Arab revolution, Mexico which allows thousands of its citizens to be killed while trying to cross the border with the USA and acts as the policeman for preventing migrants from Central American countries from moving to the USA. Morocco acts in a similar fashion as the policeman protecting the border of EU countries. I will, therefore, confine my attention to the actual historical context, the intertwining of capitalism and colonialism and the influence of that intertwining on the persistence of a much higher standard of living of the workers in the USA, Western Europe and its overseas offshoots than of the workers in the rest of the world. (That privileged working class has been vulnerable to repeated attacks by the capitalist class in those lands, but the privilege persists, even while it is used by the rulers to divide the working class.) A connected issue is that of a wage gap between skilled and unskilled workers. To start with, we have to get rid of the idea of existence of a pure capitalism without any entanglement with colonies or the use of nonmarket power. Post (2013, p. 12) writes: The use of non-market coercion
military power, monopoly power, etc.
is the distinguishing characteristic of pre-capitalist, not capitalist imperialism (Wood, 2004). The distinguishing feature of capitalist social relations is the absence of non-market coercion in the exploitation of direct producers. Rather than relying on legal, juridical, and other non-market forms of coercion to ensure that producers perform surplus labor for their exploiters, capital relies solely on the operation of the market in labor-power to ensure the production of surplus-value.

This formulation is contrary to the analysis of the genesis of capitalism in the only volume of Marx’s magnum opus published in his life-time, namely, Capital, volume I (Marx, 1867/1886). Second, it flies straight in the face of the historical evidence of the growth of capitalism in England, the pioneering capitalist-industrialized country (Bagchi, 2005, chapter 3; Bagchi, 2013). The use of non-market coercion was a constant feature of the rule of

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colonies. The use of the Masters and Servants Act of England, for example, which made a breach of contract by the servants a criminal, not a civil offence, survived in the colonies long after its abolition in England (Hay & Craven, 2004). Slavery remained in effect in most of the British colonies throughout the British colonies long after its formal abolition (Anderson, 1993; Lovejoy & Hogendorn, 1993; Sarkar, 1985). A new system of slavery, in the form of indentured labour was introduced into the plantations owned by British capitalists, when they could not persuade emancipated slaves to work on those plantations Tinker, (1974). The so-called law and order in the colonies was underpinned by a law of emergency, which could be invoked any time the colonial authorities thought that their power was challenged by the natives (Hussain, 2003). The perpetrators of atrocities under that kind of law went unpunished because those acts did not violate the legal code the colonial authorities recognized. So let us overcome the confusion of actually existing capitalism with pure capitalism, and turn to the uses of colonialism for actually existing capitalism. Then we will take up the issue of wage gaps between skilled and unskilled labour in advanced capitalist countries. In the case of England, the surplus generated by the West Indian colonies and the tribute extracted from British India added substantially to the savings needed to finance the industrial revolution (Bagchi, 2005, chapters 16 and 17; Cuenca Esteban, 2007). A second function the colonial connection with India served was to allow the English to develop the cotton textile industry by adopting policies that promoted the substitution of the imports of Indian cotton textiles first in England and then in other markets as well (Bagchi, 2010; Inikori, 2002, ‘Introduction’). The significance of this history is twofold. Until the late eighteenth century, India was the biggest exporter of cotton textiles in the world. By 1830, India had become a net importer of cotton textiles, and soon emerged as the largest market for British-made cotton yarn and cloth. On the other side, cotton textile manufacture became the leading industry of Britain during the English industrial revolution. Britain was the leader in flows of foreign investment during the nineteenth century. Its stock of foreign investment has been authoritatively estimated at £4000 million on the eve of World War I. On the other side if we compound the tribute extracted from India and Burma only from the 1870s to World War I, we get figures ranging from £3199 million to £3779 million (Bagchi, 2005, chapter 17). Thus the India
Burma tribute alone would have paid for the major part of British foreign investment that financed the development of the USA, Canada and Australia during the late nineteenth century. Only a very small part of British foreign investment went to the

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colonies of exploitation peopled by non-Europeans. Colonies served the European powers in other ways also. During the period the Netherlands became the dominant naval power in Europe, its control of the spice islands and spice trade of Indonesia provided it with enormous profits. But as is well-known, for a number of reasons, including that of scale, it fell behind England and France in economic and military power, and in the late 1790s it became a colony of France. It was able to forge ahead only on the basis of the surplus extracted from Indonesia, after that archipelago was returned by Britain to the Netherlands as part of the peace settlement of 1815 (Bagchi, 2013; Van Zanden, 1993, chapter 6). Let us now turn to the issue of labour aristocracy. Post (2013, p. 17) states: ‘… wages for all workers in British industry, skilled and unskilled, fell throughout the 1870s and 1880s’. This is just factually incorrect. Van Zanden (1999) and Allen (2000) and many later works show that real wages of English workers rose during the late nineteenth century. One of the contributory factors to that rise was a fall in primary product prices from around 1873 to about 1898. Colonies contributed to that fall in three ways. First, the British Indian empire exported rice and wheat even during periods of famine in India. What was true of India was true in the case of other colonies of exploitation. This contributed to the global excess supply of primary products. Second, the US and Canadian prairie and the Argentine pampas were opened up with the help of British investment in those countries. As I have argued earlier, the surplus extracted from the colonies of exploitation contributed to that investment. Third, British foreign investment sustained the massive overseas migration of European labour from the 1870s down to World War I (Bagchi, 2005; Massey, 1988, chapters 16 and 17). Along with working class struggles for higher wages, better conditions of work and democratic rights, the tightening of the labour market caused by this mass migration contributed to the rise of the wages of the workers, and also helped maintain wage differentials between skilled and unskilled labour. I have already sketched how immigration, changes in the global economy affecting the position of the particular capitalist economy and state-led attacks on the bargaining power of the workers (Goldfield, 1987) can change the position of workers in a country such as the USA. The question may be asked, ‘How have these changes impacted wage differentials in the advanced capitalist countries?’ This last issue has been the central focus of Post (2013). I will confine my attention to the wage gaps between skilled and unskilled labour in the USA and Europe from World War II up to the present. The distinction is made on the basis of the unskilled being those who do not possess a college or post-college degree and the skilled being

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those who do. According to the data available in Autor, Katz, and Krueger (1998), the skill premium was about 50 per cent of the unskilled wage in 1940, it then fell to 30 per cent in 1950, rose between 1960 and 1970, fell in the 1970s, then rose steadily from 1980 to more than 55 per cent in 1998. The data provided by Autor, Katz, and Kearney (2008) indicate that the wage gap has continued to increase in the twenty-first century.2 Similarly if we adopt the same kind of definition of skilled and unskilled as in the case of the USA, large and increasing wage gaps are found in the labour markets of Europe, including the new countries of the ex-Soviet republics incorporated in the European Union (Parteka, 2010; Ta˚hlin, 2006). The reasons for this persistent and increasing wage gap are quite complex. They cannot be reduced to just differences in productivity between skilled and unskilled labour as is done in most mainstream studies such as Autor et al. (2008). If a doctor trained in a developing country, after migrating to the USA, is forced to take up a manual job with no skill requirement, because she cannot afford to train herself again as a doctor recognized by the US authorities, her lower earning is not due to her inherent low productivity, but because of so many restrictions working in a ‘free market’. The existence of the differences is due to the fact that in the USA and most EU countries university education was expensive, but could be afforded by boys and girls who could manage to get scholarships. With the progress of neoliberal policies, those scholarships have become more scarce in relation to the potential claimants for them. Even secondary school education has become more expensive as the neoliberal regimes have cut down public expenditures on social sectors. Student loans for education in the USA are hazardous for students from poor families, since many of them have to drop out because of personal or family circumstances, and while billionaires can get out of their obligations by declaring the bankruptcy of the corporations they controlled, students cannot get rid of their obligations by declaring bankruptcy. During the last two decades and more, there has been a steep increase in the shares of the top 1
5 per cent of top income earners in many advanced capitalist countries, and especially in the USA and the UK (Atkinson, Piketty, & Saez, 2011). Steep increases in salaries and other incomes of the top layer of executives, and capital gains accruing from operations of deregulated stock markets have contributed greatly to this historic increase in inequality in these countries. Global income inequality has also increased over this period (Milanovic, 2011). That increase has been superimposed on a highly unequal international economic order in the 1980s.Structural adjustment programmes mandated by the IMF and World Bank left many developing countries more

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impoverished than before. Again, Argentina is a paradigmatic case. The dollarization of the Argentine economy under the custody of Domingo Cavallo, the poster-boy of the World Bank, led to the handing over of a large part of the economy to foreign multinational companies. By 2001, Argentina had been saddled with the largest foreign debt in its history: it is only the courageous decision of Kirchner and his successors to repay that debt on Argentina’s terms that has rescued the country from that economic catastrophe. In ex-Soviet republics the breakneck privatization of public sector assets created many millionaires out of persons who could position themselves near the political bosses. At the same time, foreign bankers and finance companies aggrandized themselves at the cost of these hapless countries. Resource-rich developing countries in every continent became targets for operations of US and European multinational companies, protected by the armed might of the US and NATO forces. Along with that, there was a steady process of incorporation of well-heeled professionals from developing countries in the finance, management, IT and telecom sectors into the top layer of the skilled workers, especially, in the USA. Such incorporation, on the one hand, deprived the home countries of the expertise created with large amounts of investment. On the other hand, these newly domiciled professionals often became handy tools for further exploiting their home countries, because of their greater familiarity with the political and economic opportunities available there. Thus, inequality within countries is closely tied up with inequality in the international order in many ways, only a few of which have been touched upon here. In the Cope
Post debate, the issue of ‘bribing’ the working class has come up several times. I think the real issue is how the working class in advanced capitalist countries has been incorporated as a conscious or unconscious participant in the maintenance of the highly unequal internal socio-political order and the inequitable international order that has grown up under the actually existing capitalism. I have briefly dealt with the processes through which such participation has been sought to be ensured. But, of course, the ruling classes have sought consciously to ‘bribe’ or influence the working class from the time they faced a challenge from that quarter. I will cite only three examples, two from the late nineteenth century Europe, and the other from Britain under the heel of Margaret Thatcher as Prime Minister. Semmel (1960, p. 13) writes: The governments of Europe, during the decades before the war, had erected barriers against socialist internationalism by their programmes of social reform which gave the workers a further stake in national well-being. The Italian working class, to cite one

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example, which had attempted to sabotage the ill-fated Ethiopian War of 1896, joyously supported the successful war against Turkey to acquire Libya in 1911. One Socialist even described it as imperialism in the primary interest of the Italian working classes. What had intervened was a decade of Giolittian social reform, a system of national insurance, and a promise of universal suffrage, all of which had sapped the revolutionary ardour of Italian socialism.

Turning to Britain, the most powerful capitalist-imperialist country of that era, we find that Joseph Chamberlain, an industrialist turned Conservative politician, championed the cause of social reform that would benefit the workers, with the pursuit of an active imperialist and protectionist policy. His son, Austen Chamberlain shared his views. According to Semmel (1960, p. 14): ‘The democracy’, Chamberlain observed, ‘want two things; imperialism and social reform’. The Conservative party was successful when
under Disraeli
it combined the two; its success ended when it failed to satisfy the aspirations of the working class in the matter of social reform. ‘We can only win by combining them again’, Chamberlain had concluded. Disraeli had ‘combined’ the two-he had called himself both a social reformer and an imperialist-but had made no attempt to integrate them. In the first decade of the twentieth century, several attempts were made in Great Britain not only to combine these ideals but at the same time to demonstrate their interdependence, to say that the realization of one was not possible without the realization of the other.

Following the same tenet, Chamberlain opposed Home Rule, and of course, even more, the independence of Ireland. He was Foreign Secretary of Britain under many administrations. He famously said that ‘you can do business with Mussolini’. Again, following the usual practice of imperialist powers to reward persons who serve their interest well, he was rewarded with the Nobel Peace Prize in 1925, because he played a large role in the signing of the Locarno Pact that legitimized the then division of Europe among the contending powers. Soon after Margaret Thatcher became Prime Minister of Britain (in 1979), her government passed a Housing Act under which tenants of houses built by local governments or councils could buy the houses they occupied at prices that were sold to them at 33
50 per cent discount on the market values. About one in three tenants, that is, 2 million out of 6 million tenants bought the houses they lived in. Thatcher’s policy created a Conservative vote bank, but the construction of more houses for the poor was badly affected. Moreover, since most of the best housing was sold off, and the Conservative government did not spend much money for repairs, there was

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a large backlog of housing when the Labour Party came back to power. That party had to get to continue Thatcher’s policy in an attenuated fashion. The result has been the entrenchment of a working class which is willing to sacrifice a public good in pursuit of private benefits. Combined with other policies of retrenchment of expenditure on social security, that policy of blessing home-ownership at public cost has led to also to an enormous increase in the numbers of homeless people in Britain (BBC, 2013; Jones & Murie, 2006). In conclusion, the question of the existence of a labour aristocracy and its evolution over time is intimately related to the emergence and evolution of an unequal global economic order. The degree of success achieved by workers in their struggle to obtain better working conditions cannot be delinked from how the international economic order shapes up. Before the abolition of formal colonialism, the tributary remittances from the colonies pushed up the profits of the capitalists of the imperialist countries, but from the late nineteenth century, they also helped increase the wages and improvement of living conditions of workers in those countries. Earlier, in the days of declining living standards of workers, say, from the 1780s to the 1840s, cane sugar, cheaper cotton clothing and tea had provided supplemental calories and some comfort for the distressed workers. Up to the 1970s, exploitation of the initial advantages of the imperialist countries had allowed continuation of the earlier relationship. But as new competition and resistance movements of peoples in poor countries have threatened the dominance of the USA and EU as economic superpowers, the fates of the workers of the advanced capitalist counties and developing countries have become much more intimately tied up than before. Unfortunately, deliberate misinformation, manipulation of opinion and state repression have kept workers from a full recognition of this fact. Full recognition would not only improve the conditions of workers in all countries but might threaten systemic change
something that is dreaded equally by the ruling classes of both imperialist countries and the developing nations.

NOTES 1. For full references, see Cope (2013). 2. A critique of the methodology of this chapter appears in URL: www. georgetown.edu/grad/gppi/hpi/cew/pdfs/undereducatedappendix.pdf, accessed on 7 October 2013.

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REFERENCES Adams, W., & Dirlam, J. B. (1966). Big steel, invention and innovation. Quarterly Journal of Economics, 80(2), 167
189. Adams, W., & Mueller, H. (1982). The steel industry. In W. Adams (Ed.), The structure of American industry (pp. 73
133). New York, NY: Macmillan. Allen, R. C. (2000). Economic structure and agricultural productivity in Europe, 1300
1800. European Review of Economic History, 3, 1
25. Anderson, M. R. (1993). Work construed: Ideological origins of labour law in British India to 1918. In P. Robb (Ed.), Dalit movements and the meanings of labour in India. Oxford: Oxford University Press. Atkinson, A. B., Piketty, T., & Saez, E. (2011). Top incomes in the long run of history. Journal of Economic Literature, 49(1), 3
71. Autor, D. H., Katz, L. F., & Krueger, A. B. (1998). Computing inequality: Have computers changed the labour market? Quarterly Journal of Economics, 113, 1169
1213. Autor, D. H., Katz, L. F., & Kearney, M. S. (2008). Trends in US wage inequality: Revisiting the revisionists. The Review of Economics and Statistics, 90(2), 300
323. Bagchi, A. K. (2005). Perilous passage: Mankind and the global ascendancy of capital. Lanham, MD: Rowman & Littlefield. Bagchi, A. K. (2008). Immigrants, morality and neoliberalism. Development and Change, 39(2), 197
218. Bagchi, A. K. (2010). Colonialism and Indian economy. New Delhi: Oxford University Press. Bagchi, A. K. (2013). Contextual political economy, not whig economics. Cambridge Journal of Economics. BBC. (2013). Viewpoints: How did Margaret Thatcher change Britain? Retrieved from http:// www.bbc.co.uk/news/uk-politics-22076774?print=true. Accessed on October 4. Briggs, V. M., Jr. (2001). American Unionism and US Immigration Policy. Retrieved from http://www.cis.org/Unionism%2526ImmigrationPolicy. Accessed on October 28, 2013. Cuenca Esteban, J. (2007). India’s contribution to the British balance of payments, 1757
1812. Explorations in Economic History, 44, 154
176. Davis, S. (2012). Victory for Hot & Crusty workers. The Picket Line. Retrieved from http:// www.workers.org/articles/2012/12/02/on-the-picket-line-11/. Accessed on October 28, 2013. Fletcher, L. E., Pham, P., Stover, E., & Vinck, P. (2006). Rebuilding after Katrina: A Population-based study of labor and human rights in New Orleans. Berkeley: International Human Rights Law Clinic, Boalt Hall School of Law, University of California. Retrieved from http://www.law.berkeley.edu/files/rebuilding_after_katrina.pdf Goldfield, M. (1987). The decline of organized labor in the United States. Chicago, IL: University of Chicago Press. Greenhouse, S., & Yaccino, S. (2012). Fight over immigrant firings. New York Times, 27 July. Hay, D., & Craven, P. (Eds.). (2004). Masters, servants, and magistrates in Britain and the empire, 1562
1955. Chapel Hill: University of North Carolina Press. Hussain, N. (2003). The jurisprudence of emergency: Colonialism and the rule of law. Ann Arbor, MI: University of Michigan Press. Inikori, J. E. (2002). Africans and the industrial revolution in England: A study in international trade and economic development. Cambridge: Cambridge University Press.

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Johnson, K. (2006). With illegal immigrants fighting wildfires, west faces a dilemma. New York Times, 2 May. Jones, C., & Murie, A. (2006). The right to buy: Analysis & evaluation of a housing policy. Oxford: Blackwell Publishing. Lovejoy, P. E., & Hogendorn, J. S. (1993). Slow death for slavery: The course of abolition in Northern Nigeria 1897
1936. Cambridge: Cambridge University Press. Massey, D. S. (1988). Economic development and international migration in comparative perspective. Population and Development Review, 14(3), 383
413. Milanovic, B. (2011). A short history of global inequality: The past two centuries. Explorations in Economic History, 48, 494
506. Parteka, A. (2010). Skilled-unskilled wage gap in the enlarged EU: Sectoral analysis based on the experience of EU-15 countries and five New Member States. Retrieved from http:// www.etsg.org/ETSG2010/papers/Parteka.pdf. Accessed on October 12, 2013. Sanchez, R. (2013). Immigrant laborers pave road back from Sandy, Aljazeera America. Retrieved from http://america.aljazeera.com/articles/2013/8/29/the-road-back-fromsandy.html. Accessed on October 30, 2013. Sarkar, T. (1985). Bondage in the colonial text. In U. Patnaik & M. Dingwaney (Eds.), Chains of servitude: Bondage and slavery in India (pp. 97
126). New Delhi: Sangam Books. Semmel, B. (1960). Imperialism and social reform: English social-imperial thought 1895
1914. London: Allen & Unwin. Swarns, R. L. (2006). Immigrants rally in scores of cities for legal status, New York Times, 11 April. Ta˚hlin, M. (2006). Skills and wages in European labour markets: Structure and change. Retrieved from http://www2.sofi.su.se/∼mta/docs/Skills_and_wages_in_European_ labour_markets.pdf. Accessed on October 12, 2013. Takeaway. (2013). A new kind of organized labor, August 13. Retrieved from http://www.thetakeaway.org/story/312305-new-kind-organized-labor/. Accessed on October 28. Tinker, H. (1974). A new system of slavery: The export of indian labour overseas 1830
1920. London: Oxford University Press. Van Zanden, J. L. (1993). The rise and decline of Holland’s economy: Merchant capitalism and the labour market. Manchester: Manchester University Press. Van Zanden, J. L. (1999). Wages and the standard of living in Europe, 1500
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197. Wood, E. M. (2004). Empire of capital. London: Verso.

FINAL COMMENTS ON CHARLES POST’S CRITIQUE OF THE THEORY OF THE LABOUR ARISTOCRACY Zak Cope ABSTRACT The essay is a short response to Charles Post’s reflections on my critique of his work on the theory of the labour aristocracy, challenging Post’s denial of the existence of imperialism and its transformation of the global class structure over time and insisting upon the correctness of the idea that workers in the global North constitute a labour aristocracy and a bulwark of global capitalist rule. Keywords: Labour aristocracy; imperialism; superwages; embourgeoisement; value transfer; Marxism

The following are my final remarks on Charles Post’s repudiation of the theory of the labour aristocracy. Since I am very much in agreement with the major thrust of Prof. Bagchi’s comments on the ‘debate’ thus far (although I am, I think, less sanguine than he about the prospects of mass

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anti-imperialism taking root in the imperialist countries), I will respond to Post alone. For reasons of space I am unable to respond to some serious errors made by Post in his rejoinder to my critique (those concerning European Communist parties, the equivalence of reformist movements worldwide, the social basis of Russian Bolshevism, the declining living standards of US workers, and so on). Before proceeding, however, I must note that Post is in the unenviable position of at once denying the existence of the labour aristocracy whilst at the same time ascribing to it qualities of exceptional revolutionary virtue. Post (2014) writes: Cope is correct that I focus on explanations of wage differentials within the working class of the global North. The reason is simple
Engels, Lenin and Zinoviev, and Elbaum and Seltzer were all attempting to explain that differential.

Lenin (1970 [1916]) considered that ‘entire nations’ were becoming parasitic within the class structure established through imperialism. Before this time, Lenin had considered that widespread re-proletarianisation in the context of war and economic crisis would push the labour aristocracy into the arms of the revolutionary movement. In the final years of his life, however, when this did not come to pass, Lenin increasingly witnessed the centrality of anti-imperialist movements to the revolutionary struggle. When Engels, Lenin and Zinoviev were writing, the working class and wage labour hardly existed outside the imperialist nations. Since the working class in Lenin’s day was mostly concentrated in the imperialist countries, so too the ‘upper stratum’ of labour must have been. A century later and this is no longer the case; the vast majority of workers reside in the oppressed nations of the global South. All three writers, in any case, saw the development of the labour aristocracy in a global perspective and as intimately connected to imperialism and its extension. Post (2014) writes: Unfortunately, the source he [Cope] cites (Elsenhaus, 1983, p. 19, n. 70), provides data on the growing importance of the global South in imperial foreign direct investment
but gives no indication of the relative weight of foreign direct investment in the total economies of Britain, France, Germany or the US. We have no sense of how much investment or profit these ruling classes derived from their investments abroad generally or from investments in the global South specifically. His specific claim of a correlation between imperial profits and the higher than average wages of workers in textiles, iron and steel, engineering and mining remains unfounded.

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In my original critique of Post (Cope, 2013), I provided figures on capital export to the colonial world stating, inter alia, that Britain’s ‘net annual foreign investment between 1870 and 1914 was a then unprecedented onethird of its capital accumulation and 15% of the total wealth of its Empire’ (cf. Edelstein, 1981, pp. 70
72). As noted, Britain responded to its declining international market share and depression at home by resorting to protectionism and the export of capital, iron, steel and machinery to secure the global standing of its monopolies. Table 1 shows that Britain’s Imperial revenues were never less than those accumulated domestically, and rose continuously over the period in question. Moreover, the unpaid trade surpluses extracted from the oppressed nations of the British Empire allowed British capital accumulation to advance rapidly. By calculating the direct merchandise import surplus from India and the West Indies into Britain and using this as the measure of value transfer from these colonised regions, Patnaik (2006) estimates the level of Britain’s rates of capital formation that were thereby made possible (see Table 2). She finds that the combined colonial transfer expressed as a percentage of Britain’s savings, works out to 62.2 in 1770, 86.4 in 1801, 85.9 in 1811 and 65.9 in 1821 (Patnaik, 2006, pp. 49
50). These are certainly very high percentages indicating as they do, that domestic capital formation figures were raised by between two-thirds to over four-fifths, owing to the transfers of wage goods and raw materials, even when the study is limited to only the two most important tropical colonized regions. Given the underestimation biases in our

Table 1.

Britain’s Imperial Revenues, 1867
1908.a Revenues

Year 1867
1868 1877
1878 1887
1888 1897
1898 1907
1908

Gross imperial

Per capita (£. s. d.)

Gross local

Per capita (£. s. d.)

£69,600,218 £77,739,671 £89,802,254 £106,614,004 £146,541,737

£2, 5s, 6d £2, 5s, 10d £2, 8s, 8d £2, 12s, 10d £3, 5s, 10d

£36,496,000

£1, 3s, 10d

£67,162,960 101,126,879

£1, 16s, 5d £2,10s,1d

Source: Hirst and Palgrave (1910, table 9, ‘Imperial and local revenues and debts, 1867
1908’, p. 19). a The figures for imperial and local revenues and imperial debts are for the United Kingdom, but those relating to the local debts are only for England and Wales. The figures are only approximate.

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Table 2.

Estimated Contribution of Domestic Savings and Transfers to Gross Domestic Capital Formation. Percentage of GDCF from

Percentage of GDP Formed By

Year

Domestic savings (Million Pounds) (1)

Domestic savings (2)

Transfers (3)

Domestic savings (4)

1770 1800 1811 1821

6.90 30.28 39.19 38.23

61.60 53.60 53.80 60.30

38.40 46.40 46.20 39.70

5.00 7.00 7.00 8.00

Transfers GDCF (5) (6) = (4 + 5)

3.11 6.05 6.01 5.27

8.11 13.05 13.01 13.27

Source: Patnaik (2006, p. 60). procedure (no account being taken of colonial tax-financed imports via third countries into Britain, or of smuggling, or of transfers from other smaller colonies), in many years around the turn of the century, the actual order of benefit from colonial transfers would have been at least double the capital formation out of domestic savings.

Post’s suggestion that British industrial hegemony was not based on imperialism is, therefore, erroneous, as is his suggestion that workers in industries dependent upon imperialism could have maintained their relatively high wage levels without it. Post (2014) writes: Cope fails to demonstrate that the benefits of empire and colonialism accrued primarily to the minoritarian ‘labor aristocracy’ of skilled workers in late nineteenth century Britain.

As should be uncontroversial, in the period under discussion involvement in trade unions was greater in those establishments where skilled manual workers were better paid (Prandy, Stewart, & Blackburn, 1983, p. 54). Thus in Germany, Wilhelm Liebknecht (co-founder of the Social Democratic Party with August Bebel in 1869) frankly stated at the Party Congress of 1892: ‘You who sit here are also, most of you, aristocrats, to a certain extent, among the workers
I mean in so far as incomes are concerned. The laboring population in the mining regions of Saxony and the weavers in Silesia would regard such earnings as yours as the income of a veritable Croesus’. Britain’s trade unions, too, largely represented the

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labour aristocracy and pursued a reformist course throughout the Victorian period. Hunt (1975, p. 24) writes: [The] mid-Victorian period of trade unionism was essentially that of the definitive national organisation of the ‘pompous trades and proud mechanics’, the skilled minority of the working class. ‘Defence not defiance’ became the union motto
to defend the vested interest of the craftsman, not to defy the employing class with the organised might of the whole working class; similarly the line ‘a fair day’s wage for a fair day’s work’ implied the full acceptance of the existing order, subject to specific and limited reform, to getting the best that could be got within its framework.

The ability of Britain’s rulers to maintain divisions within what were then, quite properly, known as the working classes was due to the industrial hegemony Britain had achieved by means of colonialism. Hunt (ibid., pp. 24
25) writes: The triumph of Free Trade meant complete freedom for capital. There was an industrial and commercial expansion on an unparalleled scale, ‘leaping and bounding’ (in Gladstonian phrase), returning profits not of tens but thousands per cent, confirming Britain ‘the workshop of the world’, in its privileged position of industrial monopoly. Thus it was both possible and necessary for substantial concessions to be made to the two main groups upon whom this prosperity depended, the textile factory workers (who were greatly benefited by the Ten Hour Act of 1847) and the skilled artisans in the metal-working and building trades. The consolidation in this way of an ‘aristocracy of labour’ over and above the main mass of the working class was fully reflected in the new [reformist and defensist] character of trade unionism.

The growth of new unionism in the final decade of the nineteenth century and beyond broadened the trade union movement. Yet it did so without thereby undoing the stratification of labour and, crucially, without challenging the imperialist social contract. [The] further we progress into the imperialist era, the more difficult does it become to put one’s finger on groups of workers, which did not, in one way or another, draw some advantage from Britain’s position … Or … on workers who could not be made to feel that their interests depended on the continuance of imperialism. (Hobsbawm, 1972, p. 324)

Even the wave of syndicalist unrest in the period leading up to World War One did not reverse the social chauvinist mentality of most British workers (Holton, 1976). Post (2014) writes: [The] notion that the British trade deficit represented ‘pure profit’ that could be used to bribe workers in Britain assumes that the British owners of the colonial plantations and mines that produced these imports would forego their profits to bribe workers half a planet away.

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If a capitalist country is able to sell the goods of another country without paying for those goods, then those sales do indeed represent pure profit. I did not suggest that Britain’s trade deficit was used to bribe the labour aristocracy directly, but merely pointed towards mechanics of imperialist parasitism other than the repatriation of colonial profits. Post displays a marked ignorance of the extent to which Britain’s capital accumulation was intimately connected to its plunder of the colonies. According to data compiled by Davis (1979) in his masterful The Industrial Revolution and British Overseas Trade, by the early Victorian period, Britain was importing more primary products than it could itself produce. Up until the 1840s, Britain was essentially self-sufficient in the ‘temperate’ foodstuffs (grain, meat and dairy products). Even then, however, an estimated 12
18% of English and Welsh consumption during the industrial revolution was met by Irish livestock produce (Jones, 1981).1 By the 1840s, however, grain imports rose steeply as British population growth outstripped all possibilities of domestic supply alone (Davis, 1979, p. 37) (see Table 3). Many of Britain’s primary products were producible only in colonised tropical countries, though some were temperate food grains from colonies like Ireland and India, as well as from the settler-colonial United States. Table 3.

1770 1804
1806 1814
1816 1824
1826 1834
1836 1844
1846 1854
1856

Retained Imports as Percentage of British Output of Primary Products.a Total Retained Imports as % of GNPb

Retained Imports of Foodstuffsc and Non-Mining Raw Materials as % of British Output of Agriculture, Forestry and Fisheryd

8 16 15 15 15 15 19

11 48 60 65 62 64 104

Source: Davis (1979, p. 51). GNP and output of agriculture, forestry and fishery estimated from Deane and Cole (1967, pp. 156, 166). b Allowing for re-export to Ireland. c Making a small allowance for some processing, for example, wine-making. d That is, value added in these primary industries, which would be close to, though not identical with, the total value of their product. a

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The most important items of direct mass consumption for which there was substantial or complete import dependence were wheat and wheaten flour, rice, cane sugar (beet sugar production in Continental Europe being fairly insignificant), tea, coffee and tobacco. Of these, only the first was produced in Britain but production was not growing as fast as population between 1700 and 1850. The most important raw material to Britain’s economy was raw cotton, imported first from the southern states of the United States where it was produced by an enslaved people and later, from the US Civil war onwards, from India and from Egypt where it was produced by colonised and semi-colonised rural labourers. As Davis (1979, p. 10) concludes: Overseas trade did much to strengthen Britain’s economic life during the eighteenth century, and in doing so it helped to create the base without which the industrial takeoff might not have proceeded so fast or gone so far. Moreover, once home demand ceased to be sufficient to maintain the momentum of growth of the most advanced industries, around 1800, overseas trade did begin to play an absolutely vital direct part in their further expansion.

From the middle of the nineteenth century, a substantial general rise in incomes particularly, as Davis notes, those of a large minority of the population (farmers, many kinds of skilled workers, the professional classes and rentiers), led to a sudden leap in demand for semi-luxury food and drinks and a sharp increase in the amount consumed per head. In this period, especially in regard to basic ‘temperate’ foodstuffs, Britain shifted to ‘the kind of import dependence in which starvation, rather than inconvenience or even poverty, became the alternative to importing’ (Davis, 1979, p. 52). Post writes: Even if we were to assume, following Cope, that the rate of profit in the global South is so much higher than in the global North and that all of US corporate profits earned abroad came from the labor of workers in the developing country, those profits could not account for the wage differentials within the US or other imperialist countries.

First, I do not say that the rate of profit is so much higher in the global South than the global North (though, to reiterate, Post ignores the lower unit costs of non-OECD manufacturing). Post is determined to understand value creation in purely price-based terms, whereas I understand superprofits as that portion of surplus value made possible by the superexploitation of labour but which is not otherwise distinguishable from reported profits (Cope, 2012, 2013; Cope & Kerswell, 2014).

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As discussed in my previous essay (Cope, 2013), it is notoriously difficult to measure the value of labour power, and hence the rate of exploitation, in an imperialist economy. Value itself must reflect average socially necessary labour, but we are forced to measure this in price terms which distort our understanding. Third World exports produced by superexploited labour and imported by First World countries contain a great deal of embodied labour that has never been paid for. This is true whether we are examining production chains within multinational corporations or examining extra profits from the export of money capital. The vast majority of industrial workers are workers in the global South. Yet the value of their output and the profits that are made from it are appropriated by countries in the global North and accounted as being created in the global North. The surplus labour appropriated by the global North in the form of underpriced commodities is transformed by the tendential equalisation of profit rates internationally into superprofits so that when the goods are sold there is enough money for the capitalist e´lite to pay the labour aristocracy more than the value of its labour and substantially more than the value of labour power. Apple, for example, makes a massive gross margin of 72% on each iPhone it sells (Chakrabortty, 2012). Yet this profit is appropriated by the Northern countries where there are high enough wages and salaries to create a substantial market for Apple sales and, after having gone through the gamut of unproductive advertising, retail and distribution networks for which most First World workers rely on for employment, appears as value added there. Jauch (2005) provides a series of examples showing the same dynamic at work: The retail price for coffee is 7
10 times higher than the import price and about 20 times the price paid to the coffee farmer. Designer shirts produced in South East Asia are sold in Europe for 5
10 times their import price. Less than 2% of the total value of shirts produced in Bangladesh are received by the direct producers as wages. The profit by local companies is equivalent to about 1% of total value. About 70% of the total value in the clothing sector consists of firstly profits of distributors, wholesalers and retailers; secondly costs for transport and storage etc; and thirdly customs duties and indirect taxes imposed by the importing (industrialised) country.2

Post (2010) has referred to World Bank figures (2006, pp. 296
299) to the effect that the global South is responsible for a mere 4% of global fixed capital formation, implying an extreme and widening North
South divide. World Bank (2014a, 2014b) data I have examined, however, show that ‘Low & Middle Income’ countries account for around 23% of gross capital and gross fixed capital formation in 2005, and that this jumped to 32% by 2009, reflecting the collapse of investment following the onset of global crisis. Needless to say, the capital stock of First World companies is vastly

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inflated by the extortion of value from the global South described above, whilst the contribution of the global South to Northern value added is all but completely obscured by bourgeois pricing structures. Thus, extra surplus value transferred from the Third World sui gratia raises the profitability of First World business not only by cheapening the costs of constant and variable capital (especially in the form of undervalued intermediate and consumer goods imports), but also, by raising the rate of surplus value beyond that which is possible in the imperialist country itself. As Lenin (1970 [1916]) wrote, imperialism ‘sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies’. This is true even though some groups of workers within the imperialist country may gain less than others and a minority may not gain at all. Which groups of workers are able to obtain the highest superwages is a matter of political economy, but superprofits are required to pay superwages. Post makes a number of erroneous remarks about my book, Divided World Divided Class. First, apart from his incorrect definition of ‘prices of production’, I do not say anywhere that labour-intensive industries generate a higher rate of profit as such, and nor do they necessarily create a greater quantity of value. Second, whereas Grossman sees unequal exchange as resulting primarily from trade between industries and countries having differing organic compositions of capital, Emmanuel sees wage differences as paramount. Third, I certainly do not assume that production in the global South has a uniformly lower organic composition of capital than production in the North. In fact, I compare like labour with like in my work, by means of the concept of average socially necessary labour time, that is, value. I even go to great lengths to assume massive productivity differences between the global North and the global South. Post consistently implies that it is possible to gauge productivity according to value added per labour hour, despite the fact that the production costs, and hence the prices, of developed country manufactures include relatively very high wages and capital costs (particularly those incurred by the inordinately large unproductive sector of the First World economies), compared with those of developing countries. In any case, Post is certainly incorrect to presume that productivity differentials between Third World and First World industry are equal to or greater than wage differentials. As I have shown, trade between Third World and First World countries leads to a situation of unequal exchange, that is, ‘the exchange of products whose production involves wage differentials greater than those of productivity’ (Amin, 1977, p. 211). Fourth, I do not claim that US $20 trillion worth of surplus value is transferred from the Third to the First World in 2010, and I do not say

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that that global value transfer is purely the result of unequal exchange anywhere in the book. Added to the extortion of surplus value resulting from unequal exchange is, of course, the transfer occurring through profit repatriation, intellectual royalties, transfer pricing and debt servicing. Paradoxically, Post finds the source of the First World’s higher wages in the greater capital intensity of First World industry, but explicitly states that the capital intensity of certain Third World industries, where workers are paid much lower wages, is the same. Post can’t have it both ways; he says that wage differences are the result of greater organic compositions of capital, therefore, if he agrees that wages are greater in the First World than in the Third World, then it follows that he thinks that there is greater capital intensity in the former than in the latter.

CONCLUSION: AGAINST SOCIAL IMPERIALISM Post belongs to a tradition in ostensibly Marxist thought which prides itself on making the labour of hundreds and thousands of millions of slaves, peasants and superexploited workers in the export dependencies of the Third World disappear from the ledger sheets and pay packets of the advanced capitalist countries. My contention, by contrast, is that a section of the proletariat had and has a vested interest in maintaining the profitability of capitalist enterprise and commerce and that this entailed imperialism. In Victorian England, we see precisely the kind of social imperialism avant la lettre of which the Western left would find itself increasingly guilty as superprofits have increased: The domestic Radical programme, like the Fabian program of a few years later, rested on the assumption that home and foreign affairs had in practice very little connection. At home, the task of the radicals was to promote a more even distribution of wealth; but the wealth that was to be redistributed was taken for granted, without any examination of its sources. It was regarded, in effect, as natural and assured that Great Britain, as the leader of world industrialism, should go on getting richer and richer, and should devote her surplus capital resources to the exploitation of the less developed regions of the world, drawing therefrom an increasing tribute which Radical legislation would proceed to redistribute by means of taxation more equitably between the rich and the poor in Great Britain. (Cole & Postgate, 1949, pp. 411
412)

The vested interest a small section of the proletariat had in imperialist capitalism has, over time, diffused throughout the metropolitan working class, undergirded by discrimination, segregation and repression. The stratification of labour implies a relatively rigid caste-like system for which white

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nationalism is very often a basic organising principle. Post, on the other hand, would have us believe that ‘precarity’ provides the sole explanation for working class chauvinism. Yet the major imperialist countries are also those in which underemployment is lowest. The question we must answer is: who has an objective interest in a radical transformation of the current system? I do not question the reality of restricted life opportunities, disadvantage, oppression and misery experienced by many of the lower income groups in the First World countries, disproportionately (but not exclusively) composed of Black and Minority Ethnicities. Struggles for self-determination and equal rights by oppressed nations and minorities within First World state structures, and for adequate healthcare, accommodation and job opportunities for all citizens, should be supported. However, we must recognise the limits of such struggles in the context of imperialist parasitism both in their minoritarian character and, just as importantly, in regard to who is to pay for their just resolution. Hitherto, the strategies pursued by the metropolitan left strategies are overly mired in a national perspective. The left in the First World must lift up its eyes to see class from a global perspective.

NOTES 1. British importing of Irish grain, cattle, butter and so on contributed to the hellish starvation in Ireland in the 1840s and 1850s, from which the country’s population has still not recovered, almost two centuries later. 2. Of course, most of the money from the imperialist clothing industry redounds to the benefit of the metropolitan masses; it is not just absorbed and hoarded by the haute bourgeoisie. Taxes, meanwhile, fund public services (including many jobs), and much of what is spent on transport, distribution, marketing and the like goes to First World employees.

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1946. London: Methuen and Co. Ltd. Cope, Z. (2012). Divided world, divided class: Global political economy and the stratification of labor under capitalism. Montreal: Kersplebedeb.

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Cope, Z. (2013). Global wage scaling and left ideology: A critique of Charles post on the ‘labour aristocracy’. In P. Zarembka (Ed.), Contradictions: Finance, greed, and labor unequally paid (Vol. 28, pp. 89
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