three myths about the crisis

Conrad Russell challenges common left myths about the meaning of the crisis

This article is designed to question a number of theoretical assumptions implicit in much Marxist – including autonomist or left communist – writing on the crisis. In particular, I want to question assumptions around capitalist contradictions, capitalist decline, and the role assigned to financial and ‘fictitious’ capital.

much left analysis of the crisis leans on a shallow understanding of the financial sector

My argument is that these assumptions paint a model of a decaying ‘collapsing’ capitalism (hence my term ‘collapsism’). They also fetishise the mechanics of capitalist functioning at the expense of the real social relation underlying them – the class struggle.  It is class struggle, not some quasi – mystical ‘debt meltdown’ or ‘falling rate of profit’, which constitutes capitalism’s permanent crisis.

Contradiction

 Too often, there is a tendency, in Marxist writings on the crisis, to see the famous ‘irresovable contradictions’ at the heart of capitalism in purely mechanical terms. The rate of profit is falling, financial capital is strangling ‘productive’ capital, and various occult ‘fixes’ involving trading debt are all that is keeping capitalism on life-support. The crisis, it is argued, results from the inexorable ‘tightening’ of these contradictions, as the fixes stop working. Implicit to this view (if unintentionally) is an understanding of capitalism which represents it in the same way that an ‘orrery’ – a clockwork model – was used to represent the solar system in the 18th century. This analogy is used by the Marxist Historian, E.P. Thompson, in his critique of Althusser’s ‘structural’ Marxism (see his book The Poverty of Theory). In this mechanistic account, the capitalist ‘orrery’ has inherent flaws, which will ultimately lead to its collapse. The problem with this model is that it takes the appearance of the system – as a system of objective, interacting, determinate, yet contradictory, laws – as its essence. In the process, this analysis ignores the one fundamental contradiction within capitalism – the appropriation of private social labour through the market mechanism. Capital, try as it might, can never abolish social labour.

In the words of Simon Clarke (in the edited collection The State Debate) – as capitalism reproduces itself, it always reproduces the working class as a barrier to capitalist accumulation. This barrier may be a weak, atomised one, dispersed in precarious labour, atomised in home-owning households, divided by ‘race’ and ‘gender’, but it is always there. All the other contradictions flow from this one – they are not autonomous forces inscribed within capitalism’s ‘laws of development’. The contradiction is social and political, not technical and economic.

Dominance of Financial Capital

It is often argued that the rise in unproductive ‘financial’ or ‘fictitious’ capital is an unavoidable feature of ‘late’ capitalism, which both intensifies capitalist crisis, and pushes capital to ever increasing levels of abstraction and unreality. The argument usually goes something like this – because of a decline in capitalist accumulation (the ‘falling rate of profit’- discussed below) a form of fictitious growth has taken its place, through the inflation of money capital. M is transformed into M’ (profit) via derivatives, inflation of property prices etc… Whilst it is true that such capital is fictitious because it does not involve the creation of new value (only social labour can do that), it is not true that this is the only kind of ‘accumulation’ available to the bourgeoisie, to stave off otherwise inevitable collapse. Rather, this is a political choice. Isidro López and Emmanuel Rodriguez in ‘The Spanish Model’ (New Left Review # 69) make clear that the inflation of the Spanish housing market allowed the ‘wage’ to rise – in the form of debt secured against property – as house prices kept rising. This secured ‘growth’ without actually raising wages, taxes, employment, or, crucially the concentration and centralisation tendencies of Capital and therefore working class power –  a model which they term ‘asset-price Keynesianism’.  The issue here is whether this is the only strategy left. Is this Capital’s ‘last gasp’ or the most attractive option for a particular capital fraction at a particular time?  If ultimately, this ‘asset growth’ approach is exhausted, what inherently prevents a switch back to ‘productive’ capital investment ?  In a recent article, Oisín Mac Giollamóir (The Commune # 24) argues that such asset-inflation is relatively marginal within the capitalist economy, when compared to profits derived from the exploitation of labour. This suggests capital has more room for manoeuvre, and more options, than the ‘collapsist’ model suggests.

There is also a more fundamental problem in the way that the concept of ‘fictitious capital’ is used. Whilst it is true that self-inflating money capital is adrift from the ‘underlying’ value produced by variable capital (labour), we must remember a fundamental, apparently obvious, but much neglected point. Value is in itself inherently ‘fictitious’. It is not inherent in social labour as such, but is imposed upon it. Labour Value is rooted in the accounting of labour in terms of (necessary and surplus) Labour Time, which only emerges at the point at which social labour is separated from appropriation –  under Capitalism. It is when labour becomes commodified, that ‘valuing it’ (in terms of clock-time) becomes necessary to govern its exchange on a market (in terms of money). As Marx observes, all (bourgeois) economy is economy of time. E.P. Thompson (in Customs in Common) discusses the long history of working-class resistance to the shift towards working to the clock, rather than the demands of a specific task – which was inherent to the introduction of wage-labour.

Whilst the concept of fictitious capital may be useful when used cautiously, the notion of a ‘real productive economy’ – as fictitious capital’s ‘real’ counterpart – is bourgeois. It is no accident that Orthodox Communist Parties, whose model was ‘Soviet’ State Capitalism, made much use of this concept in their attempt to form popular fronts with the ‘productive’ sections of their respective national bourgeoisies. Of course it is true that fictitious capital has a fictitious relationship to value – but this is a fictitious relationship to a fiction.  All ‘value’ is at root an ideology, a set of imaginary social relations imposed by real and symbolic violence everyday on living social labour. Value makes no sense outside of private property, market exchange and rational accounting of labour time, which reduces living social labour to an abstraction. Getting worked up about dodgy debt bonds or banking sleights of hand distracts us from this essential reality.

Blaming fictitious capital for the crisis is a fetish – a bestowing of ‘magical’ powers upon an object – in the same way that fetishising commodities gives them an inherent value they do not possess. The nature of both ‘real’ commodities (a raincoat, or a brick, or a copy Marx’s Capital) and of ‘fictitious’ bonds, shares, futures etc… derives from social relations which are antagonistic – from the exploitation of living labour. And thus both can only ultimately be understood from the perspective of class struggle.

Falling Rate of Profit

There is an observable tendency for the proportion of capital deployed in production represented by plant, machinery and infrastructure to increase over time at the expense of living workers. Only workers  – not machines – create value, so profit will decline as the ratio of workers to machines does … unless counter tendencies are in operation. These include raising productivity (output per unit of wages) or cutting wages or raising prices. In order to really understand the issue of ‘falling profit’ we need to examine it in the light of concrete social relations. Capitalism separates workers from what they produce, in exchange for a wage which represents only part of labour-time, that deemed necessary for survival – this portion is ‘negotiated’ through the class struggle. In exchange for a wage, workers produce what they are directed to produce, with no control over the process, or the end product.

The commodities workers produce (objects in which labour is embodied) pass through market exchange to realise (release) the value labour has embodied in them. As this value exceeds the value of the wage, this is the source of profit. Thus living labour is transformed into ‘dead labour’ – stored up in marketable objects which have a ‘life’ of their own, severed from those who created them, a life as consumer objects or as constant capital (machines and material for production). Capitalists are forced under the pressure of competition to constantly expand production by reinvesting the value realised by exchange – either as money value (stocks, investments) as constant capital bought with money value (plant, machines), or by purchasing more labour. This reinvestment typically leads to ‘dead’ labour crowding out living labour, as mechanisation increases. Thus, the more commodities are produced (under the ceaseless pressure of capitalist competition), the more go round the circuit back into production, as semi-finished goods to be worked up, as machinery to govern labour, or supervise and control it (computer monitoring, CCTV etc.)

Thus, as Marx concludes, under capitalism, dead labour ‘weighs like a nightmare on the brains of the living’. The growing mass of dead labour is turned against the workers who produced it. The more they labour, the more they are separated from labour and the more it is turned against them. This contradiction at the heart of capitalism between dead labour and living labour becomes a stake in the class struggle – for example, machine breaking and union struggles over control of assembly lines, where living labour takes on dead labour. What is often at stake here is the use of dead labour precisely to increase productivity (automation) and act as a brake on falling profit. In other words, the rise in dead labour (machines) makes the remaining living labour more productive, so profits shouldn’t fall – unless workers fight back against speed-ups.

Thus, there is no automatic falling profit rate – rather it is precisely contingent on class struggle against the stranglehold of dead labour. So, in consequence, there is certainly a ‘tendency’ for successful class struggles to cause profit rates to fall.  The ‘hot 1970’s’ –  where factory workers pushed wages close to, or above productivity gains in Italyand the US- are an example. A ‘freeing up’ of capital to flow to lower wage zones with repressive labour laws, the crushing of Allende’s social democracy in Chile, and de-industrialisation and a shift to atomised service industry in the UK were all parts of the bourgeois response. So was a shift to ‘asset-price Keynesianism’ and financial capital (also boosted by the freeing of capital controls to weaken labour).

My argument is that this shift to the neo-liberal asset-led model was an assault in the class war, not a rearguard action to shore up decadent collapsing capital trying to escape the inevitable Fall of Profit (a near-Biblical vision of Apocalypse). This was an active strategy – just, as, I argue, are bourgeois responses to the current crisis. Taken as an abstraction, an autonomous dynamic under capitalism which drives it as a system (i.e. a fetish), the falling rate of profit does not exist. Rather, it is historical and contingent, and a ‘stake’ in the class struggle.

The Crisis

It could of course be argued that the points made above are self-evident, but abstract. One could object that you can reduce the mechanisms of crisis and capital accumulation down to class struggle, but that this just makes a fetish of that struggle rather than of fractional reserve banking or falling profit rates. So I want to sketch out briefly here what an account of the crisis based on my premises here might look like, and why it is important in understanding the crisis politically. Evidently this is an impressionistic sketch, not a full analysis – I’d hope it might however spark debate about alternative ways of developing such an analysis.

The crisis needs to be understood as a struggle over the wage – over the balance between socially necessary and surplus labour time. Firstly, austerity in Southern Europe, the US and elsewhere has led to cuts in wages both absolutely (cuts in the money wage) and relatively (where the wage is not directly cut, but inflation is allowed to cut into the wage; i.e. the UK public sector pay freeze). Secondly, the surplus value capitalists have previously been forced (under the pressure of class struggle) to return to workers as a ‘social wage’ (benefits, health services etc…) is being cut to ‘pay for’ the debt crisis. Thirdly, rising house prices allowed workers to finance consumption through borrowing secured on assets (asset-price Keynesianism). This debt-financed consumption formed a ‘fictitious’ component to the wage itself. As interest rates go up, this ‘virtual wage’ disappears. Finally, increases in working hours without pay increases and increases in lifetime working (pension ‘reform’) serve to increase socially necessary labour time – time worked to ensure survival – and thus are another attack on the wage.

The crisis is a social struggle over the price of labour. It is a particularly harsh and vicious one. In Europe, the most vulnerable and poorest workers – precarious labour, women, public sector workers and above all, those on the ‘periphery’ (Spain, Greece, Ireland, Portugal) are paying the highest price. The crisis is not a result of Capitalism’s senility (stalling accumulation) decadence (fictitious capital) or decline. Capital can precisely flourish in the midst of utter misery and jobless growth is hardly a new phenomenon. And the push to cut wages is precisely to brake falling profits, by reducing the ‘cost’ of labour. Asset inflation is not the only weapon available in capitalism’s arsenal to help sustain the profit rate.

Of course, proper theoretical work on the crisis needs to carefully examine the mechanisms of debt, credit ratings, asset inflation, and, yes, fictitious capital. However, this work needs to start from an understanding of the essential causes of the crisis -not overheating machinery in the engine-room of moribund capital, but a crisis in the previous class settlement, of which domestication of debt and asset inflation were a part.  A politics of working-class self activity cannot fetishise the crisis by pointing to ‘failing’ bits in the circuits of capital accumulation. We should be clear that capitalism is in permanent crisis because of the antagonism between social labour and private appropriation at its heart.