The expansion of capital in the imperialist heartlands could not be explained by Varga's Law, or by this supposed super-exploitation of the colonies, and less developed economies, and another explanation was put forward that was equally un-Marxist. It was the basically Keynesian idea that the destruction of physical capital, i.e. the use-values that comprise the components of productive-capital, in WWII, meant that it all had to be replaced, and so this facilitated increased growth. But, in Theories of Surplus Value, Marx makes clear that what makes possible a higher rate of profit, and faster accumulation of capital, i.e. increase in economic growth, is not the destruction of physical capital, i.e. not the destruction of its use-value, but the destruction of its value!
“In so far as the reproduction process is checked and the labour-process is restricted or in some instances is completely stopped, real capital is destroyed. Machinery which is not used is not capital. Labour which is not exploited is equivalent to lost production. Raw material which lies unused is no capital. Buildings (also newly built machinery) which are either unused or remain unfinished, commodities which rot in warehouses— all this is destruction of capital. All this means that the process of reproduction is checked and that the existing means of production are not really used as means of production, are not put into operation. Thus their use-value and their exchange-value go to the devil...
When speaking of the destruction of capital through crises, one must distinguish between two factors..
A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction.”
(Theories of Surplus Value, Chapter 17)
A machine that is physically destroyed can take no part in the production of profit; it can employ no labour. The machine as a use-value, must be replaced for production to take place, for labour to be employed and exploited, i.e. to produce surplus value/profit. That is a tie-up of capital, as described by Marx in Theories of Surplus Value, and Capital III, Chapter 6. It means that surplus-value/profit that, previously could have been used to accumulate additional capital, employ additional labour, and so, raise economic growth, and social wealth, now has to be used, just to replace what previously existed, to maintain production on the same scale. Had the machine not been destroyed, the surplus value/profit could have been used to buy an additional machine, to employ an additional labourer, and so on.
By contrast, as Marx sets out, if the use-value of the machine is not destroyed, but its value is, for example, as a result of moral depreciation, there is both a rise in the rate of profit, making increased capital accumulation/economic growth possible, but, also, a release of capital, which can be used for accumulation or additional consumption. Another variant of this Left-Keynesian argument to explain post-war expansion was the so called Permanent Arms Economy thesis put forward by Michael Kidron and others. It is again nonsense, and fails to understand the Marxist theory of value and of surplus-value as stemming from the relation of labour to capital, as opposed to the relation of labour to revenue. As with Keynes under-consumptionist theory, it is just a version of the idea put forward by Malthus - which he stole from Sismondi – that capitalists should just hand over more in rents and taxes to landlords and the state, rather than accumulating the profits as capital, because then the landlords and state would use these revenues to create demand for the consumption goods produced by the capitalists.
Right-wing social-democrats, as well as trades union bureaucrats have routinely used this ridiculous argument to justify continued or increased military spending, and its no surprise, therefore, that today, it is being used by the latest renegade to the camp of imperialist war-mongers, Paul Mason.
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