Sunday, 24 January 2016

Overcoming The Power of Capital - Part 7 of 8

The notion of the state being subordinated to the owners of money-capital is also problematic. In the end, the function of the state is to defend and extend the interests of the ruling class. But, this begs a series of questions about what Marx means by class, and ruling class. For Marx, the determinant is property. As he sets out early in Capital I, people are no more than the personification of economic relations and forms of property. In a situation where the dominant form of capital is that of socialised capital – and as Marx and Engels describe, the big banks and financial institutions themselves are usually socialised capital too – where the social function of the private-capitalist has ended, and has been taken over by the “functional capitalists”, the professional managers, who are drawn today from the ranks of the working-class, who exactly are the ruling-class, and what interests does the state, therefore, represent?

In so far as, ultimately, productive-capital is dominant, because it is only by an expansion of productive-capital, that an increase in surplus value is possible, and thereby to produce the revenues required by the money-capitalists, and the owners of landed property, (not to mention the revenues of the state itself, obtained through taxes) the state must itself, in the end, always act to defend and extend the interests of that productive-capital, and as that productive-capital takes predominantly the form of socialised capital, it is its interests that it must pursue. For a whole period, in which this productive-capital, was openly seen as the dominant fraction of capital, after WWII, the state acted openly to promote its interests, both within the nation state, and increasingly on an international basis. That saw the development of supra-national state bodies, such as the EU, as well as the IMF, GATT (WTO), World Bank and so on, which operated on the basis, quite clearly of a Keynesian, interventionist and regulatory model, designed to create the necessary conditions of stability required for the extension and accumulation of industrial capital. The anti-colonialist, policies of the US, most notably expressed in Roosevelt's suggestion to Stalin that, if necessary, they should join forces to break apart the old British and French colonial empires (which had grown up on the basis of the power of merchant and money capital, along with landed property), was a part of that tendency.

The period from the mid-1970's only in part saw a reversal of that trend. Even Thatcher and Reagan presided over an expansion of the state's role in the economy, both in monetary and fiscal terms. In fact, Thatcher ran a considerably larger budget deficit as a percentage of GDP than did, Blair. Moreover, this ultimate subordination of money-lending capital to industrial capital was demonstrated in 2008, when the financial crisis broke out. The first reaction of states was to reach for the Keynesian fiscal tools, whilst the banks that were nationalised, saw their shareholders lose vast amounts of their fictitious wealth, as the state paid only fire-sale prices for them. It was only after the situation was stabilised that conservative governments once more began to tend to the interests of those reactionary sections of capital, upon which they rest, and to do so with the same kinds of measures that created the financial crisis in the first place, and which ensure its return, on an even greater scale.

To summarise, what I think is wrong with the theoretical underpinning of Mike's position it is this. Mike makes a similar mistake to that made by the bankers like Overstone, against whom Marx polemicised. They believed that it was only money-capital that was truly capital, only money-capitalists who were truly capitalists. For Mike, this takes the form of the assertion that interest-bearing capital subordinates industrial capital to it. This leaves Mike free to ignore the fundamental division that currently exists, between this interest-bearing capital, and industrial capital, and the fact that it is on the basis of this material division of interests that the conflict between conservatism and social democracy rests.

Mike begins by saying,

“As will already be seen from my classing the centre-left as part of the left, I do not take as a starting point for this argument a presumption of ‘revolutionary politics’, or even of Marxism. Rather, I start with the idea it could possibly be that a policy of reform government could work; but present reform government policies (including Syriza’s, that of the ‘Euro-lefts’ more generally and that of Corbyn and those around him) fail to answer the immediate empirical objections to this policy, which can be made on the basis of the experience of politics in the last 70 years. The Marxism comes in as a part of explaining why this is so.” 

But, underlying his argument is the concept of social-democracy as effectively a variant of socialism, or at least a movement that seeks to ameliorate or enhance the position of workers. Having done so, he is then free to present it as hostile to his undifferentiated capital, and vice versa. Moreover, having done so, he is then able to set up an argument as to why this social democracy cannot then deliver socialism, faced with the opposition of this undifferentiated capital.

But, the truth is that social-democracy is not a variant of socialism, its purpose is not to bring about an amelioration of the workers condition, or to further the workers' position within society, other than to the extent that this flows naturally from the needs of socialised productive capital itself. The roots of that social democracy actually lie within Ricardian economic theory, as Marx describes it in Theories of Surplus Value. It is based upon the undoubted historic fact that, in terms of their standard of living, their ability to negotiate higher wages, the workers are always best placed when capital is growing strongly, and accumulating.

“And so, the bourgeoisie and its economists maintain that the interest of the capitalist and of the labourer is the same. And in fact, so they are! The worker perishes if capital does not keep him busy. Capital perishes if it does not exploit labour-power, which, in order to exploit, it must buy. The more quickly the capital destined for production – the productive capital – increases, the more prosperous industry is, the more the bourgeoisie enriches itself, the better business gets, so many more workers does the capitalist need, so much the dearer does the worker sell himself. The fastest possible growth of productive capital is, therefore, the indispensable condition for a tolerable life to the labourer.”

(Wage Labour and Capital)

But, as Marx sets out in Theories of Surplus Value, the obvious contradiction in Ricardo's theory is that workers are best placed when capital accumulates faster, and capital accumulates faster when profits are higher, and profits are higher when wages are lower! It is this reality also, which lies behind the fundamental nature of social democracy, as the agent of productive-capital, that its basic drive is to promote the accumulation of large-scale productive-capital, and only thereby to bring about the improvement in the workers condition. As Marx continues,

“To say that “the worker has an interest in the rapid growth of capital”, means only this: that the more speedily the worker augments the wealth of the capitalist, the larger will be the crumbs which fall to him, the greater will be the number of workers that can be called into existence, the more can the mass of slaves dependent upon capital be increased. 

We have thus seen that even the most favourable situation for the working class, namely, the most rapid growth of capital, however much it may improve the material life of the worker, does not abolish the antagonism between his interests and the interests of the capitalist. Profit and wages remain as before, in inverse proportion.

If capital grows rapidly, wages may rise, but the profit of capital rises disproportionately faster. The material position of the worker has improved, but at the cost of his social position. The social chasm that separates him from the capitalist has widened.” 


Central to Marx's thesis here is that, the growth of capital facilitates a rise in nominal wages, which occurs at the expense of profits, although the mass of profits will still rise. We see this during periods such as the 1960's, and early 1970's, when this results in a profits squeeze. This is then reversed, as capital responds with the introduction of labour-saving technologies. But, alongside this is also a rise in real as, opposed to nominal wages, which goes along with an increase in both the rate and mass of profits. As productivity rises, so the prices of all those commodities that workers need to consume fall, so that the same or even slightly falling nominal wages, result in a higher standard of living, at the same time that the rate of profit, and mass of profit also rises.

But, Marx's pamphlet was also written in 1847, when the vast majority of capital was in the hands of a monopoly of private capital. The rise of socialised-capital, in the shape of the joint stock companies only began to occur in the late 1860's, following the passing of the Limited Liabilities Act, in 1855. So, when Marx talks about the dichotomy of interests between wage-labour and capital here, it must also be remembered that, after this point, the rise in the power of capital as against labour, is a rise in the power of this socialised capital, as against labour. It is reflected in his statement in Capital III, in that regard, in reference to the purest form of socialised capital, the worker-owned co-operative.

“The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour. They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage.”

(Chapter 27)

But, economically this same situation applies to the socialised capital of the joint stock company, whose capital is the property of “the associated producers” too.

“The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”


This is clear in respect of this relation between the "profit of enterprise" of the “functioning capitalist”, and wage labour, compared to its relation to interest-bearing capital.

“The lending capitalist as such faces the capitalist performing his actual function in the process of reproduction, not the wage-worker, who, precisely under capitalist production, is expropriated of the means of production. Interest-bearing capital is capital as property as distinct from capital as a function. But so long as capital does not perform its function, it does not exploit labourers and does not come into opposition to labour.”

On the other hand, profit of enterprise is not related as an opposite to wage-labour, but only to interest.” (p 379) 

The reality is that social democracy is an ideology that represents the interests of large-scale productive-capital against the interests of those fractions of capital that stand in opposition to it. It is the representative of productive-capital, at a particular stage of its historical development, i.e. when it has grown into the stage of socialised capital, and broken the fetters imposed upon it by the monopoly of private capital. Its personification is the “functioning capitalist”, the professional manager, and bureaucrat, which is why social-democracy itself is most readily identifiable with such social layers, and world outlook.

Social democracy exists not as part of “the Left”, other than in the context that the interests of the working-class also lie in the accumulation of this large scale productive-capital, and in its transformation into socialised capital, and in the defeat of all those previous forms of property such as privately owned capital, and landed property, upon which conservatism rests. The implication of Mike's argument, that social democracy must fail, because its goal is the furtherance of the interests of the working-class against the interests of capital is then wrong, because the real interests of social democracy are the furtherance of socialised capital, of the large-scale joint stock company, co-operative, and state capital, and as Marx sets out, objectively it is in that direction that capital develops, against the obstacles put in its path by conservative forces, which represent those older forms of property.

This, in fact, is the problem with the analysis that the Weekly Worker presented in relation to Greece, (and the same is true in relation to other analyses in relation to the imposition of austerity in general), which was to see austerity as a policy designed to meet the needs of this undifferentiated capital, whereas it is merely a policy designed to meet the needs of interest-bearing capital, and those other reactionary forms of capital associated with it, such as the remnants of privately owned capital, and landed property. It then, in this dichotomous model, sets up anti-austerity measures, such as those advocated by Syriza, Podemos, and other Social Democrats as being equally anti-capitalist, whereas, in reality, such anti-austerity measures, for example, as implemented in the US, and advocated by it, are entirely in the interests of large-scale productive-capital, and only contrary to the interests of those forms of property that leech off it, and whose fictitious wealth, in the shape of various forms of debt instrument, are written down, or cancelled entirely by it.

That does not at all mean that these conservative forces are insignificant, but it is important to understand exactly what the contending social forces are. From the perspective of the dominant form of capital – socialised productive-capital – and the state, whose role is to protect it, the objection to the left social democrats, in the Wilson/Callaghan Labour governments of the 1970's, was not the proposals for an extension of social democracy into the workplace, which is quite compatible with that socialised capital, and exists in a variety of forms across many of these large firms; not the proposals for greater regulation, via the National Enterprise Board/s, or the introduction of Planning Agreements, all of which acted as means both to provide the kind of stable, regulated conditions for capital accumulation that such businesses require, and which had been introduced already, on a wide scale, not just in Germany, but in the shape of the Milk Marketing Board in Britain, the Common Agricultural Policy in the EEC, and so on. The actual objection to it was that it was not social-democratic enough! All of these policies, summed up in the Alternative Economic Strategy were nullified by the narrow nationalistic, and hence conservative framework within which they were constrained, and which was symbolised by the opposition to the Common Market itself.

It is, in fact, an indictment of the incompetence of social-democrats that they have been unable to latch on to those general historical forces, moving in the direction of Socialism, so as to at least maintain themselves in office. That can itself be explained in terms of the continued role of nationalist ideas within the workers' movement, and a failure to deal with the continued ingrained political power of the conservative representatives of those old forms of property. I have considerable agreement, therefore, with the points Mike makes in those respects. A fundamental task of social-democracy should have been to deal with those vestiges of political power retained by conservative forces.

No comments: