Zombie Capitalism: Global Crisis and the Relevance of Marx

Faced with the financial crisis that began in 2007 some economic commentators began to talk of 'zombie banks" financial Institutions that were in en 'undead' state incapab� of fulfilling any positive funcVon but representing a threat to everything else.

n ::J: ::c

RIS HARMAN ,,'

pic Hi tory of the Wand

However 21st century capitalism as a whoM! is a zombie system dead to achieving human goals and responding to human feelings but capatMe o f sudden spurts of adivity that cause chaos all around. Chris Harman shows how Mant's understanding of capitalism is essential fOf any explanation of how this world emerged and developed over the last century and e half. He shows that the rools of the crisis today lie not in financial speculation but much deeper in a crisis of profitability which 30 years of the neoliberel offensive have failed to reverse.

L 293

The future of the system will not be a return to steady growth but repeated instability and upheaval, together with a rising ecological crisis. Finally he looks the force in society capable of ending the rule of capital -the global working dass_

'Apowc·'oI, )IT)reher: and ae ble en- �ue f l".3pltaJlsm 11)!Tl O'le Jf the wOll:l'5 pre-eminent Marxl.:;1 e )OOT.TlISts ThIS book needs to be tC
author of Credit Crunch: Housing Bubbl... Grab.tUsation .nd the Worldwide Economic Crlsls

Wing ')1' ntone .�, .. 10 lJnJers.tand tne pre ""f11 111 the h tury 01 :l "Id an Il'1JlO1cu11 I M:IllSl '-"'Y n'

ra

Ala, CllthnlcOI. Prol.,,,,,01 Eu.ope.n Slud_, KInO" CO".Ii" london

CRISIS AND NCE OF MARX

Contents

Zumb,e C"pOIal,)m: Global rnsiJ and Ihe rc!nann' uf Man"

Introduction·

flhl l"ul'olo\hrJ

rart One: Understanding the system: Marx and Beyond

( 10m II.Jfm.m

on

luh 200Q I" »uokm.u).., f'uhIKJII
Cf!r' rl�hl () BIll ')..ondTb l'uhh"'.lIlOI1�

(

""T

de"� 11 b)' Nod n"II):I,l.I

II r�'t'l h) flouklllJrl.\ Pllhlo'-,HI("l� I'rolll�J h, Inform,lllon I'rt"\,

;-

7

1

Mar 's Concepts

21

2

Mane and his Critics

4J

3

The Dynamics of the System

55

4

Beyond Marx: Monopoly. War and the State

87

5

Stare Spending and the System

121

Part Two: Capitalism in the 20th Century 6

The Great Slwnp

143

7

The Long Boom

16 1

8

The end of the golden age

191

Pact Three: The New Age of Global Instability 9

The Years of Delusion

229

10

Global Capual in the New Age

, .. -"

11

Financialtsation and the Buhbles thai Burst

277

Part Four: The Runaway System I ')

The New Limu!> of Capital

307

t3

The Runaway System and the Furure for Humanity

14

Who Can Overcome?

325 329

Noles

353

Gfossary

393

J"dex

403

Introduction

About Ihe Author

An unstable world.

Chris Harman is a leading member of the Soci ai isl Workers Parry

We live in an wlsfJble wurld, and the Instahility is gomg to Increase.

( www 5 wp org uk ) . He IS the author of numerllUS hooks includmg

It is a world where a billion people fL·d hungry every day. and the

.

.

.

A I'eoples History of tlu' World ( Bookmarks 1999 and Verso 2008). Revoll/tion ill tbe 21st Ce/ltury (Bookmarks 2007), The Fire L"St Time: 19(;8 alld After (Bookmarks 1988), The I.ost

RefloflltlOll: GermallY 1918 to 1923 ( Book marks 1982). He is lht!

editor of IlttentallOllal Socia/mil, a quarrerly journal of Marxist thenry (www.isj.org.uk).

hunger is g�ing ro increase. II is a world which is desrroYlIlg its own

environm ent, and the destruction IS going to increase It is a violem .

world, and the violence IS going to increase. I t IS a

people are less happy, C\'cn in the

lIl

w orld

where

dustriaJ ly advanced counrries.

than they used to he.1 and the unhappiness is goms to mcrease.

Even the most craven apologists for capitalism find it h:trd t o deny this reality any longer, as Ihc wnr:..t economic crisis since the

The Social is t Workers Party is linked to an internatlon,d nenvork of organisations, for further information go to international.php

.swp.org.ukl

www

Second World War continues [() deepen as I wnre. The world's best known banks have onl )' been S
.

Unemploymem is shooting upward!>. Twenty million Chinese workers have been told they have to return to the vilJages because there arc no lobs for them in the cines An Indian employers' think .

tank warns that ten million of their employees face rhe sack. A bundred million of the world's people threatened

10

the Global South are still

with hunger because of last year's doubling of grain

prices, while In tbe ricbest country in the world, rhe United States, three million fa milies ha\e been dlsJX)�scssed from chelf homes

III

18 momhs. Yet just tWO ye;lrs ago, when I began lhl� book. the message W
"

Rec ent Illgh levels of growth will continue, global

inflation will stay quite subdued, :lnd global current :lCCQunt im­ balances will gradually moderate." was Ihe "consensus" among mainstream economists, reported the

Bank of Inrernaf10nal

Settlements. The politicians, industrial ists, financiers and com � menrarors all agreed They toasted the wonders of free markets .

7

and reJoiced that -entrepreneurial gcniu,," hdd been hherdted from regu),nion. It wJ.� wonderful. rhey raid 11:'), th.lI rh�' ridl \\CTl'

agaUl. Their futures will seem better and they wilJ generah�e thi�

getrlng ri,hcr hec.lUse th.lI pn)\'ided till' incentives which made the

italism and [he impossibility of ally ahernatlve-unul cmis hits

.!oy�tl·m <,0 boulHifuJ.

agam and throws them iO(o another panic.

Trade was gomg to ()hhter�te hunger

to the world at large with renewed ralk abour the wonders of cap­

Afn..:a. h.:onomi..:

But cflses are not some new feature of the s)"srem. They have oc­

gmwth W,IS draining the vast pools 01 pO\crr)" 111 Asia. The crises of

curred at longer or shorter intervals ever since the industrial

the 1970", SOs, 90� and 2001-1 wcre me-moric)' we could put

revolution estahlished the modern form of capitali�m

bchmd us. Thne Illight be hurrors in the world, W3rs in the J\liddle

fully at the begmn mg of the 19th century,

III

III

Britam

EaSt. civil W.ltS in Afnca. but the-"e were to be blamed on the shorr­ !>ighrednc!o\ of essenti311y honest politiCians In Washingron and London \\ho Ulay have made miSLIke" but whose hum;lnitariall in·

The poveny of ecouomio

tervenrion W.1S Still needed to de,11 with p"ychopathic m:lIltacs. The words 01 those who saw things differenr1}' were Ignored, as the

The maimtrcilill economics thar is taught in schools and uni"crsi­

media poured our candyfloss lavcrs of celebm)" culture. upper

ties has pro"cd complelely unable ro cume to rerms wlrh sllch

middle class M:lf-congratulation and senseless n,ltionalist euphoria

things. Th�Bank of Lnternatiunal Settlements recogni!oCs that:

o'er sporting events.

Then in mid-August 2007 somethmg happened which began to

Virtually no one foresaw rhe Great Depression of the 19.105, or

swcep rhe c
the ccist', which affected Japan and South Easr Asia in the earl)"

reality, A number of bank!> suddenlr dl'>Covered thcy could not bal­

and late 1 9905. re!opcctive ly. In fact, each downturn was pre­

ance rheir books and stopped lendlllg (0 each other. The world's

ceded by a period of non-inflationary growth exuberant

financial system began grinding to a 1t.11t with a credit crunch rhat

enough 10 lead many commentators to suggest that a Moew

turned into a crash of the whole ��srem in October 2008.

era"" had ;lCfI\ed,'

Capiwlist complacency runled to capiralisr panic, euph oria to des· peration. Yesterda)"s heroes becaml' wd
Nothll1g sums up the incomprehension of those who defend capi­

who had assured us of the wonders 01 the �ystem there now came

t:llism as much as their inabilir:' to explalll the most Significant

one me....age: "\Ve don'r kllOw whar has gone wrung and we don't

economic episode in the 20th centUff-the slump of the 19305.

know what HI do." The man who not lung before been treated as

Ben Bern3nke. the present head o f the U� Federal Reserve and sup­

the supreme genius overseeing the US economic system, Ala n

posedly Olll' of mainsrream economics' mo�t respected experts on

Greenspan, 1)( the Federal Reserve, admlned to rhe US Congress

economic cri�s. admirs that"understanding the Great Depression

that he .!otill did Hnor fully understand what went wrong in what he

is rhe Holy Grail of macroeconomics""-111 other words. he can

thought were self-govermng marker�

find no explanation for Ir. Nobel economic laureate rdward C

H.

Governments have been throwing hundreds of billium ro those

Prescott describes it as "a ... pathological episode and It defies ex­

who run the banks-;llld tens of billions to those who run the

planation br stand3rd economics".' i-=or Robert Lucas. another

multinational CM firmS-III the hope that this will �OI11ehow srop

Nobel Laureate "it rakes a real effort of will to admit you don't

the crisis. Bur rhey cannor agree among themselves Ito" ro do tillS

know what rhe hell is gOll1g on in some :lreas" ,"

and e\en whl'rher it will work or not.

These arc not accidental failings. They are huilt into the very as·

Yet one thing is certain. The mOlllent any part of the global

sumptions of the Hneoc1a�sicaIM or "rnarginaliSf" schuol that has

economy begins fO �mbilise they Will forget the hundreds of mil·

dominated mainstream ecollomi,s for a century and a quarrel'. Irs

lions of lives that have been shattered by the crisis. A few months

founders set rhemselves rhe rask of showing how markets

when banks are not collapsing and profirs arc nor falling through

"c1ear"'-that is, haw aII the goods in them will find buyers. Bur

the floor and the apologiSTs will be pumplllg our candyfloss oncc

that assume ..

,

IntTuducnn"

111

advance that crises are not possible. ,

The lI11pbusihiliry of the neoclassical modelm the t.n:l' of some of the mmt ohvlOus features of capitalism has led tn reLurrent at­ tempts within the mainstream to bolt extra elements OntO it in an ad hoc way. I\one of these additioos. however, alter the haSlc belief that rhe �y'tem WIll rerurn to equilibrium---r--p oviding pnce"i, and especially w.tACS. adjust to marker pressures without hmdrance. Even John Maynard Keynes. who went tunher than anyone cL..e 111 the 1ll<1II1SrreJm m quesrinnmg the equllibriullllllodel, stili assumed It could he made to work with a degree of guvcrnmcnI mtcn'cnnon. There were always challenges to such complacency. The Austrian economist Schumpeter derided any Idea of equilibrium as incompatihk with what he

the great posillve \'Irtue of cap­ Italtsm. its d)namism. Some of Keynes's dI sc iples wem much further than he did in breaking With neoclaSSical orthodoxy. saw as

Cambridge econmnish tlJrc apart the theoretic<11 basis of the nco­ dassical �chool. Yet the orthodoxy is as r,mmgly entrenched m the llIliversiril's and sch(lols as ever. pumping into the heads of each new generation a picture of the �conomic syStem that beMs litfle reJation�hlp to realiry. Th� pressure on students to study the hooks putfmg forward �uch views as If they were scientific texts has led lO �amucJson's F.COII01I11CS and Lipsey's Art 11Itroductlon to I'uslfll'e f.CC)flom/t·S sellmg millions of copies. I! IS h,lrdly �urpmmg rh:n tht' economics profession hilS diffi­ culty conung to terms with those aspects of the capitalist system that have the greatest impact on the mass of people who live within It. The obtuse theorems rhar fill economic textbooks and academic Journals, with their successi\'e algebmic calculations and gcometrtc figures, assume st:l.biliry and equilrbrium. and so h:1\'e little to say to people worried by the system's propensity to cnSIS. One of the founders of the neoclassical school. l\larshilll, observed nearly a century ago that the economic theory he believed III was of little use ITl pracrice and that �a man IS Likely to be a better econ­ omIst if he trusts his common sense and pracrical insti ncts Yet what is involved is not Just abstract academiC scholasticism. "

.

The orthodox}' is an ideological product In the sense th:lI It opt'r­

atl's from the standpoint of those who profit from the market system. It pr('scnt� their profiteering as the supreme way of con­ tributtng to the common good, while absolv11lg them of anything

other structures of capitalism. The radical Keynesian Joan Robiruon summed lip the situatIOn: The radicals h:lve the e:lSler case to make. They have only to POint to the discrepancies between the operation of the modern economy and the ideas by which it is supposed to be Judged, while thc conservatives have the well nigh impOSSible [ask of demonstrating (hat this is the beSt of all pOSSIble worlds. For [he same reason, however, tht: conservatives are compensated by

occupying positions of power, which tbe) can usc (Q keep criti­ cism in check ... The consenranves do not feel obliged to answer radical cmicisms on their merits and the argument is never fairly joined.'

But even m�t of the "radle;lls" usually "un by taking the exist­ ing system for gr:lnted. The arguments of rhe radical Keynesians like Joan Robinson have always been

111

terms of amendme.nts fO

the system. through greater state Intervention than that envisaged by the mainstream. Ther havl' not seen the �y"tem Itself as driven by an inner dynamic whose destructive effects are nor restricted to purely economic phenomena. In the 21st century it is producing wars. hunger and climate change as well as economic crises, and dQing so in ways which threatens the very baSIS of human life. Capitalism tra nsforms SOCiety in ItS entirety as its Slicks �ople by the hillions into labouring for it. It changes the whole pattern

by which humaniry lives. remouldi ng human nature Itself. It gives a new character to old oppressions and rhrows up complete!) new ones. It creates drn'es to war and ecological destruction. It seems to act like a force of narure, creating chaos and devastation on a scale much greater than any earthqua ke, hurricane or tsunamI. Yet the system ;5 not a product uf narure, but of human activity. human actiVity that has mmehow escaped from huma n control

and tahn on a life of its own. Economists write that "the marker does thIS" or "the marker demands th;lI". �ut the market IS only t he coming together of !.he products (If man)' di�parate acts of human creative activity. I"bour. What the economists' talk dis­ guises is that somehow these have fumed inro a machine that dominates the humans that undertake such activity, hurling rhe

tions in educational structures, connected as they arc to all the

rheir right mind would wam. Faced with the financinl crisis th::1t began in 2007, some economic commentators did begin to t;1lk of "zombie banks"-

10

IntrodUCTIon

that goes wrong. And it rules out any fundamental critique of the present system, in a way that SUits those with commanding posi­

IntroduUl011

world in a direction thar few people

III

11

financial InSmUllOm rhat wen· III the "undead statc" and mca. pahle of fulfilling 3n� positive funcrion. but reprt:!>cnnng a threat to everything else." What they do not recognise is thai 21 St (;cn. tury capitalism as a whole IS a zombie system. �ecmlngl) dead when It comes ro achienng human goals and responding to

worker it produee\ privation. It produces paiaces-bul for the worker, hovels. It produces beauty-but for [he worker, defor· mity ... The worker unly feci... himself outside his work, and in hiS work feels outside himself. He feels .n home when he is not working; when he IS working he does nor feel at home.

human feelings, but cap.lble of suddcn spurt!> of activit), that In his early wmings Marx called wh,lt was happening ··alien­

cause chaos all around.

ation",

raking op a philosophical term developed by the

philosopher Hegel. Marx's contemporary Feuerbach had used the A world turned against ourselvcs

term to describe religion. I t was, he argued. a hu man creanon rhat people bad alloned -to dominate their li"e!>. Mar., now !.aw capi­

There has onlr been one serious tradmon of analysis to attempt to provide an ;u,:ellum of the system in these term!>. It is thai which originated III the Writing!> of Karl .Marx and hi!. I{)ng-timt· col­

tahsm In the same way. It was human labour Ih,1I produced new wealth. But under capitalism that wealth wa� turned infO a mon­ ster dominating them, demanding to be fed by ever more labour.

league I-redt:rick Engels. Marx came to adulthood 111 the early 18405, JUSt as industrial capit:llislll began to IllJke its first, limited, impact on southern Germany where he wa� hOrT!. Engels was sent by hiS father to help manage J factor) in Mnnchestcr, where the new system was al­ rc.ld)' flourishing. The}' shared With almost the whole of their generation of German inrellecrual roulh a desire to overthrow the oppressive PrussIJn feudal system of class rule presided over b)' a monan.:h wlrh despotic powers. But ther soon began to grasp that the mdustrial c.lpltalism that was supplementing feudalism con­ tai ned oppressive features of its own. Abo\'e all it was characterised by an Inhuman subordination of the Illass of people to the work they did. What Marx was beginning to discover ahout the fUllc.:liolling of [his then-new system led hllll to undcrr,lke a crilll.:al reading of ItS most t:mllleor proponents, political ccono­ miSts like Adam Smith and David Ricardo. HIS conclusion was that, although the system \'asrly incre.. sed the amount of wealth humans could produce, It aho denied the maJorit), of them [he

•

The object that labour produces, ITS product, stands opposed to it as smnethmg alien, as a powt·r independent of the producer. The more the worker exerts himself in hi� wurk, the more pow­ erful the alien, objecflve world becomes which he brings into bemg over against himself, the poorer he and his inner world become, and the less the}' belong to him ... The worker places his life in the object: but now It no longer belongs to him, but to the obJecl . .. lQ As Marx pur It In hi!. notebook!> for C..a/Jltaf In the early 1860s: The rule of the caplfallst over the worker IS the rule of the object over tbe human. of dead lahour over living. of the prodUCT over the producer, since In fact the commodities which become the means of domination over thc worker are ... the products o f the production process ... It is the alienation process of his own social lahour."

benefits of this wealth: The mOfe the worker produces, the less he bas to comurne. The more values he creates, the more valueless, the more unworthy

lahour, and it [Urns the other section into a machine ... Ii produce... Intelligence-bur for the worker, stupidity ... It is true thai

he was dead. He also set out. through a quarter of a century of grinding intellectual labour, to Ir)" to understand how the s}'stem had come iIllo hcm!!; and how it created forces opposed to itself . His works were nOt JUSt works of economics, but a ··cnrique of political economy", of the system which other schools of econom­

labour produccs wonderful things for the rich-but for rhe

ics [Oak for granted. I-lis starting poim was th::u cJpitalism is a

he hecomcs ... IThe system] replaces labour by machll1es. but it throws one !.ection of workers back to a barbarou... type of

12

Bur Marx did not simply record this state of affairs. Others had done so before him, and man)" were ru continue w do so long after

ImrodUCllun

Inuodu.."'lion

13

historical product. 3rr1Vll1g where h e found It as 3 result of a d\­ namic which drove It ever onwarJs In a prcx:cs't of rndlc..s chan e wuh �constant revolurionising of production. uninterrupted di�­ turbann' (If all social conditions, everlasnng ullcenainry and agltation".'l The economic studies of the mature Marx aimed to

g

gra�p the nature of this dynamic. and with it the trends 10 the de\>'el­ opment of the system. They are the IfldispensJhle starting pOIm for

anyone who wants to try to grasp where the world is g01l1g today. J·h� method was to analyse the system at different le,·els of abo stractlon. In the first volume of CapItal h e set out to delineate the most general underlying features of capitalist production. The second volume" deals with the way in which eapltal, commodities

and money circulate within the system, and the thIrd volume" 111tegrate� the procesio of production and circulation to provide more

concrete accounts of things like profit rateS. the cn�is, the {;tcdit system and rent. Marx's origmal intention had been to produce t'�lnher volumes. dealing among other thll1gs with the �tate, for­

eign trade and world markets. He was unable to complete these, although some of hi!> work towards them is contalTled in various notehooks by him.1< wpltal w as rhen. an unfinished work In some respects. But II was an unfinished work that accomplished Ihe goal of unveillllg (he baSIC processes of the sy!>tem, Intcgratlllg Into 11\ account the very things ignored by rhe static equilibrium anal)M� of the neoclassical mainstream: technical advance. accu­ mulation. recurrent crises and the grO\\ th of poverty alongside the growth of wealth. ,

Using Marx today For these reasons, any account of the world system raday has to begm with basic concepts developed by Marx. I try to uutline these

In the fir�t three chapters of this book. Some re:lders from a Marxist background migb t regard rhe account as redund.ulI. But the concepts have often been misunderstood wlthlll the Marxist

has been an aJmost schoi.btl( Jpproach In which competing inter­ pretations pore over texts hy M.trx and Hegel. It is often as if Marxist theory had been ambushed by Its opponents and retreated inro a theoretical bunker of irs own, lUSt as detached as the)' are from the real world. For IhlS reason I have felt It necessary [0 ex­ pound the basic concepts 10 a way which IS ( 1 hupe) cas)' [0 follow. showing how mey describe the interaction of the underlying forces that determine the direction of capitalist de\-elnpmelll. I ba\'c left detailed discussion o f other lllterpret3tions

to

footnotes. I have.

howc,·er, feh ir nece�sary to deal with the most common oblection!> 10 Marx's account frpm mainstream ect)nonlLst� in Chaprer Two. since anyone wbo studies ("conoml(s ,tt school or university will have their views Inflicted on them. Readers who have heen lucky enough to escape that fate arc welcome to skip thiS ch3pter. \Vhere t� Incompleteness of Mar,,'s own account doe� matter is in coming to terms With changes 111 capltalism Since hiS dearh. Things he only referl> to in passing in CaIn/ai-the growth of mo­ nopolies. the intervention by states m c;lpit'l1i�t production and markets, the provisum of welfare services, war as an economic weapOn-ha\c become ma�sively Important. Marxists in the first decades of the 20th centu,)' were forced by circumstances to debate some o f thest' mJtter", and there was a new burst of cre­ ative thinking in the 1960s and early 1970s. I attempt to draw from such discussions the concepts needed

[(l

"go beyond CaP/tar

and 6.11 in gaps in Marx's own account of the system (Chapters �()ur and Five). The rest of the book then mes to come to terms with the development of capil-aiism over the last HO }cars, from the great slump of the inter-war years (0 the Crisis causing turmoil across the world as I wrlle. The account must be not simply one of economic processes, bur at every stage of how the interaction of capitals and states on a world scale gIVes n"t! to w:trs and civil wars, hunger and environmental disaster, as well as booms and slumps. Nuclear weapons and greenhouse gases are as much a product of alienated labour as car facwries and coal mines.

camp as well as outside ir. They have been seen as compenng with the neoclassical to provide an equilibrium 3ccmmt uf price (orma­ tion and then faulted for failing to do so. l -

A note on the book

One re:lCtion has bet:n to drop key clements 1Il Marx's own analysis. keepmg it only as an accoullt of exploitation and of the anarch) of competition. Another, apparently opposed. reaction

The instability of the capitalist economy has had ItS Impact on the writing of this book. I set about writing the first draft when what I call "the great delusum�-rhe belief rhat the capitalism had

14

LnlrnJUCtiol'l

imroJu,uon

15

found a new way of expanding without crises-was at J[S height in late 2006. I viewed another economic l"rJ.sl� a" l1levitable, III much the S;lI11e way that someone Ilvmg 111 a city built on a seis­ mic fault line knows It is at somt: point going to suffet an earthquake. Bur I did not pretend to be able to predict when this would h3ppen. or how destruc[]vC it would be. My aim, r:Hher. was to update my E:'(/llallImg the C riSIS of 25 years ago, taking IIHO account changes in the .system S1l1ce. but repeating [he basic conclu!.ion that its blind rush forward would have devastating repercussions for peopk's hves through the rest of this century, creating immense social and polmcal crises With potentially revo­ lutionary Implications. But one of these blind rushes had Its effect I, S I was finishing a lSO.OOO-word draft. The credit crunch of August 2007 turned into the great crash of Scptt:mber-October 2008, leading one apol­ ogist for the system. Wll1em BUlTer, ru wnre of '""the end of capitalism as we knt"w It"'. Many detads about the system which I trc;lrcd as part of the prescnr were <;uddenly in the past, and everywhere then: was an urgent demand for an ex-planation as to what brought this crisis about. I had no choice btu to update and restructure what I had Wrlrten, shifnng the emphasis in some of the ch.lpters towards the end of the book from what was gmng to happen over the decades to come. TO what was happening i n the here and now. In rhe process I cut ahout a third of the words our of the draft. removing a good deal of empirical demil in an effort to make the whole book more accessible. Anyone interested in greater detail can find some 111 the 15 articles on economiC!. I have wnnen for the journallll/entaltOfr,11 Sneitz/ism O\'er the last twO decades, while some of the theoretic,11 arguments are articulated mote fully in f.xplaillillf( /be Crisis.

prolit rates to Robert Brenner and Andrew Kliman. I also have a huge IIltellectual debt to many orhcr people. Pride of place goes to what I learnt in my youth from Mike Kidron and Tony Cliff. Along with that there has been the stimulus over the years &om [be works of dozens of others who have maintained the tradition of Marxisr economic analysis from the late 1960s to the present-Riccardo Bellofiore, Henry Bernsrein, Dick Bryan. Terry Byers, Gugliemo Can:hedi, Fmn�ois Chesnais, Franli;ois Dumenil, Alfredo Saad Filho, Ben Fine,John Bellamy Foster. Alan Freeman. David Harvey. Peter Gowan, Claudio Kar-L, Jim Kincaid, CoSt.IS Lapavics
•

A note on figures and tenns

long and disorganised draft to Tobias Brink, Joseph Choonara. Alex Callinicos. Neil Davidson, Jane Hardy. tvLke Haynes, RIck Kuhn, �lan Nichter and Mark Thomas. Thanks are also due for comments on some of the preparatory material that appeared in International Socialism to Tom Bramble, Sam Friedman, Mehmet Ufuk Turan, Thomas Weiss and others, and for mformation on

Anyone anempring to explain economic changes has little choice but to usc the statistical inform;aion provided by governments, business organisations and international institutions like rhe OECD, UNCTAD, the World Trade Organisation. the World Bank and the Lill. This book is no exception. Bur readers should be w,lrned th,lt some of the most commonly used figures can be misleading i n important respects. Figures for economic growth, in particular, are nor as clear cut as they sometimes �cem. The growth they usually measure is of marketed output. But a lot of rhe human labour that 3dds to people's well-being is nor marketed. This is true at the domestic lahour of women and. to a consider,lbly lesser extent, men. It bas also been true historically of much of the family labour on peasant land. The rewlt is that there is a false impression of increaSing wealth as households begin to pay fc)r things they used to produce outside the market-when a housewife gets a job and bllY� read} to cook mcals, or when a pe;\sant family pays someDne else to build a shed on dlClr land where previously they would have done the job rhelllsclve�. Such changes lead the usually provided figures to give ,Ill in­ creasingly distorted picrure with growing marketisarion and the feminisation of paid labour in recent decades. Tht' official!) pro­ vided figures also exaggerate the rt'al rare of growth of the things

16

Introdu�non

Acknowledgements I uwe thanks for reading and making comments on my excessively

Introduction

17

that satisfy human need by counting

in

output rhings [ike financial

Part One

serVIces whICh merei}' move wealth from one pocket 10 anmher­ agalll a pMril:ularh marked phenomenon In recent decades.' Finally mC<1!>urements of output per head cannot he equated. as thft) llrf' all roo frequently. with human welfare. since rhe OutpUT i!> alwan unevenly distnhuted her-ween dasse... Ne\erthele!o�. for walll oj anything bener. I have had (0 use such figures.

A hriet f"\plananon of some of rhe terms I usc. Generall), "\'(.'e.. r" and "East" Me u!.cd in rhe wa)' rhey were In the Cold \'(ar dc!.:ades of the last cenrury, with "the Wen- including Japan. "Third World" and "Global South" refer to the poorer part.!> of

UNDERSTANDING THE SYSTEM: •

rhe world which were relari\'ely unindusmaJised for mO!.1 of rbe 20th century. as do the phrases

"developing"

or Mundcrde\'eJoped

countries" used wuh some of the statistics. The "Cummunt�t counrrics" are those wldl srstems slIllilar 10 that of the U�SR before 1991. "Productive c,lplral"' IS that employed in in dustry agricul ture, 3� oppo\cd to that

III

or

finance and commerce. finally,

capitalists are a�sllmed to be Ina Ie, �Hlce 99.99 percent of them werc unti[ only a couple of decades ago, while the workers they ex­ ploit have always been of both genders. I provide a glossary in an attl'mpr to make rhe mau:'nal more 'lcct"ssible bOth to rhose fortu­ nate enough not to have studied mainstream economics and [() those who are nl)[ yet familiar with ,\Iarxisr wrITings.

18

Irumdu.:"on

MARX AND BEYOND •

CHAPTER ON!::.

Marx's concepts

A worl d of commoditi es The most obviou!> feature of the economic system III wluch we live is (hat it is centred around the bUYing ;lnd s ellin g of goods of all

sorts. We h :vc

to

pay for food, shelter, dothing, em'rgy to light

and hear our homes, tran..port to move
need ro keep ourselves ,llld OUf f:ullIlics alive. And in order to buy we have to sell, e ven If all we have to scll is Ollf capacity to work for others. Our very lives depend on the movements of commodi­ ties. Hence �1arx's starring point in Capital: The wealth of those SOCIeties

10

which the capitalist mode of

production prevails. presents Itself as an

1mmense

accumulation

of commodities. Marx was wntmg al a lime when market relations had still nor penetrated large parts of the world. There were nill societies in

which all production was for people's immediate needs, whetht'r In "primitive communist" SOCletles based on hunter-gathermg or lig h t agriculture,1 where people agreed freely among rhem.<>eh-es

how and what to produce, or in peasant societies where a local lord or ruler dict.ned to them from above. Even in most of the so­ cieties where me market already existed, the majority of the population were still subsistence fa rmers , producing mOst of the things rbey needed fa keep their families alive, with only a !omall proportion bought or sold. Today we can extend Marx's words to say that "the wealth of the whole world, with a f ew exceptions, presents itself as a mass of cOlllnlodities". And the exceptions­

the provision, for instance, of frce health and cdu..:anon in

.1

number of advanced countries-are increasmgly subj ect to forces �king fa commodify them. This near u niv er sality of commodiry 21

productiun m:uks �ocietr tOddY off from d.nythlng that h,ls ever happened before. To under!>tand what is happen 109 to thl' \\orld we have to hegin b)' understanding the working!> of cOnlllloditr prudlKnol1_ {\-iJr\: was not the fir!>t ro try to understand such workings. He wa� preceded b) the cI.lssical pollncal econonllSts-earir support­ er� 01 capItalism who tried [0 understand ItS baSK dynamics as ir struggled

fO

hreak through, in a Furope 'Iill domin:lfed by

landowning classes. Two were of �pccial lmportance: Adam Smith, who wrote IIl lhe 1770;. at the time when the I1rst modem factor}'. a !.pinning mill, was openmg at Cromtord 111 Derbyshire; and David RIcardo, who defemh:d the tnterests of the carl}' mdustriltl-

151\ again�t the big landowners 40 years later in the afterm
value, somethmg useful. ThiS property of a commodity is inde­ pendent of the amount of labour reqUired [() appropriatc us useful qualities. But commodities are also: [he material depGsirories uf exchange value [whichl presents itself a..

a

qu,mmatlve relation, as the proportion in which

values in use of one sort are ex(hanAed lor those of another "

economists_< The on ly sort of value they see is "marginal utility",

tant poinr. developed further by Ri.:arc.lo, which

h,ts been

completel} obliterated hy nearl�· all those mamstrcam economists hiS footsteps. He noted that once societ)· is

hased on production for the marker. evcr)" commodiry can he seen from two complctely different points of view:

exprcs!.es the utility of some particular object, and sometimes the power of purchasing other goods whICh rhe possesslun of thai oblcct comeys_ The one may be called "value

ise : the

111 l

"

other, �value in exchange"_ The thmgs which have the greateo;t value 111 use have frequenrl) little or no value

111

exchange; Jnd

un the contrary, those which haw the greatest value in eXl.'hange have frequently Imle or no value

ill

use_ Nothing is mure useful

than water: but It will purchase scarce an}' thing; scarce ,lilY thing can be had in exchange for It. A diamond, on the contrary, has scarce :llly value in use; but a very great quantity of mher gOllds may freqllemly be had in exchangl.' for il.l Marx'" (',o/Jlla/ tOok up and developed thi5 ino;ight, removing cer­ 111

based on people's subjective apprcci:nion of lise values. Nor s i it made by some of those dissident economists who ci..im til be in the tradition of Ric••rda (the so-called "Sraffians" ) . Their model is based on the mputs and output:'> of physical obJects. in other words, again on u�e values. hnally there are �Onle present day Marxists who argue the disrinction is not relevant, smce the imponanr point MaD.: was making was about exploitation. nor \·alue.· In erasing the dlstmction made by Smith. Ricardo and Marx, aLi

The word value . . . has twO different meanlllgs, and somctimes

22

or a diamond, is therefore, so far as it is a material thing. a use

This distmction is not made hy today's mainstream neodassical

,lI\d of It� ll(·oda)�ic.:;ll el.'onornic theonsls. But he made an impor­

tain ambiguities found

apan from that cununodiry_ A commodity. such as iron, corn,

.

Smith is often treated a� the patron saml of present da}' capitalism

III

rhe physical properties uf the commodity, it has no existence

sorr. a relarion constanrlv chanAinn with timl;' and place.

Use valuc and exchange value

who clalln [Q follow

The utility of a thing makes It a use value ___ lklng limited hy

Smith's work: Under
such theories ml;'S somethmg essential to a system based on com­ modit), production: everything thar happens in It 10; o;ubject to two different setS of scil-mihc laws. On the onc side there arc Ihe laws of the phYSical world--of physics, chemistry, biology. geology and so on_ It is these which determine the

ays in which different thmgs have to be combined

. .. \

(0 produce goods

(the different components of 1 , machine, the ma­

terial structure of a factory. the techniqueo; used i n a surgical operation and so on) and also the usefulness of those goods to those who finally consume them (the nutritional value of food, Ihe warmth provided by fucl5 and electricity, the number of chil­ dren who ("an be accommodated In a school or patients in a hospital. etc). On the other side. there is the w;.y rhings relate to each orher a� exchange values. These often behave in a very d ifferem way to use values_ The exchange nlue uf something can fall while its use Marx'� CmH:tpiS

!3

value rema1l1.i unaltered. This has happened to the price of corn­

something else. 1<; rhe roil and trouble which It can ')ave to him­

putcr� in recent year�[hc computer I used to wrm: my last book

self, ,lnd which It c.ln Impose upon olher people. What IS

\\'.IS tWI(e Ihe price of the much more powerful one I am usrng

bought with money or with goods I!> purchased by labour, as

nnw. \X'h:tt i::. more, exchange mluc� are mfillltely dlVl\lhlc

hile

much as what we acquire b)' the toil of our own hod)' . . . They

lI�e \a luf's are usuall}' nor: you mi�ht s..1\' that a hlcycle is worth

contall1 the value of a certain quamlty {If labour which we ex­

one twentieth of a car. but if you cut a car lip IntO twenty pan<; It i�

change for what IS ..upposed at the time to contain the ,-alue of

This marters Immensely when It comes ro 01 ml use ro myone. .

an equal quantity.

\\

IhlllgS \\ 11Ich are Important for modern capitalism like factones,

Lahour was the first price. the original purchase-mooey that

oil well\. airliners. schools and ho!>pitals. The market trcats these

was paid for all thi.nAs. It W3:' not by gold ur by silver, but by

a!. exchange \'a lue.. that

can

be infinitely di\'ided into parts (worth

labour, that all the wealth of the world wa!> origin;)lIy purchased;

<;0 many pounds. pence. etc): but rhey have a physu::al CXI\tcnce

and irs value, to tRuSt" who possess It, and who wam to exchange

that " lI1nO( usually • he dividcrl rn rhar wa\'.

it for somc ne\\ productions, is precisely cqual to the quantity of labour which It can enable them to purchase Of command. �

•

The exchange values of commodlttes arc also IIlfinirely fluid. In thc form of Illoney they can move from one part of the ecunomy to another, from Dill' p:tn of the world to anorhl·r. be spent on one item or :ltl}' other or the samc pnce. But the fl mdl ty of mc va lue!.. like their di\'i�lbillfY. is restricted by theLf phys1(;al make up. You

ThiS undcr�tandtng Marx also lI\corporated into hls own analysis: The exchange values o( commodifies must be capable of bcing

can movc £ I 00 million III cash from Bm31T1 to India overnight, hut

expressed in terms of somethIng cummon to thC11l 3 II, of which

you cannOT mo\'e a f.!Ctury worth £ 100 million at anything like the

thing the)' represent ;I greater or less quantity. This common

same speed. u..c \a lm's and exchange v.lluc!. operate accordmg to

" something" cannot bt a geometncal, a chemical. or any other

diffcrent, often contf:tdictory. logics and a fallure to see rhi, leads

natural propcrry of cornmodltie!o... If then we leave alit of con­

a t.ulure ro l1nder�tand rhe most basic thing ahout a conunodlfY

sideranon the use value of coml1lodtne�, they have only ooe

10

producmg eCOnom\. II does not operate �moothly, lUSt through the

common properry left, that of be1l1g products of labour.

now tlf exchang,e values, hut IS always sublect to bump!., to iotop­ ping and starung. due to the embodiment of exchange '-a lues in

But Marx refined the analysis of �mHh and Ricardo in a very

usc values With ph\-sic<1l properties that limit their fhlldlry.

porrant way. It was nor the particular concrete exertions of labour

uu­

as such that determined exchange value. �()r difterenr people with different skills take different amount3 of time and

use

different

amounts of c£fun to producc particular commodities:

Labour and money 5nmh and Ricardo were nm come-or lust with see11lg the duuble

Some people mig.lu think that if the value of a commodifY is de­

nature of commoditie... They weill on to argue that It was only

termllled by the quannry of labour spent (In It. the morc id1e and

rosslble 10 :t..cribe exchange values to obJects wilh very dlfferem

unskilful the labourer. the more valuable would hIS commodifY

phvsicaJ properties because- the)' h:l\'e one thing in common-they

be, because more time would be required In its production.'

:tre all product'i of hwn:m labour. Rather the exchange value of a commodiry depends on the -so­

A� Smith wrote:

cially necessary labour Ctmc": The rcal price of every thing, what c\'ery thmg really COStS to Ihe mao who wants [(1 acquire it, is the toil and trouble (If acquiring

that is required to produce an artIcle under rhe normal condi­

n. What every thing is really worth to the man who has <1C�

tions of production, and with the average degree of skill .1nd

quircd it, and who wants to dispose of it or exchange it fur Unden;t;lI1dmg ,hI" �ystcm: Marx and Bcrond

intensity prevalent at the tllne . . .�

25

It is social [ahour th,lt has transformed nature to create the means that humans depend on for a livelihood. So It IS the amount of social I.\hour incC)rporared m It [ha t constitutes the underlying value of 1 . r.:ommoJit\. The concrete labour of mdlviduals IS transformed th rough exchange 1Il a commodity-producing society Into a propor­ tionate'

part of -homogenous", -SO("la[- labour--or Mabstract

I.1hour'·. Marx ("ails thIS ahstract labour the -suhMance 01 value . It "

find� expres�ion in exchange value and determmcs the levd around wlueh rhe commodity'S price wilt fluctuate on thc market:

a whole declmes every time the technical advance somewhere in the system decrea� the amount of labour requ ired to make them. This leads Marx to a "counter-Intuitive" conclUSion which dis­ tinguishes his .ltcount of the srstem-and it IS one which even

some Marxists have difficulties coming to terms with. A rise in productivity reduces the value at which th ings exchange. It seems absurd on the face of it. Yet there are numerous examples of in­ creased productlvi ry cau!>ing some goods to fall in pnce compared to others. Marx provided one from hiS own time:

The inuoduction of power-looms into England probably re­

J vcr)' child knows that any nation [hat stopped worki ng, nut for a year, but let us say, lUSt for a few \\/eeks, would perish And

duced by one-half the labour req uired to weave a given quantiry

.

of yarn into doth. The hand-loom weavers, as a matter of fact,

every child knows, too, that tbl' amOUTltS of products corre­

continued to require the same time as hefore; hut for all that.

sponding to the differing amounts of need� demand d ifferi ng

the pro �uct of one hour of their labour represented after the

and quanmam'ely determined amounts of society's aggregate lahour . . . And the form in which thiS proportion al distributIOn

change only half an hour's M.)CiaJ labour and consequently fell

of labour asserts Itself in a state of society in which the IIlter­

to

connection of social labour expre�sc� itself as the privatc exchange of the individual products of labour, is precisely the exchangc \'alue of these products.'1 All the diftcrent kinds of pri­ vate labour, which are carried on independently of each other . . . are contlllually being reduced to the q uantltatlve pro­ portions in which society requires them.'-' Neoclassical ecunomlsts tried [0 devclQp a norion of value our o f peoplc s subjective judgements, with some even trying to incorpo­ '

rate Ltbour as "dislltiliry" . M a r x, b y contrast, saw value as .

somethmg objective. as II1dicatmg the proportion of total social labour "cmbodied"l1 in i t . But what that value IS only comes to

une-half it s former value.'·

Thousands more examples coul d be given today. For we arc living in a period in which technical advance is much faster in some in­ dustries (especially those invo lving microprocessors) than others,

and so the prices of th lng� like DVDs, televisions and computers produced by indusrries using the most tec hnologically advanced equipment are tending to fall while those in other industnes using older techmques remain fixed or tend to fISC. Thjs is someth ing of central importance as we shal l see later when we discuss [he dy­ namics of 2 1Sf century capitalism. Once co mmodiry pr oduction is g ene ralised across a society, one particula r good come" to be used to represem the value of all

light as a resuir of the continual. blmd, IIlteraC(1on of commodities

others-money (Marx calls It "the uni\'ersal equivalent"). In

on the market." The system as a whole forces us IIldivldual com­

Marx's day it was usually In the form of gold (or sometimes

ponents to worry .I bour how thc mdividual labour thc)' employ

silver), and a certam quantity of gold (sa)' an ounce), produced by

relates tQ labour elsewhere." He calls mis process the operatiun of

a

"the I3w of vallle·'. Values, however, are not unchanging. All the tim e there is the

certa in amOUD( of aver.lge lahour time, could act as a measure

of the value for all the othcr goods that were bought and sold. As cap ita lis m developed as a system, blinks and then govern ments

introducti on of new techniques or new meth ods somewhere in the

found that they could use paper nores to stand in for gold in many

system. Thi� results In a change in the amount of sociall y necessary la hou r needed to produce certain commodities-and that changes

so long as people believed others would accept those notes

thelT exchange \'a lue. The use values of objects remain fixed until

transactions and eventually to dispcnse with reliance on it at ail, (known technically .15 "fiat money" ) for goods. Credi t fro m

natural processes of wear, tear and decay damage them. But the

banks cou ld also function in the same wa)" so long as people con­

excha ngc value of things-the value that matters for the system as

tinued to trust the banks.

26

Ulldcrstandmjo; [he �yslcm: ,\lJrx ,lilt! Ikytlnd

Marx's CoIlC�p�

27

•

The development of commodit\' production h.ld one Important

tionals, then the (Jut of a world populanon of over six billion. a mere

effect. It s\'stel113ticaiir distorted people·s underSt.l ndlng of rea lity

20,000 people exercise decIsive comrol ovcr tht: creation of wealth;

through what Marx called the �fe(ishi!om of commodltics�:

in faer. the figure will be considerably lower than that because most o f the directors Will sit on the bo;lrds of more than Olle hrm.

relation of the producers to the sum tot;ll of their OWI1

Production, of course. is not carried out slmpl)' by the multination�

lahour I" presented to them as a social relation. eXlstmg not be­ rween themselves. bur berwecn rhe products of their labour. . . A

als. Alongside them are a mass of fl:nionally based medium-sized firms that have not achieved multinational status, and alongside

definite social relation between men assumes, in their eves, the

them exist an even la.rger number of small firms. some little more

fantastic furm of a relation bet\\'een things. In order to find an

than family operations employinEt perhaps a couple of people. Bur,

.Inalog)" we must hJ.ve rccnur� to rhe mlst·enveloped regions

even raking all these into consideration, onl) a small percentage of

of the religious world. In that world the productions of the

the world's populatlDn conrrol the means of production responsible

human brain appear a" independent bemgs endowed with hfe.

for producing the major portion of Its wealth.

The

•..

,

and entering into relation both With one another and the human race. So it is

111

men's hands.l -

rhe

world of commodities with the produc rs of

Those who dn not own and control such mean.. of production have no chuice 1£ they afe til make a livehhood. beyond the mmi­ mum prO\'tded by welfare programmes, other than to trr to sell their ahility to work to those that do. They get paid

.1

wage, while

People spe
their labour produce s goods that arc the property of those who

come from the human labour for which it i s a token; or of the

control the means of produc£1on. Some of the value of these goods

"needs of the market" , as if the market was anything more than

is used to cover the wages of the workers, some to pay for the ma­

arrangement for linking together rhe concrete acts of labour of

terials used m production, some to co ver the wear and tear of

differeTH human beings. Such mystical attitudes lead people to as­

means of production. Bur some forms an excess which is the basis

cnbe social Ills to things beyond human control-the process

of the profits of the owners-what Marx called "surplus value"'

which the young Marx had called ·'alienation" and which some

and some non-Marxist econumlsts Simply call " the surplus".

,Ill

Mar,ists since Man have called "reincarion"". Simply seeing through such mysticism does not in itself deal With the social ills.

Adam Smith had already suggested whete this surplus came from (although he did nO[ stick consistently to this view):

As t-tarx noted. simpl}' arriving at a scientinc understanding of the ch.lfacter of existing society leaves it intact JUSt as �aftcr the dis­

In rhe original srare of things, whICh precedes both the appro­

covery of the component gases of air, the atmosphere itself

priation of land and the accumulation of stock, the whole

remained unaltered".It Bur without seeing through Ihe fellslusm,

product of labour belonged to rhe lahourer. . . But as suon as [he

con",ic)u� action to transform societ)· cannot rake place. Hence the

land becomes private property. the landowner demands a share

Importance of graspmg the distinction between use value and ex·

of the produce ... The produce of almost alJ other labour is

change \'alue and of grounding value in socially necessary I:lnour.

liable to the likt' deduction of profit. In all arts and manufac­ tures the grcater part of the workmen srand 111 need of a masrer to

Exploitation and surplus value

advance them the materials of th�ir work. and thell" wages

and mamlcnance rill it be

mpleted He shar�s in the produce

co

.

of their labour, or in the value which i t adds to the m:nerials We do not only live in a world of commodity productiCln. We live in

upon which It i .. bestowed; and

10

this share consists his profit.'"

a world where control of most of that production is concenrrated in relatIVely few hands. In 2008 [he sales of the world's biggest 2,000

Profit, men. arises when the land, wols and materials required for

compalUe� equalled about half of rota I world output.'� If we assume

production become the private property of one section of society.

that around ren direcrors sit on the hoard uf each of the mult1l1a-

ThiS section is rhen ablc [0 get comrol of the labour of others.

28

29

Rlc:mlo tOok up and dl.'velolXd Smith's ideas. In doing so he pointed to a ..:entral amblguiry In Smith·... own writings. Smith mixes With rhe view that labour alone creates value another ap­ pro:l..:h, in wh1..:h profits and rent as well as labour contribute to rhe

final \'alue of goods. Ricardo rejected thl" titter \'It'W. Bur soon after his Jearh in Ihc I 820s it became the orthodoxy among pro,apltaJ-

1st economists. Jr was much more palatable to defenders of the eXlstlllg system than implyrng that profit� were parasmc on labour.

Marx, however, saw that [he development of �Jllith's views b}' Ri..:ardo could alone provide me basis for a ""'ientJfic account of how capnallsm funCTioned. Like Ricardo, he recogl1lsed J( was absurd to say thai profits somehow created value when they were part of value that had already been created. But he went mu..:h fur­ ther than Ricardo had in clarifying the issues .md working out the im pliC'Jtions of the theor}'. The first Important advance he made wa� to differentiate dearlv ,

two different meanings given to "the value of labuur" by Smith. On the one h,md it meant the amount of labour required to keep

the labourer for the time during which he or she worked. Adam !:'mith had argued:

There is . . . .1 cerram rate bdow which it seems Inlpo)'sible to reduce for any considerable time the ordinary wages of even the lower species of labour. A man must always lIve by his work, and his W
and Ric;lf(lo (and

his own earlier writings) absolutely dear. He said that what rhe capitalist paid for whe n he emp loyed someone 30

111

Und"r�';mding rht S)�ltn1: .\\ar>: and Ik)'ond

was nor labour as such hm "IJbour power"-the abtlity of some­ one to work for a certain penod of time. The value of labour power depended. like that of any other commodiry. on the amount of labour needed to produce It. Workers could nor provide labour power unless mey had adequate food, clothing, housing, a certain amount of relaxation, etc. These were their rcqUlrements if they were to be fit and c.,pable of working. Their wage had to cover the COSt of these trungs-that IS, to correspond to the amouor of social bbour needed to produce them. ThiS determined the value of labour power. It shuuld he nOted that Marx did nor see rhe ll1J1l1mal level of ubslstence alone as deterrlllning the value of labour power. There was also the need [0 make mlnim.1Iprovision for the upbrmging of the workers' children, since they would constitute the next genera­

�

tion of lab ur power. And there W,h a "hmori..:.11 amI mor,11 element" which depended on lhe "h.lblts and degree of comforr" which the workers were accustomed m. Without it they would not apply their full facu lties to their labour ;Hld might even rebel agamst It. In this way the cumulative effect of workers' struggles could n i ­ fluence the value of lahour power. Marx was not, as he IS ometimes presented, a believer in an Miron law of wages" whereby only a fixed portion of nanonal Output could �o to me workers.n

Be that as it may, the lahour people could perform was greater than the amount of labour needed to provide them with at least a rninimal livelihood-to replenish their lahour power. It might, for instance, take an average of only fOllr hours work a day to provide the level of consumption necessary for lOomeone to br- able to per­ lorm a day's work. But they could then perform eight, nine or even len hours work a day. The extra labour went ro rhe employer, so ,

that the value of the goods rurned out by hi� factory was always ,Kreater than his 1I1\,estment. It was thiS which enahled him contin11.l1I) to get surplus value, which he could keep for hmlSeif or pass 1111

to orher members of the ..:apitahst class in the form of Interest

.\IId rent. The relation between the employer and the worker had the ap­ ,,{'.lrance of Oemg benveen equal�. The employer agrcl'd to give the wage and the worker his or her labour. No coercion was involved. On the face of it t.he situation W,IS very different to that between the slave owner and the slave, or between the feudal lord and the �l·r(. lt was compatible With a Juridical system based on "the f1ght� III man", of equal1l1' before the law of all citizens. Even if actually ,IAn" CoIlCCPIS

31

•

(Xlsnng bourgeois !>oLlene!> were tard�- ITl W.lJHlIlg chi!>, I[ set'med engra vcd on rlll'ir ,tructure, Yet the surf.lle ,lppeara ncc of equallt)' hid

.J

deept'r lIlt:quallt)'. The employer rosse!>�ed the prcreqUlsl[e�

tnr rllt· worker:. engaging in social production and getting a liveli­ hOl)d. The worker:. were "frec·· m rhe �n\C that rhey do not have to work tor dn)" indn'idua] firm or laplr.l llsL Bu! the)' cHuld not t'M:,lpC hd\ mg to try to work for Someone. A� I\larx put It; the worker can lea\'t� rhe individual capitalist to whom he hires himself whenevcr he likes... Bur the worker. whose !oole sourcc of h\·elihood IS the sale of hiS labour, cannot leave thc whule

ital comcs of capital. By incurporatlllg mto Itselt thiS power, cap pos­ aliw am! bcgms to work "as if its body wcre by love ans whereby sessed-. Living lahour thu s becomes a me objecrified labour is preserved and increased. . .�·

m of makmg it The fetishism 01 commodities now takes the for gs but with Sttm tbar creatlnty does not lie Wit h living hum an bein capital creating rhe producrs of their labour. :!>() that people talk of ... . whereas in wealth and employers "pro\'iding people with work thc worker reality it is labour rhat adds (0 the value of capnal and who provides labour to the employ�r.

class of purchasers, that is the capitalist class. wuhou( ren(Junc­ mg his existence. He belongs nm to thiS or that bourgeois, but TO

(he hourgeoi� clas:..-·

•

The differencc between the value of the worker's labour power and the value created b)' the labour done was the source of tht. surplus value. Once the employer bad gm this surplus v;llue, it could be kept (hrecdr as profit. it could be used [() pay off intere... ! on any mone� horrowed to build the facton or as rent 10 the . ,

owner of the land Oil which the factory stood. But however sur­

i terest and rem, Irs source plus value was divided up into profits, n remamed the excess work done hy the workers-the C'(piOltJlioll by those who owned thc means of productloll of those who did nul. Once the owner Iud got rhe profit. he could use II to build ne\\ means of production. increaSing still further hiS capaCity 10 blackmail workcrs into labOUring for him on his terms if the)' were (0 get a bvelihood. It was thiS process which made the employer a capitalist. It ,llso gave a spccial meaning to (he word "capital-. The word is used by mainstream economists and in everyday hIe simpl)' to mean long� term investment as opposed to immediate comumptlon, Bur it has a deeper SIgnificance once the means of production

Absolute and relative surplus value

.Ift"

Ill lhe con­

Irol of one group of society. compellll1g others who want a Ilvehhood (0 work for them. It is now a product of pa�t ];lbour which is able to expand through the exploitation of current labour.

h IS. a!> Marx put It, not a thing, but a relation: Value·creatmg and v:l[ue-enhancing power belongs Ilor 10 the worker but to the capitallst. .. All the development of rhe pro. ductn'e forct's of labour is development of the productive forces

s could r;lise Marx disnngulshed berween twO way!> 111 wl1ll.:h firm �Tude method the ratio of surplm value to wages. One W;IS by the solute surplus of lengthening the working day. He called this �,Ib widespread in \':\ Iue ". This method 01 forcing lip profiT:!> wa!> very in Capital pro­ the early days of industrial capltali"m. and Marx in Capital that \'Ides many examples of it. But l\.1arx a.1�(J nuted terproduc­ prolonging the working day over much could be coun tIve for the capltalist: A point must inevitabl) be reached. where extension of the working da.r and II1tenSlty ot the labour mutually exclude one another, in such a way that lengthenmg of the working day be­ comes compatible only \\ith a lower degree of intensity.l' to successive ar­ "ao II was that. after putting up ma!>!>Ive opposition working day for children, Ilmpts ro provide a legal IUll it to the pressure-and lIIajor capItalist imere...ts gave way to working class ed once hours �t)metimes found that production actually mcrcas method of pro­ wt're shorter. For mu ch of the 20th cemury the past. In (he IUllging the working day seemed to belong 10 the �tance had �dvanced mdus trial countries. at least, workers' re�i and holidays IIIrced capItalists to concede a shoner working week become the with pay. The 72-hour week of Victorian rimes had �H hour week .1nd then the 44-hour week. increasing the But there was another range of methods for rker, which Imount of surplus value to be obtained from each wo JJ

Marx called

relal in! surplus va IUt' �. Ir rel ied on r ed uci ng rhe pro­ portion of tbe wOrk tim e that we nt into co\'eril1A the coSt of replenish l ll A worker's capaci ty to wurk, that is. theIr labour power. This rook three forms, Thl' first was to inrrnduc{' new machineI')' InlO the workplal"e, !>o h . to mcrease p roductivH ), and reduc e rh{' amount o( lime If took for the wo rkers to produce goods whose ,>ale would cover their wages. In eff ect. ill\tead at, Sa). (our hours worl.. cO\eflng the COSt ot their labou r power, two hours would do SO-WIth two ho urs extra goi ng rn pr oduce surplus \'alue. r.1a u saw thi .. as the method of incr easmg explOltt. The fir st capital ist to introduce ne\\ machinery would be able to pro d uce the same amoullI of v<1 lue WIth less hours of lahour. Once m her capitalists also introduced new machinerr, the socially necessa ry time n{'eded for production feJJ and with it the value of rhe g{) od� he sold and the excess sur­ plus value he obta ined. The ,e(on d form it took was inc reased productiVity III the con­ �umer good� II1dusrric-s and agric ulture. ThiS would reduce rhc amount of l.lbour ri me ne(·ded TO produce their ourpm and the prices workers had to pay for [heir means of li\"t'llhond, ThIS meant that the COSt to the capiralish c\· el')·where IIi providmg workers With theIr accustomed li \Cing stand ilfd (of paying inr theIr labour pov ..er) fell. and the ,lmOUIlt of surplus \'alue exrracted could he in­ creased without cunmg real wage s or extending th{' worklilS day. The third method wa!> (0 intemif� [he pressure on wo rkers Tn work harder. As \Ia",: puts It. the only way to ··ch ange the relative magn itudes" of the workin g day gO lllg to th e capitalist rather than the worker Without cuning real wa ges was to · change either the productiv ity of labou r or irs m tensiry".r There was a dfl\'e to Impose "o n the workman IJlcrea�ed expenditure of labour 111 a given fIIlle, heighten ed tension of lab our-power, and closer filling up of the pores oj the working-da y. "" Or again, "What IS lost by shorteni ng rhe duronioll IS ga in ed by th e increasing tension of labour power"." The drive for increased productiviry beca me an obse'�lon for big bu<;ine<;s as was shown by the movemenr for scientific man­ agement" founded by the America n r \VI Taylor in th e 1 8905. •.

'

,

"

Taylor believed that every lask done III indusrry could be broken down into tndividual components and timed, so as to determine

the maximum which workt'r� could ;lccomplish. In this way, anl' breaks in the tempI) of work could be elimlDated, with Tarlar claiming he could increase [he amoum I)f work done in a day by as much as 100 percenr.

"TaylorismH found us fullest expression with the Intmduction of the assembly line In Henry ford's car plants. The speed at which people worked nnw depended on the speed al which the line moved, rather than [beir mdividual motivation. In other industries the same pressure on people to work flat out was achIeved by in­ creasing surveillance by supervisors. with, for mstance, mechanical counters on machines indicating the level of work achieved. And today a si m .lr approach is being attempted 111 a \';lfiery of white

�

collar occupations with increased use of a,,�c�sment. a Ttempts at payme n t by results, the lise of key 'itr(Jke counters on compurers. and so on.

Accumulation and competition A world of commodity pTlJducrion is a world of competition be­ tween producers. Ir is this element of compelllioo which distingUI shes a societl' based all commodity production and ex­ cha nge value from one where individuals or groups deCide on what use values [0 produce for their own consumptIOn. Through exchange the effon pur in hy those working In one unit of produc­ tion IS linked to those of millions of other indiViduals in mher units. but the link on ly tak{'s place through compemion between

those taking the decision s ahu ut production in the Individu al units. In Engels· phrase there is �ocial production but capitalist . a ppropnatlon . "

"

The capitalist firm which exploits the worker IS therefore. nec­

essarily, 111 competition with other cOIpitailsl firms. If it cannot out-compere them. eventu ally It wi ll be forced nUt of business.

To out-compete m eans keepi ng ahead III developing new, more productive techni ques-only 111 (hM way can it ensure that It is not gomg to be driven OUt of busmess by riv.lls producing and selling goods more ch eaply than ir ca n . II can n or guarantee being able to afford new equipment using such techniques unless irs profits are as high a!> possib le. But if II raises ItS profits 111 order 3S

to he ahle ro reinvest. so mu.!>t its rivals. The fact that each firm is Involved i n exploltmg wage labour means that none of them dare

reM on its laurels.

Ilowever successful a firm may ha\'e been

III

the P,lSt. it hve.. In

fear at a ril':l1 firm Investing profits i n newer and more modern plane and machinery. No capitalist dare �rand still for any length

01 lime, for thai would mean falling hchlild the competitors. And to l.tll l1ehind is e\cntually to go bust. h i\ this which explains the dyn,lmlsm of capitalism. The pressure on each capitalist to kcep ahead 01 everv mher leads to rhe continual upgrading of plant and machin�ry. SO II is rhat capitalism becomes not merely a systcm of e'\ploil· ing "frcc" wage workers, bur also a sy�rern of compulSive accumulation . The Commllltlst

Al,mi{eslo.

which Mar'\ wrote

with Engels early III 1848. inSisted:

The bOll rgeoisic, dllri ng irs rule of scarce one hundred years, has created more mas�i\'e and mOre colossal productive forces than

Capital is nOt then defined IUM by exploitation (which occurred

In many precaplralist societies). but by It� necessary drive to self· expansion. The motivatIon fur produ..:non and ex..:bange is

Increasing the aDlOunt of value in the hands of the capitalist firm­

a process for which some MarXist wnter� u!>c the (in my view confusing) neologism "valorisatlon".

So rbe system IS nor lUSt a s}'�tem of comnl()(ht}' production: it is

also a system of competitive accumulation. This creates limits to the acrion possible nOt onl}' for workers, but also for capualisrs.

For if tbey do not cOllfl1lually seek to exploit their workers as much as is practically possible. they will not diSpose of the surplus \'alue necessary to accumulate as qUickly a� their rivals. They can choose to explOit their workers in one way rarher than another. But rhey c�not choose nor to exploit their workers a t all. or e\'c:n to exploit them less Than other cap.tali!>!,> do--unless they want to

go bUR They themselves are subject to a system which pursues it!> relentless course whatever the fec illlg1> of individual human beings.

all the prc(:t'ding generarions pur together. It emphasi�eJ the contlllllal transformation of Industry under capitalism:

Machines and raw materials do nor themselves create value. Only

The bourgeoisie canDor exist without consr.mtly r�'volutiolll!>ing the means of production . . . Constant revulutlonising of produc­ tion . . . distinguishes the hourgeois epoch from all eMlier ones.

In CapItal Marx �s the continual drive to build up ever bigger In­ dustry as the ..:haracteristic fearure of capita l ism: Fanatically hent on makl1lg value expand Itself. he Irhe capital­ ist] ruthlessly forces the human race to produce for production's sa ke. . . Accumulation for the sake of accumulation. production for production's sake!"

the exercise flf human labour has added to rhe natural wea lth thar existed in a state of n,nure and only continued human labour can i.ncrease it still further. Machllles and raw materials exist because human labour has been applied III the past and they cannor substi· tllte for it in the creation of new value. But they are necessary if labour i" to achieve the average level of productiVity prevaihng in

a particular society at a pamcular time. The final \'alue of goods produced has to include an element cm'ering the COSI of the ma­ chines and materials used.

When a company produce" clorh by emplOYing workers to

work on power looms that weave wool. rhe pnce of the final

product has to cover not only the cost of providing the labour

The work's firq volume begins with analysing production for rhe tllllfket ( " commodity production"), then looks what happens when wa�e labour arises and labour power becomeS ;1 commod· ity, and finally culmmates i n showing how production lI"ing w:lge labour brings about a prncess of ..:ompulsive accumulation that ig­

llorc� human need and individual desire'>. I.

Surplus value. accumulation and the rare of profit

llndtr�("nJIJlI' fht S)'§t..m: \Inn. and lk)vnd

power of the workers (their wages) and the profit of the company,

bur also the ..:oSt of the wool and the wear and tear to the power

looms. If the power loom can keep going for ten years, then in each year onc tenth of its COSt h;IS to be covered by the annual sales of the cloth-th is IS what acullIntant!> refer to rhe deprecia­ . other way. the labour tion cOSts of capital. Or, to put it m

IIlcorporared in the value of the cloth includes nm only the new 37

socially ne(;es�ary labour expended by the workcr�. but also the

"dead labour" used to produce the wool and one tenth of rhe power loom. For these rea<,ons. t\tlrX argued that the I nvestmen t made by

driven forward not anI}' by conct'rn with the ratin I,f surplus value to wages, bur by the drive to malllt;lIn and increase the ratio of surplus \'alu e to ditferent levels of rotal investment. It LS a pOLllt we will have to rerurn [0 repeatedly,

the I.:dpLtali ..t could be divided mto rwo parts. One was the expen­ JLture on paymg wages to hLre the workers. This he called �v:1rI.1ble capital"-because It \\,.1S capLtal that by putllng labour power ro work expanded vaJue to create surplus value in the course of production. The other part was expenditu re on the means of production. He called this "constant capital" because its existing value passed into rhe value of the goods produced \\ uh. out growing any bigger-its value was simply transferred to the final product. In the case of fi.xed constant capital ( factory budd­ ings, ll1achmery etc) this took place over several production cycle�; In the case of circulating constant ca p ital (raw materials, ene rgy, cumponents) in

::t

�lIlg1e producrion cycle.

Marxists usually usc the lener v to �rand for vanable c.t pit::tl (wages that purchase workers' l::tbour); c tu st:lnd for constant caplI:!1 (plant, equipment and raw materials); s 10 s(;lnd for su rpl us \'.llut'. The mtit) of surplus value to variable capital (wage-s) is the ratio of the length of the working day the worker gives to capital compared to th.u which provides for themselves-sometimes

called the rate of l'xplouation. It can be represented hy slv. Bur for the capitalist, the ratio of !>urplus value ro wages is not the only thing that matters. since his inn-stlnent is bLgger than si mpl y what he has spent on wages. He is interested in making his rota l capital expand. nut Just that which goes IntO wages. What marrers, therefore. IS the rano of surplus value to rotal im'cstment­ that IS. expenditure On instruments and m.:nerial!> of production as well as on wages. This is rhe "rare of profit", which Marx depicted

as "'(c+v]. It I:' affected not only by the (3[10 of surpl us value to wagt'S. bur also by the ratio of expenditure on instruments and material� of production (constant capnal) [() w;lges (v'lriable c::tpital). Marx called this l ast (3t10

(dv]

the "organic composition of capital" .

Thi� varies from industry to mdustr) and over time. DLfferent pro­ d uction processes can usc the same amount of labour but different amounts o( pJanr and eq uipment; rhe COSt of equipment in a fac­

I'rimiti\'e accumulation Today we take the bUYlIlg and sel l ing of labour power for granted. It seems as �na[Ural" as the rlSlIlg and settlllg of the sun. Yet nowhere was 1[ moP'(' than a minor teafure of any socier) until a few hundred years ago. So in Europe III the late .\1iddle Ages. or III Africa and Asi a at the fIIne of European colOnisation in the 18th

and 19th c",nrurics most people had at least some dIreCT access to the means of getting a livelihood-e\'cn if they had to hand over a slice of wh3t they pn)duced to a pa raSi tic 1.1 ndlord. Peasants could ,

grow food on their own land and craft�1llen 11l3ke goods

III

their

own little workshops.

What changed this, aecorcl lllg ro M.1rx. was a pnm eval act of robbery-the use of force to remove mas:.e!) of people from any control ovcr the means of productton. ThiS was often earned

through by the stare al the hehest of some of the IllOSt privileged groups in society. 111 England and Wales. for example, the nse of capitalism was accompanied by "endOSllres�-the forcible dri\"ing of peasants from common klnd ther had cultivated for centuries. laws against "vagra nc),,' rhen compelled rhe dispossessed peas­ ants [0 seek work at \\ hatcver wage thcy could get. In Scotland the

"clearances'" had the same effect, as the lairds drO\e rhe crofters (small farmers] from [he land so as to replace them first by sheep

and then by deer. As Britain's rulers carved our an empire for rhcm­ selves throughout the rest of the world. the)' took meas ures ro bring about the same separation of the mass of people from con­

trol over the means of gaming a livelihood. In India, for example rhey granted complete ownership of the land ro the already highly privileged zamindar class. In East and South Africa rhe y usually .

(orced each household to pay a fi xed sum of money. a poll tax. whicb it could only raise b)' �ending some of Its members ro seek rmp loymelll with European r,tnchers or businessmen.

that to employ thl' same number ({) smelt iron ore 1Il[(J steel. This

Marx called [his process of crearing the conditions for the growth of capitalist production "the primitive accumula tion o f

has Important Implications for the d yna mic of capitali�m. It is

cap ital . Marx tells hl)w:

tory em p loying 1 .000 people to sew clOTh into clothes is bs than

"

Understanding Ihe "r>IC'Il1; Man; and

BclUIld

"

39

The dis(.;owry of gold and siiver In A merica . the extirpa tio n, en­ sla\'emenr and enwmbmenr In mines of the 3bort�inal population, the beglnnlllg ot rh e (.;onquest and louring of the Ea..r Indies, the turning of Africa into a warren for the COlTlmer­ tlal hunting of bla�k sk im signa hsed the rosv ' d,lwn of rhe er.l of �.lplr.llist producuon... ,

CHAPTER T\t'O

Marx and his critics

nUt h) i rself

this could nor lead [Q caplfaltS! prndu�[lon. Theft' h.ld, a trer all, been pillage of ODe sort or anorh('r throughout the history of dass society, going back to na hv • /oman times Wlthuut It leading to the ra pid accumulauon thar characterises capitalism. The forcible separation of masse s of people from any control over t le means of prod union-and so fro m an y pos<;lbihry of making a Il\clihood without seiling their lab ou r power-was IIldilopem.able. "The expropriation of tbe agric ultural prod ucer. ot the peasant, froill the ..oil, IS rhe basil. of rhe wh ole process ". " For ThiS reason, It can be misleading to refer to an y forCIble seizure of wealth by . ca pi ta lish ,I S pri Ili lrive acc umula tion . , " In Marx's wnrings it has TWO aspec rs: un the one hand the "frec­ in� " of the mass of popu/.lrion fro m any direct ;lccess [I) the means of maklllg a li\'elihood: 011 rhe or her the ilccumul:lIion of wea lth h) a class that can usc econom ic necessiry [0 make such " (ree l.Jhour" toll for it. •

!

.,

Once capital1sm had established itself, its uwn economiC mech­ anisms pushed the process of sep arating peoplc from control over the means of production nen fun her. without necessar ily needing Int('rVention b) rhe Statl' or the us e of force to b ring ir about. Th us in Britain III the lare 18 th cemur y there were srill hundreds of thousands of handlomn weaver lo, who worked for rhcmseh'es \veaving doth to loell. Within 50 ye ars rhey h.ld all bl'Cn driven OU t ot bUSiness by capitalist firms using power loums. In Ireland in the 18 40 s a terrible famine caused by the requirement that hungry peasants pol), rem to (mam!y Briti sh) landlords led ,I mi llion to (he of hunger and another million to ab andon their holdings and loeek work in Britain an d the US . Thc marker could acill('\'C such hor. rors withOUT the direct help of we sta te (except, of course, in profecting the property of th e lan dlords). Capir.llism had become ,1 sclf-)ustallling an d self-exp anding system destined to absorb the whole world into its wo rkings.

The neoclassical crit;que of hi.� tbeory of value Marx's thcnry of value has been under

�

�llt3ck ever Since Capital

�()

was first pu lished. The most common form thl' attack takes is . claim that capital as well as labour creates \'alue. ACrer aU. It IS said

k

a worker using a machine prndu�e.. much more than a

wor e r wi thout one, and all the time workers are being replaced by machines thar do the same lob, It i� cvcn pos�ible to conceive �f an economy in which all work is done by 1l13chincs. So nc():lassl­ , � IS cal economi"rs argue thar nOf only labour but also capnal involved in producing things which satisfy hum3n need. And just

IlS labour gets paid according to what it contributes to wealth crc­ ation. so docs cap i ta L Each Mfactor of production" gets a "reward� equ.11 to ItS "marginal output", There is a cemral fallacy III thiS argument agalilst MarX'. It rests of i which capital and laOOur simply a static picture of the {'Conom), n

exist

alongside each other. It ignores (he palpable reality thar rhe

means and matcrials of productiun themsclves ha\'e been produced. \iachilles .lIld factory buildings are flOt things ,har exist in rheir own right. They arc rhe prudu(., barrow which aids the Toil wil of the metal

worker,

uf prcvlous human

labour. The wheel­

of the labourer is itSt'lf the product of thc

That was why Marx called the means of

production "dead lannur' (a.. opposed to

present work, which

IS

"Ih,jng labourM), They are the products of labour thar has taken place previously-and can, If necessary, be replicated by the appli­ cation of labour today. The amount of socially necessar)' bbour needed to reproduce them determines their current worrh. The failure of ncocla..sical theory to take infO account the cre­ ation of the means of production by \,lbour is no accidental failing. Its founders in rhe late 19th ce ntur y-the Austnans Menger .1Ild Bobm-Bawerk,

Und.,rnandmt( th� SrSlem; fo.lnrx :lnd !klond

the

Englishmen Jevons

and

Marshall.

rhe

Frenchman WI,IIras. rhe Italian Pareto, and the American C1ark­ built the assumption of a '>tati..: s)'�tcm mto tlll'ir theory. They

\'Icwed the whole econom} :u. like a strt'et market where the hu)w� calcubte wh.lt combination of good� gives them the beSt

\alm' for the money rhey havc got III thclr pockets, while the �tall­ hulders cJ.lculate the beSt price the" c.m get fur each of theIr goods.

The mutual adjusrment of rhl' price each seller ii. Willing fO accept and edch buyer is willing to pay leads to aU the good" heing sold. And, "lI1Ct' each M'ller is in turn the buyer trom someone who has h()ught from someone else, a who le ncnvork of prices is sct up whICh cnsurt:s that whar is produced is e�acth what people want.

WalnlS clalllled to show how rillS works for .1 nanon,l l economy \\nh hundreds of pages o f equations and graphs.

lnhui h lItrO rhc whole approach was a very unreal view of cap­ nahsrn. For, whate\'cr else capitalism is, It is not Static. I n a real street market, peopl do nor agree lfl�tantanenu�ly on the prices � for bUYlllg and seilmg. Bur neoclassical theory assumed that

through the mediation of a central auctioneer they could amve at agreed prices insta �raneo usl)" Real lile haggling ofren rakes quire a . long tune, With pnces across [he marker a� a whole bl'mg arrived at through a process of successive adJu"tment5. Once that i� taken into ;lccOunt dlvergt'nces open up benvl'cn rhe atlual pril.:c� of

good� .1nd tho...c presupposed III me theory. The actual production (It good" th:1I are ro be sold is always a process takin g place In

IIllll'. "Price "Ignals" do not tell you what will be wanted \",hcn �roducllon is finished. bur what was wanted hefme It began. The

smlultanelty of the theory is a myth. and the simultaneous equ.t­ Hans developed (10 the basis of its a!>sumptions bear little relation to reaII)' existing capitalism.

volume of production, in ItS methods. and ItS costS afe evcr mutu­ ",lIy modifying on(' another. " TIllS did not, howeve[, stop him teaching the theory and a whole generatIOn of mainstream econo­ mists taking It as proof of the efficacy of marker capitalism. An

updart'd version of Walms's mathematical model was product'd in the early 19505 by Kenneth Arrow and Gerard Debreu which at­ tempted to take rime lOra account. But Arrow himself recognised cal that the model only works �if you assume no technologi . progrcss. no growth JIl popul<1t1on and lots of orher things . .. The refusal of the neoclassical school [0 grasp the basic point rhat capitalism is a.system undergolOg cOlltlOual transfurmanon

that disrupts the old price structure and prevents any settled equi­ librium means that It provides at best an apologetic description of thingsas they exist at any moment in rime. not an account of eco­ nomic dev�opments and dynamics. The neoclassical school's own theory of value, whic h it coun­ [('rposes to the theories of SmIth, Ricardu and Marx, is III terms of the utility which a commodity gives-th<1t is. how individuals eval­ uate the commodity compared to other commodities. But this leaves completely unresolved the basis for measuring the utiliry for one person compared to another. How do you measure the �uril­ Ity" of a glass of water to someone in the desert with the "urility"

of a diamond tiara to a princess? The most you can do is lisr the preferences of individuals. But to explain wh} the preferences of some individuals matter more than the preferences of others you have to expl3in why some .ue wealthier than others-and that de­ ptnds on factors to do wllh the structure and dynamic of capitalist society which "utihtyM theory Ignores. Pareto replaced the (erm "ulihty- by "ophelimity"\ because, as

al low It to affect their theory onc iota. Walras. tor lI1"tance, recog­ , nised that "pruductlon reqUIres a certain lap�l' of time". Bur he

his American contemporary Inin g I:i",her pUl it, Mrhe grell untu­ tored and na'jve public . . . find it hard to call an overcoat no more trul), useful than a neckl<1ce. or a gnndsmne than a roulette wheel" Some later neocla'isical theorists dropped any notion of

given period of time"." as f i the transformation of the whol e pro­ ductive app:Harus wirh economic growth would nOi mean cuntlnual transformation of rhe structure of supply and demand. Mar�h.11I went as far as to admir that "time is the sourn' of m<1ny

tive basis to their theory oi value, despite morc than a century of effort. Of courSt', ulnmately, someone must W.11lt to use something (or, ar least be able to sell I t to someone else who will use it) if thcy

Faced with the realiry that production occurs o\'cr lime how ' did the founders uf neoclassical economics react? They did not

Ihen wrote he would deal with rhe "difficulty purely and simply by , Ignur1llg rhe (Lllle elemem at this POUlt ";' and when he returned to the iSSue II was to assume that "data" remained �consrant for a

of the greatest diffic ulties in cconoll1ic s-,· since �changes

111

the

.•

value altogether-a lthough �margin;ll utility" continues to be taught in school and college textbook'> (() this day as the �modern" answer to the labour theory of value. Neoclassical economIsts have not succceded III giving an objec­

are going to pay for It. BUI it is not lise thaI determines price. f>Larx and h,� Cnucs

H

Nor can ;'margmal output" as ddlned br the neoclas�jcal .!>chool pro,ide an amwer. This i� mea�lIrcd. they argue, by the value of the I.:aplI.lI used up in produl.:mg it: hut when ther define (h� \ .llue of that capital they do so in term!> of the marginal OUtput. They enJ up saym&, m effecr, that "the rnargm.t1 value of capi tal equal., the marginal value of capital�. or " profit equals profic". ,)tarements 01 thiS son cannot explam an}rlung. All they do is to state that if something exists. It exists. Orthodox economics 10 fact dOt's no more than state that I.:cr. tain thmgs are bought and certain thmgs are sold at present, wuhout e>.plaming why these thmgs .lre produced and not others, why somt people are rich and somc poor, and why some goods pile up unsold while people wh() desperately nt'ed them go wuh­ out, or why sometimcs there are booms and at other time� slump.!>. These pomts were made against margillal economics more than 80 year� ago hy the Austrian Marxist Rudolf Hil ferdmg and the Ru�slan revolutionary Nicolai Ilukharin. They have been put �lCroSS more recendy in a rigorously logi(:al form by dissident aca­ demIC economists known as the "Cambridge School". Bur the capacity o( dissident economists to pmnt Out the ahsurdities In neocla��ical theory has nor weakened ItS hold on academic eco. nomics" It hilS slIllply led HI ever more obtuse mathematical models being used to proviJe an appearance of sC:lentific ngour. As Juan Rohmson pointed our half a ccntur) ago: Quanurative uriliry has long since evaporated but I[ is still COlll1110n to set up a model in whICh quamities of "capital" appear, withour any indicatiOn of what it is supposed to be a quantiry of. .lust as the problem of giving an operational mean­ ing to uriliry used to be avoided by putfmg it mto a diagram, so the problem of giving ,I mcarung to the quantity of "capnal" IS evaded by purring It into algebra.' RecogmHon of the difficulties with their own theory has, on occa­ SIOns, forced those who otherwise accept the neoclJ.s�ical system to try ro reinforce it with elements frOI11 the labour theory of value. So Marshall suggested there might occasionalty be merit in using a labour theory of value: " the real value of money is better meaioured for some purposes in labour rather than In commoditit,s", al­ though he hastened to add. "ThiS difficulty will nm ,,£(cel our work in the presenr \'olumc. . . "" John Maynard Keynes also half Und<'rSlandm8 Ihl" S��[em: �bn{ ;lnd 8c:)"ond

grasped rhe linmatlons of the very neudasioLCal syi>tem whose pos· rulates he took for grallled. At one poinr in his most famous work. the Gelleral Theur), of Emp/o)'ml'flt, MOlle), a" d Interest, he recognised that you cannot simpl)' add together dif!erent sers of physical commodities at one pOint III time and compare them with II differem set at a later POint. To make such compansons in­ volves "covertly inrroducing changes III value � . < I To deal With this problem, he dropped the usual assumptluns uf neociassi!:al theory and made half a turn to a labour theory of value, suggesnng that Output could be measured by "the amount of t'mploymenr associ­ ated with a gi\en capltal equipment... · !-Ie explained latt:r: I sympathise with Ihe pre-classical [:.ic] ductrine that cn:r}thing

is produced by labour, aided by wh.1( used to be called art and is now call�'d techniq ue, by natural resources . . . and by the results of past labour, embodied 111 ;Issets . .. ,. . .

Neither Marsh all nor Keynes was prepared to go further and jetti­ son the neoclassical system as ;1 whole. Bur if they had taken thetr own observations of these points seriously, they wuuld have been compelled to do so. The failmgs of the neoclaSSical system prOVide at least a partial, negatl\'e, proal of M:ln..·s appr03ch. For his theory of v31ue avoids such a subjective and static approach. t-tarx's theory i s objective because it is not based on mdi\"idual evaluations of a commodity, bur on the necessary amounr of labour needed to produce it given the level of technology cxi:.rlllg III Ihe system as a whole at a par­ ticular point in time-both the direct Ii"ing labour of rhe worker and "dt'ad Iabourw embodied 111 the equipment and materials of production used up in the production process. For I\..larx, it is the pressure different capitals exert on each other, not rhe evaluations of individuals. that maners, Slllce an)' capitalISt who prices a com­ modiry ,It a level higher than rhe amount of socially necessary labour neede d ({) prnducl' It Will soon be driven our of bUSlIless. The law of value is therefore an external force operating on every capitalist through the In{eraction of all capitalists once there is the general p roduction of commudllle� for exchange mediated by money. Since the "individual capimlisrs", wriTes Marx, "confront one another unly a� cOlllmodlty-owne rs, the 'inner law' enforces itself only through their competition. their mutual pn:ssure upon each Olhcr, whereby rhe devianons are mutually cancelled" .1' Marx and hili CritiCS

The relation berween capnals CdllnOt be undl'rslOud a!o some­ Ihlng fixed :md unchanging. It is a dynamic process, ba� d on Ihe Interactiun through time of difterenr capitals, so that [he a\'erage "MKially necessary labour" aT any point is the result of mdividual prOCeiSt·.. of production orgamsed lIldependt'ntly of each olh er with dlfferenr. often changlllg, amounts of concrete labour. The fir!>t cap­ italist to mtroducc a new technique Ul any .section of Indu slT) wil l be abl e (0 produce goods With less than (he amounts of labour pre­ v:uling JI1 the system as a whole, and wi ll be able lo cap ture markeD from OThers. But once orher capitalIsts adopt the r<.'chniqu t', this ad­ vantage is lost. Only a capitalisr who comrols a very larg e part of the markel for particular commoditIes, or who can exert political pressure to Impede others accessing his markets, will be able 10 gel away for longer or shorter periods of tUlle with chargin g prices which reflect amounts of labour lugher than thOSe tha I are sociall y necessary. TIle law of value only operates as the resu h of the pres­ sures these differenr capitals exert on each other through time. Any stilt phOTOgraph from the moving film of capimh!ot development will always show d,screpanl'ies-and sometimes large ones-from Ihe law of value. But the film itself will show the di..crepanc ics even� rually disappearing under the pressure of uHe r-capitahs[ competilion even as othcr discrepancies arise.

Value and prices It is this dynamic aspect to Marx's theoT) rhat enables it to deal wilh a proh/em that beset the attempts b)' Smith and Ricardo to bd5e value on labour. This s i that (he ratio of lahour ttl IIlV(.'Stmenr varies from IIlduSIr} to industry. YCt III practice the rate of profit (fhe ratio of the surplus value to inveH1l1enr) docs not vary in the ,ame way, e\'en when wages arc more or less the same le\'el and the rate of explOItation must he about rhe same. The pric es of goods seem to depend nOt on rhe amount of SOCially nect!ss; lfy labour needed to produce them, hut On a mark up on tht! COSI of capital invc\trllent. The bigger the capital investment the bigger, It seems, i� the mark up. A capitalist selling something pro duced by om' person workll1g on an expensive machine wil l expect a bigger mark lip Ihan for somethll1g produced by One person worklllg on (1 cheap machlllc. The fact that somc ind u stries are marl' �cap1(al II1lel15ive" than others. implies that prices have to diverge from UnJ.:rst.Jnumg the- s� 'Ie-ffi: Marx Jnd Bc.'rond

values in tl'nm of lahour d profil.lbi!ity is. not to be much lower 111

some cases than others. This is wha! led Adam Snmh to d ilute his labour thenry of value with another. conrradic[Qq' approach. The sale of goods produces a paymenr that is divided up into different �revenues"-wages for the wor�ers, profir for the lIldustTialist. interest tor the banker who lem the Induslrialist mane), and rent for the landlord. Smith con­

tradicts his own II1lnal hlbour-based Iheon of va luI"' by arguing that each of these revenues add!> tn value. D;md RICardo was more

conSISlent than �mirh and tried to stick to the pure labour theory. BUI this left a gap U1 his theory that economists who came after

him could nOI solve one \\ hich e\Cntualh opened the way to the neoclassical abandonment of Ihe 1.1bour rheory of value.

Marx could, however, deal with the problem-usually called the "transrormaf1on problem"-precist"ly bCI.:,lUSl' hIS model is a dynamiC one that operates through lime. Ills solution depends on

looking at how firms will reaci to rhe cllll'rgcnce of different profit rates. Those with lower profit Tares will begin to move their capi­

tal elsewhere. This wil1 cause a pOlential shortage 111 what they have been producing, leading to it rise in prices above Ihclr value in

labour terms. Other firm, whn usc those products as inputs to their own production (either directly or through paying their workers to buy thcm to replenish their !;tbour power)' are forced

to pay the hJgher prices, in the proce�� effectively handing o\'er some of the �urplus \'alue In their own hands. The equali..ation of tbe rate of profit take!> place through the redIstribution of surplus

value within rhe capitalist class. This does nor in an}' degree alter the fact thar the surplus value came from the exploitation of wurkers 1I1 the firSI place, and that

e\'ery change In the SOCially necess;try labour lime needed to pro­ duce a commodity has an l'Uel:1 on liS pnce. It is rhe flow of

already produced surplus value from one capitaiisl to another through time that equali!>e!> the TMe of profir" -which is also why there can be bIg differences between Ihl' r�:Hes of prOfil III difterent parts of thc system when there are Impediments

[he /luw of \'alue through the system (for imtam.:e, when firms have ver), large to

amoullls of II1vestmem tied down immovably in (ert,lin sorts of fixed capiral or when states prevenr investment moving our of what they see as priorit) industrlesl. Marx's ,olurion to the problem posed in Snllth and RIcardo was

atracked within twO year, of It appeanng m Volume Three of

("Apital by the maq�inali"t BOhm-Bawerk. The ".ll11e arguments he used have been emplnred repeatedly en'ry �tnce. They h,1Ve often thrown �I::trxi"ts OntO the defensive. with mam accepting the core of the criticism and rerrearing from the attempt to understand the dynamic.. of caplrai.sm uSing J\larx's cOl1cept\. This happened. for Instance. soon after the rC"i"ai of Interest

J1l

• fter the Marxism •

(" ·ems of 1968. Figure.. on the left such as Ian �h�edman and Geoff H<x1gson rook up arguments essenrially the !oame .IS tho"e used ilga insr ,\13r, by Bohm-Bawerk (although they dId not accept th(' marginalisr theor� of value) and his successor� like Samuelson. ' Marxiq scholarship, alread}' on the defenSive for pollllca[ reasons 1Il�ide universlt)' economiCS faculries. otten retreated into scholas­ TIC dehares Over te"ts or into obtuse mathematical calculation.. as remore from the real world as rhose of thelt mainstream colle'lguc�. The resulr overall was, as Ben Fine has put it, "an IIlcreasingly and exclu�ivc1y acadcmicised Marxism "'· and "llmired engagement WIth the world of capital as oppu!>cd to that of Cap/fal".·� The criricism of Marx's approach centres around the contenTion that simply looklllg at the mov(.'"ment of value between (.'":1 plfals �lftc r production h.lS takcn place cannot explain nn:1l prices, "lIlce it does not explaIn the pnccs of the lIlput� into production (the means of production and labour power). For the Inputs themselves are �omrnoditic\ With prices di fferent to their values. So Marx's

clusion wat. ar­ only in min or dct.uls- .I..: A somewhat similar con ikh among other!> ri\led at hy Miguel An�el Garcia and Anwar Sha mathematical In the late 1 970� using models that were much less ikh �howed that .1nd easier to follow than \'on Ikmkiewicz·s. Sha profit would not tOtal price could equal total value, hut tOral d to prove that always equal wtal surplus valuf'. Garcia claime �Il by allowing a both equalities could hold. Blit he could only do tion cycle to the change in the rare of exploitation from one produc ents of value bc­ next. since the shift In prices caused by the mo\em of wage goods rween sectors caused changes in the relative priccs and capital goods.:< heen able com­ Since then, however. a numher of �lar,isTs have fuml.lmema l pletely to rescue Marx\, position by challenging the Sh3 ikh and many assumption made by \'on Bortkil!wic7. ')wce£y. ' hoJ of sinmltane­ e others-th reliance on simultaneity.· The met to production ous equations .Issumcs that lhe prices of the mpllts y do not. The out­ have to equal the prices of the outplils. Bur the production. Or, putS are produced after the inputs have g(lIle into a process A will to put It another way. the value of the inputs for s B---cven if in differ from that of the same tnputtecl used to 1ll,lke a ntical machine not be the same as the value u'>ed to make an ide .

no change in the amount of capnal investruenr from one cycle of

next week.l' the mpuTs into But, argue the ernic.. of Ma rx. this still le:l\es them ro labour production as price�, not as values. and to reduce d to produce i \'olves an infilllte regress . The investment nee values n ue!;, but that is rhe inputs needs to be broken down into bhour \lal stment needed not possibl e withOUI breakmg down In turn Ihe Inve

production to the next (what is called "slIuple reproducrion "J. His

10

method. it i� clainll'd, explains prices in terms of prices. not in term� of labour values.ll The Ricardian, von BorrkicwiC7. artempted III

J 907 ro sol�'e rhe

prohlem of deducing prices from labour \·alues mathematicalil. using 'illlll1lrancous eql1ation�. He used a model in which thcre IS

equations supposedly showed that any arrcmpt to proVIde a gen­ erally applicable way of transforming labour value5 nltO prices led t�onc of the "cqualltles" taken for granted by �Iarx not working. EIther total fJrice dId lIot equal total value, or total pro/it did 1101

eqllal total surfJlliS lfalltl!. Every attempt to dcdnce prices from values for most nf the 20th century rtlIl into the samc problem. The respon�'-' uf t-.l.trxi,ts was either to ab,mdnn the cenrral feature of the labour theory of value or to condude, as for instance Paul Sweezy did in 1942, that "the Marxian method of tr.msformation is logically unsati�factory" hut that the "patterns of development'· of value and price "will differ lIndnst;lnJing Ihe' �VSle'm; \\.In. ;lIld 8.:)",ul

produce n, ad IIlfimturn. the problem like There is a simple response 10 those who pose produce the inputs this: Why? Why do the investments needed ro value when they have to be broken down in terms of theIr labour

themselves were produced?" duction IS the The starting point for looking at any cycle of pro it. The exercise of money price of the input.. needed to undertake rnin amount of labour in the production process then adds a I:er modity. the price new \lalue, which forms the basi� of the new com of surplus value of which i n turn is for11led IMough the movement . Vcrage her than l from capitalists who would otherwise get a hig . rate of profit to those who would get a lower one

There i� no Iln'd to go hack i n history ro dec ompose into labour values the prices of thlllgs which \\erc pa id fur at the heglOlling of the protlu�tlon round, in order til under\t .llld the lIT1pa�t llf creat1O� new value and surplus value on the dy namics of the S) �tem. It I� no more ne>.:CSSMY than It is i n physical dynamics to dccompo"e the momentum of an oble'ct thar !>trikes an other inr o all the iorce� [h.lt have prenously acted on if to create that momentum. gOing tlghr back (0 tht' foundation of the uruVI:t 5e with the big bang; or than 11 is necessary in biology to kn ow tht: whole histon of the evolutlon of an orgarusm, going right ba ck [0 the first fo mation of organ;1.: life forms, 111 order [Q see wh at rhe eff(.ocr of a gcneuc change will be i n rhe pr{'sent. As Guglielmo Carchedi has pointed our, " If thi� critique were sound, It would mean rhe bankruptcy nOt on ly 01 t>.larx·s transfor. mation procedure bur also of SOCi.l l \ci ence III all ih versions" IIlc JUdlllg those thai cnncise fo.la t:lc

�

TIllS l.."rHique. i n fact, would have to apply to an y SOCi.ll phe­

nomenon inasmuch <1S i t is derenmned b)' other phenOmel1'l. borh present and p.l�L ,",ocial sciences. the n, would becomc an endless qucst for the srarring pOlllt of the inq ulr)'.!· It would never be possible to analyse hO\\ '5ome current actions rc­ lared to the cu mu l:H l\'e products of past :lctiuns.

Skilled and unskilled labour The !.ame dynamic character of 1\tarx's mudel alst) dispels whilt has heen presenred from Bohm-Bawerk (In ward!> as another pron­ lem for the lahour [heury of \'alue. ThIS is how the contribution of �killed lahour (() v.llue creation is to be me.lsured. fo.larx seems to sec thiS as eaSily solved. He writes that: .skilled labour counts onl), .IS simple labou

r imensified, or rather, as mu ltip lied simplc labour, a given quan tity of skilled hemg consJdered equal ro a gTe.Hcr quantity ot simple labOllr. . . The different proportions in whICh the differ em SOrtS of labour arc reduced to ul1.. kllled labour as their st
10

Und"r't.lndwg Ihe Snl<'m: \t. H.\ and /kw.nd

This explanation IS fuUy adequate when the same job is dune by a skilled worker and unskilled worker, With the skilled worker doing Lt much more quickl). An hour of the skilled labour will be worth more than one hour of the average �socially necessary" labour 111 rhe system as a whole, while the un.skilled labour will be worth less man thar. There is a problem, however, when it comes

{()

skilled labour

that cannot be replaced by a greater quamlty of unskilled labour. It does not matter how many unskilled lahourers .1 capitalist em­ ploys, thcy will never be able to do the same usk as a skilled toolmaker or a systems analyst. How then can the value produced hy the second group hc measured in terms of huurs of labour of the first gtoup? It seems that any attempt

10

do so must IIlvolve an

arbmariness rhat undermi nes the ba,il.: theory. Bnhm-Bawerk argued that �hen Marx writes Ihal "a social prtll.:c!>s" explall1s me measurement, he is taking for granted rhat which he is trying to explain. For B611111-Bawerk this proved thar It IS nOt the amoum of Inbour in goods which derermll1cs their prices, bur rhe way people evaluate them in relation to orher goods (rheir "utiliry" ) and thar this deals a death blow to the labour theory of value. However, rhe problem for the theory evapor.ltes once rhe law of value is seen as something working through time. The develop­ ment of technology ag:lIn l.Ild again lead� 10 jobs emerging thar can only be c..1rried out by, those With particular 5kills. Ar first there IS no ohjet:tive measure of the amount of socially necessar}' labour rime needed w produce them, and thn� in possession of such $kills or the goods produced by rhem can recclve payments which bear no obvious relation to lahour time. In eifect. \'alue flows w chose comrolhng a monopoly of these skills from the rest of tbe system. But this is only a transitory phase, even if sometime:s a long one, as capitalists elsewhere in rhe system will do their utlllO..t to try ro gall1 control of some of the benefits of the new skills for themselves. There arc tWO ways they can do thi!>. The)' can tralll new groups of workers to acquire the skill�. This effectively amounts to lIsing Cloe sort of lahour to crcatc new labour power capahle of doing the �killed work, so that the fillal lahour is in fact composite labour, made up of the hving labour of the immediate worker!> and a form of dead lahour embodied i n their lahour power as skills. The cap­ Italists can gel this extra element

labour power directly by on the job trainlllg for workers (as with apprenticeshi p systems), the) JIl

"

can leave irs provision to the workers themselves (when worker!. pay f(l go through cour!>es to get skills qualific.lIions) or the}' can rely In part on the S[3[e providing It through it� traming courses. But in each case, dead labour i ... embi.JJled in the enhanced IJbUUf power and rhen transferred n i to the products of the labour prQl.:e'>s, J.:> with the dead 1,l bour embodied III means and m;:HeClals of proouctlon. But thl!' snil leaves a question unresolved. Whl) train!> rhe train­ ers? Skilled tr.liners cannOt them..dves gcr their �"ills from un..kliled workers. U their skills arc mon{)pol� sk i lls and they pro­ duce goods that cannot be produced by unskilled worke!!>, howe\'er man)' work together at tbe job, then those whn own those gooJ� WIll be able to charge monopol}' prices that do not reflect 1300m \ 3Iue!>. hUi simply huw much people arc prepared to pay. ThiS will be true of certain skill... .md certain good.. at any par­ ticular pOHlt in time. Rut over time this labour tOO will be reduced to s( mle objective r,ltio of other labour. Capit.lli"ts elsewhere In the s}'stem will actively seek Ollt new techno logies that undermine

?n the other hand, capitalists have to reduce the Il'vel uf wa�es. ied pnsmuns trhe the same techniques create new and qualif n subJected to de­ counter-tendency) which, III their turn, arc soo observe both the qualification ... At an) moment in rune we can !onions and tbus the tendency (the dequalific3t1on of cerralll pu the counter-ten­ de\ aJuation of rhe agent..' labour power) and for \\hich agents dency (rhe creation of new. qualified pO!>ltiom ). with a high v,llue of labour puwcr arl' needed c..<,ar)' labour time in­ Labour may not be reducible to SOCi.ll1) Ilec time through the bli nd r o\e tl tKe red !oo is t It Bu ly. us neo nta sta er. Again [he law of interaction of different c;)pltals with e:H:h oth lIldi\jdual compo­ \lal ue has to be understood as pre�,uming the formula l''itJ.blishing nc�nts to operate in a certain wlY, nor as a fixed fast f}bzen relations berween them. Isms once rhey ar�' Marx's basic concepts SUf \1\ e I I I the critIC ignoring Ihe process not imerprt'red through the swtic framework. neoclassical system. of change through time that characteri!>es the ,

such skill monopolies by enabling the tasks to be done by much less 1>killed labour. [n rillS way, the reduction of skilled labuur to i a never ending feature of capimlist ac­ unskilled labour O\t'T time s cumulation. If enough unskil led lahour i .. tr,lined up to the level of ..killed labour needed to produce particular commodities, those commOlhtles will cease to be scarce and [helt \'alue will (all to the level that reflects the combination of the labour needt'd to repro­ duce a\crage bOOur power and the extra co!'.t of the (raining. A1> Carchedi puts if: Due

rhe labour proccss, the le\·eI of skills requued of an agent IS lowered. The value tlf his or her labour power is then devalued. We can refer III

the introduction of new tl'Chniques

•

III

(0 thiS process as del'llludtiOlI (of labour power) through de­ qUdltfja1ll0n (of �kills). /f is thIS process which reduces skilled I() unskilled labour and thus (at least as far a.. the \alue of labour power is concerned) alter� the exchange rebIlons be­ tween the commodIties of wbich those different types of labour power :tre an input. It is this real proce...s which justifies the rhe­ oretic;)1 reductiull of skilled to unskilled labour, or the expres!oion of the former as a multiple of the latter. . . The process of devaluation through dequaHficarion is a con­ stant tendenc), in capitalist production, due to the constant need 52

Under5fdndln� Ihe �rS{crn:

M,HJe and Bcyvnd

\brJe and bb emu:"

(.;HAI'TER THIU:.E

The dynamics of the system

•

Illusions and reality The history or-capitalis m in i\ hrx's rime and thaI uf hiS uumedi­ :'Ire successors W:lS punctuated hy economic ,rises that occurred

about once every tcn years-there were 15 In the US in the 1 1 0 years between 1 8 1 0 and 1 920. For a few years firms would invest on a large scale, taking on new workers; building new factories and buying new machines would ere.He a demand for the products of Industries like construction, steel and coal, which 111 [Urn would take on new workers; the new workers would receive wages which in turn enabled them to buy goods. Very fast r;nes of economic growth led firms to do cverrthing they could to lure people from the countryside-and increa�ingly from other, poorer counrries­ into SC'Uing their labour power In the [C)wns. Unemploymenr would fall to around 2 percent. Then something always seemed to go wrong. Giant firms would suddenly go hust, cancelling th� demand for the products of Other industries. where firms wuuld also go hust; right across the economy workers-many only re­ cently drawn inro industry-would be sacked; their loss of bUying power then ensured [hat the crisis ricocheted from industry ro in­ dustry; panic wuuld sweep through the capitalist class. while unemployment shot up virtually over night 10 1 0 pcn.:em or lugher, where it would stay for momhs or even years until a new period of rapid growth wok off. The mainstream economics of the time denied that such �crises of overproduction" were endemic tel the sy�[em. basing thelf ar­ guments on a popu lariset and vulganser of Adam Smith'� ideas, Jean-Baptisre Say. His "law" argued that supply and dem;.lnd must always coincide. "ince every time someone sold something Umln,tandmg th., Snlrm: \13r1( and lkvunu

55

someone cI�e mmt have bought It: sup ply, It \\1.1S da Imed, created its own demand. SoJ ohn Stuart Mil l argued: F.l!.:h per,on's means for paying for the production of other people comists III those Icommodl[ie�1 th.lt he hml sclf po:.. :.e'ises. All sellers are inevItably hy the meanin� nf the word bU\'er... . . . A genera l mer-supply . . .of a l l commodirie, aho ve the dem.lnd Is... (an1 unpos'ilbility... People must spend theIr. . . sanngs . . . pwducri\cly; that IS, in employmg labour.' The founders of tbe neoclassical school h.ld to accept that in prac. tice the economy experienced ,I -tr.lde q'de" or -busi[]e �� cycle" of hooms and rece�sions, in which for some reason supply and demand did nut .Ilway� balam.:e as their theory claimed. Their re­ aCTion was to blame these things on external f3ctor<; tha t somehow led to temporary distorTions 111 an otherwise fun damentally healthy system. So Jevons wrorc that the business cycle was a result of SUll SpOh wh ich . he claimed, affected the dun ate and therefore the productivity of agriculture and the pro fitability of trade. wh ile \'\o',l lras saw crises as disturbances caused hy the failure of prices to respond TO supply and dl'mand, compar ahle 10 effect to passing "fOrms on a shallo\\ lake. Some I.HCf neoclassical economsts i did try to de\elop theories of the bu�iness C)de. Anwar ,)haikh has summed up their approach: the �ys(em IS stdl viewed as bemg self-regulating; onl y ntlw the adl ustment IS seen as being cyclical rather than sl11u oth ... In orthodU'l: rheory a crc le is not a crisis . . . C)"cles must be viewed as "sm all fluctuations" . . . which at flr<;t approx ima­ tulll one ma}, justifiahly neglect . . . Violent ur prolonged expansions and contracrions ;lftSe from external facrors . . . Crises, therefofe, remain ourslde the nOfmal process of capi. tailst reproducrion. Thl� view !ollil persists i n what is known as "rcal busincsscyde the. ories". These hold that: husiness cycles arc the aggregate rcsult of the opti mum response of ind ividuals to changes in the economic enVironme nt . . , The economic cycle is assumed to havc a stochastic [irrcgul ar-CH J oscillation around a trend.. 5.

Underslandln!,: the "'�·s{C'm: Marl( and &�I)nd

rhey still do nor .lllow what they see as short-tenn aherrations to undermine thclr faith in .1n unchallengeable system of laws which lay down hovv any efficient e�onorny must oper.He.

Tne possibility of crisis I\arl Marx, by COntrast, argued thai the po<;slbJllr}, of general Crises o f overproduction was built into the very nature 01 capital· llim. He desuo)'ed the arguments based lIpon Sa} 's law III a couple nf paragraphs in Ihl� first volume uf Cap/t,J/. 01 cour�e, he ac· knowledged, ('\'ery time someone sells ,111 arude someone else ours It. But, argued Marx, once money is med to ex..:hange goods through the market, It does not fullow that the seller has then 1m· mediately t� buy sOlllethmg else. Mone)" acts not on I}' as a measure of value in directly e)/changmg goods, but al�o as a means of storing value. If Someone chooses to ..ave the money thc}' ger from selling a good rather than spending it immediately, then there will nor be enough money being spent in the system as 1 . whole to huy all rhe goods that have been produced: Nothing can be more childish than the dogma that because every sale is a purchase and every purchase a sale, therefore the circulation of commod,tic!o necessarily implies equlilbrium of sales and purchases. If this means that the number of actual sales is equal to the number of purchases. It I.. mere tautology. But its real purport IS [() prove that every seUer brings his hu}er to market with him. Nothing of the kind. The sale and [he pur­ chase constltllte ... an exchan�e benveen a commodity-owner and an owner of money, benveen twO persons as opposed to each other as rhe twO poles of a Illa�ner. . . No one call sell unless some one else purchases. Bur no one is forthwith bound to purchase, because he has ,ust sold. Circulation bursts through a l l resrrictiom as ro time, place, and individuals, imposed by dIrect haner, and this it ef1ects by splitting up, mro the atltHhesis of a sa le and a purchase, the direct idcntit
57

too pronounced, the intimate connexion ht-rwe en them, their oneness, 3!<>scrts itself br prodUl,:lIlg�3 crisis,

\hare some fearures In common w1lh the form of Ihe mainstream economics mat developed

111

the 1930s under the inOuence of

"'eynes, Tbe conclusion seems to he that capItalism can escape lrisis if the stare lDtervenes to raise consumption the moment a re­

The innitabiliry of crisis

(esslon Sttms hkely to develop.

Thc!oc arguments used by ,\Iarx in Volume One at Ca,JltaJ Mimply the possitulity. and no more than tbe possibiJit}. of crists"." Bur in Volume Three he went further. to arguc for the ineV Itability 01 crises. He did so hy monng beyond the most 3bs fract considera. uons about Ihe buying and selllllg 01 commodin f'!o WIth mane} to look at Ihe concrete process involvcd III capitalist producnon and exchange, As IS often remarked, M a n .. did nOI provide a single, in· regrated accoullt of the criSIS. Rather he refers to different aspects of the cri�is ill writings that are scancred in dIffere nt parts of the text. Hut it is not that difficult CO construct a cohere nt account from these. The sr:trting point is that l'ompetLlIVe accufllulanot l meam that C:lpltallsts llre simu It. lllcnuslr tf)'ing to increase the output of their goods a!o much as possible at the same time as tryi ng to maximise profih b} holdtng down wages. Bur wages con stitute a ma lar part of the money l . V31lable to buy goods. Production rends t{J move 111 one direction. the consumption of the masses in the other: The condHlons oi dIrect explOitatton, and tho w at reali'i111g it. arc nor Identical. They diverge not onl y In pl.tee and fJJlle, hUI also luglcally. The first are only limIted b) the pro ductive power uf society, the laner by the proporrionlll relation of the v:mous branches of pruduction and rhe consumer power of society. But rhls hlsH13med is hased on antagonistic conditIons of distrlbu· tiun. which reduce rhe consumption of rhe bulk of 'lociety 10 a minimum varying within more or less Jlarruw lim ns. It IS fur. thermore restricted by the tendency to accumula te, the dri\'e to expand capnal and pruduce surplus \'a lue on an extended scale. . . The marc producti\'eness develops, the more it finds itself at variance with the narrow basis on which the.> condilions of conSll rnptton rest" ,' . meaning that the mere Some people ha \'C interpreted this passage IS fact that workers are exploited limits the scale of the m:uket and creates crises.' Such "undcrconswnptionistH versions of Marxism ;,

Untl"I"5I.lDdin� rh" �)'Slcm:

'\at'( anti Ik�-ond

But Marx's own argument does not StOp wHh potnting to the J'IOssibiliry of consumprton fa lling below production, He goes on 10

Ulsist that the double nalure of one set of commodines, those

Ihat make up the means of producflon, as borh va lues and use \'alues, makes that inentable. A Russian Marxist economist of the

IJte 1 9205, Pavel V Maksakovsky, spclt out how Ihis double nature works itself Out.,o As we have �ecn, the exchange value of Koods is determmed by the amount of labour required 10 produce them usmg the llverage level of tech1l1ques and skIll operaltng n i Ihe system as

� whole (what Marx refers to as "abstract labour" ) .

Ilut their production lIwolvcs concrete human labour bringing ob­

lecrs ("use values" ) into physical interaction WIth each other, The (arrect relations between dtifcrcnt exchange values and dIfferent

II

values must exist for production to take pillce. The more tndustry develops, the more complicated these relations

OC"Come. Textile machines cannot be produced without steel; steel WIthout iron are and coal: coal Without cutting machinery, windLllg �ear and so on, But the chams of physical lIlteracrion depend on ..hains of buying and selling, in which coal firms sell to steel firms. �teel firms to textile firms and texlile firms to consumers-Ihat is, to reaple who ger wages or profits 10 spend from other firms so long as Ihese can sell their goods. Such long, intertwined chains linking production to final cnn· \umprion onl)' funcrton if twO completely different conditions are fulfilled. The correct phYSIcal rdations between things that go to produce other [rungs has to exist determ111ed by the law of physics, d\emistry .md biology. But. at ,hl' same time. each act of produc· lIon has to expand the amoum of value (ie the llmount of average .lbstracr labour) in the hands of the owners of each particular firm. I he physical organis;won of the production of use values has \omehow to correspond WIth the capita li"l dctermmatJon of prices hy values. Discrepancies berween tht' IWO requirements mean that the ex· pansion of production inevitably leads to bottlenecks in rhe supply uf raw materials, causing their prices fa rise. cutting into the profits of those capitalists whu buy them, and so redistributing surplus

Ihe: Dynam"'� "f tIl( 51slem

"

value from rhe capu,l!Jsrs producmg flmshed goods and compo­ nenrs TO thnse producing r.lW materials. It also means rhat the demand tor nne vital commodity. labour power, can begm to exceed rhe supply, leadlllg to upward pre�sure on wages (at lea�t

111

nUlI1er term.), although workers may not see It like this If rising raw material prices cut 1I1to the bupng power of rhe expanded wage). Th.1f is not all. If If were, the problem would simply be a ten­ dent'}' towards disproponinnality benveen the different parts of the economy.

Bur there are further problems. Production will

not take place at all unless C.1PltalIHS think thev can su�taln them­ selves III compenrion with other capitalists,

b}' getting a r,He of

profit af lea�t equal t o tile ,1\'erage in the ..ystem as a whole. To guarantee this they have repeatedl} fa reorgamse production,

uSing more advanced techniques to IIlcn'ase productivity per \\orker. But as all the capitalists rry fa do thiS, they continually reduce the average amount of labour needed to produce �oods­ and therefore the value of the goods. Tht' physic3 1 quantity of goods produced hy the system will tend to rise. bur rhe value of each Indiv idual goou will tend ro fall. The fWO things necessary for thc system [() function, the physical organis3t1on of produc­ tion and the flow of value through the system, both change repc:lIedJy-hut Without there being any 3urom,lIic compatibility berween the 'h,wges t,lking place. hrnh undertake production by buying physical equipmenr (ma­ chines, bUlldmgs, computers and so on) at prices dependent un [he avera�e amOlillf of lahour needed to produce them at a particular moment III rimc. But even as production is taking place, increases in producnvit), e1�cwhere n i the system are reducing the value of that equipment and of rhe goods the firm i s producing with it. The firm's calculations of profitabiliry were hased on the amount it had lU

spend un this equipment in [he past, not on what us present

tlll� theIr prices bel()\\ the level!> "1 to mamtain theIr s.lles by cUt

r� m order to try to determined by value while rhey sack worke ling at reduced prices rrotect their profits on [he: good� theY ;lfe �cl tments for fear the y "nd at that same time cancel their own inves n goes rhrough the Wil l no t be profitable. A w;n'e of contraCTio cec; below values. e:conomy and with It a general reduction (If pri s go hankrupt. The contraction does not last forever. Some firm on the cheap and �lIowing other firms to buy plant and equipment pared to aCl:ept. FvenruaUy, to cut the wages which workers are pre higher than average " point is reached where ther can expect to get estment and a new rrofits it they em bar k.o n a nt!\\ round of inv h to take advantage wave of expansion t;Ikl"S off as capitalists ru� d, firms to un­ uf the better busines� conditlom•. Comretition le;l ranly exceeds the dertake a level of investment which rernpn tS ,Ind raw material!>. rXlsting outP of new machim'ry, componen ed by �underpro­ rhe "ovetproduction" of the downturn is replac ore were helow va lues duction" in the upturn, and i list as prices hef ve values in the boom. But thl" only U1 the slump. now they rise :1ho pass IIlto production, I,t!:lts until all the new plant and machinery ng the value of indi­ Increasing output af the same time as reduci rofitable and giving \'Idual goods, making some invesnnenr unp ri� in time to yet another downturn. i that tht! cycle IS not a result of mistaken de­ The central point s ernments. hut of the .. Isions by ind ividual capItal ists or their gov takes place: through \e:ry way value expresses Itself in prices. This prices ari<;ing above and falling below .t continual oscillation with rium. \Jlues, not through some continuous equilib h the objecTIve con­ This cannot be grasped without starting wit Only by dialectically Ir.1dicrions expressed in the: notion of \al ue. able to provide an drawing out these contradictions was �:1arX' nverview of the !>ystem'$ dynamic.

�

value is-bur IT is on its inlrial ll1\'cstment thai the firm has to make a profit. So the rapid rate of accumuJarion that characterises the boom has the effect of cutting the prices of each unit of OUtput. and this hits the profits to be made on investments made earlier in the boom. Not only

do the values of goods keep

changing, bur,

Maksak(wsky shows, the reaction of capltalisrs to these changes leads pnces to diverge from values. As profits fall, some firms Stop new investments for a period. This reduces rhe demand for the goods of the other firms that previnusly supplied them. These rhen 60

Understandmg Ihe 5),)1('111: r.bry and Belnnd

< redit and financi al capital modified and intensi­ rhe spells of expansion and contraction arc se who play a special fied by the role played by credit-and tho p3rt in the developmenr of this. the hankers. the course of capi­ Capital passes through di fferent form� in . This is used til bu y IJIi!>t producrion.1l It begIn!> as money labour power 3� lIl!>lruments and materials of pruductiol1 and Ihe Dyn:lm,o of rhO' 'i)5I('m

61

commodities. whJ(;h In turn art' combined in Ihe production process to produce orher mmmodities. The,c are sold ru gCI more money, which is then used to huy more mean� of produl.> tlon and labour power. In rhis way one cycle of production follows anOther endlessly, so that "every elemenr'" III It Happears a� a point of departure, transit and ferurn -. �o capiral rakes the form of money, of commodities, of mean, of production and labour power, then of commodille� again and finally of money. For the system to operate. al1 rhese forms ha'·e to eXist sllnllltan�ously. If production is to keep going Without a Stop, (here has 10 be a supply of money to buy commodities, a �upply of commodities to be bought as productive c.lpilal .1nd a supply of 1.1 bour power. The cycle ()f capitalist production, then, is m.lde up of three Intnconnected circuirs-of moncy, of productive capital and of commodities. Each circuit fulfils :1 fUllction for capital 3C· cumulation-and does so to �Ol11e extent accord Ill):; to a drnamic of its own. In thc early stages o( capitalism, when the units of production �vere small. the productive capitalist could operate (Q some degree 1I1dcpendenrl). He had the possibilLty of fin;mcing the buying of plant and machll1ery and paying hiS worker� frolll his own pocket. He also had the possibility of selling his output directly to th()�e who l:onsul11t'd iL Hut as the Individual enterprises grew bigger, (he capitalist often found hIS own resources were Oot enough to pa)' in advance for all the plant, machillery aod materials he needed. lie had tu horrow fmm others. Hl· came to rely on credit, and on speCial insmutions, banks, ready to lend to peopJe lD rerurn for interest on these loans. At [he same time, as the scale of the market grew, he could onl)' �ell hiS goods by relying upoo specialists in the wholesale and retail trades, who would not be able [0 pa)' him for all those goods until they had, in rum, sold them to the nnal consumers. The produc· five capnallst borrowed on the one hand and lent on the other. Credit became an indispensable part of capita list production. And the grealer Ihe eXH:�nr of capitalist production withm a particular economy, the longer and more complex hecame the chall1s of credIt, of borrowing and lending. The pr(lductive capitalIst couJd also become a large scale lender. His fixed capital-his factory building and machinery-was only renewed every few years. But production provided a more or less const:lnt flow of profits. He could lend tht'5e profits to others m the 61

Under-landing Ihe S)'51�1lI: Mn", .:and Berond

Intenm before renewing his own fixed capItal-and would do so 111 return for the payment of interest. Once capitalism is fully developed as the dominant way of pro­ dUCing in a pMticular economy. the lending of past profits by those producti\'c capitalists who do not wish ro immediately reinvest be­ I:omes the chief source of the funds for those capitalists who do Wish to lOvest but lack sufficient pa�t ptofits 10 do so. The financial ystem emerges as a network of IIlStifutiOm. rhat mediate berween Jifferenr product",e caplfail"ts (and the stare. IIlsofar as discrep­ . cies [hat exi...t between its Immediate tax lIlcume and its m Immediate expenditure: lead 11 to also horrow ,1nd lend ). Those who run the financial in!iututions .I n' Ollt to make penfits lust as much as the productive capifahsl� an:. Thl') have funds of their own \thei r banking capItals] which pay for the expense of ...een their operari(lbs and bridge any gap that 1llIgh! opcn up be n their lendins and borrowing lor. at least, ;"JTe meant to bridge the �.lp-a- ll roo often in thc history of the system rhey have lIot), and fhey expect to earn a profit on them. just as the productive capi­ t,llists do on thelf capitals. There IS 3 difference. however. The limmeial capitalists' profits do nOl come directly from produ{.'tion. hut from a share the}" get of the producnve capitalists· profits 111 return for lending ro them-that ;�. interest payment... The rate of interest has often been confused 111 mamstream eco­ numic writillgs with the rate of profit. But 111 fact the level and direction of mO\ement 01 the rwo are qUire different. The ran: of rrofit, as we have seen. is dcternlilled hy the ratio of surplus value the rate of m� to IOvestment in the production process. By contmst, trfest depends solely upon the supply and demand for loanable lunds. [f there IS more money av.ulable for lending 111 an economy, i an IIlcreased Ihen the fare of IIlterest will tcnd to fall; if rhere s Jl'mand for borrowingit will tend HI rise. SlIlee the profits of productive capitalists are the major source nl the funds for lending, a high rate of profit will encourage a I.)wer rate of Interest. On the other hand. if profits arc low. more productive capitalist� will themselves want to horrow and this will nett a pressure ior interest rates to rise. How these cuntradictory nds on other lues-sures on IlUcreSt rates work themselves our depe !.Ietors, particula rly borrowing and lcndin� by the state and the movement of funds in and out of a national economy. But these lither factors cannot do away with the pressures of real production "11 the financial sector. 1 � DynJrnu;s of the �)"Slem

63

Other .:omphcations arist' out of this �t,lte of affalr�. The lend­ ing that nn,lnl;iai lD!!orirutions make I!> nm necess.lril) re�trined to rhe ,IIIlOUI1l they .lCtually han: at their disposal a!!o a rt!sult ot their uwn 11l\'f'�tmem and borrowing. The financial institution.. can assume that what rhe) ha\"l: borrowed will nUl h,1\'c to be paid b,u.;k Immt!diarcly. Therefore mey can extend their lending beyond their immediare mean!>, trusting that eoough of it Will be paid bat:k for them to meet their own debt.'> as they becomt:" due. TIll'; mlkes sense MJ long as the produt:tlve sector of rhe s)�tcm is expanding Its ourpur; int!reascd lendlllg tooa) can be p;ud balk out

for rhis reason IS regarded by the finallcial lTlst1rutLun� as an �in­ vesonem" of "capital " . Yet It in no way (;unrributes [0 the process

" f capital accumulation, and the inrerest earned is paraSitic on i the productive !!occror of the econom)". For what is taking place n this reason Marx calls it "fiCtitious capital'" describing i( as ·'me most fetish like form of the relations of capltal-," since Mcapital

appears as a mysteflous and !:idE·creating source of IIlterest"' and "Il becomes the pmperty of money to generate value and yield in­

I�rest, much as it is an attribute of pear trees to bear pears"

uf IIlcreaSi'd ompul and surplus \'aille III rhe not tOO dL'>t;ml future. Such prophecies about increased lending bemg recoverable arc self-fulfilling up to a degree. !!oince the IIlcreased lending to produc·

tive Glpi[ll encourages it in turn to increase its own Ie, d.. (If investment, and to produce mon: profits from whll;h 10 repily the ha nker�. But invariahly a ponlt IS eventually' re.lched when thc drive for financial profit� leads to levels of lendlllg above wh,n can he paid b;,lck out of rhe expansion of real output, prod ucing finan­ ll:11 r.::ri�cs on rhe one hand a n d attempts ro escape cheir impact throUAh fr.lUd on the other. As Marx putS It, "The nedir sysrem ac�elcratL� rhe m,ltt"rial development of thl· producllve forct"!. and rhe world market", bur doe,. this through developing "the incen­ tive to capitah�[ production. enrichmcnt through explOItation of thl' lahour 01 other�. ro the most pure torm of gambling :lOd swin­ dling.. ... finance drives "the process 10E produl"l ionj heyond ItS t:apu.lli ..t lill1l(s" resulnng cessive credlr'"

III

"'O\'crtradc, uve rproduction and ex­

in w.lrs that rehound on production Itself.

J\.l arx·s view of this process foreshaduwed by a century the cur­ rentl) fashionable accoum of Hyman Mm!>ky," according In which finJncial operations invariably move on from a stage of normal profitable buslllc<;s (- hedging") to one of specul.1I101l which culminates at a point (a "Minsky moment") when all of what is lellt cannor be recovered-a nd encourages POl1z.i! or pyra· mid scheme) whereby money from new investors IS simply used to p.lY high i1tereSt rates to old in\'estor�. The fin�l complication i� [hat financial lll.'>rHutions do not only use their fJnds to lend to producrive c;lpiml. They al!.o lend to in­ dividuals for their own propeny).or to buy shares

requiremeJ1t� {nombly Eor

bUYl1lg

in already existing companies through

the �tock (X,;h:lOgC. Such use of flUlds It> expected to earn the gOITlS rate of interest, Just as lending to productive (oncerns does, and

.

•

•

rinance, speculation and the crisis We have seen that the profit� of prmlut:tive capital are the m.1 1Il ..curce of the ?\Jnds rhat the banks have ,I{ their di!.po�al tor lend· IIlg, and rh;.1T the productive capitalist�' need for funds for ,lCcumulation is a maJor !!oource of borrowing from the hanb. This

means that the cycle of expansion and contractio n of new invest­ ment is accompa nied by a cycle of expansion and contraction of ll"nding. But rhe two cycles are nOf fullr III phase with each other. Credit expands as the boom begins to take off, With some capi­ I,tllsts keen to lend nsmg profits and other caplralisrs keen to

horrow, all convinced that there will be no prohlems of repayment I\lth interest. But eventually a puint is reached where the frcnzy of Llwestmenr begins to exceed tbe funds commg from pools of previ­ nus profits. Firms outbid one another as the) try to get access til these pools, ralslIlg thl· level of interest they are prepared to pay to

Ket credit. Rising i.nterest rates cut 1010 profits JUSt as rising raw lIlaterial prices and money wage� do so as well. The)' add to rhe pressures tipping me system from expansion into crisis. The con­

traction that follows makes firm!. and banks much less willing to Itlid-they fear they may need every penny themscivlos as their rev­

Jlue from sales threatens to decline. But contraction also IIlcreases ,h(' need for Illany firms 10 borrow if they are gOing to make up the .llImfall in their sales incomes ,md not be fon;ed inro bankruptcy I

II\' unpaid bills. Interest rates continue fO rise for a time, despite rILl" shortage of profits to pay them. and add to rhe downward l"fCes in the system.

nuctuatlons are Intensified because ot something else that Il.Ippens at the height o f the boom. Firms and banks see that

" nding is a quick way to huo!.t their profits. They offer credit

I'

DyIl:,J.m,u of the S"s(�m

through "fin:lncial paper" (in effect proml�es to pay) of v� of their cash re!,crvcs on rhe ,Issumption th::u

other people and Institu tions will tru!>! in :o>uch �paper" and accept II as payment for wmmodlties withou t rr)ing immed i­

areh [0 turn It

cash. In effect, nedl! created b}' the hank� \,'olnes ro he Ireated as a form of monev-and as "credit monev " 111[0

,

I..

counted

111

certain measures of the money supply,

,

Such easy credit encourages each firm to undertake massIve pro­ dOl'nve im'esrments as It comperes to get a bigger slICe of the expanding m:uket than its rivals, e...en though this causes Iheir

whole. The}' intensify the swing:. from boom to recession and back, and [hey also play havoc with the capacity of money to pro­ Vide a fixed measurmg rod for value.

Major economic cri<;cs almost invariably involve crashes of banks and other financial mstltutions as welt as the bankruptcy of productive firms and rising unemployment fOf wurkers. It IS easy

then for people to misunderstand what IS happenmg and to blame finance, the banks or money for the criSIS. r.uher than the capital·

1St basis of production.

combmed outpUt to far exceed rhe C3paciry of the market to absorb

if. Easr credit also enables those on friendly terms with rhe banks to emoJrk on an orgy of luxury spending. and all sorts of cronks and

fmudster, to join in rhe '-ery profita ble business of borrowing in order In lend and lending in order to borrow. The real, underlying processe:'> of production, exploitation and creanon of surplus v.llue

gct completely hidden from " iew-u nnl the economy suddenly starts turning down and all the bits of paper which represent credit have to be repaid f((JIll profits which are too small to do so. At this pam! firms and hanks come to distrust the ahllity of each other to

pay back what has heen borrowed, and lending can grind to .1 vir. mal SlOp in what is today called a "credIt crunch":

due at specific dates is broken l The cham of payment obigations in a hundred place... The confusion is augmented by the atten­ dant cuI/apse of the credit system . . .and leads to violent and acute crises. to sudden and forcible deprecianons, 10 the ,ICtu,11 stagnauon and dIsruption of the process of reproduction, and rhus to a real falJlI1g off in reproduction.IQ The !x'haviour of "fictitious capital" serves further to Intensify the general boom-recession cycle of capitalism. Despite its non.

productive nature, the monetary value of fictitious capital at any point in rime represents a claim all fcal resources that can be con.

verted into cash and from cash into cummoditles. When, sa)" share pricc� are rising during a boom, they add to the capacir)' of

their owners to huy goods and tend to Intenstfy the boom; when they f;1 1i with a recession, this adds ro the pressure, red ucing ex. penditu re Through the economy as a whole. The incvttabl} unstable, suddenly f1uctuaring, prices of the various sorts of ficti­

tious capital add to the general instab ility of the system as a ..

UndcfStJndlDg lilt S\'\u�m: \Iar� and Beyond

•

fhe modernity of Marx Marx's plCfUr,of crisis was far ahead of h" conremporary maln­ \Iream economists. It was not until the J 930� Ih.11 study of crises hcgan to be taken seriously by the Illainstream. Even the arch­

, dnm 111 one "riest of free market econOIllICS, Hayek, could I passage that Marx was responsible for II1troducing, III Germany at It-ast, ideas that could explain the trade cycle, whIle "the (lilly sat­

"fJetory theory uf capital we yet possess, rhat of Bohm-Bawerk". had "not helped us much further with Ihe problems of the trade ­ " qc1e .Recurrent economIC crises are as much a p.lrt of our world as of Marx's. Some at least of the Ideolo�ical hms of John Stuart Mill. 'evans and Bbhm-Bawerk do not try to conceal the fact-at least when they are wrinng fOf an elite upper class audience III the I T/me5 Of the feot/om/51, rather than propagandising to l.",allcol

Ihe masses. So the long-nme ConservatIve chanleJlor of the exche­ 'Iller in Britain, Nigel Lawson. who once embraced the "monetarist" doctrine that Crises were an accidental result of cen­ If.II bankers allowing the mane)' supply to go wwng,C' was

�entuaUy arguing that he was nor responsible for the slump which followed the Illlplementation of his policies because the "husiness cycle" is lIlevilahle. They see the cmis as �creative de­

•

\Iruction" without making clear that the creative element consists

nf wealth for one class, while the destructiOIl is of the livelihoods

lit others. I wiil return to rhe question of cri:o>es

(he 2 1 s t cenrury later in tlus book. All that needs to be said for the moment IS (har there is 1111 problem accuuntmg for them by starting with Marx. Indeed, Ihe only serious question confronting Marx's crisis theory does nor Ih

DynamiC5 of the S)�lem

III

67

of cri,>c� roda). bur r.lIh....r from the fact that for three ,md 3 half decades. trolll 1 91� to 1 974. a major cap­

of hIstory was enough to cast doubt on [he (.Mar x istJ theor)' of an

Italist country like Britain did nor e�perience a recession in which

Many Marxists who accept rhe tbeory of \'a1ue and the main con­

arise from the

occurrence

economic output fell. while the bl�cst ccononl\', rhe US, only ex­ periencl'd onc ver� brief such recession (that of 1 948-9). The

absence of �uch crises became a malar elemcnt in economic dis­

inevitable decline of ca p italism owing to a falling rare of profit" .;'

tOurs of Marx's accuunt of the cnsis are lUSt ,l'> dlsm lssh'e of it.l' Others hedge round their support for it with 10

M)

many provisos as

ef fecti vely cut It out of any 3CCOunt of the system's long-term

cussion In the decades of rhe 1 9505. 1960s and early J 970s. And

developmem.

iry of the boom-rece��ion cycle roday.

him [0 assert that capitalism IS doomed by the very forces of pro­

w i thoul commg to terms with it, one cannot gra�p rhc intractabil­

However, If crises were an i nevi table feature of ca pitalism for

Yet Marx himself regarded It as absolutely central. It ena bled

duction which It Itself un leashes:

Marx, they were nut 111 themselves the c( mral point in his analr�is

•

of Its long-term dvnamic. Ther were a C)'dical feature of [he

The rate of self-expansion of capitalism, or the rate of profit.

system which It had nUllaged to cupe with sen'ral times by the

being the goal of capita list production. ItS bll ... appe.u,> as a

time Capital was pu blished , however great the ha rdship they had

caused [() the mOlSS of the pop ul arion rhe distres,> 10 those capital­

threat to the�aplt3list productlun process.'

.

ists who went bu�t, or the occasional outburst of popular

This �[estifies to the merel), historica l, tranSitory ch,lraCler of rhe

b rin g Ihe system

to an end As the Russian revolutioll;lry l eon Trotsky pur it nearly

ca pitalist mode of prod uction" and TO rhe way that "at (1 certain smge it conflicts with Irs own further development". It showed

capital ism does live by crises and

that "the real barrier of caplr3lisr production was capl tal ltself" ,l'

diScontent. They

were

l10t in themselves going to

.

40 years a fter ;..tarx'� death,

"

booms. Ilist a<; a human being lives by I nhaling and

cxhali ng � ,

The long-term dynamIC came £rom eh.cwhere than rhe crisis­ from

[WI)

long-term processes at work JIl the ..ystem. processes

that werc a p rodue! of Its ageing as it went through each repetuion of the cycle of expan sion and contraction.

Marx did not pick the idea that profit rates fall out of thlll air.

h was common among economists who preceded him. " As Eric 1I0 bsbawm has said, ""Two rhings worned the early 19th cen­

tury businessmen and economists: the rate of th eir profits and

the rare of expansion of their Industries." Adam Smuh had be­ heved p rofit rates must fatt as a result of mcreased compet trion ,md Ricardo because of .!>llpposcd "diminishing rerurns" 111 ,Igri­

The tendency of the rate of profit to fall

culture. WJ M arx provided an explan ation which did not depend on such q uc stion ab l e assumptions, II but upon grasping thar rhe

The tbeory

dynamic of capitalist accumulation contains within it a n Irre­

The first of these processes IS what Ma t� called �the law of the

�olva

tendency of the r�ue of profi t [Q fall� (sometimes called, for short,

ble contradic tion.

Each individual capitalist can increase his own competitive­

by Marxi..ts Sl!lce, "the fal ling rate of profit"-the phrase I will

ness through increasing the productivity of his workers. The way

often use bere),

to do tbis is for each worker to use more and more "means of

Thi� IS one of the mosr difficult pans of J\larx's theory for new­

comers to hiS Idea<; to un derstan d. and also one of rhe mOSt contentious. Non-Marxl�t economists rClcCt II. �o the often per­ ceptive Ohsert'cr economic columnist William

Keegan has

prod uction "�tools, machinery and so on�ln his or her work. That involves the means of production cx panding

more

rapidl y

than tbe workforce. There is a growth in the ratio of the ph),sical

exte nt of the means of production to the amount of lahour

denounced J\'larx'� account as ;'an o bso lete economic texrhook

power working on them-a ranD that Marx catts the

which was Itself wnuen during the early. faltering p hase of unre­

(omposition of capital".'2 But other things being equa l, a growth

formed capitalism '" quoting rbe French economist Marjo hn to tbe effect thar. "A modicum of e�perience and some knowledge

68

Undcnlll.ndmg Ih� "yslcm: Mar... ;lnd

Bcl.md

"

techlllca J

In the physical extent of rhe means of production will also be a

growtb in the

level of investment needed to buy them. $0 there .,

will also be an expanSion in the ratio of IIwestment to the work­ force. i n the value of the means of produulon compared with wages (or. to use Marx's rerminolos),. of "constant capital" to "variable capital" ) . This ratio is Marx's �orgallIc composition of caplral" (as explaLlled i n Chapter One). Its growth, for Marx, is a logical corollary of capital accumulation. Yer the (lnl)' source of value and ,>urplus value for (he system as a whole IS labour. So i f n i vestmelll grows more rapidly rhall the labour force, it must also grow more rapidly than the crcallon of new value, and profit comes from tbis. ln short. capital investment grows more rapluly than the suurce of profir. As a consequence, there will be a downward pressure for the ratio of prolic to invesl­ mcnt-on the rate of profit. The reason for rhe growrb of Investment s i competition-the need of e:lch capitalist to push for grearer productivity III order w stay ahead of comperitors. But however much competition may compel the mdlvidual capitalist to take part in this process, frolll the point of view of the capitalist class as a whole it is disastrous. For. as we S:lW III rhe previous cbaprer, capitalists measure the suc­ cess or fadure of their undertakings not in terms of the tOI.l 1 profit they bring 111 but

111

terms of the rare of profit.

Two ohlewons Me ont:'n raised to this picture of Marx·s. The lirst I!> th:lt rechnological l . dvance does not always n i volve increas­ ing the ratio of means ()f production to worker..-that It can be "caplt:ll saving'· rather than -capital Intensive" . I f scientific knowledge is progressing and being applied as new technulogies. tht:'11 some of these technologies may employ less machlllery and (aw materials per worker than old technologies. At any one rune there wi1l be some new technologies [hat are capnal-saving. This IS true. But It does Dot refute Marx. I-'or there arc likely to be a greater number of '"capital intensive" rather than "capital sflvmg" mnovations. Ar flny gi\'en level of scientific and technical knowledge some innovations may indeed he capital-savlng. Bur when all these have been employed, there will still be other inno­ vations (or at least capitalists will suspeCt there are other Innova tions) to be obtained only by Increasing the (evel of invest­ mem III means of production. The fact that some techn ical progress c:ln take place without any rise in the rario of capital ro labour docs not mean that all the advantages of technical progress c
111

Undrr�landil1g th.. 'i)">lrm: M3tx :Inti �\·ond

"nd take ad\'amage of inIlOV:ltiom. Ih:ll need more capital as well as those that do nor. If he cannot increase Ihi!> ratio then he will benefit only from those Innovarions that do not-and he will lose out III competition WIth those who C
production to workers. there is nu theoretll.:.11 1111111 to possible in­ nOvation based on (hi" method of competition. In the real world. every operating capitalist takes it for �ranred that the way to gain access to the most ad\'anced rechni­ cal change is to mcrease the level o f IIwcstmenr in means of production or "dead labuur" (lndudinA the dead [ahOUf accu� Illulated i n (he resu lrs of past research and developmenr). It is only in the pages of the most eSOIem; lournals 01 political econ­ omy that any�ne ITllaglnes that the way tor the Ford Motor Company to meet competition from General Morors or Torota is to Cltt the level of physical investment per worker. The c:lpitalist

usually recognises that you carlnot gCI the henefics of innovation withom paying for it. For these reasons the average amount of means of production �r worker, 1.larx·s "technical compusition of capnal". will rise­ and with it the "organic compOSition of capital". Only one thing �ould s[Qp the pressure for this rise: if for sonte reason there was a ..honage of profit-seeking investment. In such a case the capitalists

would be forced to forego hopes of achlevlllg the tnnovations pas­ �Ible through greater investment and settle for those they might \fUmble upon by accident. The second argument against Marx's account claims thar ..hanges m technique alone cal/1Int produce a fall in the fare of

l'fofit. For, it is said. capitalists will only mtroduce a new tech­ "'que if it raises tbeir profits. SUI if It raises the profit of one t.lpitalist. then it must raise the average prolit uf the whole capl­ \.ll ist class. So, for instance, Steedmfll1 states. �The forces of tllmpetition wiU lead to that selection of production methods in­

duStry by industry whicb generates [he highest possible ul11form f,Ue of profit through the economy "." The same point has been J..:cepted by v.lfious Marxists economists over the last 40 years, fm instance hy Glyn,1I Harrison Himmelweit.... Brenner'- and I )lLmenil and Levy" -and has hcen elabor::t(ed mathematically by Okishio.'" They conclude th
71

extern,ll competition. These things, nor the org.mi c composition of ..:apital. hit the rate of profit. Mar,-'s 0\\ n wrinngs provide a !>Imple an� wer to any such argu­ ment: th:H the first capItalist ro im"est 111 a new tCl.:hnolugy gets a I.:ompl'utin: ad\ antage over hiS fellow Cilp ltallStS which enables hun ro �·l In.1 surplus profir. bur that thl.'> .'>urplu s wil l not last once the new techniques are generalised. \'('hal the capiraJist gets in moner t('rms wh en he sells hiS goods depends upon the average amount of sociall y nece..sary labour ("ontamed in them. If hl' IIlrroduces a new, more productive. tech­ nique, but no other capitalists do so, be IS pro ducing goods wurth the same amown of sociallr necessary labour as before. but with less expenditure on rea l concrete labour power. HIS profits rise:' But once all cap italists have Introduced these tec hniquc�. the value of the goods falls L1mil i t c orrespon ds to the average amount of labour needed to produce them under the new techniques. The ad­ ditional profit disappcan-alld i f more me ans of prod uction are used to get access ro the new techniques, the rate of profit fa lls" l The IInpllcaullns of Marx's argument are far rea ching. The very sllccess of ca pitalism ar accumulating lead� to problems for fu rrher accumulatiun. Eventually the competitive driv e of capltali\ts to keep ahead of other capualists results 111 a ma ssive scale of new in­ vestment wh ich ,"mnOT be sustained by the rate of profit. If some capitalist:. arc tl) make an adequate profit it can ani) he at the ex­ pense of other capitalists who are driven Out of bUSiness. The drive to accum ulate le.lds lIle\'itably to crises. And the greater the :.calc of past accumulation. the deeper the crises , w ll be.

j\llarx's theory, It should be stressed, is an ahs tract account of the most general trends in the capitalist system. Yo u cannot draw (rom it immediate conclusions about rhe con crete beh.wiour of the L'CC)Ilomy at any individual point in space and tIme. You have first to look .11 how the general trends interact wit h a range of other factors. Ma rx himself was fuJly aware of this, and hlJllt Into hiS ac­ COUIll what he called "countervailm g tenden cies ". Two :lre of central importance. Fir�t, there is increas1Ilg the rate of exploitatio n. I f l'ac h worker contributes more surplus value thi s wil l cou nteracr the fact that thert' are fewer workers per unit of investment. The increased ex­ ploitation could result from increasmg the leng th of the wurkll1g Undcrst.!.nding (hI' 'i) ,(m-!: .\13r...

\:reaslng the physical inten"ity of labour or a bll in the cost of providing worker" with a livelihood as a resuit of increased pro­ ductivity. In this case the capitalist could increase the proportion

of each individual worker's labour that went into surplus value, tven if the worker's hvmg standard was not reduced. Such an in­ ,rease

And Jk\'ond

in

the rate of explOItatIOn could counter;)ct some of the

downward pressures on the rate of profit: the total number of workers might not grow as fast as total

111 \ esrment,

but each

worker would produce more surplus value {'ven If he or she did not uffer a wage cut or hase to work an� harder. There is, however. a limit to the capacity of thiS method to ...oumer the downward pressure on profit rates-the numher of hours ;n the working day. The number of hour� per day that go into

providing for "he upkeep of the workt'r can b I I frnm four to three, or

from three to two, hut It cannOt fall bdow zero! By contrast 10-

\cstment n i means of producnon can IOcre.1SC witholll lu uir"; Take the example of a firm which cmploys a static workforce oi '0,000. Even if it worked them as long 3S was phYSICally possible each day (say, j 6 hours) and paid thelll no wages, Its dailr profit ...ould not exceed the value embodied in .10,000 x 1 6 hours labour.

IhiS is a umtt beyond which profit cannot grow. But there is no uch limit Oil the degree to which lI1\es(mem can grow (and with

,uch a high le\'cI of explOitation there would be all enormouS quan­ lit)' of old surplus value to be turned IIltO new enlarged 111\ estmcnt}. �) a point wi ll be reached where profits stOP growing. even though �I)mpctition forces the level of Investment to continue rising. The I, triO

Tbe cOIl1ltervailh'g te" dlmcies

72

day (Marx'" "ab<;olute lourplu� value"), cuning real wages, in·

of p rofits to investment-the rate of profit-unlf tend to fall.

The second "countervaIling factor" is (hat (he Increase in the I"oductivity of labour means there is a connnual fall In the ,Imount of labour tllne-and therefore of value-needed to pro­ llu,e each unit of plant. eqUipmenl or raw materials. The

" lo:.:hnicotJ composition of capiml" -the physica l ratio of factories, machines, etc to worker"-growlo, But the factoTles, machines and '", 011

get cheaper to buy. And so the expansion of IIlvestmcnt in

\,l lue terms would be rather slower than the expano;;;on in material lams. This would counteract to some extent the tendency for the ,l lue of investment to outStrip the growth in smplus value. There have been claims that this IS more than jusr a "couoter­ \.\lling tendency" (0 Marx's law and in fact completely destroys it.

l rlflcs argue. using mathematical equations provided by Okishlo, I

Dynam'cs of rhC' SHtC'm

that tcchni.:al progress means that goud.. arc always bemg pro­ duced more che
111

the rallO of dead

to [inng bbour in a Certalfl industry lI1ueases productivity, the pn.:e of it" output will fall compared to the uutput of other indus­ tnes. But that in turn wi ll (t'duce the COStS of Investment In these IIl(Ju�lnes and Its ratio to labour. Lower in"estment COSts will IO\\-'cr the organic composition of capital and T
. What they have out of their gross profits for wm ing off that sum houts, wit h "de­ Rallled on the swings the)' have lost on the rounda headache as a preciation" of capital causing them as big 3 ,traightforward fall m the rate of pront." the self-expansion Capitalism IS based not lUSt on value but upon y implies a com­ uf the values embodied 111 capital. nlls necessaril itaiisl invesmlCnt parison of current surplus value With the prior cap xpandIng values" is tram which it flows. The very norion of "self-e eqUIpment and ,"coherent without It. And the los.. of value of the i detri­ paid for s materials of production that have already been

mental to the self-expansion of valut'. capitalise. The fall in the COSt of investment nll�hl help the new er capitalists who But he in turn is under pressure from still oth lhe lime the ex­ invest aftcr hun in sull cht'apcr eqUIpment. And ali nds of production IStence of st plus value ill3de in previous rou mques serves to and available for invesnnent in still newer tech e. push up the ratio of investment to the bbour forc s value seeking 31l There is continual growth in the lll'ISS of surplu e an individual outlet for invt$Ullcnt. Thc morc of this surplu.. valu he can make l can get hold of, the bigger the investments I.:apita ist he will be able to and the more productivlty-mcreasing mnovations may be able to ,"traduce compared to his competitors. A capitalist as one he paid the buy today a machine which is twice as productive if a rival IS using !>arne price for a year ago. BUI that IS no help to him chine four times as gn-ater accumulated surplus value to bur a ma business only if he productive. The individual capitalist ,an stay m mcans of produc­ \pends as much surplus value as posslhle on new th3t only results in tion. If the means of production become cheaper. competitive suc­ his having ro buy more of them III order to achlcve available for in\'�tment cess. So long as there is more surplus value n of capital wil l than there was previously, the organic compositio no difference if the t('nd to rise, other thlllgs being equa!.'· It makes cheaper-that just physical means and materi31s of production are

�

I.:auses more of rhem to be employed.

processes raking place Ihrough lime. Simultaneous eqU3tlOns, hy defimtlon, aSSLlllle simultaneity. with no passage uf tilllt.'. The decline in the value of their invested c3pltal certainly does nor

make life any easier for the capiralists. To survive in business

they have to recoup, wirh a profit, the full cost of their past invest­ ments, and i f technological advance means the..e investments 3re now worth, sa)" half what they were previousl), they have til pay Undrrs(;Indmg thr �,slrm: l\\an: ;anJ IkronJ

Crisis and the falling rate d productivity But if the depreCiation of caplt31 through IIlcrcase it is combined with cannot by itself save the rate of profit, it can if es some capitals rometh ing else-rhe cnsis. For (he CrISis IIlvolv

The DynanlslC of the- S)Mrm

75

being made bankrupT. They are men fon:cd to dlspo�t! of their cap­ ital nnt lust at its depreciated valuc_ but for anythlllg they can get,

however linlc. The beneficiaries are those capitalists whu surv ive rhe l.Tisis. The) can pid.. up means of producflon-.u::curnularion s of v.l lut'--On the cheap, enabling them tn restore their own rare�

01 profit.

In this way depreciation can ease rhe pressure On tht! c.lptta],St srs.tem as J. \\ hole, wlm the hurden of paying tor It falltng nn those

capitalists who were driven our of business, but not on those who remained. Those capitalists who die bear many of the costs of de­

preCiation for the sysrem as whole, making it possible for rhos e \\ho liv on to do so with lowercaptral COSts and eventually higher �

ratt!s 01 profit than would mherwise he the case. "The crises are always but momemary and forcible soluflom of the existing. con­ tradictiullS. 1lley are violent eruptions which fur a lime restore the disturbed equlli brium ...·� There IS a continual double interaction between the long-rerm tendency for the rare of profit to fall alld cydical crises. The rille III

tht· ratio of investment to labour employed as new investme nt takes place dUring peflods of expansiun exertS a downward pres ­ sure on the rate of profit. ,USt as it IS under pressure from risin g r,lW material prices and wages. This can have a direer effect with ' he fall in the rate of profit causing firm� [0 Stop Im'eStlll�, SO C,lUS­ tng reccssulIl tn the capital goods indusrries which then spreads

�

elsewhere. Or it can happen indirectly if firms are successful tn protecttng the rate of profit temporarily by forclnl': down real wages. In that case, firms In the consumer goods industries cann ot !>ell aU their goods-or, as Marx putS Ir, the}' cannOt "realise the

surplus value" thar they have exploited-and their profits fall. agam producing recession."

But the CrISis tn rurn leads to some firms going bust and pro­ vides opportuniti es for orhe r firms to buy up thei r equi pment a nd raw mareria l and rake on workers at lower wagc=s. If enou gh . firms go bust, rhe crisis it�elf can work to completely cUlimerac t the lung-terlll downward tend ency of rhe rafe of profir. In shor t.

thl' decline in rhe rare of profit helps produce the C)cltcal CrISis, but the crelical crisis helps resolve the long-term decline in the rate of profit. Marx's account of the fall ing rarc of profit was not published until I I years after his death and did not have a big impact on the analyses of his followers n i the next two decades. [t b;uely featured 76

. bnc and Ik)ond Ilnd�r'tJnding [he "'ystcm, \

the most Importanr w()rk� of Manost analysis by Rosa I uxemburg. Vladimir Lenin ;lnd Nicolai Rukhann. It wa<; ac­ cepted by Rudolf 1-ltIferdlllg but was not central to his analysis.' It 10

not umil the 19205 that a concerted ,mempr was made to usc alv. se the long term tralectOry of the "yMem b) rhe Poli!>h­ n II to a Austtian Marxisr Henryk Grossman. He wa!> reacring to the rropensit) of many Marxists 10 deny that �apualism was in­ was

eVitably heading to a great na,h, a MhreakdO\\ n " . He rook up rhe argument i n rhe form in whi�h it had been put b)' the Austrian oClal democrat Ono Bauer. who claImed ro �h{)w (hat capiralism !,Quld expand mdcfinne.Jy, using schema from \Iarx In Volume

rwo of Ctlplfal depicting the I llterreLHIon betwcen dlffcrent sec­ rors of capitalist productlnn.'I Gro�sman claimed to prove. as against Itwer. that If thelle ....:hema were a plied o\'er " suffiCIently large number of cycles of

�

production a point would be reached (If whICh the rate of profit would be roo low to allow production to conllnue without currll1g IIltO workers' real wages and the comumpnon of rhe capitalist l lilss itself. This would happen because "'the scope of acculTIul:t­ lion expands._.in proportion to the weight of the already .tl;cumulared capital " even .1S the rate of profit rends to decline. I venrually a point would be reached where su�ratning accumula­

lion absorbed all ex,snng surplus value. leaving none for the luxury consumption of the capitalist class, and then beginning to rilt into the value needed to sustain the working e1ass. 'I Alternarively, If surplus value was used on ;1n tncreastng scale (()

m;unrain the rate of profit on eXI'iltng tn\'cstmem, there would be for new invest­ J collapse in the mass of surplu.. \alue available ment. The industries catering for invesllnent would not tx- ahle ro " . I a nd 'a anon u 3ccum overlute lunction. There would be "absu ,tate of capital saruranon in which the over-accumulated capnal

!.lees a shortage of investmenr opporlUmries and finds It more dif­ II In either case the system hcult to surmount rhi� saturation M.

would no longer be able to reproduce itself. There have been lTIany objections [() Grossman's arguments. W It 1\ not clear from hiS argument why rhe rate of expansion of in­ \Jcument has ro reml1l1l constant from one cycle ttl another, rather

than slowly decline in fl'SpOllSe to the decline in the rate of profit .IT"d in doing so reduce the tendency of the orgall1c composition of �.Ipital to rise. [n that case the " breakdown'" ir mighr seem, could ' I� postponed for a very long fIIne. Further, Grossman s book is

1M DynamiCS uf [he \rSI�m

77

ambiguou\ about whether his theory pro \"es the inevitability of cri!ois or rhe inevuabihry of a complete breakd own of the system. He recoglllses that the Crisis can COunter act the tendency of the r.1fe at profit to fall. hut still concludes tha t: the met.:hanislll as a whole tends relentles sl)" towards Its final end with the general process of accumula tion. . . Once these coumer-tendencies are themselves defuse d Or sllnpiy cease to Operate. the breakdown tendency gains thl' upper hand and as­ serts Itself n i the absolure form of the fin al cri SIS.' YCt It is possi ble to see hypothetical cir cumstances in which Grossman's argumenTs would apply. lntens t: competition between capitalS-Itself intensified b}' falling profit rates-could compel each to Invest in ever more expensive means of production so as ro obtain the advanced technology that is a pre condition for surviva I. In thl � way the technical prerequisites of successful competition would contradict the possibiliry of maint aim ng profit ability; the embodimcnt of capital in certain use values would contradiu the possibLilry of expanding irs val ue. Resistanc e from the workmg class could prevent restoration o f profit rar es through the method of paying for labour power at below its rep roduction COSts. And something might prevent the usual boom -recession cycles from driving some firms our of business and easing rhe long-term prob­ lems of others. Grossman's rheory can the n show how the fallmg rate of profir can produce deep problems for the system. wuhout being treated as definitive proof that caplra lism has to collapse of its own accord.

The concentration and centralisation of capital The second long-term process recognised by Marx was wh;n he ca lied the "concentration and centralisatio n" of capItal." It is not difficuh to grasp what is involved. ConcenLr:J tlon refers to the way in which exploitation enables n i dividual capitals to accumulate and so grow larger. The small firm becomes a big firm and rhe big firm becomes a giant-providing It can surviv e each cyclIcal criSIS. Centralisanon refers to the way in which each crisis weeds OUt some capitals. leavmg those that remain contro lling a bIgger part of the whole system . 78

Understanding fhl.' �}'sfem, Marx and ik)'ond

This process has Important Impli.:atiuns-nor all of which were fully drawn out by Mar'\; himse lf. The bigger rhe individual units of capital and larger the proportion of the sptt:m as a whole [he) constirute, the greater will be the impact on the rest of the system every time one of them goes hust. If a small firm stops making profits and goc.. bu..r. thIS will deslro) onh .l small parr of e

(�

market for other, previously profit.lble, small firm� that supply It. y• hmlted dommo effet.:t. If. huwever_ one of rhe There will be a ver giants of the srstem goes bust. It can h.l....e a devastating Impact on Other previously profitable hlg firms thar depended on It for thc r . or other firms that have lem It own markets. and on any bmks

�

money. The dOlnrno effect become .. an a\·al.lnche effect. At [he same rime, however. the \.'er\ size of firm.. can pro\"ide them With protection from market forces up [Q ;r certa in P01l1t. ' rhe mdividual acrs (If lahuur wnhin a greal capitalist enterprisc .ue not directly in cornpemion with individual actS outside It. Instead managerial decisions determ lnC how rhey rehm' to each mher. A� Marx puts it: In manufacture ... thc Collccllve working organism is a form of existence of capital. The mech.misl1l that is made up of numer­ ous indn'idua l detail labourers belongs to the capitalilot... Manufacture proper nor onl) subjects the previously indepen­ dent workman to the discipline and command of capital. bur, in addition, creates a hIerarchic gradarion of the workmen them­ selves . . . Not only IS the detail work distributed to the different individuals, but the individual hLlnscif IS made the automatic moror of a fractional operation...

-

rhe grear enterpnse'> are like Islands Within the system where rhe rdation between the work done by individuals is organised by a rlan, nor by the interrelation of thelT products through the market: What ... characterises diVISion of labour in manufactures? The fact that rhe detail lahourer produces no commodities. It is only the common product of all the derail labourers that becomes a conunodiry. Division of labour in society is brought about by the purchase and sale of the produCl� of different branches of industry, whtle the connexion between the detail operations in a workshop is due

[0

the sale uf the lahour power of several

workmen to one capItalist, who applies it as combined labour IDe

OynamKs ..f Ihr ';'f�lrm

79

power. . . Willie within the workshop, the iron liIw of propor­ uonllliry sublectS definite number... of workmen to definite funcuolb; 111 the society Outside the workshop, chance <md c,'rrice have full plar in distributing rhe producers and their means of produnion among rile vanou.. hrallches of indu'itry. I Tht' l'iland'i of planning within the enterprises do not ('XISt apart trom the sea I)f commodity production around them. The Internal re�jme is a response to the external pressure to extract and accu­ i order (0 compete: -Anarchv in the 'KKial mulate surplus value n division of labour and despotism in that of the \�orkshop are murual conditiom the one of the orher".\ The despOTIsm an5eS from the pressure on the capitahst to relate the productivity of Illbour within rhe enterprise to the ever eh.lnglllg prnductivuy (jf labour in the system as a whole. But (his cannot he done without using compulsion, pressIng down on e,lch worker. to ach ieve what i� brought :loour in the wider society by the blind interplay of eOI11m{)ditie�. The law of value operates between enterprises through rhe market. Wirhln the enterprise it has to be imposed by conscIOus regulation on rhe part of the c.lpitalist. Planning within capitalism is not the opposite elf the market; It is the way III which the capital­ ist tries to Impose (he demands of the market on the workforce .... The caplt.,list can on-en still ha\(" a certaIn leeway Within which to operate. The enterprise can make profit."> if the m:lrkct for irs outpUt is growing rapidly despite costs of producrion internally dc­ parong markedly fmm those currently pre\'ail i ng In the system as a whule. Thmgs are similar when it has gamed a major share of the markel in a sector of production that reqUIres \'cry large am()unts of fixed capital. The producnon methods associated with the phys­ Ical structure of liS fixed capital (its use value) can be much more costly than those available in the systcm as whole (eg \\ hen old ma­ chines u�lIlg man}' workers are used), bur the enterprise is prm{'Cted from serious competition for a long period uj tulle by the sheer COSt to new firms of emering the industry to compete with it. The exi<;­ tence of a certa III capit:ll as a fixed. physical ly constit uted ust' value :IS well as :l pmentially ilUld exchange value means that lhe law of vllluc docs not apply £0 it directly and instantaneously. Thl ... is not a stare of affa irs that c:ln last indefinitely. Everuua lly the devclopmcnt of new, more advanced production mcthods in the Wider system wEll lead to it facing sudden serious cmnpctlTlon. 80

l1nd"T�I'lilding Ihe S�'�fcm; f\.br..; and fI.c)onJ

It. that the enterprise is It is (hen. through rhe impact of CtlSl� on ording til the law of value forced to re�rrllcture so as to produce acc that have been rcla­ re arc the ses pri ter en re mu e Th . der un go or to hiAher the concentrarion m'ely protected III the pilst-that is. the r will he the crisis when It ate gre the lita cap of ion t lisa ua cen d oln

eventuaU}" break... s-and some­ (.:flsi i [he interim rhe giant firm "w evade rhe Bur n e. If many giant firms arc (lin g lon y \er a he n ca im ter i n rhe es tim sion can arise that that "ble to do thiS for ;l period, rhe impres free. Whar is not naliced yStCII l or part of It-has become crisis is that II IS there is no re­ " that the price II pa)'sior avoidmg cflses downward pressure on ..nucturing [Q offset thc long-term only TO be hu, e\'cnruaily. t'�. cm ,1l1 SIll oid av als pIt Ca . ' it) bil fita �ro by a much greater one . •

rhe other limit of capitalism? n lost III expositions of there is a final poim thaI has often bee uf the �forces of produc­ Marx's ideas: his stress on the expanSIon With economic growth on ari fic nti Ide as ed ret erp int t'n be s ha lio n" the I:.ucr wriTIngs of Marx .Il all COSts. Yet in both tht' carlier and contradictory charac­ the I)f ss ne are aw en ke a is re the ls ge En .tn d in general and Within ler of such growth within dass societies 1 845-6: I,aplralism III parncular. Thcy wrote in ces there comes a ..tage In the den'lopmenr of the producrive for imercourse arc hrought when productive forces and means of ons. can only causc mJS­ mto being which. under existing relati structlve.·' i , and are no longer productive hut de f.:hd bsm as generally destruc· Marx and Engels dId not lust \ iew cap1la critique of the particular a (If le� r1l1 ou the ed vid pro o als ey Th lIve, iters like John Bellamy Hological damage wroughl hy it, as wr .�: I u..ter have emphaslscd In recem years rt of the natura l world. pa ral eg int an s ing be n na hw saw rx Ma " I ubour". he wtote:

Illan and Nature in rhe first place, a process in which hoth own accord starts. regu­ panicipare, an d in which man of his s between himself and on cti rea ial ter ma the ols orr w d an hues, 1$,

CS of Ihe Sy�[o:m

namI

I)" Dy

"

Nature. He opposes himself to N.lture as one of her own forces. sening in motion arms and legs, head and hands, the natural fun.:es o f his bodh in order (Q appropriate N3turc'� productions in a form adapted to his own wams."'

er an­ Here Engels noted that, althuugh humans differ from oth often Imals in being able [Q "ma�ter'" nature, thiS histOrically has out inirial had unforeseen negative consequences which cancelled i wluch deforestation had �ams. He took as an example the way n wreaked h3voc on Greece, Mesopomml3 and A'ii3 Minor:

But Ihe drive 01 capital to create surplus value leads to It undcrmm· II1g of the vllalitr of nature-and the condltrons for human life:

rule Thus with every step we are renunded Ih.u we b)· no means out­ o\'er nature as over a foreign people, like someone standing brain, side nature-bur that we, With flesh 3nd blood and belong to namre and exist in Its nlldst."

Exploitnrion and squandering of the vitJlit)" of the soil take!> the place of conscious rational culti\'ation of the sOil as eternal communal property, an lIlalienable condition for the existem:c and reproduclion of a cham of !>ucce��lvc generations of the human race." There Mises " an irreparable break in the coherence of $ocial in­ rerchange prescribed by the namral laws of life"," "Capirnhst production de\'elops rechnolog)" and the comlmung rogether of variou!> pro;.:es,e� into a �OCi.ll whole, only by s'lpping the original sources of all wealth-the soil and the labourer . . . "'.. Just as "Iarge·scafe industry. . . Iays waste and destroys . . . lahour·power", "jarge·scale mechanised agriculrure . . . dlrectly exhausts the nat· ural vlt,llity of the soil... �.' Capltali�[ productIon, Marx tecognised,

·as �Iowly destroying the very basis on which It, like all human production. rested-the metabolic interaction between humanity and the rest of the natural world. Marx':!o temarks wert' malO]r concerned with the immediate ef· \ ...

fee(s of capitalist agriculture on SOIl fertility, which

III

hiS time

could only be overcome by the use of guano-niu-ous mineral de· posits resulting from thousands of years of bird droppings to be found mainly on the coast of northern Chile. Marx's Ulsighls were taken up and de\'eloped in this ..ense by K.1f1 Kaursky in the 1 890s as lmplYlllg a criSIS of food production III the short term. But they seemed to luse their relevance With the discovery of huw n1lrOLIS fertilisers could be made artificially (th rough the H,lber­ and world food production was able to expand without difficulty throughout the 10th cenrury. But ,1Ilalyses of the relatIOn hcrwccn humanity ,llld

•

avoid \cienrjfic progress was slo\\l) providing Ihe means to ing -pro­ causing ecological calamjries hy controlling and regulat mething duction auivity". Bur "thi s regu lati on " required "so lution more than "'ere knowledge". It reqUired "a complete revo l1leously III our hitherto existing mode of productIon, and slmult: S was revolution in our whole contemporary social order" ' ThI .•

a

necessary beClluse: The individual capitalists, who dominate production and ex· change, are able to concern themselves only with (he most immediate useful effect of their actions . . . In relation to nature. as to society, the present mode of production IS predominantly concerned ani)' ahaut the immediate, the most tangible result; and then surprise IS exptessed that the marc remote effects of aCtions directed to this end turn out 10 he quite different, are mostly quite the opposite in character. ' ilr limit Ihe implication is that capitalism contained another inbu that left l'CSides that of its mbuilt tendency to econOllllC crises. It is environmental condi· 10 1lSt"1f it could eventually destroy the \'ery n. Neither lions for all) forlll of human existence, Induding ItS ow ilecollle \tarx nor Engels developed thi!> implication. BUI it would very important a century later.

Bosch process) during World War One

Ilature had witier implications than il simple concern with food output. as was speir our by Engel� in his the manUSCript The Dralectlcs

of Nature, which was not published until 30 year.. after

hiS death. in the mid·1920s. 82

Undcnlandmtt the SySICIII: MdT>; and �y"nJ

A dyn3mic and contradictory system system of I he recognition that capitalism is. an evet expanding nomic writ­ .Ihcnated labour runs through the pages of Marx's eco them In�s. It is a system in which people's livlIlg force is taken from 1 1,� DynamiCS (If the Sysfem

83

and turned inro a system of things m.lt duminate them. Capital is labour that is tr�msformed into a monstrom product whose onlr aim is to expand ir�elf: "CapitaJ is dead lahour, that, \'ampire-like, only live� b}' sucking living labour, and IIH'� the more. the more laoour It su..:ks". It is this which gives capltalislll a dynamiC of I:mwrh unparalleled in previom sOCieties. The endlrss drne ro pump our surplus "alue In order to further pump (Jut yrr more .!.urplu� value, of accumulation in order til fur­ ther accumulaIC, knows no bounds. As capitalism emerged in p.lrtS of north we!>t Europe, it was compelled to stretch out its ten­ tacles to encompass the whole carlh, subjecting ever more Ilvlllg labour to it: The need 01 a comtantly expanding l11;1rket for Its products chases [he bourgeoisie over the entire surface of the globe. It must nestle everywhere, scnle everywhere, c�tabli�h connections everywhere. The hourgeoisie has through its explOitation of the world market given 'l cosmopolit,m character to production and con'iumption in every COuntry. To the great clugrin of reaction­ ists, it has dr,lwn (rom under the feet o( Industry the national ground nn which it stood. All old-estahllsht·d ndtional industries have been destroyed or are daily being destroyed. They are dis­ lodged br new industries, whose inrroduChon becomes a life and death question for all civilised nations bv indmtnes that no longer work up indigenous raw material, but rJ.w Olaterial drawn from the remotest zones; industnes whose produCTS are ,

.

n III the cmis and rhe contradictory forces that find, expressio The expansion of the downward prc�!.ure on the rdte of profit. wth In the productivc �ro e .. !.w rna a to d� lea sly eou an ult m si tem 'ys its livclihood-and of forces-the capacity of humanity to produce ce!> through the crip­ the transformation of these IIltO destructive for

pling of people's li,·es. tempted to write Capitalism ha s been a fotall<,lng-1 .lIn 111 \\ hi..:h no previous mode of ) wa a in . em yst -s � n ria ita taJ "ro ole world til dance {Q it!. production had been, eompeUinA the wh ulation. As n has done frenzied rhythms of competiton and accum lluJ.lly reaucd ba..:k upon the in­ '00, the system a<; a whole has colltl Inr(e� ('.leh capltoll to dividual processes on which It depend�. It 1ll11l111lUm that will the to r we po r ou lah of ce pri the wn do ce for The d .l �h of capitals keep its worker!> able and willing to work'" ill produce downward compels each � accumulate III a wa), that w ps any uf them stand· pressure on profit rateS for all of them. It sto are of the devast;Ulon IIlgstill, even if they occasiolHllly hC((Jllle aw nodic havoc fur all pe s ate cre t tha tem sys a is It g. sin cau arc Ihey of hanken.!.tein's mon­ those who live w ithin 1t, :1 horrific hybrid t haS escaped comrol ,Ier and of Dracula . il human creatlun tha creators. .Uld Jives by deVOUring the lifeblood of its tinguishes Marx's ap­ It is this understanding which above all dis nomiCS, orthodox and eco am tre llls ma of l oo ry sch eve m fro ach pro provides a guide for heterodox alike, and which me'lIls If alone so means using i g capitalism III ou r century. But domg 4naiysn Marx's concepts [Q go beyond 1la rx.

consumed, nor only at home, bm in every quan:erof the globe. In place of the old wants, satisfled by tbe production of the country, we find new wants, requiring for their satisfaction the producfX of distant lands and chmes. In place of the old local and national seclusion and self-sufficiency, we have IIltercourse in every d irl'C­ tron, universal illterdepcndence of nations:: What �tands out from Marx's analysis is precisely what ha$ been Illis.,ing from malllsrrearn economics !>JIlce hl� rime-a �ense of the ' HIS model providc�, as no other mass forward rush of capitahsm .ha!>, an account of a sy!.tem that had expanded to fill most of Western Europe .lnd Nonh America hr the Time of hi, death in 181:13-and expanded funher to fill the whole glohe 111 the 20th cen­ rury. Bur that is nor all. His mode! was nOt only of a self-expandinA system, bur of one whose expansion is based upon the imerplay of cs of the System .... I . Dytuml

85

(.HAYI ER FOUR

Beyond Marx: monopoly, war and the state

•

New developments

d

Marx depIcte a sy�te1Tl th:1I was very drn:'lInlc. bur also plagued With seemingly insuper:)ble contr:'ldictions. J fS vcry dyn:'lmism con­ !!!luaUy led capital to try to expand at a greater rate rhan could he �ustained hy the living labour power on which It ulrimately de­ prnded. The barner to capitalist production, Marx wrOte, lay in ".lpltal itseli. The Implication was th;lf 3S capitalism engulfed rhe whole world, i t would be subject to longer :lOd deeper slumps, In­ (l'rspersed with sharrer and shallower periods of bc)om. At thc . \tne

the concentration and centralisation of capital would I·roduce an c\'er greater polarisation berween a capitalist class time,

"hleb was dimmish1llg 111 sil.t' and a working class that absorbed IIItO itseU the rest of society. The model was by design an abstraction. Marx cUllsciousiy ig11I1re attempt to t7asp the undcrlymg tendencies bUilt IOto the mode of production as .Itch-its "general I:nvs"'. The way each of Ihe three volumes of f .Ipital operated at a different level of abstracrion meant thar the

Ih lrd volume, by Integrattng production and circulation, was closer

to the actual operating detail

of :lOy rcally eXIStlOg capitalist soci-

1 1\ Ihan the first vulume, even though its analysis depended on the It 1�1C concepts developed there. It dealt nO! only with the equahsa­ IInll of profit rates, the deviatIon of prices from values, crises, and I hI" tendency o f the mtc of profit to fa II. bUI alsu with credit and the j, IIIking system, commercial profits, interest payments to moncy I, ndc.rs, and rentS to land owners. Bur even the third volume delib­

,.Hciy paid linle attentiun to many Imporrant things: foreign trade.

U"dl'rs{d"dm,.; the Sysctm:

\tarlC a"d Beyo"d

87

!ht' unpue! on chI' clpl talis t system of ab"orbing the slIll enormous pre-caplrali!>t pans uf the world or the role of the ,tate. Marx had intended In rhe Original plan for Gzplt
manu"Lripts of the work further volumes dealing with such rhing$. Bur Ill' never had time to do so, munersed a!> he was In day to day

rcvuluuonu)" political activity. compelled to make OJ livelihood for humclf through Journalistic articles and, in the last rears of his life.

plagued by illness, although the three mlumes he did full). or par­ tially complete were themseh-es an incredible achievement.

The gap between the model and the reality left man)' que'>lIons u nanswered about the COurse capitalism would take. These quc ..-

nons did not necessari ly seem TO matter that much euher to t\larx and Engeb or to the acrivisr... in the new workers' movements of the

1 870s and 1 RROs. These were the years of a long penod of crist'" known a, the Great Depression. The U� steel magnate Andrew Carnegie expressed the 11100£1 even in capimlist circles In 181:19 : Manufacturers . . .see savings of Illany rears ... hecol1ling less and less, with no hope of .J change in the situation. It is in a '>oil thu� prepared thar anything promising of relief is gladl)' wekomed. The manufacturers are in rhe posmon of patients that have tried III

vain every doctor of the regular school for ye.us, and are now

liable to become the victim of any quack that appears . . 1 .

A quarter century of falling profit rates" led to massive pools of PO\crty In Lundon and other citie� and to mass unemployment III

the mid -188 0s. I t was not surprising rhat Frederick Engels could feel that the logic of Mar.'I('s model was workn i g I(self out right III

front of his eres III England as "the decennial cycle of stagnation. prosperit)', overproduction and crisis� �eemed to give wa)' to "a

permanent and chronic depression .• The traJectory of capitalism soon. howe\'er, proved to be more complicated than rhe experience of the J 8805 suggested. Profit rates recovered III Britalll in rhe 1890�, and the US :lnd Germany went through a new wave of economic expan�ion. There were ...

cl.'rtJin positi\'e reforms for workers thar seemed to contradi ct Marx's picture: Bismarck granted pensions to Germany's workers

in 1 8 8 9 and a British Liberal government produced a similar scheme In Bruain 20 years later, along witb free schnol meals; real wages rose in the last fWO decades of the 1 9th century, even if they tended to stagnate after tbar ;" working hours everywhere tended 88

10 fall from 12 or 14 hour� a day to eight. and the working week to tall from six days to five and a hdlf: The apparent refutation of the predictions drawn from Marx's model led to a cnsis wuhin Marxist r.!Oks. known as the revision­ I

( controver!>)". Out of It enu'rged two very different trends In the

analysis of capitdlism which were to confrolll each urner again and again O\'cr the next century. Edward Bernstein, only a fc\\ years prniou...ly a close collabo­ r.1tor o f Engels, produced a root and branch ultique of Marx's methods and conclu!>uJIl!>. "Sign .. (II an econOllllC worldwide ..rash of unheard of ·violence have not been established " , he wrote. "Overproduction in single JIldu�tnes does not mean gen­ ('r;ll crises".' -WQ[kingmen", he concluded. arc not -universallr plluperised :1 \waS set out III the (;omlll1l11lsl AldllI/esto": These \hanges, be argued. had arisen becau�t' of "the enormous exten­ \100 of rhc world market" and rhe re,!!ui:nion 01 production with "the rise of the industrial cartcl�"

so

thai "'general commercial

lrises" were "improbable" . Bernstem '5 -revision" of Marl{ was rejected by Engels' other col1,lborator, Karl Kaursky. But Ihi� did nUl pre\-t'nt many socialists "..uvists coming to accept in pnlccice (har capitalism had stabilised I!..elf for the indefinite future. Challenging such views meant going lurther than Kaursky and adding to Marx's analysis. It is rhlS \\ hich,

each In their own way, Rudolf Hilferdlng. Vladunir Lenin,

�Icolai Bukharin and Rosa Luxemburg tried to do. Soon it was not only the purely economic funcrioning of the '��tem that required something mUfe than the basic account pro­ \Ided by I\larx. So too did a new period of Immensc polttical •nn\'ulsions

as

44 year!> of peace

10

western Europe gave W,ty to

!lIt most hOrrific war humanity had lei known.

I hlferding: finance capitalism and imperialism I he first Marxist economist to publish a detailed analysis of the dl.mges was the Austrian Rudolf Hilferdinl; in his work Finance « .lllllal,

in 191 1 . Basing himself Oil developments in Germany, he

Ift-\ucd that banking capital and industrial capital were merging to produce a synthesis of the two, which he labelled " fin,mce capI­ ,,"". On this basis giam trusts and Cartels were emerging that ,fluid dominate whole sectors of industry:

II)000 MJrx: \10"01'01),. \'l;'ar and {hc SIJIC

89

There i!> a conrlnual tendency for canelisanon [() he extended. Tht: individual Industries become Iflcn'aslllgly dependcnr upon the cambsed industries until they are finally annexed by them. The ultimJte outcome of trus process would be the formation of a general carrel. The whole of capitalist production would then he consciously regulated by a single body which would deter­ mme the \olume oi production In all the branches of industry.' Hllfcrdlng did 11(lt see competition as disappearing completely. He emphasised the importance of international competition, pOinting to the way rhe merger of finance and Industry IIlslde a country led to pressure on irs state to use prorecnorust tax duties to aid its cap­ ltali<;rs In their struggle against rivals in the world market. " It IS not free trade EngJ.lIld , but the protectionist counrries, Germany and the United Sr:l.tes. which become the models of caplt:llm de­ velopment", wrote Hilferding." Far from continuing with the traditional liberal notion of a mmimal "night-watchman st:lte" the great trusts wanted it to have rhe power to widen its boundaries so a� to enlarge the market in whi ch they could gain monopoly prof­ ItS: "While free trade was indi fferent to colunies, protectiOnism leads directly to a more active colonial policy, and to conflicts of interest l)Crween different stares", ,1 Hilferding argued. "The policy o� finance capital is hound to lead towards war" .'1 This analysis went beyond anything In Marx. He had witnessed (he

·ars of hi" lifenme and wrinen about them: the OpIum wars of

... \

i againsr China, rhe Cnmean War, the American Ci\'il War. Brita n and the Franco-Prussian \Var. But these were wars. as he saw It, re­ sulring from the drive o f capitalism to impose itself on the remnants of the pre-capnalist world around u. Capitalism had come II1to the world ""mired in blood-, bur Marx's model cun­ tailled no more than a few hints as to why fully established capitalist countries would be dri\'l'n to war With each mller. Hilferding had taken a first step towards a Marxism for the 20th

CCmUf) that expla ined what had changed since l\larx's time 111 this all-important respect. There were. however, ambiguities in Hilferdlllg's approach. The main trend ill his bonk was to argue that the growth of monopolies did not do away With the tendency of capitalism to crisis, and their growing reliance on tile stare would lead to intensified international compelition, imperia ism and the drivt: to war. Bur at pOints there l were suggestions that pointed to a very different conciusion-{hat Undersundmg the S}\tem: Man. 3nd BeynmJ

ether to dampen the Ihe monupolies and rhe state could work rog ter of c.J.pltal is oblit­ tendency towards crisis: "The !>pecific charac e to resolve �more erated i n finance capital� which was abl um of the social econ­ \uccessfuUy the problems of the orgallls::n iery, wit h "propeny nmy", even though It was still a cla�!> soc iS"t groups" . , This ..:oncenrrared ID the hands of a few giam capllal ll.: crisis: nltanl the mingation of rhe old style ecOllonl .

i .. therefore an in­ As capitalist production develops, [here be carried on under crease. . . in the part of production that can dit need not bt: as all circumstances. Hence the dIsruption of cre iod of capitalism. complete as In cflSes 111 the earlier per is into a hank­ Furthermore, the development of the credit cris i) on the other is ing crisis on the one side and a monetary cris

�

made more tfficuh . ,\ ted at the be· The mass psychoses which specu lation genera r. " ginning of the capltali"t era . . .seem gl)ne for eve ..

h to ItS logical con­ l lilferding did not carry hiS argument throug that the system could dusion i n FillOfICe C.apital, :lIld stil l wrote of prosperity and de­ not do away wnh "the cyclical alternation as a minister In twO pression".'- Bur by the 1 920s, when he served ards Bernstein'S ap­ We imar Republic governments, he veered tow ism" in which the proach with a theory of "organised capital ards cri sis disappear. 'i ,103rchy of the marker and the trend tow anything in capitalism One corolJary was to den)' that there was d capitalisms� 111 dif­ mevitably leading to war, since the �organise h each other. !crem countries would want to cooperate wit d ill 1 9 1 4 by Ka rl A similar conclusion had already been reache ely differed in prac­ "autsky, leading him tOO to a pOSitIon that bar pointed to the merger lice from Bernstem's. Bu r where Hilferding y's argument rested IIf finance and productive capitalism, K:lufsk agonism of Interests nn seeing a fundamental distinction and ant between them: erest III transforming The finance capitalists . . . had a direct int port for their own each national state IIlto an apparaflls of sup linked to finance expansion. Imperialism was therefore dlrcctly were not Identical capitalism. But the interests of finance capital and only by hroad­ to those of industrial capital, which could exp S frOIll the mdustria l erung its markets through (ree trade. It W:l lleyond Marx: Monopol)_ War and Ih� !lla,,:

91

se(;tur thar lmpulse� towards international concord aru,e 111 the nourgeoio; camp... Imperiillism. the expression of one phase of capltalJSt development and the cause of anned cunf1ict�, was not ' l the only possible form of development of capita ism. Kaursky stressed the role of arms firms 1Il parncular as havl1lS an IIlterest in imperialism and war. But he mainrallled th.u the eco­ nomic costs of rearmamem, while they fa\ (lured the devdnpmenr of some sectors of mdustry, were detriment<11 ro others. Cilpllal in Ihe mdustrial countries needed HI dommate the �agriculturalH counrrie� In order to get raw materials. But there was no reason wh) capitalists should not be able [Q cooperate to do lhi� through a "SOrt of super-Imperialism "_,,, In holding that the drive to war wa!> sornethms that happened despite the interesrs (Ii most capitalists. Hllferding and Kautsky were articulating a view very similar ro that of some liberals. One W,IS the IIlflucntiul economisr Hobson, whn had produced his own theory of imperialism Some nine years before Hilferdl1lg. He S'IW imperialism as the product of one interest group, (hose connected with ceflam financial lIl'i"titurions.l l These opted for gu.lranrced re­ turns of intereST on overseas loans raTher than taking the risks IIlvolved III IIldusrrial lllvesrment aT home, and welcomed colonial expansion as a way of mak l1lg sure their State gu.lranrced the safety of theIr Inve�tmenrs. So for Hobson the root of imperialism lay not WIth capimlism as such but with finance capital and those he saw as bencfilflng direcrly from it-the bond-holding rmtlers who re­ ceived then dividends regularly Without ever having to worry themselves with prod uctl\'e or commercial activiry of any SOrt. Anmher Bnnsh li neral. Norman AngelJ, argued a similar pusi­ tion, idennfying an essentially peaceful dynamic in capitalism, although ascribing a more ben.ign role to finance-no doubt influ­ enced by rhe unhesirating way rhe central banks of France and Germany had sent gold to help Bmain, and Russia had then scm gold to help Germany, during rhe major financial crisis of 1 907.'" " In no department of human activity". he wrote, �is inrernation­ alis'lIion so complete (IS in finance. The I.'apitallst has no cOllntry. and he knows. If he be of rhe modern type, that arms and con­ quests llOd iugglery with frontiers serve no ends of his . . . "11 �uch arguments have percoLHed down through the years to the present day. So the former revolutionary Marxist Nigel Hard.. argues that " business has in general no more power over 92

Rovernments than popu lations" and the th reat I() the world cumes nor from unuamem lled capitalism bur from the states which guard their own interests." Fllen Wood is stili a mili tant Marxist. hut her arguments arc nor thar difierent. She has criticised what she calls "classical-Marxist theories of imperialism � of the First World War years for falling to <;ee that the '''political' form of imperialism, in whicb exploitation of colonial peoples .U1d resources depends on political domination and comrol of [erntor�'·'. IS "the essence of 11rt'-capitalist empires" .l' �Capllallsr class expIOitarion", she in­ \ISts, is 3 "purel)' economic process whll.:h, llke c.lpitalist class rel.1rions, concerns the rommodity market�. ' hom ,his it iollows Ihat, while capitalism needs a S[,He to exert control o\'er society. it does not need states that enter Into conflict With each orher. Much the same argmnem is put by },'lich:lel Hardt and Toni Negri 111 their book Ell/pm'. Hardt wrote shard}' before the U� InVaSlOll of lr.lq ,hat the "ditesH behmd the decision to go to war "are inca­ .r IMbie of tUlderstanding their own interests" rhe classical theory of illlperia lism Writing in the middle of the First World War, Nicolai Bukharin!1 .1I1d Vladimir LemnLJ drew very different conclusions. They began tal, With Hilferding's description of the integration of banking capi Industrial capital and the stare, hut remu\'ed from it any sense of the result being hannollious by stressing the wa)' in which rhe role Ilf the state in international econontlC competltlon led to war. This was the overnding (heme of Lenin's pamphJet Imperialism. to h� aim was to be a �popular oudine", showing how the resort war was a product of rhe "!aU.'SI o;tagc of capirnlism " -the origi­ n..1 subtitJe 10 the work: Half a century ago, when Marx wa� writing CapItal. free com­ perition appeared to the overwhelming mal0nty of economlSf!i competition ro be a -natural law" ... Marx had proved that free gives rise 10 rhe concentration of production, which. in turn. at a certain stage of development. leads 10 monopoly ... This is something quite different frolll the old free competi­ tion between manufacturers ... producll1g for an unknown market. Concentratiun ha� reached the pOint at which It is pos­ sible to make an approxim.ne eStim,He of all sources of raw 1I yund .\Ian;: MUllur"ly,

WAr dlld thl.' C;t.lI�

93

materials (for e.\.ample, the iron ore depOSits) of a country and cven . . .of the whole world ... These sources are caprured by Ai­ Aanllc monopolist associations... The assOCiatiom "divide" them up amongst themselves by agreement. Once this stage is reached, competition between the giant corpo­ rations IS no longer based simply--or even malnly--on the old pureh mMket methods. Taking control of raw materials so thai rivals cannot get them. blocking rival�' access (0 transpOrl facili­ ties, selling goods at a loss so as to drive rivals our of business. denying Ihem access to credit, are all methods used. �Monopoljt'S bring With them e�erywhere monopolist principles; the utilisation of 'connectlons' for profitable deals takes the place of competition in the open market"." The capitalJst puwers had partitioned thl' world between them, bmldmg riva l colonial empires, 011 the basis of "a calcula­ tion of the �trengTh of the parriclp:lIHS, their general economiC. financial, military ,md other strength." But " rhe relative strength of these panicip3n(s is not changing un iforml)" for under capl­ talmn there cannot be an equal development of di fferent undert,lkings, trusts, branches of industry ur countries". A p.tru­ [Jon of the wurld that corresponded to the relative strength of the great powers at one ptllnt no longer did �o a couple of decades later. The partitioning of the world gives way to struggle.. over the repartitionmg of rhe world; Peaceful alliances prepared the ground for wars and in their turn grow out of wars. One is tbe condition for the other. giving risc to alternating (orms ot pcacelul and non-peaceful struggle un one and rhe s.<Jrnc basis, that of imperialist connections and interrelanons uf world econumics and world politics. 'I The epoch of the late�t stage of capitalism !;how!; us that cer­ (a 10 rclat IOns bcr.veen capitalist associations grow up, hased on the economic division of the world; while parallel to and 111 con­ nection with It, certalO relations grow up hetween political alliance�, between st3tes, on the basis of tht· terntorial division of the world. of rhe struggle for colonies, of the ".Hruggle for spheres of influence". 11

8n �all1 and

�

France had een able to build great empires, dividll1g Afnca ;lnd much of Asia between them. The Netherland� ;lnd Under�randmJl (he "rS1cm: Marx and BcyunJ

i Indonesia 1\t'lgium controlled smaller hm stili enormuu\ empires n Ind the Congo. By contrast, Germ;lny had onl)' a lew rehwvely mall colonies, despue its economy beginnil1� tl) overtake rhat (If Ikitain. It was this discrep.wcy that la) behind rhe repeated dashes IIt'I'\vccn the- rival alliancc� of great power that culminated III the I

lrit World War.

nnall)', where Kaursk), focused Simply on the control of the agrarian" parrs of the world (what tod.:.) would he called the I hird World or the Global South 1. LenLn \\ as In!>i!>tent that the im­ .. JIlcreasingly centred on I'(,flalist division I)f the world wa UlJustrial areas. "The characteristic tearure ot unperialJsm is pre­

Iy that it smves TO annex lI()t IlII/)' agrarian terriTOneS, but el'en most rughJy industrialised regiom (German .lppemc tor Belgium; I rench appetite for Lorraine)" , '. Bukh3rin's /'t;lperia!tsm and \'(lurid i:.C()IIIIIIZ)" wrmen shorrly

,L

"c(ore Leni n's work, bur appearing atrerwards WLth an lorroduc­ of IUm by Lenin, made rhe argument Just a� forcefully a, he draws Lhe consequences of the tendencies that Hilferding had described: Combines . . m industry and bankmg. . . ullite the entire "na­ rional" production, which assumes the form of a company of hecoming a state capitalist (rUSt. thus ..:ompanic..,.. Competitlon... is now competlfJon of the St3te capimlist truStS on the world market. . . Competition is reduced to 3 mini mum within the boundaries of the "national" ewnomie!>, only 10 flare up in colossal proportions, such as would not have been possi� .

ble in any of the preceding historical epochs . . . The centre of gravity is shtfred in rhe competition of gigantic, consolidated and organised ecnnomic bodies possessed of a colnssal fighting " . 11 Gtpacity in the world tournament of "nations . .

\\ming three }'cars after the end of the war, he drew out the Impli­ Il Ions e\'en more sharply; The state organisation of the bourgeoisie concentrates within Itself the entire power of thiS class. Consequently, all remain· ing organlsations... must he suhordinated to the state. All arc . .. militarised . . . . Thus there arises a new model of st:lte power, the classical model of the Imperialist state, which relics 011 state ..:apitalist relations of production. Here �economics" is organ­ Isationally fused with "poli ncs"; the economic power of the

.nod Mal':lr: Monopoly. WJr 3nd Ihe Srure

bourgeoi\ie unites itself directl y with the pol itical pow er; the \l3 te cC;lse!> (f) be a simple protecror uf the prOI.:e!.s of explOIta­ tion and hecomes a direct, capita li!>t collecti\e exploit er . . .

\'('ar now hecome.. cemrl , l ro the system. a rising from the competi­ tion between the " st,lte capitalist trusts", and al... feed o ing back Into and determinmg ther i Internal orgilD i ... arion : With Ihe formation of state caplmli!.t tru"ts, com pc uuun IS being almost entirely shined (() fOtl'lgn cou ntr ies. The org an... of the struggle wa�ed ahroa d. primarily state power. mus t there­ fore grow tremendously ... In . peac{'ful" times the mil itar)' state apparatus is hidden beh md the scene!> where II never srops func­ rion mg; m war tinlt's it appears on the !;Cene mOSt direct ly. . . The �truggle hem een state capitalist trusts IS decided Ir1 the firM place by the relation benveen the ir muir.lr} forces, for Ihe mili­ tary power of the l:ountrr i.s rhe last resort of the struggling "n,mona !" gro ups of capitalists . . . Every improvclllent in nllli­ rMy techmq ue entails a rco rganis:aion :md reconstr uctiun of the mil ita ry mechan ism: eveq innovation. ever} e.xp amlon of thl' mili tary power of one State, stimulates all the others. , .

-

Tht! 10Ai" of the argument presented by Lenin and R uk hari ll W.I� that the petlod of peace that followed the h rst Wo rld W:lr would, sooner rather than titer. give way to a new world war unless capi­ talism wa� overrhrown "The possihility of a 'second ruu l1d' 01 Imperialist war is ...qulte obvi ous , wrote Bukharin. ' As Wl' shall see late r the reacnon of rhe great capitalist powers to rhe <.'Connmil crisis that bcgal1 l1l 1929 confirmed tbls prediction. That has nUl, howc\'er, �lIlIed the argument againsr the Lenin-Bukh arin accuunt. .

"

,

'lime period Bmain. France. RU"'�la and Genn'lIl)' each established I.:olonial enclaves and wide spheres of influence in Chm3: Japan IHok over Korea and Taiwan; !-=rance conquered all of Indoc hllla:

the US seized Puerto Rico and the P hillppmes from Spain; and Uritain and Russia agreed to an mform,11 partitiolling of Iran. At rhe same time there was a mas'<'I\'e growth

III

the eApon of

qlpital from Britalll, still (he biAAeSt capitalist economy and the I..entre o f the world financial system, even it the US and Germany \\cre

rapidly catchll1g up 111 lIldustria l output. Total British n i vest­

ment in foreign bonds rnse frOIll L95 million in 1883 to £393 Illlilion in 1889. It S0011 equalled 8 percent of Bmain's gross na1I0nai product and absorbed 50 percent of

.... 1\

mgs.

'

Not all

(''(pons of capital, l et alone of go()d�, went ro rhe colonies. Much went to the U� and qUite a lot went t� latin Ameri�all :ountncs like Argelltina. But the cnl{)Tl1cs were unportanr. Bmalll s biggest �l)lony, lndia, alone accounted for 12 pcrCClll o f ex-poned goods .-nd 1 1 percent of capi ta l CXpOrtS; it also pro vided a surplus to I\ritail1's balance of payments that could help pay for investmcms r1�cwherc in the world; and It pro vided Britain, free o f charge, W ith an army for conquering other places." The raw matt'fials re­

Iluired for the most technologically advanced 1I1dustr1es of the rime .lIne from colonial areas (vegetable oils for ma rgar ine and soap IIIdnufacrure, coppe r for the clcctncal industry, rubber and oil for Ihe fledgling automobile IIldustry, nitrates for fertilisers and ex­

rlosives). On top of this, there was rhe str.Hegic importa n�c c.:f the

,.,Ionies. \Vhat mattered for both pol itillans and indusrnal lllter­ , Is

was rhat "Britam ruled the waves" and could use its bases in

'he colonies to p unish states that threatened (hose interests. It hardly seemed a coincidence to the thcori�ts of Imperialism Ih.l l the decades which Witnessed this massi...e expam.iol1 of coloni­ .lIion, of exports of capital and of extracllon of raw materials also ",w the recovery o f profi tabil i ty and markets from the gloom of

The economics of empire This argument assumed-and still assumes "-that peaceful free Trade rather thim a militaristic struggle to cumrul chunks of rerrl tory would have been the most profiTable COurse for rhe m:lj omy of capitalish to pursue. This claim is casy to dcal wit h. The great period of growth of the Western empires wa!> the laH q ua ner of til{' 1 9th century. In J 876 no more than 1 0 percent of iVnca was under European rule. By 190 0 more than 90 percent was colo nised. In the "

UnJ�rsr.:I.nJ UIg rh� SY�I�m: Marx and &)"011.-1 .

ti,e Great Depression. They ma)' not always have managed 10 the­ !lnse this dearly. bur the coi nci dence of empire and capitalist huom was real enough. The Lel11n-Bukharin theor), therefore stands up as an accounr

til the pre-World War One decades-and of t he drive to war. Ntvertheless, there was a weakness in Lenin's version of the llitory. It generalised from the experience of British 1mperialism .11

the end of the 1 9th centur), to the whole of i mperia lism, and

tcnded to mllke the entire theory rest upon the key role of the
W�t and rhe Srar�

"

banks in exportJng financial ca pital . But this did nOl fit with rhe picture e\en when Lenin was writing. ll:t alone 111 the decades af­ rer\\'ard!>. The e"rort of finance had indeed heen a central fearure at Brlflsh I mperiali sm but rhe situation was rather different wnh ,

Irs new competiwrs. [n the German case it was the industrial com­ hines, especia lly those in heavy industry r:uher than finance a� su('n, that sought to expand beyond national Irontiers by the es­ lahlishment of culonies and spheres of in tluence. And the ,

characterIStic feature of the US and Russian economies in Ihe pre­ hrSI Wo rld \'(far decade!> was nor the export of capnal bUI the intlow of funds from other capitalist countries (ahhuugh there was some re-export of capital ) . Tbe focus on finance: became even

economy by "state ca pl l llisr trusts struggl ing globally .tgainst other "state capnalist trusts". ueh a struggle dId not have to concentrate on inveSTIng III for­ ('Ign countries. It could turn mtu "omcth lllg else: the effort to \\ rest na llonal

"

.

lrom ower countries already industrialised areas or sources of im­

l�m3nt raw materials by force. As Bukharm pur it. �The further it I l mperial ism) deve lops the more it will hccome a struggle for rhe

\.aplralisr ceorres as well n ••, i other wurds, to ttlrn \;tst ,Imounrs of value It was necessary. n 1I1t0 means of destruction-not onl} in urder to tr)" IO obtam more value bUI to hold onto that already possessed. Thl!. was the logic of Ihe capitalist market applied to the relauons between "tates. Each

more problematic in the quarter of a century after Lenin wrote. The quantity of clpiral lllveSfed abroad ne\'er rose above the level of 1 9 1 4 and then declined.·� Yet the great capitalist powers re­ mained inrent on imper ia list expan sion d ur ing the Interwar years,

hdd to invest in preparations for war in order not to lose out as the lither IIlvested �nore, jusl as each ca plt1 1 had to IIWC!.t III new means of produ ctio n so as to hold It<, uwn III m.uket competition. ··Imperialist policies" were "nolh ll1g but the reproduction of the

with Brimm and France grabbing most o f rhe Middle I-'ast and the

�ompetitive struggle 011 :1

former German colonies, Japan expanding into China, and German heavy Industry looking to carve out a new empIre in Europe.

The phraseology of certain pans of Lenin's pa mphlet has led to so me interpretations of it thar see final1cllll interests, rather as Hobson and Kauhky did, as mall11y responsi ble for imperialism. This was especially so when, ba!>ing huruclf on Hobson. Lenin in­

.

scale," with '�state caplra lisl HUsts". nor individua l firms. �rhe subjects of competition. The ··cxplosions of war" werc a re!>ult of "Ihe contradiction benveen worldWI de

Ihe producti ve fortes of the world eCO/lomy and the 'national ly' lunited methods of apprupriatioll oi the bourgeOisie separated by I.tles".� [n other words, lUSt as compelltion between capitals (and \\Ith it the free operatIOn of the la w of value) wa" reduced wlthm \1.Ues.

it operated on an c\'er more ferocious scale between them.

SISTed on the �paraSltlC" character of finance capital. Writing of: the extraordinary growth of...a social stratum o f relllu!rs, ie people who live by clipping coupons", who take no part in an}

Rosa Luxemburg: imperialism and the collapse of capitalism

enterprise whate\'er. whose profession is jdleness.�J

I (,1111l a nd Bukha.rin were nut the only M.1rxist opponenrs of im­ I'I·rialism to atte mpt to pro\e that il was an essential stage of • lpualjsm. Rosa Luxembu rg also did so with a rather different I llt""Orctica l a na lysis in her The Accumlllall011 of Capital. published III 1913.'- It rested on what she believed to he a central eontradic111111 w ith in capitalism Ihal had escaped Marx's notice. \tarx had p roduced tables in Volume Two of Capital showing

;"

This stress oil ihe parasi tism of finance capital has even led to some on the left e mbracing srrategies based on anti-l lllperialist allia nces with secti ons of Industrial capital ag,: u llsr finance capl ' ta l-precisel y the Kautsky policy thai Lenin attacked so bltrerl). M

"

Uukharlll's account of imperialism by and large avoids these fauhs. lie IIses the category of "finance capital" repeated l y. 13tH he expl iCitl y warllS against seeing it as sumeth ing distinct frolll industrial capital. .... Finance capital. . . Ill USt nor be confused with money capital, for finance capital is charOlcterised by being si. multaneously bank i ng alld i n dustrial capita I" ..... It i s I nsepa ra hIe, for Bukharin, from [he trend towards dorninanon of thc whok 98

Undt'rstandmg thr SY51rm: Marx �nd BeyonJ

Ihe in terrel :nion between aceul1lul.Hion and comu mption . Each rollnd of production IIlvolvcd uSing the prod ucts of the previous IBund, either as material mpurs ( mach inery faw materials, etc) or ,

means of consumption for the workforce. This required that the lII.uerial products III one roUlu.! corre!)ponded to what .....as needed Illr production to proceed at the next rOUlld. It was not merely a 1\

\t>CJd Marx: r-,·lor"lUpoh. \'('ar: llld Ihe Stair

99

qLlc�tlon of the right .lffiounrs of value p .lssing frorn one round to Ihe n�xt, but also of the right sorrs of usc values-such and such quanmie\ ot raw 1TI.1rerials. new machinery, factor} huilding, erc. and such and such qua nrmcs of foud, cJorhmg, etc, tor the work­ ftlrl.:e (plus luxury goods for the capitalis[s themselves). Rosa Luxemhurg, In examining Marx's tables, came to the conclusion thar discrepancies wcre bound [0 ariore between the distribution uf value from one round

[()

another anJ [he dIStribution of the use

values needed to expand production. More consumer goods would he produced th,Hl could be bought With the w.lges paid out to workers or more investmem goods rhan could be paid for Out of profits. In other words, the "ystem lIleVlrahly produc�d an exccss of goods for which there was no market within it. Overproduction was not jll"l a phase in the boom-slump cycle. bUI endemic. Conceived of as a closed system, in which all the OUtputs of one round of prnductlon had to be ahsorbed as inputs in later rounds, capitalism was doomed to tend towards a complcre breakdown. In rhe carl)' stages of capitalism rhis was nor a problem. It wao:; not a closed system. Precisely because it grew lip wilhin a pre­ capitalist world it W3), surrounded hy people whu were nOI pari of it-artisans, [he remnants of feudal rullllg c1a��es and vast numhers of .. ubsis[cnce peasams. They could absorb Ihe surplus goods. provldmg raw !luHerials in rCnlrn. But the more capiral. ism C,lrlle ro donunate in a particular (·ounrry. the more it would he faced with this contradiction-un less i[ expanded uutwards seize control of other, pre-capitalist, socieries. Colol1lsarion was III rhis way essential for rhe continued functionlllg of rhe to

sysrem. Without it capitalism would collapse. Luxemburg did nor simply produce this argument in an anal)'r­ ical form. Shc supplemented it with chapter after chapter showing III horrifying detad how the historical de\elopment of capItalism in Europe and North Ametlca had been accompanied by the sub­ lugation and cxplOiTatlon of the rest of rhe world. Her conclusion. like I eni n and Bukh arin's, was that socialist revolution was the only alternative to imperialism and war. Her ana lysis was, however, subject to trenchant and devast:lt. ing crlriq lies. most nota bl)' b}' the Austrian refurmist Marxiq Ono Bauer and b)' Bukharin. Bauer produced his own versions of the reproduction tahles, claiming [hat there was no problem gerring the inputs and Outputs to halance properly over ')everal rounds of production. Bukharin concentrated nn refuting poinrs Luxemburg 100

Undel"'\r .. ndln� rh(: 5)Urrn: Man and &'ond

ued that made in her "'anti-critiquc" repl} to Bauer. She bad arg an incen­ (here had to be something outside capitalism to prm·ide llgh for tive ro the capitalis[S to keep mVCO:;lIng. It W3S nOt good eno wing t'v�r mcreasing amounts of imeSttllenr (0 absorb the gro gain [0 output of society, since, she argued, Ihl'> would providc no Ihe capiralisrs to iuS[ify )'uch in\'estmem:

sake is, Productlon to an c\'cr grearer extent lor prodUCTion's from th� capitalist POint of \ ie\\, .lhsurd �ause In this way it is and impossible for the emire C
it was Ilukharin's reply. III cs'tCnce, amoumcd It) poiming OUT [har .lC­ precise!) such ipparemly absurd accurllulanon for the s;lke of I[alism f.;umulation that characterised capllalism for Marx. ,. (ap I I is pre­ did not need a goal oUlside itself. It could be added that of hum an usely this wh ich epitomises the extreme alienation en forward not by the satisfaction of drtv t is i em: syst in the y rivir ,h .. but by human need, not even by the human need of (he capitalist, It own dynamic. of Buk har in did nOt deny rhat discrepancies arise in the course ption. He c.lpitalist de\elopmem between production and consum le­ Insisted in his comments on Luxemhurg thai rhe)' are inevirab them. hut it is precisely the capitalist crisis that o\ ercomes [he rime. Over-accumulation and overproduction occur, but nOi all fur­ I hey arise i n the course of rhe crisis and are liquidared by irs is no Ihe.r de,'elopmel1l. And Buk han n quoted Marx: "There lained �rmanent criSIS�.kl �or him Imperialism was nor to be exp h) the problems of overproduction. bur by the way in whICh 11 aids

Ihe capitalist purSUIt of higher profits. BUI Bukharin's argument against Luxemburg cannor be faulted. ort of ht and Lenin do leave something unexplained: why the exp able to I,:.}pital dun ng the high tide of Imperialist expansion was s. lead capitalism out of the Grear Depression. For all ItS problem cn im­ Rosa Luxemburg's theory did anempt to find a link Oel\'iC in and l'lCrialism and thc temporary mitigation of crisis, which len Hukharin failed roo a Writing 111 rhe 1 920s Henr)'k Grossman. cmical both of Ros I uxemburg and her detractors,II did poinr to a way of mak ing a­ Ihe link . The flow ot capital from existing cenrres of accu mul ing to a lion to new oncs overseas could ease rhe pressure lead I\q'ond Marx: Monopo1r. U'ar and flit �tatt

101

rising organic composlrion of capital and a falling rare uf proftt, even If such a �olution would "'only have d short time e{fect" . . This Inslghr can make sense of the actual panern of economic devdopmem during rhe

high

tide of imperialism at the end of the

.IS far as integrating them IntO hiS analYSIS of rhe caplralist system

a whole. But the question is not one that an) senous analrsis of A quick glance �JPualisll1 In rhe cenrur), after hi� death ('an avoid. III the growth of St.lle expenditure shows why (sec the graph below lIS

rnem to labour (the organic composition of capital) and so

Inr the United Stale�). From its share of narional ompm heing more or less Slatic through the 19th century, except at times of all­ out war. it starred gf()wmg in the second third of the 20[h century

lowered the tare of profit. As it was, estimates suggest Ihat Ihe Cap­

.and has never stopped doing so.

i vestment that went overscas 1 9rh cemury. Had the half of British n been m\esled domestically it would have raised the ratio uf m\'est­

Iwl-ompul ratio acrually fell from 2 . 1 6 In 1 875-8.3 (the years of i 1 8 9 1 - 1 90 J.. and thai Ihe the firsl �Great Depression") to 1 . 82 n

US GOI.�mIO/I Sp�HdiHg as I'ro(JOrl.Q"

Q(Crou Ooml'stlc Product'"

earl)' 1 890s were a period of rising profit rates (following a fall from the 1 860s to the 1880s).'· And in these ),ears what happened in Britain still had a major Impact on the rest of the syslem. TIllS points to a wider and very important insight 1flto the dy­

i the 20th and 2 1 st cenTUries to which we namic of capitalism n will return III huer chaptl'rs. For the momenr it is sufficienr ttl recognise that Imperialism arose out of the competitive drive of capmlls to expand beyond national frontiers-::md led, as a tem­ porary side-effect, to a lessening of rhe pressures otherwise driving up [he organic composition of capital and so lowering the rale of profit. But It could only be

a

temporary effect because

eventually investments made in the new cen tres of accumu!.ltlon would produce new surplus value seeking invesnnent and exert­ IIlg a downward pressure on profit rates. As that happened the old contradIctions III the system would renun with a vengeance, openlllg up a new period of economic lllstabihty whIch would lead to intenSified competitIon, nO[ on I} of an economic but also of a military sort. This IS effectively what happened in the first decades of the 10th cemury. with an imernalional tendency to­ wards falling profit rates and increased tensions between Slates. Amended in this way, the insistence by Lenin, 8ukhann and Luxemburg on the connection beh\;cen capnaitsm and war could be made rheoreflcally watt·night.

I o 1800

1840

1880

1910

1�60

I he most common view of the state, among Marxists and non­

.\obrxists alike , has been to see II as somethlllg external to the �;lpitalist economjc system. This approach has long been ac­ I;cpted by the mainstream "Rea list" school 1Il the academic discipline of international relations. It �ees state" as self-can­ tJlIled entities c1ashlllg InternatIOnally according to a logic which h.lS nothing to do with the economic form of organisation exist­ IIlg within them .'- A somewhat Simil ar approach is ro be found

lit some Marxist writings. Capitalism, lfl [h is "iew, consists of the pursuit of profits by hrms (or. more accurately �peaklflg, the self-expansion of capitals) without regard to where they are based geographically. The stare.

h) comrast, is a geographically based political emity, whose

A problem Marx left behind The classic theory of imperialism has one m i ponanr implication. It raises rhe queslion of the relarion between St�Hes and rhe capI­ tals within them. Marx left the question unresolved. lie rook up sOllle of its aspects 102

III

his non-economic writings,

bUI did nOI get

Understandmg Ihe SYSI�I1l: Marx lind Beyond

houndaries cm across the operations of individual capitals. The �Iiite may be a Structure that developed hi"wrically to provide rhe political prerequisites fur capitalist production-fO Pf()tcct capi­

I,ll ist property, to police the dealings of different members of the

ruling class with each other. ro provide certain services which are r\§ential for the reproduction of the system. and ro carry through Iyond Marx: Monopolv, WJr and r� .!Irare I

103

such rdorms as are necessar} ro make other secllons 01 MKiet}' ;,u,:cepr capitalist rule-bur It is nor to be idl'lltified with the capitals th.lt operate within u. Those who vie\\ the stare as simply extenld l to c.l pital ism tend to refer to rhe �stJte" in the singular

and often to

-

"

capna l

"

in

Iht' �lI1gu lar as well. This way of putting It m ay make sense when pro\ Jding an accounr of capitalism at the most abstraCT Jc\'cI, with the �tate providing a len·J phlYlng field on whit:h dlfferenr capnals t:ompere 011 e qual terms. Bur the aClUally existing capitalist s)'stem is made up of many states" and many capitals." But even those who see states as ex.isrlllg in the plural, as does Ellen Wood, often conclude that they sene the Interests of capiml in general. nor of parricuJar capitalisrs based within them. �The es­ sential role of the state in capit'llism", she argues: is not TO serve a� an instrument uf appropriation, or a fotm o(

general thar must I'll' analysed hut

"'the spe­ cific political orga"isario" of the world market /11 mallY states" . . . the role of the state in que�t1on in its speCi fic relation­ it IS not the sute

m

ship with the world market and with other s(ates must always be included 111 the ana lpis from the ClllI'>et:

�ew people have fullowed through such .1ttempts to develop such Insights into a ngorous interpretation of the world system. But '-Ome of their presuppositions are t,lken tor granted III everyday

ways of talking and wrIung ahout the w(lrld. People habitu ally reak of .. the econOl'll i c Interests" ot this or that stare, of h ow one 1\ doing compared with another, of the �profits" of one or other

\:OUIltry. So the recent ver) useful ac\:oum of cap![all�m slOce the ....econd Wo{ld War by Robert Rrenner emphasises the Interactions IIi "US capitalism", "Japanc�e capitalism" and " (,erman capltal­ with ncgotiation by states pla}'lJlg
l'5fll",

ating and sustailling the conditions of accumulanon .It arms

the impl ication of a tight alignment I)f mlerest between a parricu 1M na tiona l state and a partlc ulnr sector of rhe mternanonal

length, maintaining the social, leg.11 .md administrative order

la pimiisr

. S a means of cre­ .. pollr1ca lIy constitllted property", hut rather I

nece�sary for accumulation.'" As agall1st rhese views, rhere are those whose analyses st:m from the classic theori es of imperialism, with their language about the Stafe " merging" with capital, of "state monopol)' capitalism", or simply of �state t:apitalism", and their \'Iew of the clashes between states as a n expression of international competition of the capitals

-

system.

The view of national states as wholly congruent with "na­ llonal" capitals is a big oversi mpitfic;1tloll, especially in today's world. with multinational corporal1ons operating in SCaTes of

lountries, as we shall see later. But this does nOt mean rhat states \Imply stand at �arms length" fro m particu la r capitals. or that \Utes do nOt act at the behest of particular nationally based group­ IIIgs of capital. The)' remain tied to them III comple x ways.

operatmg within them. A b owd lerised \'erSlon of th.is " lew Ix>('amt" part of the ortho­ dox)' of Stalinised MarXism

111

the years from the 1 9305 to the

1970s, known for shorr as "stamocap" A more serious anempt to . describe the world system as composed of state capitals m the decades after the Second World War was made by Mike Kidron.·' In his account individual states and mdlvidual capitals became completel ), congruent with each Other: e"ery state acted at the behest of a set of Jl<1 tionally based capitals, and every significant capItal W:lS i ncorporated in a particular state, Any excepnons, for Kidron, were a hangover from the past, reljcs which woul d disap­ pear with the further development of the system. A paralJeI attempt til sec the world in terms of states represent­ ing capitals was developed in the early 1970s in debates between

1 he genesis of the cap it a list state

\ starting point for understandmg thiS can be found in the relation­

,hip between the development of modern states and capitalism. This was not dealt wi th explicitly by Marx, and it was Engels who first i a man uscripr written after Marx's death and not published Jld so n

unril 1 935. His studies led him to conclude thai as merchants and Imdcspeople of the towns (the "burghers") grew 111 importance at Ihe end of the !vtiddJe Ages they allied themselves with the monar­ "hy against rhe rest of the feuda l ru ling class: "Out of the confusions

11( the people that charactemed the carly Middle Ages, there gradu­ ,Illy developed the new nationalisll1s"-and the heginnings (If

German Marxists.o..i: Claudia von Braurunuhl, for instant:e, wrote:

lI.uional states ver)' different to the earlier political structures.·<

'0'

I yond -'tar"': Monopoly. War and the Stare

Undnstandmg the S)'�ltrn: l\1.IT'" and Ilcyond

105

I.enin further theoretically elaborated similar IIlsights as the revolu­ tion.lr) movement in RUl>sia trit:J to come to terms with the demand for mdependenr sta(e� arising among the Tsarist emplre's mmority

"ive i n a world increasingly dominated by Cilpltahst powers on the one hand, and the middle class intelligemsia who came 10 play a i many of the national nto\'ements In the colonial leading role n

nationalities on Its borders III suuth ea5tern Europe and 10 the colo. mal pos�S�Jons of the West European powers.

world on (he other_ This picruce has been rejected by some lI.tanmls on the grounds that states existed before rhe rise of capitalism. The "system of 'It3res" is rhen seen as something completely di stinct from the ,ystem of capitalism, and there is a "logll.- of Mates" that differs Irom the -logIC of capltal-. But rhe old st,lIt"1 were not left as [hey

He ,pelt out the deep connections between the srruggle to es­ tabhsh national states and the emergence of groups in rhe pre-capltali!>t world who wanted to base thernselH.'s on t:aplwlist forms of economic organisation: Throughout the world, tbe period of the final vicw!) of capital­ ism over fe udallsll1 has been linked up with natJonal movements. For the complete victory of commodity production. the bour­ geoisie must caprure the home market. and there mu�t be politically united tcrnrories who�c population l>peak a !>lIlgle lan­ gl1:1ge, with all obstacles to the devclopml"1lf of that langnage and ro it!> consolidation in literature eliminated . . . Therefore, the tendenc), of every national movement is towJrJs the formarion of lIatu)flal stat('s, under which these.: reql1ircment� of modern capitalism are hC'�( �atisfied . . . The national state is tYI)ical and normal for (he capitalist period.... j\ lodern states hJve not developed, accordmg to thiS conceprion, a1> e'ternal to the capitals (or at least, to most of the capirJls) hased

within thern. They ha\"e been shaped historlcall), hy the process b) whIch capitalist metbods o f accum ulating wealth began to tale root, first III pans of Europe and then III the ('St of the world. Those groups identifying with such methuds necded to protect

themselves agalilst the various social forces associated with the pre-capitalist society III which the)' developed-and vcr)' soon againSt uther capitalist groups located elsewhere. This meant seek­ I11g 10 shape political strucrures to defend their common Interests, oy force If necessary. in what could he a hostile world. Where old pre-capitalist state forms existed, the) had to get control of them and rcorganise them to fit their own interests (a� in Engl.1ild or France) or break apart from them to form new states (as With rhe Dutch Republic, the United States and rhe ex·cuJonial countries of the second half of the 20th cemury). By the hue 1 9th century 11 wa� not only existing capitalist interests whjch soughr to build such stares. So too did elements from old exploiting classes in places like German}" Tsarist Russia and Japan who wailted to sur106

Undcrs!andmlt [hI' �rSlcm: Marx and lk�onJ

were with the rise of eapualism. They were reshaped fundamen· tally, with a redr.lwlflg of old terrltoTlal houndaf1e� and tbe establishment for rhe hrst rune of cCnlrallscd structures that reached down into tbe lives of ever)' mhabltant /fur rhe first time they were all "citi7ens-)." The fact that the new srrucmrcs func­ [he deployment of force, not the production of tioned throu Io:ommodities for sale. did not stop lhem being shaped by the

�

(hanging rclations uf production and exploitation created by the rise of capitalism. And they were from the begmning-and remain today-----scructures that feed back mto the organisation of produc­ tion by capitals, influencing the tempo and direction of their accumulation. The logic of states was a product of the Wider logic

of capitalism. even if It frequently Came illto conrradiction with other eiemenrs in the system.... i three forms-as productive capital, as com­ Capital eXists n modity (or merchanrs') capital and as moncy capitaL·' Fxery process of capital :lCcumularion under fully developed capitalism mvolves repeated changes from one form to another: money capi­

taJ is used to buy means of production, raw materials and labour power; these 3re put together In the productiun process to rurn OUt commodlries; these commodities are then exchanged for money; this money is then used to buy Illore means of proJucriun, raw ma­ terials and labour power, and so 011. The forms of capital are

(ontinually imeraeting as one changes imo the orher. But there can Jlso be a partial separation of these three different forms. The Of­ pnisation of direct production, the selling of commodities and the \upply of finance can devolve upon different groups vf capitalis[s_

Money capit:11 and commodity capital c:tn be continuall), mobile, moving from place to place and across 113tional bound­ aries, unless obstructed by the state or orher bodies exercising lorce. Things arc rather different with productive capitals. Regarded simpl)' as accumulations of value, thcr differ from each kyond Man<: M"nop(,I�. War and thc SIJIC

107

other only in their size, But each individual capital. like each IIldi­ ndu al I:ummodlty, has a twofold character. As wel l as heln g measurable In terms of exchange value, it is als o a con crelC use \alue-a l:onlTete set of relations bcm'e('n people and lhlO j-t" 111 the prCk:ess of production. Each parllcular cap ital has Ib concrete w;)rs of bringing rogether labour power, raw materia ls and llleans of production, of raiSing finance and getting credit, and of main­ raming oern'orks fur dIStributing and selling us outpUt . These al! JIlvoJve IOreraCflon with other people and with n:lture. I1lteracrions of a physical SOrt, which take place on a day to day ba� l) ill fixed geographlcal locarinns. No productne capital can function without, on the one hand, a guaranree of us control of Its ()wn means of productiun 1a gUarall­ tee which, in the last resort, rehes upon "armed b()d le� of men " I, and , on the other. :I labour fnrce that IS dou bly Mfrel ..-"-free frolll coercion by non-capitalist exploiters on the one hand and free frOIll :lny wa y of makmg a livelihood tha n by sell ing its labour power 011 the other. The productive capilillists n i any parril:u lar 10' callty ncces!>a rily act together to tr} to shape irs soci al and political conditions, that i� to exercise i n fluence over the stat e. As Nei l Brenncr puts it: In ItS drive to accumulate surplus value, capital stri\'cs to ...oller­ come all geographical barriers to its circulation process . Yet to pursue thl!> conflnual dynamic. ..caplral necess3nl} depends upon relamely fixed dod immobile territorial lOU aStr ucrures, such as urban regional agglomerations and territor ial srates . . . CaplraJ's endemic drive ... s i inrrinsically premIsed upon the pro­ ducHon. reproduction. and reconfiguratlon of rela tivel) fixed and Immobile configurations of territonal organisatio n. mclud. IIlg urban regional uAAlomerations, transponarion networks, communication systems. and state regulatory institutions . Most capit;!.li'>t enterprises operate not sUllply on mar ket (.. kula­ flons, bur also on rhe long-term relations they establis h with other enterprises that scI! to rhem and buy from them. Oth erwise the)' would live in conrinual fear thar an}' ch.mge i n market conditions would cause thclr supplier!> to sell elsewhere and those who trans. POrt and retail their goods suddenly to lose inn-rest in them. The)' seek to '"lock in" these other firms by a combination of financial incentives, business favours and personal COntact. To thiS extent 108

UndChra ndmg rhe Sys{l'm: ,,-13M" and Ik,und

rroduction docs not take place in indlvLdual firms, bur n i '"indu!>­ trIal complexes'", whKh have grown up over time:l Tbe market models of c1a!Osical and neo-clas!Oical economics l'Ortray capitals as isulated atoms which engage in blind competi­ tion with other capitals. In the real world capitalists have always Ined to boost their competitive POSHUll1� by establishmg alliances with each other and with ambmouo; political figures-alliances ce­ me.nrcd by moncy but also by tntermarri:lge. old boy nerworh and mutual socialising.·J Even the fluidiry of monl'}" cap!!al does not di minish the im­ portance of the particular n.lIiOIl;)1 Stale" fur parncular financial IIlstitutions. As COStaS Lapa\'l(sas has noted i n his analysis of money under capitalism. '"Trade nedn depend� on Iru-'>t among IIldividual capitalist enrerprlses that is �uhJcct1ve and private, ,mce such trusr�raws on knowledge that enrerpn�es have accu­ mulated about each uther in the course of theLr comlllt'rcial rclations'".-' And the networks thai provide such knowledge have to a very high degree been organised on a national baSIS. wllh rhe ,tate, througb tbe central bank. pbying a key role. �The institu­ tions and markets of the credit �ystcm. regulated and managed by the central bank, place social power and truSI at the service of 1:,Ipiraiisl accumulation " ." The relationship between states and capItals are relationships be­ tween people. berween those engaged in exploinng the mass of the J'IOpul:uion and those who control bodies of armed men. Personal \;,onract with the leading personnel of the State is something every lapiralist aims at-just as en:ry capitalist seeks to cultivate tics of truSt and mutual support with certalll other capLtallsts. Tbe "con­ !lections� lenin referrL-d to -, are immensel) important. Such interactions n i evitably leave an Illlpnnr on the inrernal make up of each capital, so that an}' parrkul3r capital would find It very difficult to cope if it were suddenly to be torn apart from the orner capitals and the state with wbich It has co-existed in [he p.ISt. The Lliltional StalC' and different nationally based c3pirals .;row lip together. like children

111

a slllgic fa mdy. The development

of one n i evitably shapes the development of tbe others. The groups of capitals and the state with which they an.' associ­ ,ned form a system in which each affect:. the others. The specific �haracter of each capital i s influenced by its inreracriun with the other capit:Jls and the state. It reflects not only the general drivC' to expand value, to accumulate, but also the specific environment

Rtyond. Marx, MonopoJr, W,u and {hI' St3te

III

109

whkh It has grown up. The state and the individual c
hut I!'verp",'here they exist to complement each orher, The coercive

u!rtwi ned. with each feeding off the mher. Neither the stdte nor rhe particular capir.lis can easily c!>Cape fhl�

mechanisms persuade people to r.lke the easier path of integration

strllclIIral lllterdepelldence.

The particular capitals find It easier to operate wirhin one state rarher than another., becaust they may have to profoundly restructure both their internal organ isation and their rela(ion� with other capitals If they move their operations. The

state has to adjust to the needs of parricular capitals becau-.e It de. pends on them for the resources-particularly rhe revenues from 13xati<)Il-it needs to keep gomg: if i t goes ag::llnsr their imercsrs, they can move their liquid assets abroad. The pressures which dif­ ferent states apply on each other are indispensable for the capital,

based within each to ensure that rhelr imcrests arc taken into ac­ count when they 3rc operating globally. The eXistence of rival states is not something prod uced trom outside capitall�m nor IS It op. tional for capitalisr�. Ir IS imegral to rhe system and 10 irs dyn::lIl l1c.

Failure to gra�p rhls, as. say. Nigel Harris does, k'aves a great hole in any atrempT ro understand capitalism ovcr the last century.

Into rhe system; the Integrative me\:hantsms pro\'ide the velvet ttlove which conceals the Iron hand at S[
so

le­

Kltmusmg it. The Italian revolUtionary Marxist Amonio Gmmsci rightly used f..tachiavc1li '!o metaphor of the Hcenraur". half animal,

half human, to capture rhe way In which force and consem are lombilled In the state. The coercive and the mre�r,HI\'e me,h;llll�ms depend on organ­ Isation and leadership from outSide the �phere of capitalist t"xploitarion and accumulation as sw.:h-from mli ttary and police

,pecialisrs on the one hand. from politIcal leaders ahle to mobilise \ome degree of S{Kial suppOrt on the mher. An effecu\'e state re­ quires the building of coaliTions th,lT Obt;llll the support---()r at

�

least the com liance of such clements whiJ,: allowing them a cer­ ..lIn leeway ro pursue their own mterests."· It then, ineviTably, r
III

general. hut the conces­

"ons it makes ro II1tegratc other soci:'!l groups :'!nd cl,lsses into its rule. It necessaril)' displays :111 important degree (If autonomy. M:ux commented in 1 8 7 1 that "the complicaTed stare machin­

The " autonomy" of lhe state and the class nature of its

cry ... wirh its ubiqUitous and complicated military, bureaucratic,

bureaucracy

derical and judiciary organs, encoils the liVing society like a boa . u)nStnctnr. .. , The state bureaucracy arises to assure the domina­

The mutual dependence of srares and capltal� does nor, howC\'er. mean that STates can simpl)' be reduced ro the economic entme!>

that operate WIThin them. Tho'ie who do the aCTual runlllng of the state take on functions which competition benvccn firms prevent' firms themselves undertaking. They ha\'e to mediate between Tlval capitals, providing ludlCial systems and overseeing, through cen­ tral banks. the financial system and the natlollal currency. A� Claus OUe put It. "Since 'capital as a whole' exiSts only III the Idea I sense. . . lt requires special guidance and supervision by a fully dif.

ferentiated polJrical-adminisrranve system "." The stare al�o has to providc mcchamslIls for integrating the mass of people into the s)'srcm: on the one hand thccoercive instI­ tutions (hat bear people inro submiSSion (police, secret police,

prisons); on the other hand the m i egr,aivc mechanisms that diven grievance into channels compatible wirh the system (parliamcn­

TMy strucrures, frameworks for collective bargallllllg, reformist. conservative or fascist parties). The proportions in which these

tWO sets of mechal1lsms operate vary from situation ro Situation, 110

lion o f the existing ruling class. but in the process becomes a "parasite"" which IS capable of Mhumbhng under its sway even the ulteresrs of rhe ruling classes. . .

"-'

This autonomy reaches ItS highest pCllntS when governmental power lies with reformist. populist or f:1scist parties wuh a power­ lui base among workers, peasants or the petty bourgeoisie. There are cases when those who exercise such aUfOilomy are able to hreak with and even expropriate important capital ist interesrs Within their rerritory. This was to bc true on numerous occasions III the course of [he 20th century-German NaZism. Argentine !'eronism. Nasserism III Egypt, Ba'athlsm ill Syria and Iraq, arc aU l'xamples. There are also innumerable cases in which individual lapirals behave in ways detrirnenral to the IIlteresrs of "'their" �Iate-moving funds and investl1l('nt ahroad. doing deals with for­ tlgn capitalistS thar undercut other local capitals, evell seJ1l1lg wea.pons to states fighting their own. Yer there are limits to the extent TO which a stare can bre.lk free Irom itS capitals, and capitals from their sta.te. A state may override III

the IIltere:.ts of parth.:ular capitalists; It cannor forget th.1 t its own reve n ues and ItS own ability to defend itself agamst other stares depend on the continuation ot capital accumulation. Com'erscly. the Individual caplral can, with considerable difficulty, uproot Itself

themselves. Tht'\, are aggre�ates of people \\ hose relationshIp ((I material prod ucti on and exploi tation forc(·s them to au ro­ gerher collectively against other such aggregares. In a n inal chapte r to Volume Three ot Capital Marx 111unfilllshcd f

whi,h might disrupt ItS normal rh) truns of explOitallOn and again '"

�iSts that classes ,annot be Idenllfied �ll11ply b)' the "sources of revenues" since this would lead to ,In infinite dl\'l!.ion of classes, paralleling "the infimte fragmenrallon of IIltcrests and rank into which the divisi on of social labou r � pl J ts labourers as well as

uther c.lpltals and thelf starcs.

cap ltaitsrs

from one national Slate terrain and plant itself in anOlher; tml I t cannot operate for any length of time in a "Wild West" Situ:lllOIl wlln no effecrive st3te to protect It both against those forces below

A break between either a STate with us capitals or b) capi ta ls

i a difficult and risky business. If a state turns on with their srate s private capllal, It can create a siruanon

III

which people begin to

1 plral accumul,nion a\ challenge not mcrcl�' private c
and dangerous world. Thi� I1lUtual interdependence betwcen states and capnals has I

ln pl ica tions for an issue which many analysts never even touch

on-the cI,ISS character of the state bureaucr,u::y it�l·lf. The as­ sumption is usually ('ither th.lt it is simply a passive creature of a prn-,ne capiu list class or that it IS ;I separate political formation W ith IIltercsts quite differem to those of any form of capllal. Class

IS seen as depe nd ing on individual ownership (or non-ownership) of property, and the conclusion drawn IS that the Slatc hureaucTaC} cannot be an exploinng class or part of an cxploit1llf! class. Thl!. is impl tcit III the \ie\\ of, sa}. Ellen Wood and David Harvey, who see stare run ecunomic activities as l ying "outside" the system of cap­ Iraltst pfoduction," Such an approach leaves a huge hole when il comes to analysing capI Talism in the century and a quarter since Marx\ death. The total income of society passing through the hands of the state has reached levels much greater than IIlcome gOing di­ rectly to private capital as profits, interest and renr. Invesrmen t directly undertaken by the starc i� ofn'n more than half of IOta I in· "

estmenr

,"

and the STaTC bureaucracv dirc,rly disposes of a vcry

and landl urds� .'; What m,lkes slich diverse groups I.:ome together into the great c la ��es 01 modern SOClery. he argues dsewhere, is the wa}' In whICh rhe rcn�nues of one set of groups arise OUT of the exploitation uf tho�e who make up other groups. As h(' pur it in hIS noteboo k� for CIfJltaf, Capita l and wage labour only express tWO factors 01 the !.ame relati on"." The capltalis P"'i s nnly a cap ltal "t insof,lT ;Is he embodIes rhe self­ "

expa nsion of value, insofar as he is the Pl'f!>Ollific:HlOn of accumulation ; workers are workers only lllsofar a5 " thc obtec­ rive conditions of labou r" confront them as capit al. Since the d irecting layer in the state bureaucracy is com pel led to

,let as an agent of capital accumulation, whether It I1kes it or 110t, It comes to identify its own Interests 3!. n:Hlonal capital1st ,"terests III opposition to both foreign capi tal and the working cla�s. Just as ,he individu al capIta list can choose [() enter one line of business

rather than anothe r_ but cannot avoid the comp ulsion to exploit Jnd accumulatc in whaten'r IlIle he goes IntO, so the "tare bureau­ i one direction or another, bur cannot ignore rhe cracy can mon� n needs of national capital accumulation without risking its own

longer term future. Its "autonomy" con�i�ts in .l limited degree of freedom as [0 how it enforces the needs of national capital accu­ mulation, not In any chOIce as to whether to enforce these or n()t. The dep endence of the st:lte bureaucracy on capIta list exploita­

tion is often con,ealed by the way III whIch it raises its �venues-by ra.xation uf IIlcomes and expend i ture by govern­ ment hurruwing or by "prinTIng. money". All uf these :tcrj"ities r explOlta­ �m. on the surface, to be qUIte different from capi talis ,

of a socicty as expressed In its i uridical definitions uf property.

lion at the point of pruduction . The state therefore seems like all Independent entity which can raise the resoun.:es it needs by levy­ ing funds frum any class in society. Bur this �cmbl'lI1ce of independen ce disappears when the state s activities arc scen in a

Classes. for Marx, depend not on such furmal definitions, hut

wi der

big portion of the fruits of exploitation. An analysis of cl ass in such a SI T uation cannot restrict lIsclf to looking at things as they appear in the offi<:lal "common sens,"

'

on the re,TI social rei:Hions uf production in whIch people find

context. State revenue� are raised by taxing indJv iduals. Bur mdividuals will a ttempt to recoup their loss of purchasing power

1 12

lkYond /I,.larx: Mon<>pol�, War "nti the 'iIJle

Underst:Llldmg til" �Y't"m! 'tar.< and �V(>nJ

I II

by �lruggJes ,II the point of production-the f.;apltalists hy trYIrlj:!; tl) enforce' .l hl�her rale of explO1tanon. the wurkers by attempting

[Q �l·t v.'age increases. The halance of class forces deternHiles the leeway whIch exists for the stare to increase its revenues. These are part at the total social surplus value-parr of the IOtal amount bv ' whIch the value of workers' output exceeds the COSt of reproduc­ lIlg their talmur power. In this sense, state revenues are comparable to the other rev. ellues thai accrue to different sections of capital-to the rents accrulllg to landowners, the mterest going to money capital, the returns fmm trade gOlllg to commodiry capital and the profits of producti\'e Caplr:ll. Jmr as there is continual con(]ict between the differenr �ections of capital over the sizes of these different re\"­ enues, so there is cominual conflict herween the state bureaucraC)­ and Ihe rest of the capitalist class over the size of its

cur

from the

tOlal surplus value. The srate bureaucracy will, on occasiom. use its own special position, with its monopoly of armed force, to make gains for itself al the expense of others. In response to this, Ihe other sections of capital will lise their own special posnion­ industrial "Ipltal it.. ability to postpone IllVestment. money capiral Irs ability to move oversea�-tO fight back. Yet III all this. the di fferent sectIOns of capital cannOi escape their mutual interdependence more rhan temporarily. It eH:nrually asserts itself III the must dramatic fashion, through crises-the sudden collapse of the system of credit, rhe sudden inability to sdl coml1lodltie�, sudden balance of paymem crises or even the threat

nnction, berween those t.:orporations." We can add a further dis ua l c3.pital� an d those who manage the accumulation of IIld l\id the developmem of the who, through the state, seek to promote ual state-wha t may \Ibling capi tals operating Within all Individ

be ca lied "'political ca pltaIISts".

State capitalism and stale capitalists lm of the 10 th century One of the most significant developme nOlnlC sectors. The was the emergrncc of�blg �tatc-()wned eco dm:uon 111 Germany pro Jl ern Int of ole wh the n pla to e 'tate cam III ,he US and Britain as In the laner part of the hrst World \'{Iar Second World W:!r­ the uf st mu t ou gh ou thr any rm Ge as ll we to c.,orbachev and i n ,l nd, of cours�, in rhe US SR from 5tai1n .

C hin a under Mao. on sense" view that the mm "co the ept s acc yst al an ny ma as t JUS so they also refuse to ,tate i s somrthlOg outside of capitalism, · " . 1,,1. I Ita cap e b can s mie no ,Iccept that st.-ue-run industries and eco s rather differently. the classical Marxists, however, saw th ing Hmduding"' among Marx in Volum e Two of Capital was already state capital, so far as Hlhe sum of IIld ivid u.tI capitals", . . . the in mines, railways /o:0vernmenrs empluy productiv�· wage labuur italists".'" Engels speir l·tC, perform the function of industrial cap marck's nationalisatlon Ihls OUf much more ful ly III reacting to Bis n( the German railway system: H

of state bankruprcy. Those who direct the bureaucracies of the

is essentially a capI­ The modern Slate. nu matter whal Its form, ideal personificacion talist machine, the st,He of the capimlisrs, the ceeds to the taking of the toral national capital. The more It pro uJ.J1)' becomes the na­ over of productive forces, the more II act s. The workers remain rional capItalist, the more citizens It explO it relation is nm done wage workers-proletarians. The capitalist away with. It is rather brought to a head.�-

state may not own indi\'idual cbunks of capital, bur rhe)' are forced to behave as agents of capital accumulation. to !x.-come, ac­ cording to Marx's defi nItion. part of the capitalst i class. Marx points out in CapItal that with me advance of capitalist production there rakes place a divi�ion of function within lhe cap­ irailst class. Tht" owners of capital tend to play it less di rect parr in the actual organisation of production and exploita tion, lea VillA this [0 hlAhl}' paid managers. But, insofar as these managers con. tHUle

to

be

agents vf capital

accumularivn,

they relll:!in

capitali sts. Hdferding developed the argulllt.'nt further, pointing to the divisions within a single capitalist class nerwcen the mass of re"tll.'r capitalists. who rei}' on a more or less fixed rate of return on their shares. and "prolTloter� capitalists who gain extra sur­ plus value by garhering together the capital needed by the giant ' 14

UnderSl3ndmg Ihe S),sICm! ,\Ian and lWyond

original economic liber­ f..aursky could argue in the 1890s th:H the ism gets Its name) of the .I!ism (from which present day neoliber,ll ces the capitali�t cla�s" "Manchester school" "no longer m/luen ent urged the necessi!}' IlCc3.use "economic and pol itical developm te", forcing it HfI) take of the extensio n of the functions of the sta ns or industries". ' mto irs ow n hands more and more functio !I

ond Marx: Monopol). \\,';u and thl.' Statl.'

'15

Trotsk} could wme .1 quarter of a century L,ner. in The MllIl/feseo of the C(}/1/l1lltll/St IlIfer/wtional to tIl(' Workers of the World:

The stati"atlon of economic life, against which the capltabst lin­ crall�m used to prote'>t so much, has Oecome an accomplished fa(I, . It is Impossihle ro return nor only to free competition but e\-en til rhe dommation of trusts. syndicatl's and other econorllll <XlOpuSt's. Tudar the one and only issue is: Who shall hcreforrh he the bearer of stati..ed productiOo-the lI11pnialist Sfare or Ihe victorrous proletariar." .

"

Wh:JI all of

them recogni sed was tnat srarl' rather than prrvate ownership of the means of production did nOt aller the fundamen­ ml relations of production or the dynamIC uf rapn,llist accumulation. For Ihe STate, the purpOSe of nationali�cd industry wa� to en.lole domestic ,1Ccumulatlon to match that lIndena ken by foreign riv,lls so as 10 be able to survive successfully in cronomil' and/or military competition. Ttl this end, the Jabour employed re­ m:uned wage lahour_ and the attempt was made to hold ItS remuneration down to the minimal level requ ired to su�rain and reproduce labour power. The state might plan production withlll rh(' enterprises It owned, bm Its planning was su bo rdinated to ex­ tefllal competition. ,USt as the planning within an} priv3tely owned linn W.1S. The self-expansion of caplfill remained the goal. and this meant that Ihe law of \'alue operated and made Itself felt on the IlHcrnal uperatlons of thc emcrpriscs. In beh'HillS like this, stare appointees hehave as much like capitahs[),-as hying emoodlments of capital accumulation at the expense of workers-as do private enrrepreneur.. or shareholders, It was a failure to recognise: this that led Hilferding in the 1 920:. 10 come the conclusion that <-organised � capitalism was o\'erCOI11mg the contrad ictions analysed by Man:. By the late 1 930s state plalll1ln� 111 Nazi Germany led him to conclude that what exisled was no longer capitalism at all. hut a new form of class society, III which �organisation" had superseded "capitalism", and where thl' d ri ving force had cea�ed to be profit making to feed the competi­ ti\'e accumulation of rival capitals" \X'h,1t H , lferding failed to grasp-as do all those today who still identi fy capitalism with the p ri vate ownership of firms COln­ peting rn free markets-is that the system remained based on competi tive accumulanon between differen t capitals, even If these 116

lJnd�rslandJl1g rhe "YSl�m: MJrx and

Bel"om.!

were now military stJte caplt31i!>ms. It was driven forward by the ,arne dynamic and subject to the same contradictions analysed by Marx. This was (rue during the period at total war, in which the mlal sratcs did nor (mde d i rectl y with ea(;h other and naval block­ .Ides greatly limited their competition in foreign markers. Every \uccess III accumularrng milirar)" hardware by a 10rate forced ef­ tOrts to accumulate similar levels of military hardware III its tlvals. Just as the efforts of m'al car producers to outsell each IIcher bring the concrete forms 01 la huu r III different car plants mto a n unplanned inter-relatmn'ihlp with eal.:h other. tran!>form­ !llg mem into different :trnounrs of a homol!enous JbStraCf labour. o too the efforts of ri\al tank-producing states to oUfshoot one .1Ilorher have the same result. Marx desCribed how under the mllrkct caplt.lllsl1l of hIS lime: •

the labour of the individual assertS mdf a� a parr of the labour of society ollly by the relalion!> which the act of exchange estab­ lishes directly he(ween the products, and indirectly through them, between [he producers.'" In the world system af> It developed after Marx's death, military �mnpetition Came (0 play the same ro le 111 bringlllg individual acts IIf labour performed i n differem, apparently closed, STate entities,

ItHO a relationship WIth cach other. .__essary scale to Acquisition of the means of dc\tructlon on the ne( I'\ure success in war depended lIpon the same drive to accumulate III :Ins of production as did (he struggle for m:1fkers-and with thar \Vent the holding down of wages to the COSt of reproduction of tIhour power. rhe forcll1� up of productiviT)' to the level prevailing U " :1 world scale. and the drive to me the surplus for accumulation. As Tony Cliff poimed out lllore than 60 years ago. the nnly dif­ It rence, in mi!> respect. betw("t!n m ilITary and cconumiccompetirion YI,I!> thr: form the acculllulation look-whether it was terms of an 41t,:umul arion of use values that could be u�cd to produce new IlllIKis or of use values that could he u�d to wage war. In either case Ihe Ul1portance of these use values to those controlling them was d('lermined by c(lmparison wim use v;llues el!>l:where in rhe sySTem. I !,;omparison which transmuted them IIlto exchange values. rhis also meant the ratc of p ro fit continued to play a central nile. It no longer determined the distribution of investment be­ I ,.,.een diffe-rent sectors of the internal economy. The requirements " ,ond Marx: Motlupuly. "ar and Ihe State

117

of the nulitary did thi... But 1t operated 3S a constraint on the economy as a whole. I f the ratio of rotaI national surplus value to total Investment 111 the mil itary-industrial mach me fell. this we.lkened the ability of the national state cllpitalism to sll!otain .. clinc 111 the rate of profit It!oelf in warfare with its rivals. The d( could not lead to economic slump. since the war machme would go on growmg as long as there ....a.. any remalOlng mass of sur· plus value to he used up, however small. BUI It could contribute to milltar}' defeat. The same capitalist logic could be seen as operating III the States where new bureaucracies emerged to lake control of the means of production (the USSR from the late 1 9105 onwards." Eastern Europe and China after World Wl . f Two. various former colonial states in the late 1950s and 1 9605). Although they called th em­ selvc!> "social ist" their economic dynamic was dependenr on their inter-relations with the wider capitalist world. If they traded With the capita l ist countries beyond their horders. they were drawn into the logk of commodity production-and the rcquiremenr to remain competitive in markets by undertaking accumulation in an essentially capit
oIllke suhJect to pressure to reduce the price paid for every exertion of labour power to its \dlue within the S\stem
Indefimtely. At some point they had to f.ll.:e hilrd choices If they were not to risk wllapse: they could I n to impose the law of \'alue lin those who laboured for them throuv,h what wutd he a painful .Ind hazardous process of internal restruLluring; or they could take \1C';�rate gambles III order to try to !ohift the v.lohal halance of i their favour. Fuf.the u\ iliJn I.:orporailon Ihis might mean 11,rces n rouring resource'- into one 1JSt, p()��ihl)' fr.lUdulellt, marketing ploy; for those runnjng the ..tatc. to try to usc it" military force to UJmpensate for its economic weakness. Hence the wa} in which the real history 1� capitalism in the 20lh century was very dlff�rent

III the picture of peaceful and honest competition presented 10 eco­ Ilomic textbooks-and accepted b)' some MlIfxists who have not tlndersTOod the need to look at the fcal social relalions which lie heneath surface appearances.

aurarchic policy o( cuning themselves off economlca lly, they could not avoid having to deftnd themselves agaLilst predatory foreign imperialisms. In either case, they were suhJect to the logic of capi­ talism as a world system in the 10th century in the way Bukharin had dcscTlbed in the early 19105. And those who ruled these soci­ eties were a� much "'personifications" of accumulation as were thi" pf1Vale capiTalists of Marx's nme. driven into hlSlorie opPOSition 10 Ihl' wage labourers who tOiled on the means of production. They were, in other words. members of a capital ist class, even if it was a class which collectively rather than mdlvidually carned through exploitation and accumulation. The state seemed, on the face of it. a great island of planning­ at one tIme even half a cominent of planning-within a world of market relations. But so long as states competed 10 expand the forces of production within them more rapidly than each other, Ihe planning was. like the Islands of planning within the II1dividual capitalist enterprise of Marx's time, simply planning to keep lahour productivity abreast with the labour productivity prevail­ ing on a world scale. The law of value imposed itself through such co mpetition on all the units in the world system. Those runmng i dividual enterprises werl' whole �tates. particular stare secrors or n '"

Under,tandmg Ihe Sntem: Marx dml Bc:y"nJ

J'clond Marx: Monopul). War and the Sidle

119

I IIAPTER FIVE

State spending and the system

•

An important distinction •

t( the enormous growth 01 the economk imponanL'e ot the

S1.IIC

W
the capitalism of Marx's time. another was the growth of all son� of expenditures that were nor directly productive. Marx had taken over from Adam Sl1urh a dL�tincuun between ·productive" and �unproductive� labour. Smith had been writing .11

a time when the capitalist mode of production was still in its in­

I,mer and he sought to work

OUI

what W;'IS needed for it to

ullcrcome obstacles to its further advance. He therefore dlstin­ Jtuished bern'een the In

uses

of hired labour that enabled the capitalISt

make profits so as ro further advance production and those

.... hich simply absorbed existing resources. Employing someone to make things to sell was producti\-c; employing someone (0 tend to line's IOdi"idual desires was nor. Or, as it W;IS sometimes put, em­ ploying someone h

10

a factory created wealrh; emplOying someone

a personal servant simply used wealth up. But It was not only

Itrvams who Smith rcgardl.'d as unproductive and wasteful in this \('nse: he had the same attitude to the hoards of placemen and women who lived off the revenues of a stare whICh had not been re­ !Ilrmed fully to suit the needs of capitalist production. I Marx rook up thiS distinction a5 he prepared various drafts for

Capital

and developed his own undcrM3ndmg of ir. He, like

\mlth, was interested in what made c:1piraJism func tion---even if nut of opposition to, not support for, the system. And so his con�

�·ern was with what was "productlve" in capitalist terms.1 Jt was, he argued. that which was productive of surplus value. Llbour which produced f>urplus value enabled capitalists to accumulate; 120

UndC'rst.lndmg [he- S)'slt'm: Man. amJ

l!.o:vonJ

121

labour which did nO! produce surplus value W:1) of no use in thIs

re�olvlllg "rhe conflict between prIvate inrercsl" and narional in­

respect-I[ was "unpruductive".

terests" (eg statesmen, law},ers, police and soldiers). The last sort

In aU this. he was (
were regarded '"by the InduStrial capitala!>lS themselves" as Lnci­

ness- of labour did nOI depend on the physical form or how socially

Jt'ntal expenses of producnon to be kept down 10 the most

useful the product wns. What manered was its ability to create sur­

mdispensable minimum 3nd provided as cheaply as possible.-

plus value-nothlllg else. "This distinction hetween productive and

Marx recognised that sometImes personal services for rhe ruling

unproductive labour�, he wrote in one of his notebooks, �h3s noth­

d.1SS were provided not hy indIviduals worklllg on theIr own ac­

ing to do with either rhe p articular speciality of rhe labour or with

\Ount, but by capit31lsts employing paId lahour to provide them to

the particulat

IIthers. In these cases, he argued, the labour was productive be­

uS{'

value 111 which ... [ltJ . . . is inr.:orporared" .

M3fX\ dlstillctiun was not between malerial production and

�.lUse it created surplus v3lue. The capitalists who employed it,

what roday are categorised as -services" . �oll1e -servic�" have a

lher all, sold the produce of the labour at more than [hey paid for

use value that is boughl and sold a5 a commodity on [he market­

Ihe labour power and pocketed a profit as a result. 1)0 a teacher

or make a useful addition to some Other commodity. These have

t'mployed personally In someone's home to teal."h their I:bildrcn

an exchange value which is determined hy the socially necessary labour ri me needed to produce them and so can provide capital­

was providing i service from which no profir wa!> made and was unproductive: by contrast. a leacher employed by

:.t

company

i�rs with new surplus value. They are Iherdore productive. Acting

which made a profit by (\JIllllng a school was productlve. One did

in 3 film, for in'Otann:, is productive IIlsofa r as it creates a use

IIOt in any way help cnpitalists to accumulate value; the other did.

value (adding ro people's enjoyment 3nd so improving their living

rhe distinction was berween labour that was II1tegral to capItalist

standard) that i" sold profimbly as a commodity by the capitalist

production and accumulation. and that which W3S not.

who employs the actor. Simi larly, moving things from where they

But in Capital Marx also fuund himself having to revisit tbe dis­

are made to where rher can be consumed, as is done by some

unction between productive 3nd unproductive labour in a

tmnspon worker), IS productive, since it is In effecr part of tht'

llafferent conrext-3 comexi which was lOtegrai tn, nm external

praces) of complenng rheir production. By contrast, actors who

10, capitalist

appear on teleVIsion ro urge people to huy <1 particular good arlO

II became incrcaslllgly dependent on many forms of labour mar

not productive, since their labour does not create new use or ex·

produced nothing.

change values.

If merely aids

in the selling of goods that h3VC

already been produced.

Guglielmo earchedi has rightly argued:

production in its torality. 1-or as capitalism developed,

There was the labour involved in mallltainlllg disc1pline inside rhe capitalist emerpri�e-the -work" of m3nagers, supervisors, luremen. There was rhe commercial labour involved in the ex­ , hange of already produced commodities as thcy went through

The category "services" only confuses matters and should be

the various cbains of buying and selling before reaching the hnal

dropped. � A service is nothing more than the useful effect of a

Lnnsumcr. There was the finanCIal labour im'olved in reckoning

value, be II of a commodiry, or be it of labour" [according tel

up profit and loss, advancing credit, and dividing up surplus value

l\Olarx].· Therefore, �services" encompass productive labour

Ilt:tween the various sections of the capitalist class. �tat:\': recog­

(hotels. enterta inment) and unproductIve I.tbour (advenising,

IU

market research) . . . '

,.lpitalism expanded:

use

d that these sotlS of labour would grow in quantity as

1n his first discussions on rhe issue in the early 1 8 60s Marx as·

I t is clear that as the scale of production i.. ('xtended, commer­

sumed, like �mith. th:H unproductIve labour is concerned with

cial operations required cunstantly for the recirculation of

services provided by individuals for the upper classes.� These in·

tndustrial capltal . . . multiply accordingly . . . The more developed

cluded providing "entertainments'·, deallllg with "physiGl1

lhe scale of productlun, rhe greater. . . the commercial operations

infirmities" (dacrors) and �spiritual weakness" (parsons), and

of industrial capital."

122

IlJ

Su�h tlbour could not he regarded 3� productive if the C;\pifali�t

To industrial ca p i ta l the cost" of circulation appear as unpro­

employed it in these ways. an}' more than the labour of the locrvarll

ductive expenses, and so they are. To the merchant they appear

could be. Maimainrng dIscipline. sclhng goods or genrng the ae­

as 3 source uf pront, proportional. given rhe general rate of

COUT1t� done were necessar}' functions thal hOld to be paid for o}"

profir, to their size. The outi3Y to he made on these circulanon

deductJOI15 from surpl us v.llue, not creattve hlbuur that added til

COStS is therefore productive investment for mercantile capita l.. .

surplus value. The�' did not produce "omethlllg ncw, but were

And the commercial lahour which

merely concerned wnh conuollrng the production of vallie Ily

ately productive for It.-

mhers, with tranSfomling it from one form (commodIties) mlO an­ other (money), or with dividing it up between people. The attlvlties of a supervisor, a

bank

clerk or a shop assistant could no more

cre.Ht' value (and therefore surplus value) than could the valet .

ir

buy!>

is

likewise Immedi­

I ht: competition between comnll.'rc1J1 capllali�ts with each other meant that each W
Rut what happened if the pmducti\'e capit31ist used orher capi­

pC)wer. "o r thiS re
talist� to carr}' out �ome of the�e functions on his bchalf? The

"ay as workcr� for capltal 1llvolved in production . The more a

1.lbour employed by these other capi t ll i sts should be counted as productive according to Marx s est3h!.shed defimnon since it en·

,(}mmercial c.\Vitalist held down the wages and 1Ilcrea'cd rhe workload o f his employees, the g.reater W3S thc "h.1re he could

abled them to make J profit . Bur seeing thlllgs like this presented .1

I..l't'p for himself of the payment he gal from the productive c3pi·

problem. The profit did not Mise from incre.tsing the total nmounr

,.llists for p rov id i ng services to them. If It took eight hours of

.

'

productive capitalists direct!}

ocially necessary labour time to perform, say, a certarn �ales t.lsk,

employed people to perform the tasks. It simpl}' amounted to the

hut onl), four hours (() cover a sales worker's wage. then the shop­

second capnalist gcning a slIce of rhc surplus value origInal!) ill

Io.ctping ca pitalist could pocket four hour!. worth of the su rp lus

the hands of the first caplfalist. Marx concluded that (rom the

\ "Iue

of output any more than it did when

pmllt of view of c.tpltalist production such labour was unprodu�·

supplied frum elsewhere

in

the system.

But this did not mean that commercial labour could be equated

producfJve

tive, ('ven though tim �et:nted to be based on a different definition

WIth

of p rod ucri \'c labour to rh3t he lIsed elsewhere. For this reason

m as 01 whole. One creared resources lhat could l!.Imics of the lovstc ,

Jacques Bidet. for rnstance, has argued th,lt Marx was inconsis­

he used for further accumulation, and the other did nor. That is

tent. Yet IT made sense 111 t{'rms of the thing both Adam Smith and

why M3rx is in�istent:

labour when it came to understandrng the dy�

Karl Marx were 11ltcrcsted in-the dlstmction between wh3t ad­ vanced capitalist development and what retarded it. So long as capital iSTS were operanng nt an economic environmcnt

COSts whICh enhance the price of a comm odity wlthom adding to its use value, which are therefore to be classed as unproduc­

in which capita ist l production was not yet dominant, th()�c who em­

tive expenses so far 35 society is concerned, Illay be a source of

ployed workers to prov ide personal service� were providing them

enrichment to the

ll1amly to those whose wealth came from outside the capiT3li�t

this addition to the price of the commodity merely distributes

s)'stem.

The

payments received, for imtance, by [he owners ot a

indIvidual

capitnlist. On the other hand, as

school constitmed a Ifansfer of resources infO the capItalist secrnr

the costs of circulation equallr, they dn not cease to be unpro­ ductive in cha racter. For in sta nce. insurance companic'> divide

from the pockets of pre-capItalist explOIters-resources [hat coutd

the losses of individual capitalists among the capitalist class. But

then be used for productIve 3cculllulation. By contrast. the mer­

this does nOt Stop these equalised losses from being losses so far

chams or shopkeeper!> who handled rhe goods of the productivl'

as the aggregate socia l capital is concerned.I I

c3pltalists got their profit from the .tlready created surplus \'3Iue 01 the productive capitalist. They were not adding to total surplu, value and with it the further accumulation of capital. As Marx put It at one pomt:

'24

UndcrshlUdmg

I he distinction hetween productive and unproductiv(, labour is often seen as a merely scholastic question. Bur once seen in terms 01 what contribu tes to accumulation and what does not. It has

Ih( SYSltm: Marx and 1\(01'0111.1

125

enormous imphcalions-induding some rh;n Mary hml�elt never developed. \\ ha t is "productive of surplu\ value" fo r the individual capitalist (the definition of productive labour Marx used 111 his notebuoks) is not necessarily what IS productive In term!> of adding to rhe surplus value availahle to capital In gen­ eral for accumulation. And I [ IS this is that IS central for the d},namlc of the systrm.

The scale of unproducti\'e labour The

leyel of unproductive expenditures im'olved in sales and fi­ nance grew Throughout the 20th century. Shaikh and Tonak caleul.He· rhaT the number of workers employed in trade 1I1 rhe U� grew from 10,690,000 in 1948 to 24,375.000 in 1989, a nd 01 tho�e 111 finance anJ insurance from 1,1S I ,000 to 7,1 23.000. Meanwhile, the number of productwc workers only grew (rom 32.994,000 ro 4 1 , 1 48,000." Fred Moseley estimates rhe number.) In commerce as gro\\lI1g from 8.9 ro 2 1 million between 1 950 and 1 980, and the number in finance from 1.9 to 5.1 milliun, while the produ'tive workforce only grew from 28 to 40.3 million. I The figures do nor mdude the large number of managerial em­ pluyees who Marx regarded as non-pruductlvc because they are involved 111 poliCing those who acruall) produce value. Simon l\lohun has calculated thar the growth in their numbers and rcmu­ neratlon caused the share of "unproductive" wages and salaries in the "material value added" to the US to ri!oe from .l5 percent in 1964 to over 50 percent 111 2000," The.)e figures al!oo understate the tmal growth of unproductive lahour because they do not in. elude employees il1\'olved III non-productive state functions like the nulllary and rhe legal system.

Unproductive expenditurcs and waste production

1I1t0 this category. So too does labour thai goes into military wcaponry. Although such labour has usu;l lly been regarded as

rroductiH" br Marxists, If shares with non·productive labour the fact that It does nOl add to capitalist a,c;umulauun. For these ',',l.§ons it wa.) argued by Michael Kidron In the early 1970s that it h{)uld also be regarded a... non-produl:tive: The ageing of capirall...m... opened a gulf beTwt.'Cn the two criteria of producnveness that hc [Ma r--.-Cl-IJ used Imerchangeably­ cmployment hy capital and augmenting capital. .. Now thar capital i� king... the- twO criteria are no longer congruous. Millions of workers are emplo}'ed directly by caplral to produce goods and scnices whic h It cannot usc for further expansion under any conceivable circumstancc�. They are rroductlve hy one critenon an� unproductive by the other... (,,\cn the need to cboose, productive labour today must be defined a� labour whose final output is or C;Hl be an input into further prod uction. Only such labour can work for capital's self-expamlon ... To spell it out, n i Iare capitalism only part ()f the surplus can be lL�ed for the expansion of capital. The rest is waste pr()(Jw.:t. "

More recently Alan heeman has also suggested thar the notion of unproductive labour has to Ix- extended to involve the use of IJbour to produce things that are then used til an unproductive manner. "The workers who decked the European Bank for Reconstrucrion and Development III marble art' JUSt as unproduc­ live as the clerks who now walk across it ..... Guglielmo Carchedl, h�' COntrast, argues there i... lahour that is productlvc if It has cre· ;lied new value, even if this does not then contribUTe anythmg to Ihe next round of accumulatlon}- Regardless of how il IS catc­ Kflrised, [he proportion of labour that IS waste from the point of Hew of capital accumulaTion has become enormous. Kidron cal­ �lIlated that "three fifths of thc work aCfUaUy undertaken In the US HI the 19705 was wasTed from capitaJ'... own polilt of view"'"

There i.) another SOrt of labour that also has to be- taken into con­ sideration when examining 20th and lise century capitalism. Thi� IS the labour rhat goes into produdng commodities that are sold like orher commodities hut which do not then re-enter later round, of producllon, whether as means of production or as wage goods. The labour producing l uxury goods for the capita list class fall,

1 �penditure5 by individual c.1pirals that arc neither going to capi­ lal investment nor to the wages of productivc workers can be hroken down into different categories:

126

�IJre Spendmg and Ihc- Sys{c-m

Ihe state sector and non-productive labour

(.1)

Th(J�e conarned wirh the discipllnmg ot the workforce and ensuring I[ works flat out---expendrtures on internal secunty. supervisor)" labour and nm(' and motion measurement. dU'ckmg on work speeds.

(h)

Those concerned with kt:epillg the allegi:lI1ce of the work­ force, eg e),penditures 00 IIlternal public relations, work!> buJletins, management-run works cormmrtees. subsidies to works SPOflS teams.

(c)

Those de\'()(cd to financial transactions, ohtalOlI1g credit. bank charges, erc. Tho:.e devoted to sale�, ad' ('rtising, etc.

Ie)

Those cuncerned with keeping the workforce fit and able III work--company medical facilities. factorY cameens, etc, in •

�ome (;ases the provision of housing for the workforce. Those concerned with trarning the workforce-what maill' stream econfJmists often call " human capital". Expenditures on research and development.

(g)

mainrainrng social diSCipline and ensuring Ihe smooth reprodur.::­ lion of class rdatlons; maintatning state-run or financed forms

n( maintaining popular allegiance

to

rhe system, such as state

produced propagand::l and subsidies to religiOUS instlturroos; the �rperuarion of the ruling ideology through Sections of the edu. lational system; malOtalllrng the financi::ll rntrasrrucfUre of [be \}'>tem through the printing of national currencies ::Ind running <.('nual banks. Aloogs ide these there are exptndlture$ lxnefkial to narionall) hued capitals rn competition with foreign c"pltals, but which, hke

(d)

(f)

.\mong these are those concerned with prnrectrng property,

Expenditures (a) and (b) are unambiguously unproductive. The\ cre.He norhing. and ::Ire only concerned with getting the maximum

ot alread)' created I'alue from the workers. Expenditures (c) and (d) ::Ire unproductive from the poim of view of capita l in general. They do not in any way add to rhe capacity of the system as whok III accumulate. But the indIvidual firm can regard thelll as produl"­ tlve in the s::lme wa}' as Marx wrOte that rhe individual merchant capitalist did-they serve to get control of surplus v::Ilue whICh would otherwise go to rival firms. So advertiSing expenditure. for

the individual capita lists' expenditure on marketing or ::Idvertising,

110 not add to accum ulatiun as a whole. TIll'. includes military

c,,�

pcnditure, slilending on export promotion �chell1es, negotiations with other governments over inrernational trade ::Ind investment regulations, etc. ft was these unproductive expenditures that M::Irx referred to when he wrote: Politic::l! economy III irs da�sic31 period, like the bourgeoiSie icself in its pan'cnu phase, adopted a severely critical attitude to the machinery of the state etc. At ::I later stage jt realised and learnt from experience th.1f the neceSSity for cI::Isses wruch were roraUy unproductive arose from ItS own organisation." \uch growth in unproductive expenditures came to have a big linpact 00

the dynamic of the system after Marx's death.

example, may be seen by rhe firm, like e'\penditure on new equip. ment. as a wa), of expaoding its position In the marker, 01 forestalling arrempts to enter rhe market by other capitalists, anJ so 011. Similar expenditure on patents and patent prottetion m,l� . S a war of gettll1g a stranglehold on the market (1 w i ll he seen I return to the other types of expenditures (e) to {g) below), The growth of state expenditures in the COurse of the hlsr 'en tur}' ha!1 Involl'ed st::ltes tak ing over partial responsibility for man \ of these outl::lYs from the bands of th{' priv::lte capit:ll� based ill their narrona! terrimry. So state expenditures c::ln be broken dOII-'n into categorie� pla}'ing the same or analogous function.. to the eo, penditures of firms. There are those expenditures wbich are de::lrly unproductlll In terms of accumulation througholU the system as a whole '"

\\;lSte output and Ihe system 's dynamic Marx runted at one IlllpOrtant point about non-productive labour III his first ::Ittempt at a dr::lf, for Capital, the Cnmdrissc. He io­ l ludes among the �momenrs" that can del ay the rise in the organic ll1mposition of capital and rhe fall in the rate of profit: the transformation of a great pan of ca pital into fixed capit::ll which does nOt serVl' as agency of direct production; unproduc­ tive waste of a great portion of capItal etc (productively employed capital is always replaced doubly. in that the posing of a producth'e capital presupposes

::I

counterval ue). The un129

productive consumption of capital replaces It on one sIde, anni­ hilates It on the mher. . .'"

III

practice. Wars

and slumps have destroyed immense quantities of output,

10-

corporating huge accumulations of value. and prevented the

Marx- is sapng that f i for some reason par( of the surplus valut' a\.'ailable for investment is diverted lOto some other use. there 1<; less new capital avaIlable for fi.rms seeking innovations lhal will CUI their COStS, and the trend towards capltal-mtensive invesrOlem will be reduced. Tht same point was made much more explicirl} III

Capltalisnl has never formed a closed system

Ihe 1 960!> by MiLe Kidron-apparently wuhou! knowing thai

Marx had speir the argument our.!' He pomled our that Marx's ar gument about the falling rate of profit:

productIon of more. Capual exports h.ne diverted and frozen other accumulations for long strctchc\ ot time. ,.

.\, we saw in Chapter Four, Henryk c.(()��mal1 had recognised that Imperialism in divt:rting surplus value O\t'rseas had temporarily re­ Juced the upward pressures on the org.1ni..: compOSitIon of capiral

III the domestIC economy and the therefore tendency to crisis. He ..Iso at least partially anticipated Kidron's point aOOm the effect nf Iluhta.ry expenditure. He noted that. whIle war� were enormously

rested on two assumptions, both realistic: all ampUl f1ow� back Ulln the s}stem as productive inputs through either workers' or capnalists' productive consumption-Ideal!} there arc no leakages in the system and no choice OIher than to allocate total OUtput between what would now be called In vestment and working class consumption; secondly in a closeu system like this [he allocation would swing progressively in

de..tructive of usc values, Ihey had the dfe"t ot e:mng the purdr n::onomic contradictions of capiwlism !>11lce they

"pulverise

\'.l lues" and "sPhw down accumulatIOn" . By reduung rhe tendency t\lr accumulation to rise faster than the employed labour force they countered the fall i h the rate of profit: The destructions and devaluarions of war are a means of

favour of investment.

warding off the immancnt collapse [of capitalism[. of creating

system, was dropped-in other words. if some of these ourpl1t�

the destruction of capltJ.1 valul'S hOlLnd up with it weaken the

If the first assumption, that all outputS flow back into tht

are lost to the production cycle-then there would be no neeu for invesnnent to grow more rapidly than the labour emplo}'eu, The law of the falling rate of profit would not operate. "l.eak<.� of surplus value from the closed cycle of productionlinve!ot ment/production would offset the tendency of the rafe of prohl fO falL!l As Kidron put it

.1

breathing space for the accumulanon of capital. .. War and

breakdown [of capltalisml and necessarily pro\'ide a new im­ petus to rhe accumulation of capllal. . . Militarism is a sphere of unproductive consumption. Instead of being saved. values are pul\'erised.l' \lilitary expenditure is a particu lar form of w,lste that can appeal

1\1 capitalists connected to a particular Slate. For it enhances their III

l.lpaciry to struggle for control of worldwide surplus value wuh

a later work:

mal capitalists. It IS tunctional for na{lonallr hased complexes of

In Marx the model assumes a closed system in which all output flows back as inputs in the form of IIlvestment good, o r wage goods. There are no lcak�. Yet 111 prinCIple a leak could insulate the compulsion to grow from ItS most unpor·

l.lpital in the same way that advertising is for individual firms. "ven while wasring resources for the system as a whole. It was therefore a characteristic phenomenon uf Ihe cJ::Is!.icai form of im­ pcrialism that led to the Fi.rst World War-and it survives today in

tant consequences . . . III such a case there would be no declinl'

the massive arms spending of the Umted States in particular.

in the average rarc of profit, no reason to expect increasingh severe slumps and so on. lI

Marxist economists. It is absurd. they argue, to see a deduniun by

The argument is impeccable, and Kidron goes on to suggeSt thl' form these leaks have taken: 130

UnaCfSfllndintl: the Syuem: Marx and

Bernn.!

The logIC of arrns-bascd ecunomic expansion has esca ped manr the state from the total surplus value a!. somehow countering the tcndency for surplus value to grow more slowly than total invest­ ment costs, and so overcoming the fall In Ihe rate of profir. What ....IIte Spendmg ..nd the S)'stcm

131

they have failed to understand is that this �absurdlty" is juSt part of the greater absu.rdity of the capitalm system as a whole, of It� conmldlcrory narore. The) have not seen that engaging in military competition can � ,ust as much a "Iegltlmate� capitalist goal 3!> engaging in economic competition for markets. As we saw in the last chapter. one of the greatest followers of Marx, Rosa Luxemburg, could not understand how capitalism could continually-expand the value embodied In means of produc­ tion without producing more goods for consumption. Similarl}. these MarXIsts have not been able to understand how capitalism could possibly benefit from conrinuallr expanding the means 01 destruction. The) have been so bemused by the irratlOna lit ) 0 1 what capitalists are domg as to try ro deny that this is how dH.' system works. But such expenditures had enormous implications for capital· ism in the laner part of the 20rh century. Waste expendlture� played a contradicwry role. Ther reduced the aOlOU", of surplu" value available for productive mvestment, so counteracting the tendency towards over-rapid accumulation llnd CriSIS. But the eventual effect in slowing down accumu lation was to create a whole new senes of problems for the srsteOl, as we Will sec In Chapter Nine.

Welfare and Ihe supply of labour power Not all the state expenditures listed earlier fall into the unprodu(':· m'e category as narrowly defined or Into the wider category 01 waste. Sratc-financed research and dc\'c!opmenr (corresponding [0 category (g) In the lISt above) that feeds through into aiding accu· mulation in the wider economy dearly plays a role for those capitals that benefit from it. similar [Q that of dead labour embod· led in means of production. Bur what of expenditures on health. education and welfare services (eqUIvalent to the expenditures {e) and (f) of individual capitalists) ? Here it is necessary to examine someth ing Marx only discusses In passing-the reproduction 0 1 the working class that capitalism needs for explonation. The first industrial capitalists of the late 18th and early 1 9th cenrurics in Britain did not bave to worry over Illuch about tile supply of labour power. It \vas available in abundance once " prlm· itive accumulation" had driven sufficient peasants from the !:ll1d. IJ2

I hey assumed they could bend former peasants and their children II) the discipline of unskilled machine mindi!lg.� while relying on Jr.1wing men trained as artisans mfO rhe factories for more skilled "ork. For these reasons, Marx, who dealt at length with pnmitive lu:umularion and the treatment (If workers 10 the facrories, virtu­ .l Ily ignored the problem for capitalists of getting a labour force wah the nght physiques and skil1$. Yet by the time of his death, the pread of capitalist mdusrry to ever newer new se..:tors of produc­ lion was making the supply and management of labour power---outside as well as inside the factory-somethmg of in­ �reasing concern to tnose promoting capitalist accumularion. The individual capitalist aimed to pay the mdlvidual worker lu�t enough by the hour, day or week to keep him or her fit and motivated to work. But this did nOl cater for a numher of impor­ l,lIlt rhings it labour power of the right quantity and quality was Kuing to he available for rhe capitalist class as a whole over time. It �lid not take into account ,he need for workers to learn necessary ,kills nor did it sustain them through periods of unemployment so .1\ to be able to �upply ,heIr labour power when the crisis ended. Ir \lid not deal with the prohlem of workers temporarily losing their \,lpaciry to be productively exploned through illness or injury. .o\nd it did not provide for the upbringmg or working class children ",ho would be the next generation of labour power!There were various ad hoc attempts 10 deal With each of these problems through rhe 19th century. Religious and other charitable lunds provided some relief for rhe unemployed or the sick. Pressure was put on working class women to bear the burden of ,-hild rearing through Ihe propagation of ideologies that treated men as rhe wage earner and men's wages as a "family wage� (even Ihough working class women alwa)'s worked to some extent and a man's wage was rarely adequate to keep a family):!' Some firms would provide housing under their own comrol--and sometimes l1Iinimal health facilities as well-for their workforces. Groups of .killed workers would run funds to provide for periods of unem­ ployment or sickness. Firms would Incorporate into the factory ",Ste.m a version of the apprenticeship system of pre-capitalist ar­ t;�anship, with youngsters learning a trade by working under ,killed wurkers for five or seven years on minimal wages. But over rime it became clear that the ad hoc methods were in­ .IJequate and that the st,1Ie had to take over man)' of the tasks from private capitalists and charitable concerns. In Britain it inrcn'ened '\I:.te Spcndmg

and Ih� Sysu:m

133

a!> carl)" as the 1 SJ4 Poor Law to ensure that thr conditions under whi,h the unemplu)"cd or the infirm could get puverty relief were so arduous that those who could work would. howc\'er low thc::

p.ly. In 1 848 It cstabbshed a Board of Health to act against the !>prcad of diseases n i working dass areas-which was affe([ing ri,hcr drcas too. Over tbe decades t i was caloled IIltO hmi[in� tht·

workmg hours of children and barring womeu from occupanons that might damage tbeircapacity to bear and bring up the next gen. eranon. In the 187051( moved to set up a state system ofelementM� education and to encourage the bUilding of homes for skilled work. ers. Then In the first decade of the 10th century it made the fir!>t

moves to coordinate the \'arious ad hoc measures of the previous 70 years into national structures to provide minimal social lnsur. ance benefits for unemployment, old age and 5Ickner.s.; Tht"

impetus TO do so came £rom the !>huck of disco\,fring 111 the cour..e of recruitment for thr Boer \Var how few of the working class were healthy enough to undertake military service. Ann Rogers has sum rnarised the reaction of the upper and middle class:

The belief that change was necc�sary if Britam was to compete successfu Ily with Gennan), and the UnIted States remained cen' trOll. Whether the :lTgumenr was formulated by tht' "abians or b} Lloeral Imperi;l lJS{s the concemration was on the damagt' that poveny wa!> doing [Q societ)' rather than the mi!>l'ry I I caused mdividual workers... The underlymg reason for the desire to Improve the health of the working class W:lS the need for a healthier labour force in the factories and the army. These measures \,>en: not simply a resuJt of capitailslS getting to­ gether and deciding what was ratIOnal for their system. They came imo bemg only after rccurrent campaigns ill\ olving u pper clas� philanthropists with a conservative disdain for the money·gran­ hing grubbiness of capitalism, middle class moralisers about working class behaviour, political opportunists OUt to get workinv. chlss votes, factory 1Ilspectors and doctors with professional can. cerns about peoplc's safety and well-being-and, alongside th em and often indcpendenrly of them, trade union and socialisl ac­ tivists. Bur such coalitions framed the proiects they pur�ued in terms of what they saw as rational for capitalism. And that meanT what was necessary to supply it with pools of suffiCIently health\ and skilled labour power. This was shown clearly by one featurr 134

Und�nlandlng Ih� SY�I"m: Marx .and ik)'onJ

Ihlt characterised the rdorms of the earl)' 20th centurr just as much as it had the charitable efforts of the early 1 9th cemury. Any henefits were always to be provided in such a way as to coerce into \Ct'king work all those who were fit and able. The principle of "less l'hgibllity" had to apply: getting the benefit must still leave the re· upients worse off than the worst paid work. What IS more, the h('nefits were not meam to come from a diversion of value from '-.1pital to laborn, but by a redistribution of income within the working ,lass through the "the insurance principle". Weekly pay· ments from rnoS(' able to work were to su<;taill those unable to do �o because of sickness or unemployment.

The role o f the state in the supply, traimng and reproduction of labour power grew through the 20th cemury, reaching a peak in the long boomJrom the mid· I 940s through to the mid-1970�, and comin uing into the new period of crises which followed. All Ihrough this the "welfare state" continued to be tailored to the in· lerests of nationally based capirals, even when the impetus for l'xtending its role came from below, as during the Second World Wa.; when the British Tory politician Quintin Hogs famously de· LIMed, "if YOll do not give the people social reform, they are going 10 give yOll social revolution" 1 1 The British Labour minister of the .

1 9405 Aneurin Bevan argued that public health measrnes had i'ICCome part of the system, "but they do not Oow from it. In claim· II1g them capitalism proudly display� medals won in barrles It s

�a

lust".il The fact, however, is that those who formulated them-m· eluding Bevan-did so in ways that could fit in with the nceds of the system. implications for the labour power that goes i This has mportant i a 1I1to such services-a nd for the people who supply it. There s widespread tendency fur Marxists-as well as some non­ Marxists11-to insist rnat such la bour cannot be productive Since it dlXS Dot produce commodities directly. BUI that also applies [0 much labour inside any capita list enterprise, which is merely a pre­ londition for other labour that produces the final products. It is productive as parr of rhe labour of the "collecrive worker"" in the l' nterprise. A fully trained carpenter or bricklayer can be many limes more productive rhall an unskilled onc; a fully trained [001· maker can do jobs an unskilled lllbotirer is incapable of. The I.lbour of those who train them IS adding to the capacity of the col· lel:tive worker to produce value. And they arc exploited, since they are paid the value of their labour power, not of the training they \laic Spendlllg and (hr Srm·m

I3S

provide. There can be a debate over exactly how the skills added by their labour fit into Marx's categories: are they to be equated

With plant and equipment as a form of constanr capit.l l or as Simply enhanced labour power, as variable capital ? There arc also debates between individu al firms over the merits of underta k.

109 training progral1'mes. They may gain in the short term, but what IS to pre\'enr (lrher firms "poaching" their skilled labour Witham ever having paid for its [raining.I. Finally, there are argu mems about how

charactense rhe labou r used ro train other workers: is it "producTive" or "indjrectly productive"? But there should be no doubt abom irS role in increasing overelll potential 10

OUtput and producri"ity: it is part of the total productive labour 01 thc firm and of the sYHt"m as a whole." A hig portion of the l abour that goes into the educational system plays 3n idemical role

111

providmg the skills capital necd�,

:llthou �h in this case the skills are not a\'ailable simply for individ. ual capitalists, bur for all the capitalists operating from within the

state that provides it. The training in skills which future worker., get fcom a reacher in an educational institution adds 10 the amount of socially necessary labour they can produce in an hour in exactly [he same way as rhe ttaming they might get inside an enterprise. And the cost of the [faining is part of rhe COst of providing labour powef, just as much as the wage that goes iuro buying the food, . clothing and shelrer the workers require. Emerprises under modern capItalism require labour power With at least minim.1 1 le\-cls of literacy and numeracy. The teachers who provide thi� have to he conSidered as part of the collective worker, ultimateh

�

working for the complex of nationally based capitals that the St:1t ­ service... Apologist!> for capitalism recognise this inadvertenth

�

when they refer to the provision of education as "adding to soci 1 capItal" and demand �value added" in schools. The same general principle applies to health services that cater for actual, potential or future workers. Spending on keeplIlg thl'

workforce fir and able to work is in reality a part of the wage even when It is paid in kind rather than in cash and goes to the worker,

collectively rather rhan individually. In Marx's terminology, it i .. pari of "variable capital", Th is is absol utely dear in countries hkt'

the US where heahhcare is provided for most workers through in­ surance M:hemcs provided by their employers. It should be just "..

dear in counrnes like Britain where the $fate provides them on behalf of rhe nationally based capitals. The popularly used term 13.

Unda)undlJlg [ht Svs{rm: Marx and Ikrolld

"'iOCial wage" i s an accur.1fe description. It is i uSt as accurate when Applied to unemployment benefits available only to those who ,how [he), are able and willing to work, and to pension schemes

�Ie!pendent on a lifetime! of labour. The capitalist W
mem to their work urness there is some sort of pronusc rhat they will not S[an"e to death once they reach retirement age. As Marx rut it, there is a histOricaUy and socially determilled elemem to the �nSt of reproducing labour power as well as a phYSiological one. But labour power Is..nm a n obleCt like orher commodities, ....hlch are passive as they are bought and sold. It IS the living ex· pression of human beings. What from ,1 capltahst point of view is

"recuperation of labour power" i.<. for the worker the chance for rdaxation, enjo ment and cre:ltIV lly. There is J slTlIru;lt' over the )Cial wage lust as over the normal wagc, cven if both are, to a cer­

y

t.lln degree, necessary for caplt:11.

The problem is compounded from capit'II's point of view by rhe LtC! that not alJ welfare provision is in any sense productive. A K(,oo portion of it is concerned solely with maintaining the exist·

illS relations of exploitation. Studies of the schooling of working ].\\s children in the 19th century emphasise the degree to which as incul· 1\ hat was invoked was nut education in skills so much

1 ,111118 tmo them discipline and respect fur authomy." Not until I He in rhe 19th cemury did a concern with basic skIlls for the wurkforce begm ro become a cemr,,1 preoccupation for British I ines like cco· • 'plralis m facing foreign compel1t1on. . Today discipl

nnmics and sociulogy are about tf)'ing to reproduce bourgeOiS 1011'ology, while others like account,lnC) arc concerned with the un­ I mducrive redlsrnhutmn of surplus value among members of me \

I!'tralis[ class.

If capital has no choice hut UJ tolerate these unproducti\'e "cx­

!'I'nses of production " , there are other elell1ent� in welfare '
"r .lfe incapable of prOViding it (rhe chronic sick and disabled ). It Ii !\ a simila r attitude to provision for the mass of the elderly, but I restrained to some degree by it� need to gi\e (he lI11pression to

, "rrently employed workers that their future is assured. Marx idc Ihe "reserve army of l'oI1Jlred out that there exists, alongs "

Spend,ng and mt Slsltrn

13'

labour", .l ble to enter the active labour force whl!n the sy!.tem un­ d('rgoes periodic expansion (and in the rneanrune exercising .1 .. nward pr�sure on wages), a surplus population dm

111

whose­

sunlVal II has no real interest apart from that of wardll1g off rc­ hellion and prtventll1g a demoralismg Im pact on the employed workllig class. The history of weUare legislation over the last J 80 year::. has bttn a history of anernpts to separate tbar provision which IS nec­ essary for capital in the same way that wage pa)ments are and that which is unnecessary bur forced on it by its need to contain popu­

In the welfare, health and educational sectors who could at one .rage of capitalist development regard themselves as part of the I)rofessional middle class-with sala ries and t.:Onditions compara­

hie

to lawyers or accountants-find themselves sublect to a rraumatlc process of proletarial1isation. This, as we shall see. adds

[he problems that beset national C.lplI.llisr Hates as they at­ tempt to cope with sudden crises. Publil: expenditures become a "entral focus for class slruggle in a war in whu:-h rhey were nor i n 10

\ta.rx's time.

lar di5(:onrent. ThiS Ilnds expression in repeated debates among [hose who would manage national capitalisms over how welfare

•

policy interacts with labour market policy, among mainstream economists about the "natural" or "non-mflationary " level of Ull­ employment, and among sociologists and social work theorist!>

•

about the .. underclass ". The division hcnveen social expenditures that are in some wa} productive for capital and those rhat are non-pruductive cut& across some of the normal ways of dividing up national budgets. So education is both traiDing for productive labour and also tram­ ing for unproductive forms of labour (eg in SHies promotion or Ilnance) and [he inculcation of bourgeois ideological values. Health services and unemployment benefits both keep the work­ force Ilt and ready to provide labour power and are mechanism� for maJlltalOing social cohesion by providmg.1t least minimal pro­ \'j,lun for the old, the inllrm and the lung-term unemployed. These ambigUities become important whenever capital Ilnds the COSts 01 state pro\'ision begin to CUt into profit rates. At such points stares come under the same pressure ::as do hlg capitals when faced with sudden cOlllpetition-the pressure to reo structure and reorganise their operations so as to accord with the law of value. On the one side this means trying to Impose work measurement and payment schemes on welfare sector employees similar to those within the most compt'tltlve industrial firms. On the other side it means curs in \\elfare pro\'i�ion so as to restrict it as much as possible to :.ervicing labour power that is necessary for capiml accumulation-and doing so in such a way that those whu provide

fhi!> 1.lboW' power afC

prepared to do so .lt the wages the}

are offered. These pressures grow as managing labour power becolllt'!< more important for the state. In the process, employees working 138

Undcm�ndmg Ihe System;

M�rx and 8cyol1J

'Ute

S(X'ndmg �nd 1M- System

13'

I'art Two

CAPITALISM IN THE . 20th CENTURY •

140

dedine in output,z and worl d trade fell TO a third of us 192 9 level. By comparison, both world output and world trade had grown during the prev ious -Great Depression " uft he 1 870 s and I 880s.

priced themselves out of their lobs by not accepting cutS Ul their money wages. Had they done so, the magic of supply and demand would ba"e solved all the problems. Irving Fisher belatedly put

forward a monetarist interpretation, arguing that the money ..upply was too low, leadlllg to falling prices and so cumulatively

The I 920s boom The Ideological shock of the crisis was lflcreased by the way capi­ laltsm had sl'emed to have reco\'ered in the pw:edlllg years from the destrucrion of the Firs[ World \VaL Industrldl Output In the U� h:ld doubled from 1 9 1 4 TO 192 9, with [he emergence of a host 01 new industries that bt'gan to revolutionise patterns of consump­ tion-radio, rayon, chemicals. aviation, refngerario n, and the replacement of horse·borne hy motorised transporr. The boom In the US had a beneficial impact in Europe. Germany, rac ked bv ci\ll war In 1 9 1 9·20 and tben unparalleled inflation in 1 923 , ha then seen industrial output grow 40 percent ahove irs 1 9 1 4 level. [n France industrial produnlon had doubled. The pre ss had dis­ played a system 10 which the anarchy of the market and the tren d towards crisis had dis.1 PPCilred.' Suddenly Ihe}' were all proved wrong. The imtial reaction uf mainstream politicians and their fellow tra\'ellers n i the economics professlC)n was 10 assume that the} onl y hold to walt a short tlOle Iump would heglll to cor rect itself. �Recovery i� lUSt around the corner," as US preside nt Herhert Hoover assured people. But recovery d,d nor come III 1 930. 1 9 3 1 or J 932. And The economic orthodox}' which had bee n so confident in ItS pr�lise o( rhe wonders of capitalism so recenrly could nOi ex­ plain why-and it <;tlll cannOt explain \\hy today. There have been attempts .n explanation. The mosr com mon among the most orthodox at the time W
d

."

I ngllsh economist Pigou. Workers, according to his argument, had

LaplfOIhsm In 'he 20,h CtntUTI'

Increasing debt levels. More recent monerarist theoflslS put the

hlame on me behaviour of the central bankcrs. If only, the argu� ment went, the US Federal Reserve Bank had acted to STOp the

money suppl) contracting in 1 9_30 and 193 1 , then cverythlllg would have been all right-the arch monetarist of the post-war decades, rvLlton Friedman. traced It!. mistakes and the depth of the

\Iump back to the de.nh �)f New York Reserve Bank president Benjamin Strung In October 1928. By contrast Friedrich von Ilayek and the '" Austrian" school argued that excessive credit In the 1920s had led to "an imbal ance in the structure of produc­ tion",' which would be made worse by incre'lsing the money \upply. Still other economists blamed the dislocation of the world

economy in the aftermath of the First World War, while John

Maynard Keynes stressed an excess of �aving over lIwestment that led ro a lack of "effective demand" for the economy's Output. Finally, there was rhe claim, still perpetuated ill lTluch media com·

mcorar}' today, that the raising of U� tariffs by the Smoot-Hawley Act in the summer of 1930 unleashed a wave of protecrionism pre­ "coring a recover) that would otherwise have occurred If free

trade bad been aUowed untf.lmmelled sway. Ever since then the proponents of each view have found it easy to tear holes III the dfgumenrs of tho..c holding the other \'iews,

with none being able tl) survive s(.'rious criticism. That is why the

current Federal Reserve head, Ben Bernanke, secs expla1l111lg the slump as the ever illusive Holy Grail of hi!. profession. Yet if the �Iump of the 1930s cannot be understood, neither can the chances

i rhe 2 1 St century be �eriousl}' assessed. of it recurring n Disemangling the real causc\ uf the slump from this mishmash

of contradictory argument ill\ol\'es, first of all, looking at what really happened during Ihe 1 920s.

Rapid economic growth and the proliferation of l1ew consumer goods had encouraged people to sec lhis as a decade of continual rises ;n living standards and enormous producti\-c l11vestment-3 Story that is still frequently accepted today. But in fact wages rose by a total of only 6. 1 percent between 1922 and 1 929 �wlth no

TM Great Slump

."

{ IIAJ>TER

SLX

The g r e a t s lu m p

An unprecedented crisis •

I he deepest slu m p capitalism had ncr known followed br the m

ost sustained boom, IIlTcrspe rsed wilh Ihe bioodlesl w ar in human �story. Such was the co urse of capnallsm III the middl e 50 years of the twentieth centur y.

The epicentre of the slu m p was the UniTed St.Hes. whI Ch had rmerged from the Fir!>t W orld War as the greatest ec onomic flOwer, with 50 percent of glob al industrial producflon, ov ertak­ JOg both victorious Bmain an d defeated Germany. The on set is offen idcn[Jfied with the W aJl Street Crash of 29 Octob er 1929, when the New York srock exchange fell by almost a th ird. Bu t "business was aJready in tr ouble before the crash", wu h auto HUtpUt do w n by a third In September compared with March 1 92 9. 1 Over the next three years US industrial production fell by .•bout half, an d th e sl um p spread across the A llantic to Europe, where there were already InCi pient signs of crisis. German indus. trial production also fell ab out half an d, with a sligh t delay, t rench fell by nearly 30 perc enl. Only Britain saw a smaller {all­ uf ab ou t 20 percent-bu l th at was because irs heavy indu stries were already in a depresse d condi tion . By 1932 a third of the workfor ce 111 the US and Germany w ere unemployed imd a fifth III Br imm. Those hu were no t only manual workers as in prevIOUs crise s, but whirl' collar empluyee s who thought of themselves as belo nging to the middle class. H undreds III local banks wem bust in the US and some giam banks in Eu rope �o[Japscd spectacularly, destr uying people's savings and ag gravat­ Illg me gemer,,! sense of disaste r. H ining all industrial countri es at nllce, me crisis destroyed the demand for rhe output of ag ricultural (;()untries, driVing down the prices farmers received and creating VlSI pool s of misery. N o region of the globe avoide d at least some 14'

increa�e after 19251 and the manufacturlllg workforce remained st.uil white rndusmal production exp.lOded by about a tllIrd. l\hr.:hael Bernstein n(Jfes that �the lower 93 percent of the nun farm population saw their per capita disposable income fall during the bovm of the late 1 920s".

The fall m labour's sh.lre of tmal

income meant that the proportion of national output that could he bought with wages fell. The economy could only kt.'ep expanding because something else fille d rhe resultmg gap rn demand. Many analyses have argued that investment fulfilled this role. Gordon tells how much recent literature sees "that the most no­ table aspect of the 1920s was overlnvestmem"." A chastened Hansen nored in his analysis of the slump that. although
�Stimulatll1g and sustaming forces Outside busines!;

Investmenr and consumption were present . . . wlth these stimuli re­ moved, busllless expenditures would have been made on a more restricnve scale, leaving the economy stagnant if not depressed�.'� Hansen. as a malllsueam economist. even if by now a crHical one, saw these forces as being Mnon-business capital expenditures (residential building and puhlic consrruction)" and " the growing IInponance of durable consumer goods financed in large part b)' a bllhon dollar per year growth of instalment credit" and �rathcr feck less foreign lendmg". ,. A classIC Marxist analysis of the slump by Lewis Corey putS rhe stress on the growth of luxury consumptIOn, unproductive expen­ ditures and (red it. The t 920s were a de(ade in which incomes frolll dividends and managerial salanes rose sevcral dmes faster than rca I wages,li until "rhe bourgeoisie" (induding the non-farm petty bourgeoisie) were responsible for over 40 percent of consumption, "6

Capu;lllsm 111

lhl.' 20th u-mury

w1I1g expenditure on �d­ .according [0 him.I' Then there was gro markets for �he gr�wlflg venising and sates drives as firms sought hIS expenditure, 111 the number of goods they were turning out-t se same industries, could lorm of lflcomes for sales personnel I n the busmesses were trying Ihen create a market for some of rhe goods - enOl hied the middle class to sell. A doublmg of consumer credit never ne\'cr" some of and some layers of workers to buy "on the sale!. at a level III 192 9 the nt'w range of consumer goods, With l:3r And fina lly there were up­ they were not to reach agam until 19S3. lent In real estate an d ,urges of non-productive speculative mvesm create fre...h new surplus Ihe stock market. Such {hmgs could not ty (they merely involved val ue to solve tht' problem of profitabili anorhed. But thclr br­ lunds passing &om one capitalist rxx:ket to III new hu ildlllg. new product was �lproductive expend iture UmplH)Il. all 01 wll1ch managerial salaries and consplcuou� com ou r by Industry, cncour­ absorbed some of the gHods heing poured .11;ing further speculation: more aggressive and Superabundan t capital became more and profit. overflowlIlg advenrurous in its search for investment and culation seized upon into risky ellterpnscs and speculation. Spe wcre introduced re­ technical changes and new ind ustrles which a whole . . .;' gardless of the reqmrements of industry as ion rose by more �ha n ucr str eun l tia den esi n-r no new on 1g dll pen e III the central busmess half over the decade, an d was �mosr intens e in New York. where abl not st mo s wa is Th . es" citi (If cs rric Jis pirt' State Building. work o n the world's tallest bu ild ing, the Em hy 193 1 as �th e Empty began in 1929--only for it to be known �tate Building".u , c ex­ mi no ost to eco While the US boomed, there was also a bo can funds that CQuid pansiun i n Europe with an mllow of Ameri sed by the war-the make up for some of the destruction cau s particularly important Impact of the US Dawes plan of 1 924 wa in encouraging loans to Germany. capacity to sustain the These factors were already losing thelf ash. There was the h�­ boom in industry before the Wall Street Cr . Investment III of e urg ups ef bri a but 7, ginning of a recession in 1 92 the rest of the ec nomy heavy industry and autos in I 92t:!-9 pulled . S thi 9. 9 1 of r me sum ly ear _ and ing spr late the In en, Th l' rd. wa for m fixed im'estmenr-' and came to a sudden end, with a sh;lrp fall

�

TlK- Greal Slump

auto produCTion.!J The expansion of credit and the scale of specu lauon that susramro unproductive expenditur es had hidden thr underlying problems right up to tbe last minute . But once therl" was a Single tmy brmk in the chain of borrown i g and lendmg thJI held it up, the whole edifice was bound to Com e tumhling down. Marx's comment aD crises could not have been more apposite: The semblance of a \'cry soh'ent business wit h a smoorh nO\\ of returns can easily persist even long after returns acrualh come 10 only at the expense partly o f swindled money.lender) and partly of swmdled producers. Thus busine ss always ap­ pears almost excessively sound right on the eve of a cra"h. Business is always thoroughly sound untl I sud denly the deback takes p lace!" The recession precipitated a sudden contraction of speculative ven tures and unproductive expenditures, so (('duei ng .!otil! further tb(' market for industrial Olltput. Faced with declini ng sales. industri. allsts were already beginning to borrow fro m the banks, rather than lend to them. Those who had t'ngaged in the speculari ll' boom (including both industrialists and han ks) now tned to borrow more in order to cover their losses after the crash, but bor. rowing was now ver} difficult. Those who cou not ld borrow Went bust. creatlllg further losses for those who had lent to them. Thl" slump spread frum one sector of the economy to another. Once the decline st,U'ted there seemed no end to It. Induslrial de. dine led to pressure on the banks, \\hich in turn deepeneJ IIldusrrial decline and PUt more pn'ssure on rhe banks. Bur Ih.ll only furrher exacerbated the disproportion betwee n producti\-'e ca. paciry and consumer demand, further wo rsening rhe cnsis in mdustry. As firms tried to susram sales by com petitive price cut. ting, profits everywhere fell and With [hem the will ingnelos even 01 firms that survived to invest. The non-produ ctive expenditure� that helped to fuel rhe boom were cut right hac k as com panic, tried to conserve their fund!. and rhe slump grew deeper, The position III Europe was flO berrer. with rec�'ssion also al. ready under wa y when Wall Street crashed, Cond itions were worst in Germany, rhe world's second bigges t industrial ecoll­ amy, which began experienCing an econom ic downturn in 1 928:1" By rhe summer of 1 929 the existel1l.:e of depression wa� unmistakable" ,�. as unemployment rcached 1 .9 million and rhe ..

'"

C:lpUJIU;n1 I" rh� 20th umuTl

\rectacular failure of the Frankfurt Insurance Company began a \tries of bankruptcies. Problems in each country ImpaCTed on those in others. There had already been an outflow from Germany of some of the American funds associated With the Dawes plan before the Crash. II now became a torrent as hard·hit American Illstlrutions recalled their short-term loans from Germany, creating difficulties for (,erman industrialists who had been rctying on them to finance their own industrial overcapacity. Austria's biggest bank, the Creditansralt, went bust in May 1931. Britain was hit by the with­ drawal of foreign fund�from ns banks, and broke with the world hnancial system based on the gold Standard. This in turn created vastly exaggerated fears in the US where the Federal Reserve Bank raised interest rates, and there was �a spectacular mcrease

�

III

bank

lailures"'" and ndustrial production slumped even more. The proliferating impact of the crisis made it cas)' for people to (onfuse effects With causes. Hence the contradictory interpreta­ lions from mainstream economists, with some blaming too much money, some too little; sume centra l b;lIlk interventions, some lack uf intervention; some excessive consumption, some too little con­ \umption; some the gold standard, some the turn of stares to protectionism and competitive currency devaluation; some the ra­ pidity of tbe growth of investment, some its tardiness; some the lorcing down of wages, some theIr �stickilless"

III

falling; some the

'oI.ale of ndebtedness. i some the refu ..al of the banks to lend.W Yet amidst tbe contradIctory Intetpretations rhere was an acca­

\iollal parrial glimpse that somethmg fundamental was causing havoc to the system to which all the mainstream economists and politicians were conunittcd, The tWO economists usually thought as representing polar opposite attitudes, Keynes and Hayek, both rumbled on the same factor but in such a way that neither they nor their apostles took It serioLl'oly. The main theme running tbrough Keynes's General TIJeory of l-:m/J/{J),mellt. TlIlerest and MrHle), was that saving can exceed JJl­ vestmenr, opening up a gap that reduced the effective demand for Koods. and therefore output, ulHil the reduced level of economic .activity had cut saving down to the level of investment. This could be overcome, he argued, by cutting the r3tt' of interest (" monetary measures") and putting more money in people's pockets by tax (uts and increascd governmeor spending ("fiscal measures"). But he recognised that these measures might not work, since people .. { Slump The Gr�

14.

and firms might stdldecide to save rather than spend. In particu lar he wa� "somewhaT sceptical of the success of a mereh monetary policy directed towards influencing the rate of inter­

est'"." He IS best known for explai nmg the weakness oj IIwesrment on rhe crowd psychology of speculators-"when (h�'

capital deve/opment of a coumry becomes a by-product of the al;­ tlvltles of a casino, the job is likely to be ill done" ,z_and th�' naMing "anim al spirits" of entrepreneurs.II But at pomfS in thl' text he threw

another factor. He argued that the very procc,>" of expanding capital invesnnent led to a decline in the rerurn on III

It-in �the marginal efficiency"-and therefore to a blunting 01 the spur [() further invcstment.'·

He helieved the declining "marginal efficiency of Caplt.l ' " to b�· an empirical fact which could be found, for instance, In the intt'r­

W::lr "cJ>.pcrient:e of Great Britatn and the Umted States�. Th�' re')ult was that the rcmfll on capital was not sufficiently above til(' COSt to the entrepreneurs of horrowing a') to encourage new in.

Vestment, so tending " to inrerfere . . . with a reasonable level 01 employment and with the standard of life which rhe technical con­ d Itions of production are ca pable of furnishin g

" .J'

This he sees as burh a tong-term trend and a short-term eHell

turning the boom inTO a slump in each cycle:

Hayek expressed In passing the same view of what was happen­ UR to profits, although frum a different reasoning. He claimed .hat cyclical crises resulted from disproportions ben..een different

\C\:tors of proouction-with �exccsslve credit" causing rhe output lit producer goods to grow toO rapidl) in the relationship TO the lutpur of consumer goods.\8 In this way, he believed, he couJd ex­ rIa in the crcle as an inevitable mean!> by which the different ('\:IOrs adj usted to each other, much as Marx saw the crises as able ".,"iall)· to resolve internal contradKtlons IIl l;apualism-but what

\-farx viewed negatively HJ)'ek viewed POSUI\·e!y. HIS theory srill, however, had a big hole iQ It. Why should the lag berween the sec� lurs cause so much greater problems than in previous decades?

Why, in parricular, should the production goods sector nor keep Ivowing faSt enough to putt the rest of the economy behllld It? The

,lI1swer he put fo'ward in passing in 1935 (and whIch nevcr made II into the Hayekian orthodoxy ) was that profitabilllY fell with the

npansion of what he called ·'roundabout processes of "roduc­ (lOIl"-rhat is processes with a high ratio of means of production to

workers, or as Marx would have put it, a high organic compo­

" tion

of capital:

That [profitl margins must exist is obvious... if it were not so,

there would exist no IIlducement to risk money by investing it in

the essence of the situation is to be found in the collapse of Ihe marginal efficiency of capital, parricuiarly. . . of those types ot caplral whICh have been contributing most to lhe previou.. phase of hea\'y new investment.'

production rather th.to to let it remain idle. . . These margins

must grow smaller as the roundabout processes of production -' increase in length. . · .

Keynes's cxplanatlon for this was grounded m his overall "nH.r­ ginalist" approach, With us acceptance that value de(X'nded on

In other words, both Keynes and Hayek recognised, though the)' (ould not dearly explain, the feature which is central to Marx's theory of capitalist crisis-the downward pressures on the rare

fall until, eventually, it reached zero. - This theoretical reasoning scems TO have been too obscure for most of Keynes'" followers.

In fact, Marxist theory can provide an explanation of the slump which avoids the comradictions of a t t the mainstream theories. I)rofit rates 111 the US had fallen ahout 40 percent between the

supply and demand. As the supply of capital mcreased 11 would grow less scarce, and the value to the user of each extra unit would

The '"declinmg marginal efficiency of capital" hard ly a ppe.:lr� In ?lO�.t acc� ) � nrs uf his ideas. Ycr it is the most radical single notion 111. hiS wrmngs. It Implies that the obstacles to fuJI emplo yment lie . . With an IIlbudl tendency of the existing system and not just wuh

the psychology of capitalists. If that is so, there would seem to be no point in governmenrs Simply seeking to "restore confidence" ' since [here is nothing 10 resHlre confidence in.

110

Caplt.1hSIII In

.he- 20th umury

of profit.

1880s and the early 1 920s,'" those in Britain were already in de­ dine before 19 14'1 and those in Germany had failed "to return to

Such declines could be traced hack i es inrhe ratio of investment to rhe employed work­ to long-term r s force (the "organic composition of c.lpital"), about 20 percent in

their pre-war 'normaI' level

"

.'1

the case of the US.4J American profitability was able to make a \matt recovery through the 1920s on the basis of a rise in the rate 1"he Gn'al Slump

151

of exploitation. But the rise was not sufficient to induce produv rive investment on the scale m�cessary to absorb the surplus valul accumulated from previous rounds of production and exploit;! flon. Firms were tom between the competitive pressures III undertake investment in massive new complexes of plant and eqUipment (the Ford River Rouge plam, completed

111

1928, wa'

the largesr in the world ), and the fear that any new equipment would not be profitable. Some would take the risk, but many did no{, This meant that the big new plants that came into operation towards the end of tnt boom necessarily produced on 100 big a scale for the marker, flooding it with products which undercut the prices and profits of old plants. New investment came to a halt, leading to a fall in employment and consumption thai wors('neu rhe crisis. The bhnd self-expansion of capital had led to an ever greaTer accurTluliltion (If constant capital compared with livi ng hlbour. This expressed itself on the one side by a rate of profit consider· ably lower than a quarrer of a century before and on the other h> employers holding back wages and so diminishing the share ot output dun could be absorbed by workers' buying power. "Overproduction" and the low rate of profit were aspects of tht: same process that would evenluaUy lead to the slump. An up surge of unproductive expendirures and credit could postpone this, bur do no more. The stage was set for ,a deep cmis-and It only requlrl:d scares in the stock exchange and the financial sc( turs for it to occur. Tht: uisls In these respects was verr simIlar to those de'iCribed hy Marx in passages where he analysed the crISes of 1846 and

t with Grossman's interpretation 1857 In Brnain." It also fi s

at

cen­ 1.lng-term trend i n Ma rx's account-the concentration and , as If.tlisation of capital as the s)'stem aged-a lso pla} ed a role "as suggested i n Chapter Three. . econ­ At first it delayed the outbreak of the crisis. The Bolshenk

1. omist: Preobra1.hensky, arrempting It) analyse the crisis in 193 Then .rgued that there had been a big change since Marx's time. s and al­ rr..:essions had led to the elimination of IneffiCient firm

now I'lwed the rest to enter into new rountls of accumulation. But were the system was dominated by big near-monopolies whICh They ithle to prevent rhe liquidation of their IOclfiClem plants. If If "j}uld do rheir utmost to-keep their operations IOta(.."l, even l ca­ meant their plants operating at only a fr,Kllon of their usua a ['acity and cutting investment 10 the min llllurn. This produces rransltion from crisis to recession" and pre­ Hlhrombosis in

t�e

for an y�nts---or at least delays-the restrucrurlng necessary emerges as � factor of tmergence from the crisis: "Monopoly exdecay in the entire economy. Irs effects delay the transition to r'lI1ded reprod uction..... . l or stria Once the crisis erupted, the sheer size of individual indu of them hnandal capitals was such that the collapse of any one the threatened to drag others down with It. The banks would lose Its sup­ money they had lent it, and so cur off credit to other firms. r firms pliers would be driven out of business and so dam?ge othe and Jepcndenr on them. And thc cnd to its "pendmg on Investment le. The wage bills would reduce demand III the economy as a who . h c�uld not au­ whic one, d nifie mag h muc a ,leIayed crisis was now to t" maticaUy resolve itsel f. The response of the big capitals was tum to the state for "bail-outsn to keep the system going.

Marx's account, With Its stress on the way In which firms art pushed 10 undertake new mvestmenrs that thre.nen to make the al ready low rate of profit drop to such

an

extent that much of thc;

new Investment becomes unprofitable so as to cause all investment to freeze up." But there rcmalllS something else that has to be explained­ why the automatic market mechanisms which had always in tht past been capable, ultim ately, of lifting the economy out of ensl" n o longer seemed to be working . Three years after the cri�i\ started, industrial production in the US, Germany, Britain and France was still declining. To explain this it is not enough iu .. t TO look at rhe tendency of the rate of profit to fall. The othe r ISl

Capu"hsm m thr lOrh Ccmu(\

The rum to state capitalism

�

m­ :\r first gO\'ernments continued 10 pllce th�ir hop�s in the u tr �

llted JIl I melled operation of the market Illcchamsm, wah only to get actions to prOtect some banks. But the crisis continued damage worse, particularly in the US and Germany. Enormous . . ll With ttle was being done to capital itself as it tried f() operate . time e sam the At ls. leve on ucti prod ious prev its more than half e ies desperation was leading the mass of people to loo to rem . or sections of capital Maj . over ety soci of le who the turn ht that mig blems, hegan to look for an approach that might solve their pro

�

The- Grral Slump

�

153

however much it broke with old idcologlC.:al shibboleths. By thl summer of 1932 the head of General Electric in the US was cam palgning fur St.He imCfventiOIl. The shift which eventually took place was from forms of monopoly capit.llism In which the St;lh' kept III the background. providing services to big capital but keep IIlg away from arrempnng to direct It. to forms in which 11 attempted to ensure the international competitiveness of nation ally based cap it�1. That came to involve consciously restrucfUrin� . IOdusrry by shifting surplus value f.rom one sectiun of the econOlln

The 1920s had shown that the non-producti�'e expenditures as­ ,"oclated ,,·ith monopoly capital ( marketing expendi[ure�, 'HJverrising, speculative venrures, luxury consumption) could post­ I"me crisis but not Stop its evenrual impact being greater [han

previously. The 1930s showed that "pump priming" by govern­ ments mIght produce a shorrlived and limited revival of production, but could not give a new lea!.e of life to rhe system

('IIher. A more profound change in the direcnon of state capitalism .....lS needed.

to another. i the later stages of the !-ir<;! The shift had been foreshadowed n World War, when the state had taken draconian powers to font· individual capitals 10 cuncentrate their effons on the nlilitan struggle. But in the aftermath of the war, the state had given up thl' power it had acquired. Now the sheer scale of the crisis forced .1 rethink. Political crises in rhe US and Germany brought govern ments to power early in 1933 prepared to implement radical change in order to save capltausm from itself. In the US this took the form of Roosevelt's New Deal. It c\ tended a l ready existing public works schemes to mop up some ot the unemployment, guaranreed the funds of the hanks which had not gone hust, encouraged the self-regulation of industry through carrels. destroyed crops so as to raise agricultural prices and in­ comes, carried through very limited experiments in direct �tatt production and also made it a linle easier for umons to raise wagt" (and therefore the demand for consumer goods). Federal expcndi rure. only around 2.5 percenr of GOP in 1929 reached a peacetiml' pea k of iu �t over 9 percell! in 1936. Jr was a r('Cognition that cap· . Ir� llsm In n� monopoly stage could no longer solvc its problel1l� . wllhoUf Iimltcd stare intervention. Bur it was still lim ired inrer\'en· tion: federal expenditure fell hack n i 1937. Such timidity could ha\'e omy a limited impact on the crisis. All the cf(orr� of rhe New Deal couJd nor push the upturn that began III the spnng of 1 933 beyond a certain point. The number of un employed fell by 1 . 7 million-bur that still left 1 2 million jobless. It was not umil I 937--eight years after rhe stan of the crisis-th.1I production reached the 1929 figure. But even then fixed invest· mcnt in industry remained low' and there was 14.3 percCrll unemploymenr. Yet this "miniboom" gave way in August 1937 to "the steepest economic decline since the history of the US" which "'lost half the ground gained by many indexes since 1932" .<' '"

Cap[{;lh�m 10 rht 20th Cc-nlUr,

-

f rom slump

to

war

It was here that the German and lapanese examples weft" !.Ignrfi­ ' sections of thelT rulinS dJsses aCLcpreJ poli[Jcal major �,lIlr. The IIptiOIlS that subordinated indIvidual capitah'>!>; to prngrammes of n.lrional capitalist ao.:ulnul:nioll unposed by the stare while re­ pressing the working class movement. The mJtor capir.llisr groups remained intact. But from now on they were subordinated to the lIeeds of an arms drive which they themselves supported.

Armaments and the expansion of heavy mdustry drove the whole economy forward, providing markets and ouders for Investment, ,I� wages lagged behind rising outpUt and profit rates were par­ Willy restored.

In Germany such methods pulled the economy right out of the ,lump (after two years of less effectIve "pump priming") and kept I[ booming wrule the American economy was slumping agam in 1 937. By 1939 output had climbed 30 percent above the 1929 level and unemployment had fallen from six million ro 70,000, wuh the creation of eight million new lobs'" Most of the new pro­

duction went imo arms and the heavy mdustries that provided military preparedness, but a temh of increased ompuc did go 111m fJising private consumption. I And the economic expansinn itseU paid for a large percentage of the COSt of fuelling the boom, with nnly about a fifth of governmerH spending bclllg covered by a bud­ �etary deficit. In effect, the NaZI dictatorship W:IS able to ensure Ihat new investment took place. even though II1ltlal profit rate� were low. However, there were major problems with any such policy. Germany was not a self-contaillcd economic unn. The forces of production intt.'rnarionally had long since developed to the point

fbc Great Slump

155

where they cut ac ross national bounda ries, and there was a grow IIlg need for certain strategic i mports as the armamen ts noom took

of(. The only way 10 m-ercome th is while keeping the Germa n i te economy sel f-co ntain�d and therefore immune to n rna tiona l re­ <:eSSlonar)' pressu res was [Q expand the boundaries of the German ,

.

ReICh so as fa incorporate neighbOUring economics, and to suhor dinate their mdustries: to the Germall military dm-e. The logic of state-directed monopoly capimlism led to a form 01 I mperia lism Lenin had referred to i n 1 9 1 6-the seizure of " highh

industrialised regions". " Beyond a certain point such expanS ion led to inevitable dashes with other grcat powers which feared threats TO their own empues and spheres of II1fluence. As they rt'

acted by bui ldn i g up their own armed forces, the German anJ Japanese regimes in turn had to direct even m ore of the econOIlH TOwards arms-and to reach our to grab new tcrrlTOry-in order to "defend" the lands they had alread y grab bed . This p rovided their capitalists with new sources of su rplus value TO counte r an} downward pressure on p rofit rates. But at the same dille it in­ creased rhe hostility of the existing empires-leadin g to the need for a grea ter nrms pOlcntial and further mi litary adventures. The b rea king pOints were the Germnn seiZure of western Poland and the Japanese onsla ught on Pearl Harbor.'j

JUSt as deepening slwnp in each major capimlist country had fcd IIlto the sl um ps d eveloping elsewhere, so now did the path out 01 rhe slump th ro ugh military state capitalism. British and A merican impenalism could only defend their

own positions in the world after the fall of France III 1 940 and Pearl Ha r bor III 1941 by moving on from the balf baked state· direcred capu;]lism of the mid - 1 930s to fully milita ri sed economies of their own. The British state rook charge of all major econ omic decis ion s, directi ng wbich industries should gel raw materials and rationmg food and consumer goods, with till" civilian economy red uced to a mere adjunct of the cen t ra lly or­ ganised war economy. The US govern ment "nor only controlled

1 '139, and i n 1943 the state was respo n Si ble for 90 percent of all IfIvestment." AgalO a militarised stare-dominated econom} c'cmed to p rovide ans we rs to th e p roble ms that had faced the "�c)Domy before the war Nine millIOn unemployed became less .

1".In one mi lli on within three years. and (here was a growth

10

Ihl:' civiJian economy de sp ite rhe vast e x pen di t ure on non-pro­

JUl:tive output. Total output doubled between 1 940 and 1 943. "lid consumer expenditure in 1 943-e\'en when measured In 1 940 pr i ces--exceed ed those of earlier ycnrs. The war econ ­ .llIly could achieve what e igh t years of the l'\ew Deal

ou ld

c

ullt-full employment of-rhe productive carMcity of the l arges(

ttl the ageing cap ita h sms. As Kenn eth Galbraith has nOled, I he Great Depression of the 3D!> never GlIne to an end. It lucrely disappeared in the gre'H mobilisation of Ihe 40s" . . •

I he Russian \'ariant I here was one orher major economy where stare direction seemed III provide a n a lternative to being lOrn apart i n the maelstrom of the world system. ThiS was the USSR. In the 1930s nea rly all com­ lI\entators saw it as b ased un rad ically di fferen t prinCi ples to those orl Western capitalism-a nd this view persisted am ong m any right i ply as tip umil its implosion in 19H9-91 .The righT defined it sm �t(}(alitarian". as if there was no d) namlc to its economy, and IIl.1ny on the left ad opted a mirror image view sp eaking of it as ,

�ommunist" or "socialist", ur thost' who were mote critical as M(lOst-capitalist'''- or a "degenerated workers' state"". AU these .llfferent approaches assumed a high degree of continuity between Ihe Soviet system as it operated in the 1930s and the revol uti onary we established in 1917.

But the cemral mech anisms d irecti ng the Soviet economy were not established du r ing the revolution, but in 1918-9 under

the nrmamenrs sector of the econom y whICh represe nted abOln

fhe impact of a profound economic a n d pol it ica l Crisis. By that I Illle little remained of the re vol ution a ry democracy that had

half the rotal production of goods. The state decided what con·

dlM3cterised the cou nt ry

.

sumer good s should be produced and what consumer go()d� shuuld not be produced" .'1 It spent huge sums building a Tin a mellIS factories which it handed over ro private corporations to run. Government capital

xpe nditure in 1 9 4 1 was 50 percenl

e

the ImmedilHe aftermilth of [he October Revol uti on of 1 9 1 7. A new hureaucratic layer had in­ � reasingly concen tra ted power in its own hnnds amid st the ,Ievastation of an already econ omicall y backward country suf­ krlllg from three years of world war followed hy three years of war. Nevertheles... the dri V i ng fo rce beh ind the economy

high er than the country's emire m a nufa ct uCi ng invesrment III

� Ivi l

1<.

Ih' Grt3l Slump

Capu,lhsm In

Iht 20th unnm

III

t57

through to the mid-I 920s remal11ed the production of guod� tu loari)f} The needs o f the population, and hYing stantlards n)�\ from The abysmal levels V( The war and civil war years, {'ven It nurcaucrai:s' living standards rolo(, disproportionately more th.lil thuse o( workers and peasants.

Then in la re 1 928 a W:lye o( paille hit the bureaucracy In thl fJl.:e o( warlike (hreats (rom Britain and a domestic crisis as pc.h ant:. held back su pplies of food. creating hUllg!'r III the cane�. A(raid of losing their control over rhe cuuntry through a coml"llll.l

tion of rebellion .It home and armed pressure from abroad, till bureaucracy. led by Stalin, rurned pragmatically to a series of me.1 sun::s rhat IIlvoh'ed super-explonation of the peasantry and till'

working class in order to build the industry the country lacked Th{' cumulative ef fect was to push the whole l'conom), [Owart!\ ,I

ne\\ dynamic other t h m . rhat of fulfilling people's /leeds-a dl namic ultima tely determ ined by military competition With th\" Vari(lllS Western s ares. t As the en'ch historian Reiman has said: There were not enough reSOurces to guarantee the proposed rare of industrial growth. The planning agcncie!> thercfort' de­

cided . . .eo balance toe plan by means of resources the econOIll} did nor yet haH' at its disposal. . . The fulfilment of the plan d�.

pended on a \ery brutal attack on the living and working conditiuns of mdustrial workers and the rural population . . . Thl!. was a plan of organised poveny and (amllle.... Stalin, lustifying the subordinatlon of everythlllg else to accumu lation, inslstt'd, �Wc are fifty or a hundred years behind the advanced cuunrries. We must make good thiS lag in ten year!>. Either we do it or they crush us-:' "The t'nvi.romnem in which we

are placed . . .at home and abroad . . .cumpels us to adopt a rapid rate of growth of our mdustry" .�1

In unde rtaking the task of accumulation, tht' bureaucraq suh. smutt'd ITself for a capitaitst cl;lSS th.lt no longer existed. But the

method:. It u!>cd were essentially those of capita list IIlduslriali!.a­ tlon el sewhe re III the world. " Collectivisation"-in realil)' the St;H�'

takeover of the land-increased the proponion of ngricu lt u ra l OUtput available for industrial accumulation while driving a very

s were !lainly manned by wage labour-hut �ome suhordin�te task workers lJrried our by some millions of slave la bourer,. The nghts , hJd held onto through the 1 920s were aholtshed. au­ Control of the economy by a single ('.'enrr.llised Slate bure n could ltJCy with a monopoly ot foreign trade meant accumulatio opoly "rocced without IDterruprion, as in the mlli(.1flsed state mon Isolated �apitalisms of the West. But the economy could not be . n)· more than th�se of lompl�tely from th� wider world ..ystem, I hmery ( ,�rmany and Japan could in the latt' 1 930s. Impornng mac

mgs lur industrialisation from the West depended on export �arn on trom grain at a time o�fallmg world prices-and ,hat depen�ed ons of the state sei7ing the gram from starving pea�anb. some mllh As e'(porters we I the USSR 1 ""hom died. Preobrazhellsky nOlcd ,Ire suffering severely from the world cris is"." econ­ There was� however, a relatlvc I!>olation from the world and this meant thc accumulation could proceed as long as .

..

urn)"

fit aT any there was some slIrpl us val ue, regardless of the rate of pro c nomlc con­ J'I,lfticular time. This did nOl, however. overcome c ? stry and tradictions. Fulfi lling the production p lJlls for heavy mdu rnng resou rces ro (h.:m from armaments invariably involved dive nomy �onsumer goods industries. whose ourput fell even as the eco the op­ J� a whole expanded at great speed. Such an outcome was two of us posite of "planning" in any real sense of the word. Lf s up in plan to go from London to M.lI1chester but one of u� end . e gUId [ not dl an" �p our then , (,Iasgow and rhe other III Brighton the West our actioo, The sallie was true of SOVIet plannmg. As 111 wth on the lomperirive accumulation produced a dynaOlIC of gro other. It Hne han d and of chaos. inefficiency and poverty on [he ond nadlso produced a tcndency to i mperiali st ('xpa�sio� .bey Eastern 1I0nai borders, as was shown in 193 9 when Stalin dn'lded ia �d I urope with Hitler, taking half of Poland, Estonia, Lithuan . Ing seIZ on eyes hIS set had er Hitl that 1 via -only to find in 194 I...n ilnd pillaging the USS R fur German capitalism. .

�

Balance sheet o f a decade

high pf(lporrion of rhe peasantry from the land, lust ns t'nclosure� hild for England's early capitalists. The growing mdustrit'!> were

ng the sup­ In the 1930s there had h('cn a widespread feeling 3mo among its porters of capitalism that It \Va!> in deep trouble; . ten of the writ had ey Cor is Lew d, fimshe was it rhat nts one npp re can "decline and decay of capitalism·' .... John Straehey that "the

158

The G�C':l1 Slump

C,:lpllahsm

III

rhe' 10th Ccnrun

159

•

only eXISI for the (apitalist areas of the world an ever more rapid decay" With "rhl!' permanent contraction of production", Preohrazhellsky of " the termlllal crisIs of the enme capitall" �ysrelll" ," Leon Trotsky of " the death agony of capitalism" Their prophesies did not seem absurd at a time when the suppOrt ers of c,lpualism \\ere tormented by wornes as to what had �OIU wrong with their supposedly infalLble system. Yet the desper;lIt" turn to STate capitalism and massive arms production allowed Ihl

, IIAPTER <;EVFN

The long boom

syslem to enter into a new phase of expansion. The question r(' mained: for ho" long?

I he "'Golden Agc� of Western capitalism Many economic forecam:rs expected the world econom y to slip uno crisis again after the war, after a briel period of boom as in •

1919. lt dld not happen. What followed was the lnngest boom that

.,pllalism had ever known-what IS often now called '" [he golden .I)\e of capitalism", or In France. "the glorious thirty ye'ITs". By the

I

I IJ70s American economic Output was three rimes the 1940 level; ( ,,,rm a n economic output was five times the (depressed) level of i in· 1947; French ourpur up fourfold. A tlmteen·fold IIlcrease n

Justrial OUtput turned Japan, still thought of ,IS a poor country i n

the second large!>t Western' economy after rhe US. i. Ihe 1 940s, nto "-lid along with economic growth wem rising real wages, vlrtuaU) lull employmcnt and welfare pruvision on a scale people had only Il('(n able to dream of previously. Conditions were very different in Asia, Africa and Latin \merica-what became known as the HThird World" after (he

n.lndung conference of 1 955. There maSSive poverty remained the Int of the vast mass of people. Bur the EUCClpean powers were Imced to relinquish [heir coloOles, and lI1creascd per capna ceo· 1I11mic growth! created the expectallon that eventually the t\:onomically �les5 dcveloped� countries would Ocgm to catch up With [he most advanced. It became the onhodoxy on both the right and much of the le ft to proclaim that the conrradictions in the s},stcm perceived hy Marx had been overcome. The key change, It was argued, waS that governments had learnt to inrervcne in the econom), to ..:uuntemer tendencies to crisis along the lines urged i n the 1930s hy John Maynard Keynes. All that was needed for the system to work was for the existing st
III

economic life to raise the level of 161

spending on inve�(ment and consumption. This could be don\' either by changes ii' interest rates ("moner:lr)" measures") III en courage prlvare imesrmem, or through inneasmg governmen I

expenditute above Its fax revenues ( " fiscal measures"). "Deftclt finanCing" of the latter SOrt would increase the dem.lnd for goods and so the level of employment. I t would also pay tor Itself evenrually through a "'multiplier effect" (discovered IH

Keynes's Cambridge colleague Kahn). The extra workers wh" gOi Jobs because of government expenditures would spend then

wages, so providing a ma.rket for the output of other worker,. who in turn would spend thei.r wages and provide snll bigger markets. And as the economy expanded closer to ItS full em ploymem level, the government's revenue from taxes on incomes and spending would rise, until it was enough to pay for the previous increase in expenditure. These twO me;lsures were Soon seen as Ihe archern'!,1 1 Keynesian" roolsl for getting full employment and accepted as e..

U

sen rial for economic management by both Conservative and social

democratic politici:1ll5 in the 19405, 1 950s, 1960s and earh 1 970s. Keynes had, as we saw in the lasr ch:1pter, expressed morl" radical nOtions at points, notabl\" the contention that the \'en •

•

process of expanding capital investment led to a decline in rlu' return on it-"th� marginal efficiency of capttal .... He had even gom' so far ao; to urge the gradual "�urhanasia ., of the '"rentlcr" who Jives off dividends' and to argue thar ""a somewhat compre­ hensive socialisation of invesrment Will prov� rhe only means QI

securing an approximation ro full employment".� But Keynes him· self shied away from these more radical insights-'"1I1 practice ht·

was very caulinus II1deed", writes his ultra-moderale biographer Skidelsky, and rh� version of Keynesianism' that hegemoni.sed mall1stream economics for the 30 years after the Second World

War purged Keynes's theory of its radical elements. For th" reason. the radical Keynesian Joan Robinsun denounced It ;h " bastard Keynesianism

.. .•

Mainstream economics believed in those years that it had rhr capacity to enable governments to do away with the crises thaI

had plagued capItalism since the early 19th century. The capitalt.., system could now, the orrhodoxy preached, deliver endless pro) perit)', rISing hving standards and a decline in the level of da,�

struggle-providing governmems accepted its dikt.lIS and avoided the "mistakes" of 1929-32. '"

Caplt;il!sm

10 the 10th Ctnlun

John �trachey bad been by far the best known �Iarxist writer ..n economics in Britain in the 1 930s. Hi" books, The Nature of ( .Jpitalist Crisis, The Commg Struggle for fl()/�'er and The Theory lind Practice of Socialism had taught J\lar:"\IS( economics to a intellectuals, with IIhole generation of worker activists anJ )oun g tht message [hat capitalism could not e<;cape from recurring and I"\"('r deeper crises.

Yet by

1956 he was .lTglllng.

III

his book

, (mtemporary C.op'tcJllSIII, that Keynes hOld 1>C('n right and Marx

wrong on the crucial question uf"hether the �OlPI{altst cnsis could h(" reformed away.!O Keynes') on I) mi!.t3ke. Stra<:he} held, was mat II,' failed to see rhat the.. capllalists would have 10 be pressurised tlifO accepting his remedlcs: "The KeyneSian rcmedies . . .will be op­ e)(pericn<:e ,hows they can ])() d by the capitalists cerrall11y: bOl 1)(' imposed by tbe electorate The belief tlbt Keynes'!. ideas were respo11!.lbl e for tht' long hoom persists today, with a Widespread \lew on the left that the Ih.tndonmenr of ,huse Ideas is responsible for the cflses of recent \cars. This is essentially the position put forward by the iourna lists ... ·

D.m Atkinson and l.arry Elliot 111 :1 series of books,ll the Ohserver wlumnist Will Hutton! and the radical economic consultant { ,raham Tumer. 1< A version of It IS al.:l.:cpled by some Marxists. ( ,erard Dumellll and Ouminique Levy ascribe the post-war growrn '0 a "Keynesian" approach by industrial capital, in which accu­ mularion was based on a "compromise" With working class organisarions on [he terrain of Ihe welfare state.1) J)a\·id Harvey

["'resents a picture of capitalism expanding on Ihe basis of " a class I,;l)mpromise between capital and labour" in which '"the stare ..l)uld focus on full employment, economIC growth and the welfare uf irs citizens", while "fiscal ur mnnetar) poliCIes usually dubbed 'Keynesian' were widely deployed 10 dampen business cycles and I '0 ensure reasonably full emploYlllent" . . which i Yet rhe most amazmg fact about rhe period n Io..eynesianism reigned supreme as the official economic ideology was [har the measures it propo)ed for wardlllS ori cflses were not used. The economy expanded despite their dbsencc unril the 1960s

the US and rhe 1970s in Western Europe and Japan. As R e o Matthews lung :1go pointed out, the economic ex­ pansion of [he post-war years in Ikitain did not depend on the \pecific Keynesian "remed ies" tu recurrent crises of budget deficits ur a higher level of government investment than in the pre-war years.!- Meghnad DesaI has noted, "In the USA Keynesian policies

III

163

were �l()w In be officially adopted . . . Tbey finally triumphed \\' nh the Kennedy-Johnson t�'( cut of 1964"." That was after the Gre,l! Boom had already lastrd 1 5 years (25 years If you exclude Ill\" shonJi,-ed recession of the late 1940s). The same pomt is made f(n Germany bv Ton Notennans; -Countercyclical demand m3na�w ment policies were only pursued in Germany... durmg thl" 1 9�Os" . . In so far as government inter.entlon was used to deter Illille the speed of the C\:onomy, it was to slow down booms. nOI [0 aven recessions. as with the "stop go" policies of Bnrish gm efnments faced With b"lance of payments problems in the 1950, and 1960s. Ble-aney, re-analysing the figures used by M:mhcws allli others, concludes thar Keynesianism played little role 111 the We" European long buom, and only a limited !Jne in the US. And hl" nores th;1( it was the big increase in US levels of military expendl ture compared with the pre-war years that provided most of thl -fisca I stimulus" ; "Largely because of much higher defence ...pend ing, rota I government spending on goods and services Incrensed lH nearly 9 percent of potential GNP".IO The expbnation of the boom as a reswt of Keynesian policu.:, l' often combined with references to a " Fordist" penod in which thl" great ca pilalist corporations accepted a compromise with worker, based on wages high enough to buy a continually n i creasin� amount of om put. The Frencb economist Aghena, for inst:1I11:(>, has argued that "Fordism" regulated �private working class con sumption" br "'generaltsmg the wage relallon" to guarantee �rhl" maintenance q-cle of labour power".l' So, for him and hi, - Regulation School" version of Marxism. Keynes IS the prophet 01 Fordism, with Keynes's criticism of neoclassical economics and hl\ notion of "effecti,"e demand" a partial recognition of The need for prnduction and consumption ro be integrated at a cerratn stage 01 capitalist de,e!opment. Certatnly, one element 111 the dominant state inten"ennolllst idt'­ ology of the post-war decade� was the contention that welfare provision could counterbalance cyclical ups and downs in thl.: demand for consumer goods" The "')upply ..ide" need of capiml to ensure the reproduction of la bour power for it to exploit (which Wl' have looked at in Ch,lpter Five) seemed to coincide with "demalHt side" worries about keeping markets expanding. Promises [(J expand we lfare provision aIso suited social democrat and Christian Democrat parnes tn Europe as a way of winning votes and lurl1l� workers away from the Communist parries to their left. Yet nom" 164

Cap'lah�m In the 20lh Cf'nlun

.,l lhis IS adequate to explain why the glob,11 economy should boom 'II the post-w ar years after stumping pre-w:u. What is more, there was 00 con..cious pohq" h) the " Fordist" m,magers of mass production industries to (lpt for such a supposed "-erncsian'" policy of raising real wages and wellare provision. As. say, U� (apl{;\ I Ile,-er; l 1(I)hert Brenner and l\iark Gick

resigned itself to the prinCIple of m.Ul\{all1l1l� lahour's share or failed to fight tooth and nail [() bmit the oegrel: [() which wages kept up with tbe cost of Ii, in� or With prodm:m"uy. There wa... never anything rt:sell1btll�g

3

generalised "social I.:omract" on

how revenue was to be divided he[ween ,nVCHment and con­ sumption or between profits and \\ia�e�. I he reahty was t't;at as capimlism expanded 111 the po�t-war Ilrcades, the full employment that resulted forced employers .Hld Ihe State to pay much more arrention than previously to reproduc­ !1lg labour power and deOecting working class discontent. Both the lllllvenrional Keynesian account and " Regulation" thent)· confuse " I uses with effects. [n the process they fail to account for the most l�nificanr feature of the poSHvar decades; the rate of profit in the

U� was between 50 and 100 percent higher than in the four Ik'Cades before the Second World War. And it more or less sus­ I lined that higher level until the late 1 9605.:' It was this which I xplained wby capitalists kept Investing on a scale sufficient to krep the economy boomlllg without mo'>t states needing even to Iry using the �counter-cyclical measures" suggested by Keynes.

11m how were such higb profit ratcs achieved and sustall1ed along­ Ide rapidly rising real wages? Part of the answer hes in the !lnpact of the slump and the war. �tlme firms had gone bankrupt in rhe slump. Much capital had hcen wrinen off. Restrucrunng through crisis had begun to per­

IMm some of its old role of allOWIng capital to undertake renewed .u.:cumulation with a lower rare of profit. The deslruction of the war provided further assistance. Vast omounts of investment which would otherwise have raised rhe ratio of investment to I.,bour (and therefore profits) were instead used for military pur· poses" Sbane Mage, for instance, estimured Ihe combinrd effect of the crisis of the 1930s and the Second World War on the US ecun­ limy: "Between 1 930 and 1945 the capital slock of the US fell from 145 billion dollars to 1 20 billion dollars, :l net disinvestment l'he Long Boom

I.'

of some 20 percent".�· Written off was an amount equal to a �hJI . ddl of the pre·exlsting accumulated surplus value plus alt the 1 tlonal surplus value produced over those 1 5 years. Meanwhd�. caplrah�t� in the deieated stares, German) and Japan. emer)!nl from the war With much of their capital destroyed. They had II" !.:hoice bUT to write off much of the value of old Investments as the\ began :l.ccumuhulon afresh. with a skilled labour force forced to :l.ccept low wages by the m.lssi\'e unemployment resuit1llg irfllP milltMY de\·auation. BUI these factllrs are not, in themselves, a sufficient explanatloll . for the length and continuity of the boom. They do not expl 1Ul why profit rates dId not resume their downward slope once nt'\\ productive invesrment came into effect. Had capitalism conrinUl'd on irs pre·war tr3tcCtory there would have heen crises at lea .. 1 every ten yeMS or so. Yet, although there were periodIC dlp� III growth rates, someumes described ,IS "growth recessions'" tht'r\ was only one brief spell of falling Output III the U� (in 1 949) .1Tld none III the OIher major i ndusuia l COuntries for more than a qu,\! ter of a cenrur}·. Atrelllpt� have been made ro explain the boom as a result {II rapid technological IIlnovatlon, the wave� of immigratIon ClI young workers in the 1950s and 1960s, or the cheapening n( r,l\\ materials from (he non-industrial countries. But �uch thlllgs h'ld nOl been able to prevent cyclical crises previously. Technologil.:,1 1 IUIlOv.uion nl lght have reduced the cost of each unit of new in vestment, but lr would also have reduced Ihe life span of old lIl\e..tments, so Ulcrea ..ing deductions £rom profits due to deprel.l allan COStS; massi\e immigration to Britain from Ireland and to th�· US from Furope had characterised the 19th century wuhout Stop pmg pressures on profit rates; the cheapening of raw materials \\.h in part caused by the way the boom Itself encuuraged capitalists tn produce synthellc substitutes within the industrial economies (ar. tlficial fibres, plastics, etc). There was, however, onc new factor that I.:ould explam wh,1I was happening. There was an unprecedented levcl of pe,ICClUllr arms spending. It had been only a little over 1 percent of GNP III the United Sfares before the w:tr. YCt pOSt-war "dis:trmalllem� lett it at 4 percelll in 1 948, and it then shot up with the onset of th�. Cold Wrlr to over 13 percent in 1950-53, remallling between fin: and seven rimes the level of rhe inter-war years throughout tht 1 950s and 1960s. 166

Cap'tallsm

In

the 20th Ctnrur,

investible s�The military consumed an enormous quantiry of IIltO the producnve 1,lus value that would otherwise have gone l KIdron, an onomy-accordmg to a calculatlOll by Michae . . tion ma for l lta cap d fi'{e ss gro US of t amount equal to 60 percen . e a market Vid prO to was ng ndi spe h suc of act imp aU': rhe immedi tnr the output of major industries:

t and pacts More than nine-tenths of the final demand for aircraf nearly was on government account, most of It mil itary; as was over half [he three·fifths of the demand for non-ferrous metals; -third the demand for chemlcals-and electronic goods: over one ntific instru­ demand for communication eqUIpment and scie industries ments', and so all down the list of eIghteen malor d from gov· one-tentb or ",are of whose final demand stemme I procurement. " emmenta d by most main­ I he role of milirary expendirure has heen Ignore and by ma ny �Iream Keynesian account� of tbe post·war boom identify cap­ Marxists. On both sides there has been a tendency to a brief �riod It.llism wirh the pure "free market" form if rook for to see the state and rhe nllhtary In Britain in tbe 1 9th century and .i sing has been any sense of the chang�s (hat .,'> ex.traneous to it. M.s Bukhann and had already begun to be analy�ed by HilferdlOg, s brought about I enin, let alone the further transformation Ihrough slump, wa.r and the Cold War. grasp one Some Marxists and a few Keynesians did, however, market for rhe Important impact of arms spending. It provided a and downs of ,c�t of the economy that was not affected by the ups nward move­ Ihe wider economy-a buffer that IImLted the dow ts Paul Baran ment of the economic cycle. So the American Marxis ortant mec a­ md Paul Sweezy CQuid see arms spending as an imp overcnmlOg m'>m for absorbing a n ever growlIlg "surplus" and wh)' taxation IIverproduction.'• They could nor, however, explain r ducing demand. :Isewhcre In pay for it did not have tbe eHeer of : the m11ltary pur­ Itl the economy. And, as Bleam·y has pOlOted out, a major direct .. hases of the US government could not. have played '" ics. nom eco an ope Eur rhe ing st boo rule in Chrlpter The acCOunt of the impact of waste expenditure (see ed b)' Kidron live) on the dynamic of the wider economy provid point was not was able to deal with such problems. since its starring expenditure, "unde.rconsumptiollism" hut the rate of profit. Arms

�

lhe Long Boom

167

like "unproductl\e" expenditures, might be a deduction from prot Ih 111 the short term, hut in tbe long term It had the Impact III

redtu:ing the funds available for further accumulation and ,n slowed the rise if! the ratio of in\<estmem to the employed IahOlif force (the "organ'c composition of capltal" )< Kidron's logic found empirical confirmation III what actually har

pcned [0 the org. l rlic composition of capitaL Irs rise III the post-\.\ .H decade:. In the US was much slower than in the pre-slump decades. It was alsu much lower than that which occurred III post-W.H

Europe. where the proportion of national ourpUt going Into arlll' spending was comiderably lower lhan in the US."

mrplus value", to use Marx's terminology ). This changed their 10tl'rnal operations i n ways which seemed to contradict the usual " \umprion aboul capitalist behaviour hCIll� motivated by short­ It'rm profit requirement and price competition for markers. Galbraith paimed a picture of how the �Ituanon appeared: The market is superseded by vertical llltcgranon. The planmng unit takes o..er the source of supply or the oudet; a transaction

thal is subject to bargamlng twer price:. and amounts is rhus re­ placed with a transfer witlun the ptanlllng unit. . . As viewed by rhe firm, elullInarion.of a market converts an external negotiation ilnd hence a partially Of wholly uncontfollahle decision to a maner for purely internal deCJ.Slon. Nothlll�. we shall sec, hener

Arms, accumulation and planning The MillS economies were not a result of a consciuus srralcg\ aLmcd ar warding off slumps. They followed from the logic of inl­

perinlisr competition in the Cold War era. But sections of capl!.ll certainly appreciated their effect:. i n keep1T1g the bOOJll going. "Military-indusrrial complexes" eml'rged. drawing together thr

military and those in charge of the arms 1T1dustries, which had .1 direct imerest in pushmg forward the inrer-impenahst confli,t�.

They were able to unite the rulmg class as .1 whule behind their poliCies not Hnly because of fear of the rival power, hut also he cause of the effect of arms budgets in sustaining accumul:mon. John Kenneth Galbraith described In rht' 1 96(h the Huer-relation between go...emment expenditure and what be tt'rmed the "planning system" hy which each large corporation planned its Im'esrmenr, many years In I . dv:mce: Although there is a widespread supposition to the contrary, tIm Increase (in state expendiruresJ ... has the strong approval of tht businessmen of [he planning system. The e.xecut!v{' of the gre,1I corporation routinely opposes prodig:llity in government ex­ penditure. But irorn his pleas for public economy defence

expenditures are mt·ticulously excluded."

One effect of such expenditures was to allow the grear corpora­ tions ro unden,lke long-term planning of their own investment�

explains modern industrial policy--
consists in reducing or eliminati ng the mdependence of action of those to whom the planning unit sells or from whom it buys. . . Ar tbe 5.1me time the outward form of the marker, including the process of buying and sell ing, remains forma lly intact.

II

·\t a time when "'the largest 200 manufacturing enterprises had nvo Ihmis of all assers used III manufacturing and more than three fifths

uf all sales, employment and net income",J..! this represented a huge \(:coon of the US economy III which most economic operations were

tlOt subject to the Lmmecliatc vagaries of the market. There was com­

petition between the giants, but it was to a large extent undertaken hy means different to the old compemion ro sell goods more cheaply than one another. The giant firms learnt that they could ward off pa­

lemial competitors by resortlllg 10 non-productive methods-the II� of their wealth to get a right grip over distribution outlets; the usc of advertising to hype up their own products, regardless of their Intrinsic merits; the sysrematic cultivation of well greased contacts with buyers from governmental bodies. Galbraith thought thiS repre'icmed a fundamental change i n the n.nute of capitalism itself. And Marxists who defined capitalism

Simply in terms of the "free market" compet ition between rival pri­ vate capitalists could easily come 10 Ihe same conclusion, since rhe huge area of production internal to lilt: great corporations was nor

them and turn it into cash by selling their goods ("realising their

directly subject to the law of value. Extreme variations in the degree of "x-efficiency"-the internal efficiency of companies-showed

16'

The. llmg Boom

with the assurance that they wouJd be able to make a profit on

urL1dh�m In Ihe 20lh c..nllln

169

how far man) diftercd frGm rhe capltali�r ideal. And capital did nUl aucumarically move under the unpan of market forces nut of ,t·... rurs wuh big fixed Investments, a rugh organic compos ition 01 ,:" plt;.l and a low rare (If profit, as a slluplisric reading of Ca,n t.Ii might suggest. Whether It did so or nOI depended on the d(."Cision

of managers who might decide to sacrifice shon-term profi tabillll lor long-term growth II ithlO markelS over which they already haJ

a Mra nglehold. If the lawof value COntinued to Operate it was In thl­ long term, since evenrually corporations would tlOt be able 10 grim and 10 keep rivals and newcomer.!> to tbe Industry at bay unle ss thcI continued to get enough .surplus \'3Iue to make massive new inve SI mems. But often they would only dISCover whether rhey had dOllt so ollce the long boom itself came to atl abrupt end.

Ihe largest private firms worked together to ensure that that por­

l ion of the narional income that had gone intu arms before 1945 I )w went IIlto productive Investment: The motive force for rapid growth was fi,cd IOvc�tmenr in planr and equipment. Privatc fixed Investment grc\'.. from 7.8 percent of Gl'-TP In 1946 to 21.9 percent In 196 1 . When imported raw matenal\ were

III ..hort

slirply In the late

I �40s and the 1 950s the governmenr wok ch.lrge of their alloca­ non to industries it thuught wuuld heSI conmbute to the gro\Ylh

lit the economy, to the buildlllg up of key induslTie!> like coal mming, Iron and stee l and the eXpa1HlO11 of exrorrs. The Ministry of I t('rnatiolla I Trade and Indu�lry (M ITI) is�ued

�

The Olher advanced capital isms

"Ruidehnes" to mdustry which It Ignored at )fS peril. The gIant

The picrure so far has been of rhe us economy in the pOSt -W,1 f boom. It was responsible for approachjng half of tota l world OutpUT at rhe end of rhe war, and its dynamic determined to a gre. 1I extent what happened elsewhere. But rhe hig European econ Ollue,. with substantial bur [ower levels of arms spending, show ed many of the same features. In Britain and to a lesser extent Fran ce, gre.1I IOVeStments In :I rillS Indu�tries had the effect of dmwIng the rest ()I the econom)' fonvard, counteracting some of the pressure s for rlH­ organic composition to rise and the rate of profit to fall, and per mining continual c..'ConomlC expansion-all without reso n to

Keynesi,11l measures. In Genllany armaments were less important. But the role of tht' government remained important. One Marxist account tells hOI\ : (:lr more than in any other capitalist t:ourltry the bourgeoisie 111 the Federal Republic made uSt' of the state apparatu�es and

liw monetar), and fi�caJ system to force capi tal accumulatio n 1''11

means of f,lvourable depreciation rales, credits for reconsrr u� rion at favourahle ratt's of n i terest and finance for mvesrmenl .

All Ihi s took pl>1ce 111 comradlction to the official neol i ber>1 1 eco­ II nomic theory . . .

In Japan SI.lre capitalism advanced further in its IIlflucnce on'r civilian industry than alm ost anywhere else in the Western 170

world-desplte a low level of direct state ownerc;hip. The state and

Capl{.lhsm in lM 20th Ctmun

firms thar had acceprcd the dictate� of the war cconomy hefore ,,"ugust 1945 as essential to milirary expansion now a.:cepted the

Jlctales of MIT! as essential to peaceful (.'Conomic expanSion: Japanese entrepreneurs are vigorous in mvesnng. They will not confine their fixed investment within the limit of gmss profits or

mternal accumulation. unlike the case of entrepreneurs in other advanced countries. Even if the fixed Investment is over and above their gross profits, the enterprise will undertake invest­ ment so long as bank finance IS available." In other words. the heads of big business and the state worked to­ t4cther to ensure the growth of Japanese nallonal capITalism by

mobilising wards

the whole mass of surplus value and directing if to­

"strategic"

sectors,

regardless of considerations of

�hort-term profitabiity. l What other state capitals did with military umsiderations uppermost, Japanese nate capitalism did In the

lfl­

[crests of ovcrseas market compet1t1on. ��xports played a very unporranr role

in driving the economy

forwards. And that meant

that Japanese growth was u lrimu lely dependent on the US arms economy_ As Robert Brenner ..how� in .I hIghly empIrical study: German and Japanese manufacturers derived much of theIr dy­ namism by means of appropriating large segments of the fast-growing world market from the U!) .l nd UK, while beginning me Long Boom

171

invade the US domestic market, This redlstnbution of mark\'! share-the filg lin of orders (demaod) hy German and Japane "t manufacturers tbat had formerly been supplie d hy US produ.. er'i-gave a powerful boost to their investment and output." to

If was not "sociJI compromise" and the "welfare state" that pro duced the long boom and the '"golden age'". Rather they were all by-products of militarised state capitalism. Prosperity rested un

('�erywhere-was the draWing of married women into paid em­ ployment. Yet each of rhe ways of enlargmg the labour force ..reared new problems for capital and the stare. Squeezing labour from agriculture could work only if resources were put into agriculture

10

order to Increase It:> productiVity. This

�ould be very expensive. Bur the aJrernari\'e was that the provision 01 food for the growing urban populatlun and raw materials for

the cone of the H-bomb,""

mdustry would suffer, creating working .,;lass discontent and bot­ denecks in accumulation. And eventually there was little in the

Labour power in the Great Boom

way of spare labour power leh in the counrryside to provide for the need) of industrt as the peasanrry �hrank In numbers. Migration from the Third World was a very cheap way of getting labour power. The advanced coumr} had 10 hear none of the COStS

Throughout rhe first post-war decades une mployment was .11 level!> known previously only during brief boom periods, In the U<., ullen pJo)'menr was less than 3 percent in the early 1 950s; III . � B nuJI1 It hovered between 1 . 5 and 2 percent; in West German) .1 . high level of unemployment caused by the econom ic dislocation of the earl)' post-war years fell to 4 percent in 195 7 and a merc I per cent in 1960. So the problem for Industrialised capitalist S(3tes was not coping . wIth unemployment, but its oppoSite ensuring that employmcnt grew at sufficient speed to feed capital's seemin gly insatiable ap rente for labour power. The US employed wo rkforce rose by 60 percent herwet"n 1 940 and 1970. Such expam.ion demanded com­ pletely new supplies of labour power. Wheth er politicians and guvernment administrators liked it or not, the sta te could not leave supplying the key raw material for economic or military compen­ [Jon, labour, ro the vagaries of a "uee" lahou r market. The statc had 10 supplement-and even partialJy mppJa fJI-the wage) system with sen'ices and subsidies provided by itself on a mu(h greater scale than previously. ne answer (0 the shortage of labour power lay in redUCing the agricultural workforce still more, with state-spo nsored amalga­ mations of small farms-an approach follow ed in much 01 Western Europe. Another lay in encouraging ma ssive emigration of people from less developed countries to the cities of rhe indus­ (rjal countries (from Turkey, Eastern 11ld Sourhern Europe ro , Germany; from Yugoslavia, Portugal, Spain and Algeria to Franct'; from the West Indies and rile Indian subcontine nt to Britain; from Puerto Rico to rhe US). A third solution-aga in adopted almost

?

172

uplrahsm In fhe 20th CenWrl

(If rearing and educating rhl!> part of ItS labour fon:e effectively, it was gcttlllla subsidy from the inull igrant workers' country of origin.• The new workforce was usually younger Ihan the " native" workforce, and demanded less in the way of health care, old age pensions and so on. And its members were usually more prepared to tolerate low wages, harsh working conditions, rigid discipline and on-in short, to be super-exploited. The pool from which this new labour came was potentially limitless. Yet there were practical limits. As migrant workers became ac­

..0

customed to living and working in their new home, they demanded conditions closer to those of established workers; they wanted decent accommodation and welfare benefits. The state had either to mecease ItS expenditure on these things--or to s� grow­ ing social tensions that could lead [0 either intensified class suuggles (to a considerable extent the revolt in France in 1968 was a revolt of such new workers) or to �racial" clashes between old established and newer workers. Unable ro afford the social expen­ diture needed to head off such sources of social instabiJit}'-and eager to deflect discontent away from itself-the state usually re­ aCted by imposing controls on further ImmigratIon. The wholesale entry of married womcn into the workforce also demanded a certain level of investment by the statc. Means had to be found to ensure thar il did nOI lead to Ihe neglect of child rear­ ing-the socialisation of the next generation of workers--{)r a breakdown in the provision of food, sheher and clothing for the male workforce. Many of these means could be provided, at rela­ tively low cost, with the application of new technology. The refrigerator, washmg machme and vacuum cleaner, the replacement Tb� Long Boom

of thc coal fire by electriciry. gas or oil heanng, the populolrisatiotl of frozen foods, the �prcad of fast food outlets, even the relcvlSlI1!1 'iCt-all had the effect of reducing the amount of effon needed In ensure the reprodm:tlOn of both present and future labour po\\w. And they usuall)' COSI nor a penny [0 the state or capital, being palJ for hv the famllr out of the enlarged income II received as the Wltl took up paid emplo)ment. Caring for young children while hillil their parenn worked created greater difficulties, since the provisioll of nurseI')' facilities could be costly for the state even if these COSI, too could often be recouped from the wage of the working wife. So all thc mcthods of expanding the labour force could work

•

up 10 a cenain point-hur beyond that they tended to imply qlllh' conSiderable overhf'ad costs. Welfare costs could he horne whill' the system waS expanding rapidly. The "insurance" princi ple ell surcd, as we saw

m

Chapter Five. thaI ..orne sections of tilt'

worklllS class paid for welfare provision to other sections. TIll' eXira cost amounred ro only 2 or 3 percl'nt of GNP in Western

e1\'es Without selling pI)ssibilities of being .,blt' to sustain them� n of the character their labour power. There was a parual lle�;llln . IlOll. S111l.:e the stare ap­ uf free labour-but only a partwl negl the labour market. plied aU sorts of pressures 10 keep people in our market was Yet even this limlled "negation" of Ihe tree lab h natlonal capnal. A.. , hurden that put up the overheads of e:lI.: the rate of return on \uch mel' exerted a downward pressure on od this did not seem pcn g lon a for . ent esrm in\ al ion nat al tot the work protei,:tlng (he rate of In matter. Ot her factors were at the boom began to profit. Bu t once the upward dynamic of l problem. The twO wl!aken, the costS of welfare became a �rucia ing consem-were lunctions of increasing produclivny and buy try 10 reduce the COSt 10 had al pn Ca ry. ma me ple com ger lon 110 , even If domg so Ilf maintaining :lnd increasing prOdllUi\'lty trol over the wo rki ng upset its old mc!thanisms for keeping con shaping dass struggle dass. Th iS wa s to be an imponanl faclOr -

(lllce Ihe long boom faltered.

Europe, while in the US the state made a small surplus. I' But thl.'

�

cos s would ht'�ome ;J hurden once the Great Boom collapsed.

1 here was another solution available

[0

the lahour shortagl',

But It wa!> e\'en mure expensive. It was to increase state expendI rure on the reproduCtion of the labour force, so as to Illcrease rill' average level of sklil. In all rhe advanced countries there was a can· siderahle increase in educational expenditures during the Gre.u Boom-partlcularly in the upper grades of secnndary education and in higher education.'" finally, there was a third area of expansion of state expelldi­ rures de�igned to Increase producri\lry----x --e penditures deSigned to provide a feeling of secunry for employed workers. Into this Cate· gory fell old age pensions and unemployment benefits. As Jame� O'Connor noted, "The primary purpose is to create a sense of eco· nomic Secllflry wimm the ranks of employed workers and thereh� nise morale and relllforce discipLine":' Hence in many COllntrle"!. 111

the late 1 960s wage-related unemployment benf'fits and redun·

dancy payments were introduced . They were the other Side of the "shake-our" of labour from older industries. This "socialisation" of labour costs had some Importanr con­ sequences for the system as a whole. Under conditions (If acute labour shortage, the national capitalist state had to tend and care for labour power as well as exploit it i f productivity was ro match 1I1ternational levels. But this meant that workers had some '74

Capitalism n i the 20th Crntur.

rhe Eastern bloc not the only ones to rhe Western ecollomies and Japan were ar decades. So tOO did dchieve rapid growth rates during rhe post-w Eastern Europe. Soviet the USSR and the counlries It dominated in ween 195 0 and 196 6, electricity output grew by 500 perccnt bet tput by 600 percent, �teel output by Just under 250 percent, oil ou t by 1 00 percent, shoe tractor output by 200 percent, fabnc outpu 100 percent.'! By the output by 100 percent, the hOUSing stock by ich had transformed lIlid-1970s the same consumer goods wh America-the televi­ fICOple's lives in Western Europe and North llc-were also making chl ma ng shi wa the r, rato rige ref the set, n 'lIo homes. even if more their appearance in Soviet and East European bloc in 198 9-9 1 it has �lowly." Since the collapse of the Eastern 1960s even by many usually heen forgonen that III the 1 950s and granted that ItS growth Western opponents of the USSR took it for world had achieved. rate was higher tban regll11eS elsewhere in the could wtite, "The suc­ A trenchant critic of the system, Alec Nove lf the world's second cess of the Soviet Union . , . in making itsc

.... ll1dustrial and military power IS indlspumblc·· external pressures But simply growing fast did not overcome the of industrialisation the (or marc growth, since even after decades

Tht tong Bovm

175

Soviel economy w3sstill less man half the size of its then main mil Ilary compenror. tht US. Indeed, In some ways the pressures Arc\\

gre.lter. At the beginning of Lndust.rialisation, there were enormou, reserves nf labour that could be released for industr), from agricul ture. That meant I[ was nor of any great concern to those at the top of Ihe bureaucracy if much of this labour was used wastefully. It started ro maner a5 [he countryside began to empty of youn� men-Ieavmg much of the agricultural production needed to feeJ the mies to be done by diminishing numhers of ageing people. Tht> slave labour camps were run down soon after Stalin's death in 1953, in p:Ht for political reasons but also to release metficielll slave labour for effiCient explOitation as wage labour. II was an In dicarioll that the pha,e of �primiri\'e accumulation" was at an end. There Wil'i recurrent talk within official circles from that Hme on wards about eCOllllmic "reform" . During one such phase, in 1 970. the leader Brezhnev �pclt out the riltionalc; Comrade Brezhncv dwelt on rhe question of the economic com petition between The rwu world systems. " This competition mkes different forms," he said. ''In many cases we are copm� successfully with the task of overraking and outdlsrancing tlk capitalist countrieS in The production of cenain t}pes 01 output . . . bul the fundamental question is nOt only how much you product' hut also at what cost, with what outlays 01 labour. . h is in this field that the centre of gravity between the two systems lies III our time" ."J .

Thi.. was the same logiC of competitive accumulation that operated on the sometimes huge Slate sector of the Western industrial capl­ tahsms--or. for that marter. on (he giant corporations described b\ Galbraith. The organisation of production inside the USSR mighr Involve the putting together of different u� values (so much labour. so many physically distinct raw materials, such and such a particular sort of machine) to produce further usc values. BUI whal mattered 10 the ruling bureilucracy was how these use values mea­ sured up to the similar conglomerations of use va!tll:s produced Inside the great corporations of the West. And that meant com­ paring the amounts of labour used in the USSR to the labour used in the Western corporations. Or, to put it in Ma rx's terms, pro­ duction Within the USSR was subject to the law of value operating on the global scale." 176

CapItalIsm in rhe: 20th CC'mun

One of the illusions creared hy the rapId non-stop growth o f Ihe USSR was that II proceeded smoothl}' and rationall}' ac­ �mding to the variOus Fi\-e Year Plans. In comrast wilh the ups lind downs in the West. But the relentles) drive to accumulate had as a necessary by-product disorgamsation. chaos and waste In whole areas of production. At the beginning of every "plan" \';151 new mdustnal prOjects would begin to he constructed. But dter a while it would become <:lear th,\t thc) I.:ould not all be Itnished. Some (usua ll)' catering for people\ consumption n�e:ds) would be "frozen". whIle the resources for them were di­ \'�rted elsewhere (to the. prodUCTion o f means uf production). I his meant a contmual choPPIOJt and changlllg of the goods re­ u)urces were expected to produl.:t'; sudden pres'>ure on people to produce more of one product and less of ,mother: concealment b)' people at ev�r}' level in the production process of the re­ ,ources at their dIsposal in case the}' were suddenly pressed to I"oduce more; massive amounts of waste ilS some uf the things �ontained in the plans were produced, but not other rhings nec­ t'ssary for their use (such as the case in the 1980s when vast ,lmoums of fertiliser were wasted because one of the frozen pro­ lects was the building of the facrary to provide the bags for racking the fertiliser) .'Since the collapse of the Soviet Union It has become habimal on both the left and the right to blame all This simply on bureaucratic 1rrationality, without acknowledgmg Its similarity to the irrational­ tty of the managerial despotism within Western enterprISes-and Ihe: common roots of both 1n the su bordmation of hurnan lahour to ..ornpetitive accumulation, maT IS, to the self-expansion of capital. within i Vet it was possihle to trace: each of the forms of rrationality the Soviet economy back to overinvestment-Just as If is Wifh man­ agerial irrationali!)' wuhin Western corporations. There was not ani), waste m the Soviet-type economies. There was also unevenness m growth over tllne, as In the \Vest. Studies in the 1960s, rnamly by Eastern European economists, revealed the presence of cyclical ups and downs in economies modelled 011 the USSR. The Czechoslovaks Goldman and Korba told i n 1 96 8 how; Analysis of the dynamics of industrial production in Czecho­ slovakia, the German Democratic Republic and Hungary supplies an interesting picture. The rate of growth shows relativel}' regular The: Long Room

177

I

fluctuations. . . These flucruatlons are evcn more pronounced II anal)�ls IS confined to producer goods."

candy more unstable" than ten other economies that were cited . "lndudlllg the United States". A Western academic showed thai such unevenness was alread) visible In the Soviet UlUon from thl' HOle of the fint Five Year plan onwards.' The pattern of unevenness showed great similarities with ,hl' Western capITalist statcs during the long boom. Irs origin lay III

the dynamics of competitive accumulation. As we saw 111 Chapter Three. at a certain (loint i n any boom the competiriw drive of capitalists to invest leads to a drYing up of existing SliP of raw

materials,

labour and

loanable

capitJI

(il'

non-invested surplus valu e). Thc prices of all these thingscom­ modity prices, money wages and interest rates-begin ro TlW until the Icast profitab le firms suddenly find they 3re ope ratin� at a loss. Some go au[ of business. Others survive, but only lH abandoning planned Invest ments and dosing down facroric '_ Their aCtIons III turn destroy markets for other capirals, forc in� them to abandon IIlvestments and close down factones. Thl· " c),cess demand" of the boom gives rise to the overproducn on ut

the slump. The' secret of the Western long boom of (he 1 940 �. 1950s and 1 960s lay in the way rhe national state could red un· the pre�sures leading to liver-accumulation (by diverting a por tion of capital into non-productive mili tary channels); take dirc !.:1 actIOn to try to maimain a high rate of exploitation (throu� h wage controls); intervene to slow down the boom hdore It led key firms to become unprofitable: and maintain a minimu m guaranteed len:l of demand through military orders. The St�Hl· munopoly capitalist arms ecollomy was not able ro do away with the cyclical pattern of capitalist accumulation. �pecifically. It

could not SlOp ctlmpetitive pressures causlIlg capitalists to tt'nd ro expand producrion during upturns in the ecullOIllY on a scalt­ whi ch cxceeded the available resources. But it was able to pre· vent such spells of "over-accumulation'" leading ro sl umps of fill' pre-Second World War sort. Something of the same pattern existed in the Soviet-tY)'l' economies. Bottlenecks arose throughout the economy, threaten 178

the closure of vast sectors of production through shortager. of

III puts. Output ne,·er rose nearly as rapidly as planned. The mon­

The Yu�osl.1\' Branko Horva( was able to publish a book callnl Hlismess Cycles 111 Yugoslavia" which pointed oUl lhat even befor, the market reforms of L968 the Yugoslav economy was "sig mh

plies

U1J;

Capllallsm In Iht 20th UniUrI

ft.try funds paid out hy enterprises for materials and labour

I ...c�ded the omput of the economy. gl'·lIlg fiSC

to

inf1:uionary

pressures wrucb found dirt.'"Ct expression :ls rril.:c rises or "'hiddenM I

'pression as acute shortages of goods 1I1 tne shops.

uft to itself. over-rapid accumulat ion hv certam key entcr­ pn!oes would soon havl: absorbed the rc<;oUf!,:e, Illany enterprises I.lerended on to keep operating al c",i�tmg levelo;. leadmg [0 the \\

holesale closure of thclr plants and Ihl: de!olrunion of the mar­

h"tS for the output of other enrerpn3es. It would ha'·c become a LrlSIS of overproduction of commoditics. But as In rhe \'(lest in Ihe long boom. thc state stepped

III

to try and pre·empt thiS by

�t.:oolillg down" the economy. It ordered enrerpn o;;es 10 �free7C"

Lcrtain invest�ents and to di\"en resources

to

Olhers. This in­

volved factorlcs suddenly switching from one sort of output to

.\ nather. The myrh of the pre-planning of production gavc way

III the reality of after the- event,

posteriori", allocation, WIth a

"(I

(cpeated shifting of inputs and outputs. One pl an target which oIlways suffered in the process was that for consumer gouds pro­ Juction. The result was to increase stili further the discrepancy netween the funds laid OUi by emerpnses on wages and the MOods available for these wages to buy-to increase open or hIdden inflation. Deep social and political crises

m

1953 (EaSt Germany), 1956

(poland and Hungary), 1968 (Cz.echoslovakia) and 1970-71 !Poland again) showcd how the tensions thiS produced could find �udden expression. But so long as It was possible to restore growth r.nes, the rensions could be reduced. usually h)' a combination of repression all the one hand and concessions o\'er living standards em

the other. Such remedies hid temporarily thc underlying pres­

�ures towards crisis Those who failcd to analyse the system in terms of competitive " ccumularion failed to sec thiS. ThiS was true of the Western pro­ capitalist theorists of "totalitarianism". Olle can scarch their writings of the 19505 and 1960s in vam for some hints thar ltussian type systems contained IObudl economic contradictions.

II was also truc of most of those who saw them as some sort of so­ t.:lalist or workers' stares. They were colltll1ually over-optimistic "bout the economic prospects-in their own way mirroring the il­ lusions of [he Western Keynesians.

Tht Long Boom

179

Arms, profils and o( !he Cold War The arms hudgets of the great powers were central TO their e;;o nomic development, But their roots were nOt narrowly econolTm. The} flowed £rom a new struggle TO divide and redivide the world berween the main victors of the Second World War, !he US and the USSR�the Cold War. The US had aspirations for ItS industries, !he most advanced and productive in !be world, to penetrate the whole world econ

n;ploiratlon of the lesser powers unJer their conlrol. At no \tJ.ge in the 19405 or 1950s dId total US O\'crseas investmem (let ,llone the much smaller return on rh;:n Inve�tme nt) exceed US �rcnding on arms. Even In the period o f "disarmament" prior til the om break of the Korean War " milltary expenditure 10-

$ 1 5 billion a year. Thus It was 25 times as l 1,llled something ike . Iligh as the sum of private capnal expofts .. ." By 1980 total ex­ rcnditure on "defence" had risen to around S200 bill ion-less rlUW than total overseas investment of $SOO bill ton, but still

om} through " free trade", The Western European power... exhausted by the war, were In no position to challenge it di.recrh

�ubstanrially more rhan the profits thar could possibly accrue

(although British politicians often expres�ed a priv;He desm:

The picture for the USSR wa� 50mewh3r Similar. In the years 1 945-50 it pillaged Eastern Europe, relllO\in� plant and equip­ ment wholesale from East Germany and Romani3, and forced the

to

do so). Russia's rulers were in a different situation. The war\ end left them dominating virtually the whole of nonhern EuraSia, (r()ln tbe botders of Western Europe right thruugh to the Pacific. With le\els of industrial productivity less than h... 11 those of the US, rhey wt:re In no posltioo 10 sustain tbemselvc.. in economic compelltion through free trade. Bur they could con test the US a({empt at global hegemony by blocking its accel>S to the economies under their conrrol�not JUSt the territory of tht old Russian Empire, but also the coumries of Eancrn EUroPl'

from that 1I1vestment

.

•

region as a wh�e to accept prices below world market levels for �oods gOlflg to the USSR proper.'� But even in rhat period the eco­ lIomic gains from thiS must have been subslantially less than the

t'!lCalation of the USSR's arlllS budget once the Cold War had well ,md truly begun. And from 1955 onwards fear of rebellion m I astern Europe led the Soviet government to relax the direct ec.:u­

which they subordinated to their military-industrial goals. The

· \Ie!litcs. nomic pressure on its s. The imperialism whICh necessitated ;trms spending was not that

U�. for ItS part, rushed ro cement its hegemony over Western

of a single empire in which a few "finance capitalistsn at the centre

Europe through finuncing pro-American Ch.ristlan Democral

made huge super-profits by holding billions of people down.

and Social Democrat politica l parties, the Marshall Plan for r�'

Rather It was the Imperialism of rival empires, in which the COIl1-

vlvmg European industry within parameters favourable to U�

bined capitalists of each ruling class had to divert funds from

interests, and tbe creariun of the NATO military alliance and

productive investments to mililary expenditure in order to ensure

Setting up US bases in Western Europe.

that they hung on ro what they already possessed.

The panern was laid for tht'" next 40 years, of each of the tW()

The calculation in borh Washington and Moscow was simple.

great powers reaching out to draw as much of the world as possi·

To relax the level of military spending was to risk losmg strategic superiority to the rival Imperialism, enabling it to extend its

ble II1to its sphere of 1n11uence so as to gain a strategic advantage over the other. They fought a bloody wac over control of the Korean peninsula, not because of the little wealth It then pos· sessed, but because of the strategic implications fur the whole ot the [3St Asian and Pacific region. Each tried over the followin� decades to extend its sphere of influence by giving aid and ilrnb to states which fell our with its rival. The Cold War conflict could nut be explained by econom ic, as often understood, in terms sim ply of prof it and loss account­ ing. The armaments bills of both great powers soon exceeded

sphere of dominance. So the Russians lived in fear of an at­ tempted US "rollback " of Eastern Europe, which would have

i turn broken these economies £rom Ihe U�SR's grasp, leading n to the pOSSibility of an unravelling of the ties which bound the Qther constituent parts of rhe USSR 10 its Russian centre (some­

thing that did 111 fact happen eventually with the great economic and political crisis that shook the whole Easlern bloc in the years 1989 to 1991). At the same time, the US feared for its hegemony.

As one US spokesman put if at the lime of the Korean War,

anything their rulers cI)uld hope to gain from the increased

"Were either of the two cflllcal areas on the borders of the

180

The Long Boom

Capitalism In the 20th Ct'nlun

lSI

C()mmuni�t world to be overrun-Western Europr or ASla-lhr resr o( thr free world would be immensely weakened . " i n el:tl nomIC and militar)' strength . . . • ,,'

h was necessary, 111 other words,

[0

hrst twO post-war decades. ex-pons of capItal sta),ed down at the \cry low levels the)' had ..unk to in rhe great slump of the 1 930s.

'" Mike Kidron pointed out 10 1 962:

turn va�t amoums of valli\"

IIltO meam of destruction-nor in order to obtain more value hUi to hold 01110 thar already posse'ised. Such was thr logic of caplt;!1

fven i n Britain . .rhe significance of caplt.ll e\.ports. has declined .

tremendously: larrerl), they have run at .lhout 2 percent of gross

iH competition applied to rhe relations berw-eeo s tares. � the Cold \'far amounted to a new inter-imperialist conflict of the son dl· scrlhed by Bukharm. and i t soon overshadowed the old impenali..1

national product com pared \\ Ith 8 perl:cm In the penod before World Wac One; tbey now absorb I(',>s Ihall 10 percent of sav­ ings comp,ued with some 50 percent before; .lIld returns on foreign invesrmenr have been runntng at '>llghtly o\"er 2 percem

conflicts hetween thr W{'St European powers.

of nanonal lncome compared wllh . . . 1 0 perl:enl In 1 914." 'he foreign investment that did t,lke plal.:e was deueastngly dl­

Decolonisation and developmentalism in the Global SOUlh Eighty five percem of humanity lived oUlside rhe advanced indu .. Iri31 countries. Tht-ir expeTience of the "golden age" was vcry Lu ·

from golden. The great majurH"Y still lived in the countryside, :llld there was little ch. mge in the poveny that plagued their daily live.. One importam political change did. howevt-r, take place. TIl(· West European powers, were forced. bit hy bit, to abandon dired

colom a I ru le a process starting with a weakened Bntain ending II' 190 year old empire In India in 1947 and ending with Portuga l .

handing o\"er power 10 li beration movements in Africa in 1 9-,. The US replaced Western European in fluence in som e region �. II took control of South Vietnam when the French withdrew III 1954 unlil lt too was forced to withdraw aher the most bJrtl.'r nl

wars in Ihe mid-1 970s. It he<-ame the dominanr influence in mO�1 of the Middle E..m and parrs of Africa . But, like the Europea n

pov ..er.., it retreated from formal colonisation, granting indepell dence to the Philippines and keeping direct comrol only OWf

'ccred towards Ihe less industrialised pans of the world: "The "nncemnuion �)f acti vit y is increasingly withlll the developed world, leaving all but a few developing counlries outside rhe reach n( the new dyna mism " . 11 Tbere was also a shift in the demand for Third World prod­ "CIS. Raw m aterials from agricultural coumr ies had been

IIIdispensable for industrial prodUCTion in the West before rhe first World War, and colonial control was an importam way for mdustrialised countries TO ensure their own suppl ies and block .a�cess to their rivals. Bur now there were synthetic substitutes for

most raw materi als-art i ficial fertilisers, synthetic rubber, rayon, i nylon, plastics. A parallel transformation of agricultu.re n " "estern Europe and North America reduced food imports from the rest of the world. Br the lare 1 950s W ithdrawal from colonies In

Africa and Asia was no longer the threat il would once have

tx-en to Ihe ind ustrialists of the European coullIries. Companies which had made Iheir fortunes from plantations and mines of me

Puerto Rico.

(,Iobal South began to dlver!i1fy their InveStments into new lines

This retreat from direct colonisation had as a direct corollan the end of thr old clashes between the Western power� over till:

u{ business.

partitioning of tbe rest of the world. The drive to war betweell them seemed to have gone once and for all. It was also accomp.1 nied, as we have ..een, by something else unexpected by the cla ....I�

theories of imperialism-Iosing their colonies did nm stop Western econOmies participating in tbe long boom and concedi ng regul.n rises in living slandards to their workers And the advanced coun .

tries without an)' colonies-West Germany, Japan and ltaly-h:HI the economies which expanded fastest of all. Meanwhile, for tilt" '82

Caplt�h$m 10 the 10th

(tOIlI"

There was one great exception to thiS plcturc--oil. Here was the raw material of raw maTerials, the l Il�red iem for manu facturing

"Iastics, s)'mheric rubber and Mrifil.:ial fibres, as well as providing fur maSSively expanding energy needs and propelling the ever

Kreater proliferation of motor vehicles, mnks and aircraft. And the \upplies of it were increasingl)' to he fuund outside Europe and Nonh America. By the mid-1 970s Saudi Arabia, Iraq, Iran, ti.uwa it, and the perty sheikhdoms around the Arabian PeninsuJa were the countries ,hat ma tlcred-as was shown by the temporary

1M Long Boom

183

Interruption of supplies during rhe Arab-Israeli war of 1 973. II was not an accidem that the une version of old style colonialism

[hat cominued to gel untrammelled support from ail ihe Western �tates was rhe senler srafe of Israel-fustered III its early years as ,1

"jewish homeland" b)' British imperialism, armed for its seizure 01 78 percenr of Palestme in 1948 by the US and the USSR, allinl

wnh Britalll and France in thelf attack on Egypt in 1956 , and backed whol eheartedly by the US 111 the aggression that ga\"e 11

conrrol of the rest of Palestine

In

juntO 1 967.U

Indigenous governments and capitalist denlopment The dismantling of the European colonial empires was a fact ot immense importance for something like half the world's peopll" who had hved under rheir thumb. It also raised very importanT questions for those who had, in one way or another, fought again�1 the hold of thuse empires. What happened to impcrialism-,lnd the fight against it-if empires no longer existed? The reaC!l()n of m.ln)' social democrats and liberals in the Wbl was to Sll} that Imperialism no longer existed. This was, for III

st,lnce, the conclusion drawn by john Strachey. In End of Em/mo' ( 1 959 ) he argued [hat rismg living standards mel . Ilt businesses no

longer needed colonies to absorb ehe surplus and prevent overpro duolon, In effect, he was saying that Hobson's alternative 10 imperialism, a reflation of the domestic econ omy. had prevailed and solved the system's problems. An important section of the left rejected such reasoning. The\ could see that rhe former colomal countries were still plagued h\

poverty and hunger-and that the Western firms that had bene ­ fired from empr i e remained entrenched in them. What is mOre, thl'

end of the European empires was not the end to the violence in flicted on the peoples of Third World, as the US state picked up thl"

cudgel of the departing European!>. Yet rejection of facil e talk about an eod to imperialism wa, often accompnnied by quotes, parrot fashion, from Lenin's 1 9 1 f, analysis without recognising the changes that had occurred sinr.:t:

it was wrinen. His insistence that the great Western powers weft: driven to divide and redivide the world benveen them through

direct colonial rule hardly fined a situation in which colonies had gamed independence. The response of most of the left was qlllc tl� 1"

ICI

redefine imperialism to mean �Impll (he explOitation of the

I hird World hy Western capitalist classes, dropping the drive to­ wdrds war between imperialist powers 501.:entral to Lemn's theory

Inr what was in realiry a version of K..ur�k)'" ultra-Imperialism. At the same rUne they Simply replaced talk of L:olomallsm With ralk of " neo-colonies" or "S("mi
Lenm had wrinen of "scmi-coloniesM. l or hllll these were places like China ar the time of the first WurlJ War, where Mmdepen­ .Ience" concealed conrinued polltic,.1 suoordinatlon to foreign .armed forces n i partial occupation ot the country. There were \Orne places where things- did seem likt this after the end of direct '1Ilonial conrrol in the 1 950s and I 960s. In many !.:a!>es the de­ p.lrring colonial administrations were able to ensure Ihat their place was taken

,fy their own cre.lture�, with enonnous continuity

III the personnel of tbe state, e'peciall) when It came (Q key posi­ WillS

in the armed force:;. So, for instance, France had granted

"lI1dependence" to huge areas of West and Central Africa by h.lnding power to people who continued, as in the past, to work With French companies, use the French currency-and periodically II1vile French troops in to maintain Murder". But in some of the most importanr cases independence did mean IIlJepe-ndence_ Governments proceeded nor only to take sears in the United Nations and set up emhassles all over the world. They .alow intervened

10

the economy, nationalising colonial companies.

IlIlplementing land reforms, embarking on schemes of industrial!­ \.nion inspired

by the preaching of theorists of economic

llevelopmenr or often by Stalin's Russia. Such fhlllgs were under­ taken With varying degrees of success or failure

111

India, Egypt,

\\ ria, lraq, A1ger1i1, Indonesia, Ghana, Eqw:norial Guinea, Angola md South Korea, as well as oy tht., more radical regimes of Chma,

( uba and Vietnam. Over time eveo some of the ;<docile" cx-colo­ Ilia I regimes began to follow rhe same path. Tlus was true, for m\rance, of the Malaysian regime, of the Shah's regune

III

Iran In

Ihe 1960s and early 1 970s, and of the Taiwanese regime. Even the lhctator Mobutu. brought In power With the help ot the CL\ in Congo-Zaire in 1965, nationalised tbe mighty Union MinierI.' de I but Katanga mining corporal Ion along with 70 percent of export l',lrnings three years later. To call regimes like Nasser's Egypi or Nehru's India "neo-culo­ IlIal" or "semi-colunia l" was a travcsry-as Ir was with "populist" regimes in Latin America or the Fianna Fail governments in 1 he Long Boom

185

Ireland. Attempts were made in each case to establish not (mly in dependenr political entines. but also independent centres of capit.l l

dding: The establishmem at a socialist planned cl;onomy i... [he essen­ l1al, indeed lIldispensable, condition for the attainment of

accumulation. These s(ill operated withm a world dominated �\ the much Stronger capitalisms of the advanced countries, but Ih\:\

econorruc and social progress In underdenloped countnes....

were by no means mere playthmgs of them.

A new -developmentalist" orthodox)' pointed the means tH which such economies were meant to close the gap with the a

r.!

vanced industrial nations. It held that capitalist market mechanisms could nor achieve that goal. As the staff of the World Bank later recalled of "the dominant paradigm at that time":

I .under Frank was lust as adamant: • 0 country which has been tied

the IlH."tropoll!. as a satelhte through incorporatIOn In the world (apualisl system has achieved the rank o£.an economi":.l lh de\'eloped cOl/lllry except by finall), abandolllng the capltalM �ysrem.

It was assumed Ihat n i the early stages of development markeh

could not be relied upon, and that the state would be able ro direcr rhe development process . . . The success of stale plannln� in achieving industrialisation in the Soviet Union (for so il wa, perceived) greatly influenced policy makers. The major devcl opment institutivns ( n i cluding the World Bank) supportcd (hest" views wilh va rious degrees of enthusiasm."

JUS( as Keynesianism was dominant with in bourgeois economi!.:, in the advanced countries at the rime, so statist, "import subsllru tionisr". dOCTrines were hegemonic when it came to the Third

World. The main proponent of these in the 1940s and 1950s W,h the very mfluential United Nations Economic Commission for l,a[1O America, directed by the Argennnian economist RlIoul Prehisch. h argued thar development could only take place if tht'

state intervened to block imports to foster the growth of new local industries," since orherwise "dependence" on the advanced capI talist economics would prevent industrialisation .....

More radica l versions of such "dependency theory" dommared much of rhe left worldwide in the 1 960s. The writings of Paul Baran (especi aJly Tbe Poltlie-al Economy of Growllt) and Andn' Gunder Frank (who talked of the wthe development of underde­ velopment")" dominated most Marxist thinking on the subjcn (even though Gunder Frank did not see himself as Marxist).tJ Baran wrote that:

Far from serving liS an engine of econom ic expansion, of tech nological progress and social change, the capitalist order III

(hese countries has represented a framework for economic Sf.lg­ nation, for archaic technology and for socia1 b:lckwardness.·' 186

to

"�oci alism" for Baran and "bre;lklll� with 1;3plt.llism" tor Gunder I'rank meant r:Jllowing the mudel of Slalllllst Russia. The "dependency" argument. whether III its m.lInstream or radi­

,,11 form, was a weak one. It a��lImed that r.;;lpim1i"t� (rom the ..dvanced countries who ill\ested in the Third World would deliher­ u . ely choose not to bui ld up industry even when It would ha\'e been

pro6tablt:. This did not fit the fac�. There was considerablc foreign hnance of industrial development III Tsa rist Russia, Argentina and the: British domimons before: the hrst World War. Nor did Western tates at aU rimes use therr power to pre'ienr industrialisation.

\tlmetimes they did .md someWlles the) did not. Finally, a ruling dass of one country which depends on bigger capitalist CQumrit':S for much of its trade and Investment does not complerely lose ItS abLllty

forge an II1depcndcnt path of capital accumulation. The European economiCS, for lOStance. have long been to a high degree

10

dependent on what happens

the US economy Without the I:uropean ruling classes simply becomlllg American puppets. 111

So pervasive was the view rhat -capitalism means underde\'el­ npment" that people read II back into some of the Marxist

dassics. Baran quoted Lenin to back up his case, while even some· nne as perceptive as Nigel Harris could ascribe stich views to "rhe

Bolsheviks in 1 9 1 T'

•

-

.

Lenin's writings on unperiaJism had in fact put forward a com­ pletely different view, as did Leon Trotsky'S writings of the late

1 9205. Lenin wrote that me export of c3pital "acceler:ucs me devel­ opment of capitalism 111 the coumries to which It is exported"," while

rrotsky wrote that capitahsm "cqualises the cultural and (:conomic

development of the most advanced and most backward countrles�,""

The long

Bourn

187

even if as it did so "deveiopll1g some parts of the wurld econon H .... hlle hampering and thrO\\mg back the development of others . · ' ..

What mamstream dependency theory did do for a period W.I' prmlde an ideological justification for methods which enabled th�

ruler!. of some politicaUy independent states to achieve imprl'sSl\ \ le\cls of accumulauon, even if only for a period. Argcn lJna'� r.Ut of cwnornlc growth through the I 950!!i and 19605 \\'.lS compar.1

ble with rhat of haly-' and by rhe early 1 970s a third (If I, workforce was in IIldustry, with only 1 3 percent on the land. BraLit\; 9 percent growth rate was one of rhe highest m the w()rld

and by the mid·J 980s the f.cOItomt5t could rder ro Sao Paulo ,h "a Detroit in the making"'-' South Korea experienced rapid eco

nomic growth of about R percent a year afler a gener,ll, Park Chung Hee, seiud p()wer in 1961 and forced the big firms (or clmcbuls) to work within a franwwork established hy the State anJ

III India grew by 5.3 percent a year from 19S0 to 198 1 , and agri­ lI!tural ourput by l.J percent, e\en if there was continual ,h,appointment at the economy's lIlabdny 10 exceed a "Hindu" wwth rale of 4 percent. Sub-Saharan Afnca had �per capita

"rowth rates of around 2 percenr in the cJriy 1 9&05" which �rose Egypt, whose 10 nearly 5 p<'rcenr by the end ot thai decade Ir.-.dcr Nasser nationalised almn'>[ all (It lI1du�tr)', grew about 6 �.

l'1("rcent per rear through (he fir�t h.llf ol lhe 1960,. Suo.:h OUTcomes III terms of levels of cc<momic v.ruwth were enouVoh TO convince line "revisionist" Marxist. BIll Warren. to come to the conclusion

III rhe early 1970s that most 01 the re�t of the left were wrong. (.uumries in the Third World wuld calch up W i th the \'(lest with­ . li"m: nut breaking with C
China, where state control of the economy came closest 10 rhr Russian model endorsed by the radical dependency theorists, haJ

The prospects'tor successful capitalist economic development (implying industrialisation) of a sign ifican t number of major underdeveloped countries are quite good . . . Suhsrantial progress in capitalist industrialisation has alrea dy been

of civil war and J3panese mvasion. The imposition of plans whi.:h diverted resources rewards new heavy industries-steel, cement. electricity-in a \ery poor, overwhelmmgly agricultural country

the Third Worl d itself. . . The imperialist countries' pollcies aDd their overall impact on the Third World actually favour

emharked on State capitalist industrialisation.

an economic growth rate no higher than these figures once it had completed the first shorr stage of economic rc..'Covery from 20 year,

like the Chin.1 of the early 1 950s meant squeezing the l iving S(;\I\­ dards of the mass of the population. What rhl' peasants had gaineJ through bnd reform in the previous decade, they now lost through ngorously enforced taxaTIon of theIr ourput. Then came the ulti mately dlS3srroU\; attempt at coUectivisation through so-called

People's Communes, in an 3Hempt to bring about a "Great Leap �orward" III economic developmem. The leap cut total agricul· tural omput, led to famine in \·ast areas of the counrrysidc and haJ

to be abandoned. Much of the new industry was far from efficient.

The growth of hl'aV}' industry out ()f all proportion to what wa" h appelll ng in the rest of the economy led (Q acute shortages 01 lIlpurs needed tu keep plams running, and to the producrion of other goods which had no immediate use. There were massin' swings hetween spells of fast industrial expansion and spells ot Ilear stagnation, and many of the grandiose new giolnt plants were

only able to work at a fraction of their capacity.

There was usually growth even in cOllntries that were not a� successful as Brazil and South Korea. The manufacruring ompul 188

achieved . . . In so far as there are obstacles to this development, they originate not in current Imperialist-Third World relation· ships, bur almost entirely from the internal contradictions of

ItS industrialisation . . . -'

l ie provided figures showing the rcal per capita economic growth

that was in fact happening. In challengtng the assumption of the r.ldical version of dependency theory he was on strong ground. So too was he when he made the POInt that if the left saw irs main pri­ urlty as supporting mdustrialising regImes as "anti-imperialist" it

�ouJd "find ilself directl} supporting bourgeois regimes which, as In Peru and Egypt, exploit and oppress workers and peasants

while employing anti-imperia iJSf rhewric". But lacking from his analysi, was ,IllY real accounting for the enormous unevennes5 between Tlllrd \Vorld countries, even Ihough his own figures showed thaI per capita :l.Imual growth in

IWO of the most populous counTTle5. lndia and Indonesia, was only 1.2 petcem and 1 percent (compared ro 6.8 percent for South Korea, 4.9 percent for Thailand and 7. 1 percenr for Zambia). He .llso failed to see that rapid capitaiisl development was not neees­ ..arily smooth and uninterrupted through time: Ihe Long Boom

189

Private IIHeStmem i n the Third World is increasingly cre.IIIl!)� the wnduions for the disappearance tJf impenalism as a S)�ll·lII

( UAPTER

of econ�mlic n i eLJuallfY berweell m nions of the capitalist worl.1

The en d of th e go ld en ag e

')"�tem. and. . . there arc no linurs, m prinCIple. to this proce!>�.

EIGHT

ThiS led him (0 make a prediction that would soon be put till tesl-and pro\"Cd dramatically \\ rong: As for future proSpei..'ts, the World Bank's view is that Ihe m" iority of countnes In the 1970s will, as in the 1 960s, remain Irn of debt servicing problem!>... The first three years of the 19-�), strongly suggest that this will be the case. Warren had ("ken the crude account by Gunder Fr.mk and Bar.\ll that had maint:uned development was an Impos!>ihllHY of and simply turned it upside down. Lacklllg was any sense of thl chaotlc, unpredictahle character of economic growth for till weaker sections of the world :.ystem that Trotsky insiSted Oil whell re,"ogni�ing that capitalism does nor always lead to stagnation: By drawmg countries economically closer to one another allli levelling out their stages of development, capimhsm operates h\ methods of its own, that IS to say, by andfchistic methods whllh t.:tlIl\tantly undermine its own work, set one country against an OTher. one branch of mdustry agamst another. devcloplllg SOllll pans of the world economy while hampering and throwing "ad the development (If others. . . Imperialism...attalO., this "goal � 1\\ such antagoll.lst!c methods, such tiger leaps and such raids upon backward countries and a.reas that me unification and levellin).! of world economy v. hich it has effected is upset by It even marl· violently and convulsively than in the preceding epoch.' It was a truth thar would affect the lives of many hundred!> of 0111 lions of people over the next four decades. In the Global Sourh, as n i the West, Japan and the Eastern blo... variants of what Lenin and Bukhann had called "state capitalism ,. did pennit a long period of economic growth. But those who e... trapolated from that to sec a smooth, crisis-free future were soon to be proved wrong.

190

CaplCahsm in tht lOth C.tntun

I he crisis of Keynesianism

The National Bureau of Economic Re�earch has worked Itself !lilt of one of its first jobs, namely business cycle.. ·· So proclaimed 1'.lUl Samu�ls()n in 1 970. Less than three years later the cnsis which was supposed now to be impossible broke upon the world--r-o at least upon the advanced capitalist countries and a " IllS part of the Third World. The golden age" had come to a .

,udden end. The reaction of governments everywhere was to try ro keep it "mng by resorting to the Keynesian methods they had come to be11�'\·e infallible. Government budget deficits, rare in the previous three decades, now became the norm. They failed to restore the '�'�tem to its previous health. Not only was there the first lapse IIltO negative growth-a real recession as opposed to the "growth r�'i.:essionsM sometimes known previouslr-wuh soaring levels of

unemployment, but it was accompanied by ri�ing levels of infla­ non, which in a country like Britain could approach 25 percem. There were ;uremprs to explain what happened as a result of the Impact of the sudden very big lIlerease in the price of oil in (ktober 1973 due to the brief "Yom Kippur" war between Israel .lOd the Arab states and the accompanylllg emhargo on oil exports h)· Saudi Arabia. But the effect of the price increase was only to reduce the national incomes of the advanced cnuntnes by about

IInc percent-and mo!>t of the money that accrued to the oil pro­ ducers cnded up being recycled back to the advanced countries \·i" the international banking system. It was hardly enough in itself [(l t'xplain the scale of the impact on most of the world system-an llnpact which Keynesian methods should have been sufficient to Jeal with according [0 the then conventional economic wisdom. What is more, the oil price increase did not rake place in isolation 191

from other de\'elopments. Already rhree years earlier a ··�rowtl rtt("ssion" had hll all the major economies slmultaneoU!ily In I

t Ihour's prime mmistl!r James Callaghan \'ltrually adnurted rhis ,.hen he told 1-1IS party's conference in September 1 976:

way which had nor happened in the prc\!ious quarter century, an.1 had been followed b) a very sharp economic upturn and aceelC!

We used to thint... you could Just spend your way OUt of reces­

.H1ng mflatlon even before the oil price rise,I In short, the reee��Hl11

.,ion by cutting (axes and boosting governmenr borrowing. 1 tell

that began at the end of J 973 was the culmination of precisely th,

you i n all candollr th:n that oprion no longer exisls; and insofar

of economic cycle thar Keym·slan-style state IIHerventions h�hl

as it ever did e,.-isl, It worked by injecnng inflJti(ln inw Ihe econ­

SOri

supposedly consiAned to rhe history books.

omy. And each time that h,l� happened. Ihl" ;I\'crage level of

Mainstream Ke)llesians were at a loS!.. They found that rht·u

unemployment has risen.

rhoory no longer Jld any of the thmgs they had claimed for it. ,.\ one Keynesian. Francis Cripps of the Cambridge Eco"omlC Polk

I he poim was repeated 20 years later b�' the luture Laoour prime

RelJiell', later put It. the}' suddenl}! realised that:

nlln1Sler, Gordon Brown:

Nobody really understands how the modern economy wod.. ,

Countries whICh artempt to run national go it ,110ne macro­

Kobudy really knows whr we had so Illuch gwwth in the pm!

economic p(;'\icies hascd on raJ\., spend, borrow policies

war world . . . how the various mechanisms sloned rogethcr.o

boost demand, without looking to the ability ot rhe supply

to

side of rhe economy, arc hound these days to Ill" punished by Ihe form of stiflingly high interest r(l[es and

Many Keyncsians dropped their former Ideas overnight and en

fhe markers

dorsed the wmonet.uist" theones propagated hy t\ltlton Friedm.lll

collapsing currencies.'

and the C:hIC;lgO School of economists. These held that the

III

at

and

academics who

rempts by gmernmems ro control economic behaviour had been

Pnltticians

had

been

broughr

up

on

misconceived. There was, they argued. a Wnatural non-mflacion.lf\

Ke) nesiamsm camc to accept the same parameters for decldmg

rate" of unemployment, and attempt.. to reduce II by governml!nt

,�onomic policy as their old opponents, with no ahernarive to

spending were bound to fail and to merely cause inflation. All

hIgh levels of unemployment. welfare cuts, " flexihilifyM 10 milke

states should do, the}' insisted, was to control the supply of monn

",nrkers Wmore competitive" and bws to restram ;'trade union

su that 1t grew at the same speed as ·'the real economy" -and ralH­

I'\()wer". Keynesians who did not drop their old beliefs were

such action as wns necessary to break down "unnatural monopo­

pushed to the margin!> of the economic establishment. By 2007 a

lies" by trade unions or nationalised tndustries, while holding

rudy showed that "72 percent of economic students" were at ed­

down unemployment henefits so [hat worker!> would then he per

IIcational institurions with out a single '· he terodox economist'·

suaded to accept Jobs at lower wages.

who challenged "the neoclassical and neoliheral assumptions".'

The repl} of apologists for capitalism to ItS crttics for 30 year"

But the rush towards monetansm by supporters of the system nor any more able to come to rerms wuh (he crisis than

had been that it could be made to work with state Intervention

", lS

Now it was Ihat it could only be made tn work if State tnter\,fn

Kt."}'nesianism. Monetarism was, arrer all, lirue more than a regur·

fion was scrapped. As the di�!>ident radical Keynesian JOJU

�lIation of the neoclassical school which had dominated bourgeois

Robinson summed up rhe mamstream shift:

feonomics uncil the 19305. Jusr as it had lx·en incapable of ex­ Wl'

"I.limng the unprecedenred seventy of the illler-war slump, It was Incapable of explaining the crisis of the 1 970s and J 9805. still less

made a mistake, we were not offering full employment, but thl'

flf dealing with it. In Britain the monetatist Howe budget of 1979

narural level of unemployment. Of course, they suggested that.l

was followed by a doubling of both inflation" and unemployment,

Imle unemployment would be enough to keep prices stable. But

lnd left industrial output in 1984 15 percent below its le\"el of 1 1

now we know (hJ.t even a lot will not do so.

vears before.- The monetarist measures did not even manage to

The !>pokesmcn of capitalism were saying: Sorry chaps,

192

t:.lp'l;al.sm 1II th" lOth uDiun

The Emf of Ihf' Golden Age

'93

comrol the mooe) supply; its broadest measures (what eConon1l\h call MJ) grew in 1982 by 14.5 perct:nt Instead of the 1mended f, I" 1 0 percent.' The policy merely served to destroy much of local m dustrr, exacerbate the crisis of [he early 1 9805 and lay the groun.! for another crisis in 1 990. Some economisrs who had abandoned Keyne5ianism for mom

rarism 10 the mId-I 970s could be seen desertmg moneramm in 11

rurn in the earl) 19805. Financial Times columnist Samuel Bntl,l II, who had done much to popularise monetanSt ideas In Briram, \\ .1' by 1982 criticising many monetarist policies and calling himseJt .1 "new-style Ke)nesian". In the United States, Reagan's economl� ad\li�ers, faced with th e failure of monetarist policies to end .1 severe slump, quietly ditched monetarism" and abandoned one ot monetarism 's central principles-me balanced budget. Bur much mainstream economic theory muved In a different direct1On. A "new classica l" school gained influence that con tended, vcry much along the lines of Hayek in the 1 930s, th.n what was wrong with monetarism was that it left a role for tIll'

which saw the slump-h()Om 'Yde ,1 5 Inenta h le--an d a good thing. I he srstem. It argued. was capahle of non·stop expansion, but IIn ly on the basis of �creative destruction" whu.;h destroyed old

jorms of production to clear the wa) for new ones. ,l Bur it was no fIlore able than the mamstream Ke) nesial1s. the monetarists and the new classlcals to answer a centr.11 que�[lon: Why was the

y)tem plagued once again by rewrrem (fi�e, and hy a long (erm llocline i n aver.lge growth rates afler three dec.ldes of unprece­ ,1('moo, almost CriSIS-free growlh?1J It was rhe failure of the anti-Ke)nesiam to come (0 rerms with \I,-h problems that Jed some Kcyncslam-.1nd some Oil the far left mfluenced by Keynesii.1Illsm-to "lame them for the demi� of rhe "�olden age�. It was not the system as \uch. rhe�' .Ir�ue, thar was hehiod the recurrent crises. But, a� Notermans ha' poimed out: •

if neither the recovery from the Crear Depression or post-war

growth can be attnbutcd [() Keynesian policics... [lrJ cannot serve as an explanation for the termination of full employment. I'

state-Intervening in money markers. Fnedman, they claimed.

had falien iOlo the same trap as Keynes by urgmg governmelH moves to shift the money supply: he was, in a certain sense, " ;1

�o where does the explanation lie?

i sisted, could not alter busme", Keynesian" . I" Such moves, they n behaviour in rhe hoped for way, since the "rational expcctal1on�� of entrepreneurs would always lead mem to discount governmt'1lI intervention in advance. Fiddling with the money supply, hkl'

Where the crises came from

acting with each other properly. �Booms and slumps", It V..h

�lissing from all the most influential mamstream explanations lor me end of the "golden age" was what was happening to the rale o f profit. Yet various efforts at measUring it have come to a

Ing".11 It is an amazing commentary on the remoteness of mO'1

carly 1 980s.

government deficit spending, stopped supply and demand inter

claimed. �are the ourcome of fraudulent Central Resen'e bank

academic economics £rom any contact with reality that the ne\\ i tellectual credibility when they demeJ dassicals could maintain n the instability and irrationality of the laissez falfc economy in .1 period which saw three major international recessions. The high POlllt of these ideas was With a shonlived boom in th�' mid to lare 1980s. It se('med to vindicate their Opt un ism about Iht' benefits to economic growth of deregulation, privarisation and thl removal of all restraints on the greed of the nch. But they losl some of their lustre with the renewed deep recession of the earl� 1990s. A different school of free market economists gamed som�' supporr within (he mainstream. This was the variant of till' "Ausman school" influenced by the ideas of Joseph Schumpeter. "4

Capitalism

In

rht' 20th (;entun

\ingle conclusion: It fell sharply between the late 1 960s and the The results are not always fully compatible with each other. �ince there are different ways of measuring investment in fixed ....lpital, and the mformatlon on profits provided by compames and �overnments are subject to enormous dlstonions." Nevertheless. rred Moseley, Thomas Michl.I' Anwar Shaikh and Errugrul Ahmer Tnnak .l- Gerard Dumcnil ;\nd Dominique Levy, Ufuk

Tutan and Al Camphell," Robert I�renner, EdWin N Wolff," and Piruz Alemi and Dunc;\n K Folt'y- have all come to very slluilar conclusions. A cerram pattern emerges. which IS shown in graphs gIven by Dumenil and Levy ( Figure I ) for the whole bu� ine�!> \Ccror in the US and by Brenner (Figure 2) for manufacrurlng 111 the US, Germany and Japan. rile End of (ht' Gold�n i\g�

\95

"'sure I: US profitrat�s accounting (Qr (-) and abstrachng fro", (_.) thr

1 1197" was "stdl only half of ItS value of 1 1;'48, and between 60 md 75 percent of its average "alm' for the decade 1 956·65"." There were artempts to explain the decline In profitability in the I I/70s as resulting from a wave of workcr�' ..ITuggle internation­

12

Illy which had supposedly forced up the workers' share of total IIKoml" and cut into the share goin� to capLtal. That argument was

impact offinandai rrwtlonsll

"

.,

, , , , ,

.

.

--

'

" '''

'

6

"

, , , , , ' "

,

10

"

.

,' '' -

'

v

,

... "

,

". ,

'

.....

l'L1t forward by Andrew Glyn and Bob Sutdilfc,l' by Bob Knwrhorne.;'" and accepted in pan by rrnest i\l.lndel.' Glyn's

,-,,

,

,

'.

Indud",)! li.nan..;e

2

AlhtraQmg fro'" finan<.:e

_

_

,uIJlysis has been given a fnourable mention mmh more receml)' h)" Martin Wolf.°� But statist\(:al an.llysi� at the time suggested th('re bad been no increase In the share of wages when tax, capital Ilrpreciarion and various other factors were taken into account.)' 1 he argument also faIled to e.'
_ _

mo�ed lIno crisis at the same point in the IllLd-1 970s. Itl lral)" Britain, Spain and Fmnce there were imporr:mr Improve­ ments in the level of wQ[king clas� organisation in the laIe 19605

I �onomies

Ind early 19705. But there was no )Ollnilar Llllprovement 111 Japan ILlU West Germa n>', while in the US "there was a sharp decline in

..

"

,

,

40 15

.

,

.

10

" "

" " , , "

"

,, ,' , ,

21

'

'

t•

.

" '

,

"

"

' '

:

'

teal wages of non·agricultural workers from latl' 1 972 to spring 1975, while productivity on the whole Increased ".10 Wbat did seem to make .scnst'-a nd stiU docs-was Marx's argu­

"

, ,

,

I

.... Japan , , ,

'

ment abom rhe organic composition of capital. A mamstream sn]dy uf the US economy showed a rapid growth in the ratio of capital in­ vcsonem to workers employed in manufacturing by o\'er40 percent

us

2. I,

• ,

\/

I.

.

..

'

.

,

.

,

S

�'�'�j.�--�I''-6�0----�I�'��OC--cI'�'�0--�IT9'�0C---�2000· •

WCSI (rl'muIIlY 1950·90 and �any 1991·1000

There ]s general agreement that profit rates fell from Ihe late 1 960 � until the early 1980s. There IS also agreement that they partialh

recovered from about 1982 on, but with interruptions at the end of the 1 980� and the end of the 1990s, and never making up mor l' than ahout half rhe det:line since the long boom. According ro

Wolff, thc rare (If profit feU by 5.4 percent from 1966 to 1979 and then "rebounded" by 3.6 percent frorn 1979 to 1 997; Fred Moseley calculates that it "recoyered . . . only about 40 percent (It the earlier decline";H Dumenil and Levy [bat <;the profit r:lIe III 196

Capllailsm

III

the 10th

C�muf\

hetween 1957-68 and 1968-73.·' One stud)' of the UK showed a rise III the capital-output ratio of 50 percent between 1960 and the mid­ I 970s " Samuel Brittan noted with hcwildermem: .

There has been an underl)-ing long term declin(' III the amount of output per unit of capita l in man ufacturing . . . This is a fairly general experience in tbe industrial countries" , One can con­ Struct a fairly plausible story for an)' one country, but nor for the industrial world as a whole," rhe more recent calculations of l\1ichl," Moseley, Shaikh and Tonak, and Wolff" have all concluded rhat the rising ratio of cap­ lIal to labour was an element in reducing profit rares, It is a ..:ondusion that yalidatcs Marx's position that a rising ratio of cap­ Ital to labour can cut into profits-and is an empirical refutation of the position held hy Okishio and others that [his is impossible. But if s[ill leaYes open wh)' this happened then and not earlier. fllto End of the Golden Age

197

It is an issue th:u Gm be resolved by looking at contraditttoll \\ ithin the long boom already being highlighted in the earlv 1 %0, ' h) those who explained the boom In terms of the massive leH�1 1l1 MillS expcndirures Arms spendmg was very unevenly distributed among the 1110,1

unportant economies. They consumed a \er)' hjgh proporuon 01 Ihe national Output o f rhe US and rhe USSR in the 19)O s (up [0 I t

�rcenr in the first case, probably 10 percenr or more in the scmllll case), a lower proportion III Britain and France, and a mud .

smaller proportion for Germany and Japan. ThIS did not manu undul} n i the first rears after the Second World War, when tht:II'

was a relatively low level of foreign trade and most firms were suI> JCCt ro low levels of i nrernational economIC cumpettllon, Thl

rax3tlon to pay for rhe US arms budget cut nita the profit� 01 Amencan finns, for rnsrance, but this did not greatly disadvant;lgl

an} one such firm III its domestic com pemion with another. Alid there was linle for ca pita l ists to complain about so long as rIll

overall rate of profit did not decline much from Its high level in rhl irnmediatt' POSt war period. The positive effel.:ts of arms spendln):

more than compemated for thc negative effects. Bur over time the unevenness did come to matter. The US, ,I' part of Irs programme to use its dominant economk posllion 10 cement its hegemony outside the Russian bloc allowed acccs� (0 I(S markets to (he West European states and Japan. But economl(' with Illw levels of arms expenditure could invest proporflo nareh more and achic\'e faster growth rates than the US could. Over tif11l' ther heg.to to catch up with its levels of productivity and to 111 crease their relative i mportance in the world economy. Capital growth m Japan over the period 196 1 · 197 1 was J I .X .

percent per year, while n i West Germany Over 1950-62 It wa� 9, 'i percenrj these compared with figures for the US for 1948·69 01

only 3.S percent.' Japan accounted for 17.7 percent of the C01l1 billed .. dvanced Countries' GNP in 1977 and \Vest Germany 1 1 ..:! percent; III 1 953 the figures had ani), been 3,6 and 6.5 percent rc specrivcly. Meanwhile, rhe US share had fallen to 48 from 6'/ percent. ,T The shift was explained by the benefits Japan and Germany gained from the high level of worldwide arms expend I

ture, especially by the United States, without ba\'ing to sacr ifill' their own productive investment to pay for it. Had all cuu nrri("

had comparable levels of productive investment to that of the \'h'\ 1 Germans and Japanese there would have been a very rapidly ri�lll ).! 198

Klobal organic composition of capital and

J.

down ward trend in

Iht' rate of profit. As it was, capital h..d grown

III

Japan ··much

Inure: rapidly than rhe labour force-at more than 9 percent a year, IH

mOl:e [han twice the avC'rage rate for the \X'estern industrialised

\ IlUntries . . . " JI

Non·military state caplral isms could only rxpand

� Ithout crises because they operated withll1 a world system con· tJommg a very large military state capitalism. So the Japanese and German experiences did nor contradict the Ihl"3is of arms expenditure as an explanation of rl'orld growth and \1,Ibility. But the)' were a contradictory heror

111

thiS growth. Their

wry success meant that� growing .:hunk of the world economy ..... . 15not

wasting investible output on arms. t-\or was that the end

of the maner. Tbe ver)' success of Ihe low arms spendmg ('�:onomies beg"n to put pressure on the high arms spenders to witch resources away frum arms and towards productive invest­ ment. For only then couJd they begin to meet the challenge they 1.ICed in market competition from Japan and West Germany. This was most clearly the case for Britain. Its economy was lllghly dependent on foreign tmde and it ran into balance ot pay· Inenes crises with every spell of rapid economic growth berween the

1.1fc 1940s and the late L970s, Successive British governments were fllrced, reluctantly, to abandon their notions of imperial grandeur .and [Q reduce the proportion of the national product gomg on de· knce-from 7.7 percent of GOP in 1 955 to 4.9 percent in 1970. In the case of the US, the pressure was less obvious at firSt, since C'ven in 1965 foreign trade only amounted to about 1 0 percent of (,NP and tbe country enjoyed a trade surplus throughuut the 1950s and 19605. Nevertheless, arms spending dedined from ..round 13 percent of GNP during the Korean War to between to 1�[Ween 7 and 9 percent

Ul

the early 1 960s. The pressure of arms

\J'II!nding on its international competitiveness was suddenly te· \ealed when it shot up by a third with the Viernam War. The new level was not anything like that of the Korean War. But it was tOO much for a US industry facing vigorous competition for markets. rhere was an upsurge of inflation at home and Wall Street turned ,lgainst the war.JY Then, in 197 J for the first time since the Second World War, US imports exceeded US exportS. President Nixon was forced into two measures which further undermined the stability uf the world economy: he cut US anllS spendingiQ and he devalued the US dollar, in the process destroying the ··Bretton Woods" system of fixed international currency exchange rates that had The End of Ihe Golden Agt

199

acted

.h

a framework for the expansion of world trade throll).:h

om the post-war period. The dynamIC of market competition wa.'> relentles!>ly underi,:LH nn� the dynamic of military competition. Wh:n some people l"all�· I the "CtiSIS of hegemony"" of the s}stem III the 1 970s was, III t.1l1. the offspring of something else-the inherent instability of a wnrl.t of state capitalisms engaged

III

two qune different dlillensiom "I

competitioll, tconomic and miluary. wuh each other. One of the paradoxes of capltaJism, we saw III Chapter Three. that, although a rismg organic compoSlllnn of capnal reduces

engaging in capital llltensil·e forms of Investment, cur world profi1

r.ltes. wh ile raising their own national sharc of world profit... Thclr increased competitiveness in export markers forced OIhl.r capitallsills to pay, with falling rates of profit, for the increa \l.d Japanese and German organic compositions of capital. But t hi � III ,

turn. PUt pressure on these other capita lists w mcrease their COlli pt'tltiveness by raiSing their own organic compositions. The failing profit rates of the 1970s were the resuh. By 1 973 the ratcs were- '" low that rhe upsurge in raw material and food prices caused by th�. boo m of the previous rwo years was sufficient fa push the ad \"allced Wcslern economies into recession. Sudde nly there was no guarantee for the maror capitalist cun cems rhat new IIlvestments on the scale they needed to keep up wlrh IIlternational competition would be profitable. )1l\·eSII11CIlI began to fall sharply and firms tried to protect therr profits by ,,:ut ring back on employment and labour costs. Declining marh.,. then led to further falls in profits and lIl\esrmem. The old panem of boom turning into slump had rerurned ahn It'i 30·year break. When governments reacted by IrYIllS to bum1 demand wlrh budgetary defici ts, firms did not l1nmediatcJy rl. spond. as the mainstream Keyneslans held thar they should, Ln increasing investment and outpur. Instead the} increased prices til Iry to recoup their profits. [() which workers who strll had a degrlT of confidence from long years of full employmenr responded III fighting for wage increases . Governments and ccntml banks wcrl. then faced with a choice. They could allow the money supply fI! protect prol

us. Or they could try to restrict the money supply wirh hi�h shorr·term interest rares, rdYlllg on firms then being forced to 200

the late L970s. Bur me I�n);)cb in rhe mid·1 970l> to the �econd III of I"'::CesS in restori.ng investment and creating a new period succeeded in Kmwth did nor last long eYen when governments had ld not be uhduing working class reSistance. Tht., rate of pront cou nd I I· d abOl·e the pre-crisis level of 1 973, and in 1 980-82 a seco serious rul shock" was sufficient to push the world into a '>CCond di­ I ·ession, proving that monetMism could no more restore con Iluns to tbose of the long haom Ihan I.."o uld Keynesiallism.

.11

�rage profit ratcs, it raises the profits of the fir...t capltali.,t I. . Introduce new machinery. So the Japanes(' and West Germam. hI

�xpand so as to allow firms to further raise prices and

st workers' demands. TYPically Ihe)" turned from the nrst ap­

\i

I

Capn3i1sm In the 20th C..nrur

I he limits of state directed capitalism italist .l pitalism was commg up agamst Ihe liml lS of Ihe stare cap worked tr.1tegy for �aintalllilig accumulation. That 'itrateg�· had on Ihe u long as states were aole to Ignore the Immediate eHecrs lus I.ne of profit of d i recti ng some- of the mass of Invesnble surp

t

into areas that were- not i mllledia lel ), parricula rl), profim ble waste !the Japanese prioritising growth over profitability) or into the production (rhe arms economy). But rhis depended, firstiy, on secondly, on bemg r.\le of profit not dropping too sharply, and. par­ ,hie to ignore how the competiti\'eness of the production of ro th.u u..:ular goods within the national economy compared uage. f.lking place elsewhere in the world sysrem (or, in Marx's lang d with pro­ III Ignore the law of value on a world scale compare y). By Juction within the individual unus of the nanonal econom

\ ,due

1 970s both preconditions had been undermined by the ll)nrradiclOry development of the long boom Itself. e un­ The rate of profit had now fallen to a degree which mad of productive expenditures or not particularly profitable areas And the IIwcstment an increasing burden on further accumulation. d ynamism of the long boom had produced a growing inter·

The

mid

-

¥cry

foreign �onnectedness between national economies. By 1979 US percent in trade amounted 10 3 J percent of output, as against 1 0 had to 1965:' A much larger proportion of indusrry than before ole in­ worry about the international comparisons of its costs. Wh

to be dustries suddenly found that the value of their output had e it with reca lculated on the basis of what it would cost to produc of other fhe more advanced techniques and lower l a bour COSts "ad· �ounrries-and that meant it was not high enough to provide «Iuate" profits. Ihe End of the Goldrn AS�

101

This seems to explain the well known stagnation of labour rr/) ducm ity in the US In the 1 970s-the value of the machiner� ntl

which labour worked was ongmally reckoned In terms of hrm mUl:h it COSt to produce or replace inside the U�, but with mJJ1�

tllternational trade, what manered was the lower figure th.u would h.lve ohtalned if world comparisons were used."

In any case, the feature described by Galbraith, of firms beltw able to downplay the importance of profit in the mtereSIS ot

growth, was undermmed. And this was not only a very 5ignifil:.1 n1 change for the srate monopoly capitalism of the US. It was to ha\\

devastating cOn<,equences for those countries whieh had gnll\' much further m rhe direction of fuji blooded state capitalism in Iht

Eastern bloc and the Third World. They tOO were to enter IntO .1 new period of crises.

I...en suffering from �stagnatlon" for some years." His economic Jvisor, Aganbegyan, said:

In the period 198 1 -8 5 there wa,> praulcally no economic growili. Unprecedemed stagnation and uisis occurred during the period 1979-81. when producllon 01 40 percent of all in­ dustrial goods actually felL"

Ihe official figures for the )onet-rvpe e..:on()mIC� had already in rhe

late 1960s shown a long-term tcndem.y tor their growth rates

'" decline, by between a third And twO thlrdl>.

The long-term de­

.Ime in growth ratCS was paralleled by-a nd dependenr ..n-something else. The outputkaplta l ratio kept falling-trom 1 4 in 1951-5, to l.6 1T1 1 956-60 .lnd 1 . 1 in 1 96 1 -6S. Or, to put it �nother way, the :hnount of constant capita I rcqui red to produce a

u'mio amount of new outpur kept rising. The probltm was made worse becau'lc growing gross outpUt In

The end of the Stalinist model The assumption of conventional thinking on the right as weJJ .h the left was that the Soviet-type econOlmes displayed a very differ

em dynamic to that of rhe West. It was assumed with verv ILII Il" . , dissenr" unril the 1970 5 and sometimes the 1980s, that they cOILl.1 sustain high levels of growth indefinitely, evcn if they were al\1I marked by major lIlefficiencies and tended to produce low qual Jt\ goods. Typical of the atrnude on the left, even from people who were scalhtng about the denial of workers' rights in such SOClelle,. was the posillon Ernest Mandel held. He wrote in 1 956:

The Soviet UllJon maintainS a mu re or less evcn rhythm of c.. " nomic growth, plan aher plan, decade after decade, witholll

the progress of the past weighing on the possiblJltleS of IIlr future . . . All the laws of developmem of the capitalist econonn

which provoke a slowdown in the speed of economic growth arc eliminated ..... Mandel still argued in the mid-70s, that "while the recession is h1l tillS all the capitalist economics the countries with non-caplt,llt,. ,

economics fl re escaping the overall effects of the recession "., Such attitudes received a rude shock in the late -1980 s wht'll -

Mik hail Gorbachev, recently appointed as general secretary of rill' Communist Party of the USSR, revealed that the economy h.ld

202

upllal'sm

III

the 20th Cenrur

lI!.1terial terms was not good enough for rhe ruling bure'lUcracies. I heir concern was with how this matCrial output compared with Ih;l[ produced by [heir international rivals-that is with the value of the output in internationa l terms. This led to recurrent attemptS h� .s«rions of rhe bureaucracy to Implement economic reforms. llilid complaints about productivity and the qualJty of what was produced: in [he early I 950s after Stalin's death, in the early 1960s under Khrushchev and then in the late 1960s under Leonid

tlrezhoev and his prime mllllSter, Kosygin. The reforms had only limited effects. A rise in workers' living t.lndards, in contrast to the very sharp fall in the 1 930s, encour­ ..�ed

greater commitment by the workforce and a rise in

Ilroductivity. Bur the pressures of competitive international accu­ lI�ulation (miljtary in the case of the USSR, market as well as 1Il11ltary

III

[he case of the East European states) led to a repeated

t" ndency of increased consumer goods and food output to be sac­ rificed to [he needs of industrial invcstment. As Soviet statisticians , "plained in 1969, "Owing to the internatiollal situation II has nor

Il(.ocl1 possible to allocate as many resources as 1ntended to agricul­ IIlral investmenr".}] Such a switching of resources from one SOrt of

pfoduction to another necessarily led ro illcreasing waste, under­ milled the morale of [h" workforce, and led peuple at every level of nl.lnagerial hierarchies to hide the resources at their disposal so as

III enable them

ro

cope if inputs were suddenly curtailed.'l

The End of Ihe Golden Ag�

203

It is necessar)' ro note in passing that such a phenomenon

\\,,1.

nm unique to the Soviet-style economies. Exactly tbe same prl:' sures apply to those helo\\ the top managerial ranks in Wester corporations as they arc expecrcd to he able (() respond I" sudden changes In the pressures on them from above in respon" to changing competition. Under such conditions, the firms' CO�I' of production can dcpart very widely from those which ought Ip be achieved. The resull can be what one economist h.ls called " , inefficiency " -a Irvel of inefficiency in the company amountin� to 30 or 40 percent of production COSts. ' Production coStS .Inti

11 possible. At such a point new accumulation could only proceed lit rhe expense of existing accumulation, 3S Grossman spelt out in Itr theory of " capltalist breakdown � . There was Mover-accumula­

of capital". The only response open to capItalists 10 this lIuJ.tion was to shut down plant, sack some workers and try 10 re­ ture profits at the C'xpense of the wages of the others. Each of

lIun

these moves had the effect of making It imp<)sslhle for some of the 'Ilready produced commodltles to IX" sold (or, III Mrrrx's words, for

the "realisation of surplm value'" to t.lke place). I.:reatlllg a general u",erproduction of goods III relanon 10 the market.

the prices which would prevail in a "'perfect marker" depart Ill,)' sively (rom each other-to use Marxist termmology, there arl massive short-term infringements of the law of value. Such things are rarely srudied by mainstream economisb hl, cause both rhelr micro- and macro-economics deal with Wh,l l happclls between firms, not within them. But there are repeated

IA

The Soviet Uruun hadalways experienced C)'dil.:al downturns as result of attempts to acculllu!.Jte too rapidly. as we saw in the

previous chapter. SOl a� wllh the major Western capltalisms IIl lhe I,mg boom, tbe downturns had not rurned into economIC contrac­ lIOn, a reaI re�ession . " Now these became more difficult to avoid ..

1<; the slowdown in growth had ItS impacr.

references to such problems in managerial studies. lnrerestingl l. some Western studies conclu ded when it came (Q relationships Ol' nveen enterprises in the USSR "'allocatlve efficiency" (that is. for Marxists, rhe law of value) did apply: "Inter-firm trade in factor, of productIon may be as efficient as in market economies"'.w Wbat produced crisis and waste inside Western enterprises and Soviet-style economies alike was the dTlve (Q accumulate at .111 costs. h meant, as we saw in Chapter Seven, IOvestment expanll

109

repearedly

at

the

expense

of consurnpnon,

increasl·d

imbalances In the economy. a continua] cyclical partern to growth and lIlcreascd alienation of the workfurce. Figures given by tht, Russian economIc journalist Selyunin in 1987 showed the increa, ing subordination of consumption to accumulation over Ilearl� ,r \ decades, with only 25 percent of output gOing to consumption 111 1985 as compared to 39 percent in 1940 and 60.5 percent in 19.!S.

i working more and more for itsell, He concluded, "The economy s ratber than for man"." His words echoed (probably unintentionally) those of Mar\ describing the logic of capitalism as Maccumu13tion for accumu lation's sake, producllon for production's sake".'· But the dn\\' to such accumulation was not only an expression of the alien arion of rhe capitalist system for Marx. If was also the fon.1' ultimately behind the outbreak of crises. For It meant that aCnr mularion reached a point at which it attempred to proceed faster than the extraction of the extra surplus value necessary to mal-I' ,...

CaPlllIlism In the 2Ch:h Crnn"

I'oland and tbe foretaste of a dire future I\\.'o young Polish Marxjsts, Jacek Kuron and Karol Modzelewski, produced a pathbreaking study of the economic contradicrions i n

In Eastern bloc country in J 964. They polllted to the findings of ..crrain East European economists about the way over-accumula­ lion affected the rest of the economy. Accumulation came up

,lgainst three " barriers". The '"inflation bamer" signified that tOO r.lpid expansion of investment had led either to normal inflation (as Ihe state printed money to pay for it, so raising pflCes and curting

hving standards) or to '"hidden inflation" (as cutbacks in rhe supply flf goods 10 the shops led 10 shortages, queues and a growing black market.) The "raw material barrier" signified that there were just

not enough mputs for production to reach the projected level. The �export barrier" meant that attempts to make up for the shortages I)f inputs by importing from abroad led [0 foreign exchange crises.

t\uron and Modzc1ewksi concluded that a POInt was soon going to he reached in which the lIlternal reserves would no longer exist for .lccumulation to continue without creating an immense social

uisis. They argued against those who looked to reform:

What we ha\'e here is not a contradiction between the objectives of the plan and the :loci-stimuli resulting &om faulty directives, Thrc End of tht' Goldt'n Agt'

105

....

but a wntradiction between the class goal of the ruling bureau cracy (production for productlon) and tht' IntcrestS of baSI� groups who achieve the production (maximum consumption. In other words, it is a conrradictJ(Jn betwew the class goal ot

pruducuon and consumption, and i t results hom existing con ditions, not from mismanagement."

Their analysis was partially vindicated i n 1970 when attempt:. t, resolve a crisis caused by uver-in\iesnnent at the expense of 11\'J11� standards led to workers occupying tbe country's Baltic shlp)'ank attacks on them br the police and [he enforced resignation of rill country's leader, Gomulka. But at first i r scemed thai rhe new le,uJ ershlp had found a way out of rhe crisis, with a new boom basnl on massively expanding trade with the West and borrowing from Western banks which permined imports til nse by 50 percent 111

1 972 and 89 percent in 197.l. Polish srate capitalism was O\'crcoming the l imirs to accumuhl lion creared by rhe narrowness of irs nation al economy 11\ infegtation into the world economy thn.mgh market competition. The other side of this, however. was that the Polish ecullomy \\.h bound fO suffer whenever the world economy went into recession. And dependency on the rest of me world system for inputs to pro duetlon and for export earnings prevenred the state Shlftlll� resources from nne sector of the economy 10 another so as to ward off any inCipient internal receSSion turnmg lOto an actual one. From 1980 to 1982 there developed -a criSIS unprecedented in the histon

of Europe Slllce the second world war"'.;1 The "national net maIer ial produCl� fell by nearly a third; prices increased by 24 percent III 1 9 8 1 and 100 percent In 1982; and real wages fell byahouta fifth. The regime arrempted to place the burden of the crisis on thl•

mass of workers-and produced a sudden upsurge of reSiStallll' through the Solidarnosc workers' movemem. The events served [b .1 wanllng to the whole of the Russian blue. Sovier·sryle Slate capital ism was not immune [Q a crisis similar i n IInportam ways to Ih.11

then Imring Western srare monopoly capitalism. Both had tI'l'IT roots in rhe system of competitive accumulation as a whole.

CarastToplllc crisis was inevitable at some point in the nor tOO di, milt future throughout rhe Sovier blOC-including in the USSR Jt�dt:

By 198 1 , the choice between maintaining the closed econOlll\ and openmg up to the rest of the world was indeed Ihe ChUlll' 206

Capll3hsm In the 10th CrnTUr

between the frying pan and the fire. The tir�t option meanr deep­ cnmg stagnation, growing waste, an inability to sarisfy the demands of the mass of t.he population. and the continual danger of working class rebellion. The second option meanr binding oneself into the rhythm of a world (.''CI)!1()m� increasingly prone

to stagnation and recession-and J.:lvin� up the administrative means to stop recession Im-olvinp. conrractlon of [he domcstic economy. That is why the Puh..h UI"IS ot 1980 -81 was so trau­ matic for all the rulers of b,tern Furope. It proved there was no easy solution [0 the problems hesenlllg every state."

fhe Soviet crash rhe Soviet butbucracy was nor long in discoverlllg this the hard way. Its levels of accumulation were reaching the linms of what could be sustained. It depended more on foreign trade than previ­ ()usly, using oil revenues 10 huy wheat abroad II) feed the population in the 1970s and early 1 9805 (adding to worldwide in11.ltionary pressures). A fall in the world prtce of oil III the course uf the mid- 1980 s rhen threw its domestic economic calculations

uno some disarray. And the decision of the Reagan administration to reassert US hegemony by raising arms spcndmg put pressure on the USSR to do likewise. The external factors added 10 the IIlternal rroblems caused by trying to sustain accumulation 111 the face of

Jedining growrh rates. Gorbacnev's promotion to head of the ruling Communist Parry .....as a sign that innuential people had recognised the urgency of the ,ituacion-his rise owed much to AndropO\, who had witnessed what crisis could lead to as ambassador to Hungary in 1956 and s of 1980-8 1 . .15 general secretary of CPSU during the Polish event

Gorbachev has been blamed since as a "wunter-revolutionary" by \Ome people on the left nostalgic for the Soviet sryle sel-up. But his intention was to try to save Ihat sct-up through top-down reforms hefore economic, social and POlttiC:11 crisis on Poltsh hnes could .Irise. His misfortune was that the crisis had reached a point where

It could not be overcome by reform. Reports from mil1lsterial meetings HI the winter of 1988-9 pro­ vide a picturc of increasing economic chaos, with the regime not seeing any way to deal wnh II. There were biuer clashes over ;;the l1alance (or rather the imbalance) belwecn different sectors of the Ille End of Ihe Gold�n Age

207

economr�. the "number of cnrerpris(:s" which were "significanlh refuslIlg ro supply pbnned OUlput" or were "significantly redu. Ing deliveries" and the way �the volume of new investm�111 contillued TO grow" i "'The supply of goods (0 the conSUnll'l market" had "'suddenly begun to deteriorate sharply and notl..:l' ahly before Our eyes In the second half of 1 987 :md t:speciall� III I 988".U There was an: increasingly Str:l Incd suuation as regards satISfying Ihe publl< money-backed demand for goods and services . . . The prohll'111 of supplying rhe population wllh food has worsened . . . TIlt' money supply has re:H:hed critical dimenSIons. . . Everything III Ihe economy is in shorr supply.... By October 1989 there was open talk of "the crisis in man) part' of the economy, rhe shortages, the unbalanced market. the collapw

llSSR struck in the carly summer 01 1989 anJ soon after Abalktn
happening as huge mass movement� in Iastern Europe-partly

111 response to thelf economic crises-were hre<1k ing Soviet control (111 the region and deepening the genera l seme of political crisis, en­ tluraging further prou:Sts in the USSR's non-Russian republics and weakening the capaclt)" of the celltral 'Hate 10 Impose liS will. Those running the enterprISes did not know how 10 cope with the waye of protests from below apart fmm making concessions hich raised money wages. and they had even less ide:! a bout wh:!t do about the shortages of inputs needed to malllt:!in the level of \\

rroduction. StagnatIon gave wa)' to economic contral:tion-the �ginnings of a slump-in the second half of 1989. There were calls from economists who claimed that only greater IClmpetirion bet\�ccn enterprises. and eventually duect competition IIt·tween firms inside Russia and those elsewhere III the world ccon­

of old rel::ttions before new ones are put In place, an atmosplu:rl of uncenain prospeCls and scarciries".�1 Prices were rising, sin,I'

limy could force managers to be efficient and to produce the things

faCTOries and shops found they could reduce production .1 1ld

Ihe centre as how to lind the resources 10 complete the investments

simply raise prices. disrupting supplies for the rest of the econOlm

that were meam to provide the outputS that would restore balance In the economy. The economic collapl>C conrmued regardless at

The economic crisl!>, as i n Poland, turned into a political ,1Il�1 social crisis. Gorbache� had intended 10 permit a limited openlllg ("glasnost" ) of diSCUSSion in the ruling partr and the media (0 i,o

that were needed. SUI they had no more idea than the ministrie� at

\\hat the government dId, leading to ever greater discontent and 1ltlliricaJ upheaval. An attempt by Gorbachev to take a hard line to

late those III the bureaucracy opposed fO his reforms. But peoplr increasingly took advantage of this to give expression to old grin

Ic�tOre central comrol in the spring of 1 99 1 produced a new wave III discontent which forced him to retreat. A coup against him by

ance� and their di�onlent with the deteriorating economl' situation. An unprecedented series of mass demonstrations and riots took place m the non-Russian national Soviet republic� ut

Iho� who hankered ,lher a return to the past in August 1991 fell Irart, lacking support from the most important genera ls. There Io\-as no popular constituency for trying to rerurn to the old order.

Armenia, Kazakhstan, the Baltic states, Georgia, the Ukr:lJnt". Byelorussia and Azerbaij:lIl, fusing struggles for national rlgh,..

nUl those who preached reform did not have a way forward either, Ilc!>pite the brief popularity for " I OO-day" or "300-day" pro­

with grievances at the social conditions people experienced. So thl' prOlests by the Armenian minorit), in the Karabakh region nt

�r,lmmes promising miraculous economic recovery. Such progmmmes were utopian III the extreme. The collapse of i a monopolistic or u:ntral control left the giant Soviet enterpnses n ....·mi-monopohstic position. They were ahle to dictate to the market

Azerbaijan "began as protests against catastrophIC mismanagemelll and mi�rable economic conditions".M PrO/Ida said that in 1 9N" (even before (he crisis deepened) there was 27.6 percent unelllplO\ mem in Azerbaijan and 1 8 percent III Armenia.'7 In Kazakh�!.ln "only half the young people had a chance to find a iob in 1 9 8 1 85"." The head of the stare-run unions said that across the USSR .1, a whole 43 million people were living below the po�·erty llile. Estimates of the fOral number of unemplo)'ed varied from 3 pen:cul to 6.2 percent (8.4 million people). Then mmers right across thl' 208

Capltahsm

In

the 10th ("n"I!'

.tnd to produc(: what they wallled rather than what was needed by fhe economy as a whole; they were In a position to raise pnces and It) simply ignore contractua I obligations to other enterprises. There ",.IS

no stopping the combination of deepening receS!>Ion, inOation

,Ind acure shortages of consumer good<; and food. Economists, pl.mners and &ightened bureaucrats began to look for any scheme In g(:t them out of the mess, until finally they gave up attempting to I he End of the Golden Ag"

'09

control what was happening. When Yehsm and the CnmmUnht leaders of the other national republics announced the dissolution , ,I the USSR mto Irs component republics at the end of 1991 they \\ n, onl) glvmg pohric.tl expression to the economic fragmentation th.lt was already under wa)', with the heads of each industrial SCd," trying IO protect themselves from (he general economic crisis b\ r, -n resources. This was rurned into a lying on thelT o....

SUPP;)'>!" !

economic strategy through "shock rherapy" policies of Yelt<,ill

�Iiberal" ministers and Western advisers like Jeffrey Sachs. The ,1' sumption was thaI, left to compete With each other witholll restrainrs from the state, enterprises would soon be pricing gooJ. rationally in a way that would lead the effident ones to esrahll�h links with each other, and that this would resture stability. In /,Id, all it did was to provide governmental blessing to a slump alre,IJI under way whose only precedent anywhere in the 20th cemur}

\\;1'>

that of 1 929-33 in the US and Germany. The failure of economic reform was not lUSt a failure of imph­ memalion. There was a flaw in the very notion of reform I(sell The aim was to reStructure the Soviet economy so thilt those

w�

t'U·expansion of capitolI was a cri!.i:. til\'oIVln� the desrruction of at I 1�t some past accumulation. The only (ltfference between Russia ollld, say. France or Britain, was that the de<;rructlon was to be on a .

�nnsiderably greater scale. And thiS W.1S heLau!.C the $o\'iet UllIon hold undergone six decades of accumul,Htoll Without restructuring Ihmug h crises and bankruptcies, while tor rhe British and French

, anomies It wa.. only four and three dC(,ldt=\ respecllveiy. Few people were prepared to sec thJn�� t o rhc\e terms at the lune, The vast majOrity of tho"e \",hn had "lruAAled for democratic

I. lorm i n Russia bdie\'t-J that the turn to marker capitalism would "1'I('n up a glOriOUS future. \'('ho1l Ihey �Ol ilbteaJ wa,> a devastating �lllmp, the corruption of the Yeh..,n years and the Jomtn3tiun of

I hI" economy and sOCiety by former memhers of the rullllg hureau­

.racy

and

mafiosi

rehorn

, \'>

pnv.He capll,l l1M

oligarchs.

Meanwhile, Id"rhe resr of the world rhe grear malomy of polm­ < l.1ns and theorists in the social democratic and former St.llinist Idt drew rhe conclusion th:1I it was socialism that had failed and

Ih.1I [he future lay with Western sryle markets, £al llllg to perceIve Ihe depths of the crises brewing there roo.

tions of it capa ble of adj usting to (he current international level cil the forces of production would expand while others closed duwn. But this was bound to be an enormously palllful undertaking. nOI JUSt for those workers who suffered in the process bur for the rn.h\ the

of

individual

membeh

of

the

bureaucracy

as

\\'l·11. Restructuring the Bmish economy between (he mid-1970s and tilt ll1id-J 980s had in\'olved shurting down about one facrory

til

,hr\'\'

and desrroYlIlg capnal on such a scale that gross industrial il\\ r.:�t mem

III

1990 was still no higher than

111

1972. It is very douhttlll

thar It could ha Vt proceeded smoothly if British capItalism had IIC II had the lucky bonus of enormous Norrh Sea oil re\enues. TIll USSR's economy was much larger than Britain, and its emerprlw' had been much more insulated from the rest of the world for h(l years. The proportion [hat was to be destroyed hy an Jmme(h.llr opening to International competition was currespondingly greatn This, III turn, did considerable damage to the remaining comprll rive enterprtses as they lost suppliers of materials and compolH:I1I' on the one hand and burers for their outpUt on the other. The rOOtS of the crisis lay in the pressure to accumulate for thl' sake of accumulation char arose from the burcaucr;lcy's position .1' part of :1 competitive world system. The Soviet econon1\' h,l.! ,

reached the poim at which the precondition for a further W3\l' 1,1

210

C"lplta1i�m In the 20th (:rm"

Japan: the SUD that Slopped rising Ihe world's second ecnnomic power at the hcginning of the 1980!. W.1$ the USSR. Japan took its place as the Soviet crisis of the [atc 1 '1805 turned Into colldpsc.'I Japan's average growth rate through­

1980s was 4.2 percent as against 2.7 perceor for the US md ).9 percent for West Germany. Irs annual investment in man­ III.lCrunng eqUIpment was more than twice that of the US."Z That

IIU[ the

the future lay with Japan was the near Ulllversal conclusion of media commentators, A committee of the US Congress wa..rned in , CJ92 that Japan could overtake the US by the end of the decade. 'After Japan � became the slogan of European and North American industrialists trying to motlvalt> their workforces to Kreater feats of productivity. The " threat" from the "nsing sun�

hl'Callle tbe excuse for tbe job losses experienced by American aura workers. Keynesian commentators like Will Hutton and William "('egan wrote books extolling the Japanese model of capitalism.

Then in the 1992-3 a financi:l l crisis pushed Japan inro its own

"period of stagnation", with :l growth rate :l\'eraging just 0.9 per­ �tnr a year between 1990 and 2001.·J By 2007 its econom)' was Ihe End of the (;olden Agt

211

only a thrrd ofrhe size of the US's (and the European Union's)" ,r" againsl esrimates as bigh as 60 percent in 1992.-' The blame for what happened is usudlJ} ascribed to faults in Ihl runnIng of Its financial srstem--either du e to financ ial markels Ilt It being � free" enough in the 1 980s, or to Inapprop riate anion b\ the central banks once the crisis had started. The con clusion trom such reasoning is that the Japan criSIS was unique and has linle It I tell us about the direction in which the global s),slem is gOIng. Till sudden inability of the world's second biggest eco nomy to gm\\ then becomes the result of accidents. Yet all the clements of the Marxist account of the CrIS is of tht­ imer-war year:. are to be found in the Japanese case. J3pan had .1 rapldly rising ratio of capital to workers from the J 950s to the latl 198 0s. Thi!> grew in the 1980s by 4.9 percent a yea r-more Ih,m four rimes as fast as in the US and 70 percent faster than Itl Germany:· Tht result, as Marx would have predu: ted, was down ward pressure on [he rate of profit. It fell by about Ihree qU:lrter.. between the end of rhe 1960s an d rhe end of the J 980s jllp'm�k profil Tale'" Afunufacturmg 1960·69

Non·pn,wllal lorporJI.·

16.1

25.4

1 970--9

24.S

20.5

1980-90

24.9

16.7

1991·2000

14.5

10.8

Rdwrn on gross non-'U.thntial stoek. 1960

28.3

19-0

18.0

1980

7.'

1 990

J.'

'

I bis required higb le\els of tOvcsttnent. Tht' Untied States, for ex­ "mple, invested JUSt 2 1 percent of liS ('DP durtllS the 1980s

�I)mpared with a Japanese figure of 3 1 perccll{. Accordtllg to one �­ lUnate, thc ratio of capnal stock to C.NJl IIl Jap:l11 was nearly -,O percent higher than III the U!:'.· Tht' concenrranon of tnvesnnent rntO certain industries rn d'lls way ral!>ed rhelr product\'"Ity, even though it r:mained faIrly low in the re�t of rhe Japanese economy." nut such high investment could only be sustarned by holdrng down Ihe consumption of thc mass of people. Partly thiS wa� done by keeping down real wages; panly it was done through provldlllg rmn­ . Imal state provision for Sickness and penSions, forcmg people to _ave. As Rod Stevens pointed out when the boom was at its height: Real wages in Japan are still at most only about 60 percent of real wages in the US, and Japanese workers have to save mas­ sively to cope with tht' huge proportion of their hfetime earnings which is absorbed by such thrngs as housing, educa­ rion, old age and health care.'� "ut this level of real wages restricted the domestic market for the new goods Japanese industry was turning out at an ever rncreas· ttlg spttd. The only way to sell them waS to rely on expOrts. As 'I(evens ' also pointed out:

The decline seemed manageable until rhe end of the 1 980s. Thl' Sfate and the banks worked with private industry to sustalll g.rowth Without much attemion to profit rates. So long as Ihere was a m.I�' of profit available for further investment, the Japanese system en sured that it was used. Japan had been hit h:lfd by the gloh.l) recession of the mid-1 970s, but was able not only to recover from il hcfore most other counties bur also to restructure industry I I I such as way as to keep expanding througholll the early 1 980s whclt rhe us and Europe were in recession: 1I2

The crisis [of 1973·5 1 Indicated that future growth on rhe basis of heavy and chemical industrialis:ltion wa!> untenable. The role of me state in changing the strategic dtrectlon of Japanese capt­ talism WaS fundamental. Adnuni'lotranve guidance by MITI [Ministry of International Trade and lndu\try-CHj began to nudge Japanese capnal to the direction of electronics, automo­ biles, capital equipment and semiconduu(}r� ...

Capll;Jlism '" Ih� 20lh C.eIlfUfI

Because of capital's increasmgly strict wage control and author­ ity in rhe workplace, growing labour productiviry in the . consumer goods bram:hes of the machiner), industnes (eg motor cars and audlo-visu:tl equipment) had to find outlets in export markets if the Japanese working class's limited buying power . .. . was not to mtcrrupt aCCUI1111I:llton. High productivity in the select range of prioritised industry made the . required level of exportS possible, with J:lpanese cars and electronrcs rbc End of tbe Golden Age

213

Increasingly penetrating the US market. But It brought complu':,l rions in It!. wake. Japanese economic SUCCI$S W.1S very dependent nil US good wilL When the US demanded that Japan accept an upw:lr\l

re\'aIUJtion of irs currency to make Its goods less competltl....e agam�1 AmcflC<1n goods, Japanese caplraltsm had little choice but to co01pl1 and the volume oi (xporrs suffered (even though revaluation meJm

their value in dollar terms did nor). The reaction of the stare ro this was to provide cheap funds t� keep industrial IllVt'stmenr and expansion going. As Kard \.In Wolferen has said, "To compensate the corporate set·tor for thl squeeze 1)( the exchange rare, the Ministry lof Financel encuuragt'd tht.' hanks vastly TO n i crcase their lending".'" But tht!rc had been ,\ weakening of rhe old mechanisms which directed bank lendmg into industrial del'elopment--caused in part hy the growing Illtegr:ltIoll of Japanese capitalism Illto the world system.'.! The expanded bank lending found irs way IOto speculation on a massive scale: The explosion of liquidity helped set off an upward spiral 0 1 real-estate values, long used as collateral b)' the hlg compallle\. which then jusufied n i flated stock va lues.'"

In what was later called the " bubble economy" property vallll"� . sO;lred and the sl<x:k exchange doubled in value-until the Ilrt worth of Japanese companies was said to be greatl.'r than that (11

the U� companies. although by an)' fcal measure the US ecO!lOIll\ was anout twICe the size of the Japanese one. Bur while the bubbll

la!oted the Japanese econom), continued to gro\\o-and even .lftt'r the bubble had started deflating. bank lending enabled the econ omy [Q keep expandlllg throughout 1991-2 as receSSion hit the ll\ and Western Europe. Then It became dear that the hanks them

selves were III trouble. They had made loans for land and share purchases that could nur be repaid now these things had collap�("d in price. The hanking System was hn by recurrent crises fl�ht

through the 1 9905, writing off a toral of around 7 1 trillion n'n , (ovcr $500 billion ) III bad loans. Thc total sum owed by busine��c�

rrouble or actually bankrupt were set ,It 80 10 100 trill ion yell ($600 to $750 billion) by the US government, and at I I I trilJiol1 yen (nearly $840 billion) by the iMP' The role of the financial system in producing the bubble and thel1 the long drawn out banking crisis has led most COlllmcntaton 10 locate thc ongin of the Japancse crisis in faults within that s),stcnl. III

Capital'sm In (ht' 20th terlll'"

1 he problem, neollheral commentators dalm. was that the dose lin berween those running the 5t.nc. the banking system and 111JUStry meant that there was not the Scrutlll) ahout what the banks wC're up to which a truly competitive l'l.:Ollorny would have pro­ �IJcd.· 1t was this which enabled such a mas!tlve amount of dodgy k'nding to take place. As an explan:1tlon, If f.lll� hecause very siml­ I lr bubbles have happened

III

economic" like the US whicb

upposedly fulfil all the norms 01 "t:Ul11pctJ!lvcnc.,s". II is difficult to see anv fundamenral difference between the J.lp.mese bubble of ,

the late 1 9805 and the U� hou�lllg bubble of the mld-lOOOs. The ncoliberal reaSQnlllg that blame!> Iht: criSIS on the state be­ heves there was a solutIon-the state �hould Simply have walked "�y and allowed some of the big banks to go out of bUSllless. But this assumes that some banks gomg bust would nOl bring down lither banks t� which they owed money, leadll1g to a cumulanve l'ollapse of the whole banking seCTor. No advanced ll1dusrrial state dare even conremplate that happcnrng. Whencver It has seemed possible. other states have behaved in general as rhe Japanese have. In any case, there is no reason to believe Ihat the banking crisis was the ultimate cause of Japanese stagnation. The neoclassical economists Fumio Hayashi and Edward C Prescott have argued that firms that wanted to Invest could still do so, Sll1ce "other �ources of funds replaced bank loans to finance the robusl invest· ment by nonfinancial corporations 111 the 1990s..... But they have had to recogruse that "those protects thaT are funded are on al'cr­ age recemllg a low rate of return".

In fact, there was a fall U1 productive inycsnncnt. although not anythmg like a complete col­ lapse. In such a situation, restructuring the banking system, whether through allowing the crisis to deepen, as the neoliberals wanted, or gradually as those of 1 , more Keynesian persuasion sug­ gested, would not solve the enSIS. On this Paul Krugman rightly made the point: The striking thing ahout discussion of �tructural reform, how­ ever, is that when one poses the question, "How will this increase demand?" the answer� are actually qUite vague. I at least am far from sure that Ihc klllds of structural reform being urged on Japan will incre,\se demand at all, and sec no reason to believe that even radical reform would be enough TO jolt the economy out of its currenr trap:' The End of rhe Gullkn Age

215

The re;lson was th;lt tht reap lay outside rhe banking system. In Ihl C;lPlt3li�1 system 3.!1 a whole. The rare of profit had fallen to a pOlllt in the hHe 1980s which precluded further substantial Ulcreasc" III

workers' living standards. BU[ that III turn prevented the dome�n\ economy from being at.le to absorb all of the lIlcreased output, \ new maSSIve round of Jccumulation could have absorbed it. hill for that profitabili ty ....'Guld have had to have heen much hlghu

than It was. Richard Koo's study of the cmis, The Holy Crllll ..f Macroeco"omics, by stressmg the hidden debts of major carpor.1 rums, hints at what had realIy gone wrong, but fails to ground till' problem of insolvency In the long-term decline of profitab Ility.

The Japanese Sr;lre did turn to some Keynesian type Solullom. with a bIg program me of publiC works construction (hndges. Jlr

porrs. rotlds. erc). G:l.\'an McCormack writes, "With the onset 01 c hronic reces<;iol1 after thl' hubble burst at the beglOni ng of till'

1 990s, the government turned to ever larger-and decreasingl y cl

fecnve-Keynesian defil'its" , and that "Japan's public \"" url., sector has grown to be three times the size of that of Bntain. duo US or Germany, employing 7 million people, or 1 0 percelll of t hl ·

workforce. and spendmg between 40 and 50 trillion ren a )'ear around $350 bil lion 8 percelll of CDP or two to three times th.l I ,

o( other industrial countries ." According to one estimate tht, state's shareof output Increased from an average of 13.7 percell! III the 1984-19 90 period to 15.2 percent in the 1994-2000 period. ..

But It was nm enough to fill the gap created by the IUTIIted stimu Ius to inyesttnent from the rate of profit. as the graph below sho\\,.

rhe economy did not collapse In [he 19905 in the way that the US lind German cconOlllies did in the early 1 930s. The state still t't'med able to stop that. BUI It could not I.ft the economy back to

It� old growth parh. SeCTions of Jap;loese capital believed they ,ould escape from this trap by IIlVcstLllg abroad-as the gap be­ I.....een

Gross Investmrnt and Gro�s DomeHic Investment sho ws.

I\lIt it was not an answer for the great bulk of Japanese capital

which did its utmost to try to raise Ihe rate of profit through rais1nF, the rate of explolta tiun, even though It could only reduce Ilumestic demand snU tunher and deepen ItS problems. Nor was ][

In answer for the Japanesc ..... · orking class. \\hILh whelher it liked it

,Ir not would be compeUed to struggle if It wa.. to avoid life gening

worse. Economic growth did nm flse from the doldrums until the nud·2000s, when,ChlOese Impons of 111;lch tnery gave a boosl fO I.lpancse industry-but thiS was to prove f() be vcry l>horrhved. Japan's crisis wal> not as devastating to the lives of its people as I

h.lt which broke our ;l couple of YC;lrs carlier in rhe USSR. Yet, un·

early all economists. mainstream and l\larxlst alike. Ihere was a slm1larity between them. Capital accllmulation had reached me point where It cuuld nu lunger exrraci a surplus from

lIoriced by

n

tho� it exploited on a sufficiently rising scale to keep abreast of the tnternattonall)" competitive level of accumulation il looked to. The hurier to capital accumulation had indeed become capltal ltsclf.

I hose who preSided mer accllmlliation had two choices. They

tluld allow their bit of the system to rcl>tructure itself through blind �I)mpetition. taking on trUSt ideological claims that It would pro­ Jllce new mlfac1es. Or they could play safe, knowing they might nc,,·er get out of long-term stagnation. The rulers of Russia chosc Ihe first path and saw tbelt economy, already halved with the loss of

Gross 'O,·tStffitm

the rest of the USSR, halve in sizc again. Japan's rulers took the uther path. and their economy went through a decade and a half of llcbilitating stagnation without seeming any closer to a solution to

II problems at the end than It was al the beginning. The big ques­ tllln both raised was, how wOllld other countrie!>, particularly tbe

IS·

US, react if rhey fell nto i rhe s.'une stagnation trtlp?

• ••

CO"tnunem purchastS

J O +---�--,�-��_�_�_�-,---� 19&1

19116

1988

1990

1992

1994

1996

1 998

(Sourc�: /-UffiIO HayashI and Edward C. PreSCOtt. �Tht 1990s

2000

In Japan

Ike impact on the Global South '\

1 lOst Dl'("adt�) 216

I he collapse of the twO state-orientcd ideological models. Kcynesianism and Stalinism, had a profound effect on polilical

CapItalIsm m the 20th Ctllt""

ht End of rhlt' Goldlt'D Age I

217

forr.:es aspiring after the �devclopment'" ofTh,rd World eCOnOl1llt' into full and equal components of the world system. It pu!>lw.l them to look for new models of capiml accumulatlun in placc ,,[ the state-dIrected import-substitutionist model, which was alrc.llh displaying problems. In ASia (he tightly regulated Chlnese eConOffi) and the It" tightly regulated, but still centrally directed, Indian econol1n both began to sho\\ worrying signs of stagnation by the mid 1 9705,"' forcing go\ernments to look for alternatives; in Latin America the import-substirurionist model was found w3ntln� III its Argentinian homeland as economic and polaical eml', erupted; in Africa rhe promises made by proponents of " Afri(,:,l u socialism" were nO! fulfilled as industrial growth was restrtUI,.1 h)' the narrowness of nanonal markets and the meagre resour(.:t" left after the depredations of imperialism. Adding to these proh lelllS was a decline in the price on the world market for r,1\\ malerials and foodstuffs-the main source of the CXpOrt carnin),:, needed to import equipment for new industries, Particubrly after the onset of recession in the advanced countries in 1974, non 0 11 produci ng Third World countries were caught betwecn incrca��',l oil COStS and a decline in the terms of trade for primary cum nwdit)' exports of nearl), 50 percent. Those runmng industries which had grown up within the pro tecme barriers of the old model began pragmatically establishlll� links WIth foreign capital. Argentina, Brazil and Mexico were f)pl cal. Their mdustrial bases had been established in the 19405, 19m, and 19605 by the state mtervening to direct investment in industr\, often imo stateoQwned companies. But the more farsighted ,"du, trtallsts-whethcr in the state or private sectors--saw that th�'\ could not get the resources and modern technologies needed In kecp up with worldwide producriviry le,"els unl<"Ss the)' found W,l\, of hreaking our of the confines of the national economy. Thn began ,"creasingly to turn to foreign multinanonals for licemlllg agreements, Joint production projects and funds-and they beg,lIl thelll�elves to operate as multinationals III other countries, The trend was reinforced by the success of a number of COlUltril"

,I� parr of the underdeveloped world, ),:rew rapidly enough to 11110 that rich man'sclu h, the Furorean CommullIty, Brazil began lul10wing a similar export-ofll-nted path under the militar y legime that had seIzed power In 1964. Ito; �tlll vcr)' large state '"'�tor and pri\ ate ca pital a I ike I ncrea!>m�h· oriented towards the lelot of rhe world system rather than to a protected national market. The Western financi.ll pre.... reJoKed ITl Ihis, assunng ItS

readers that Brazil waS the grr.lI n�lng Th,rd World country i du<;tries were destilled 10 challenge Iho'>e of the West. \.IIhose n And there certainJ) wa!> growth . �For almo"t 1 .� years ( 1 965-80) the average rate of grot\'lh was 8.S perl.:cnt, making Brazil the Inunh fastest growing cuuntry" ' Other Latin Ameflcan States hegan to ('mUI,He the Rrazili.m policy. The mil\[ary coups in Chile ( 1 973) and Ar),:entlna ( 1 976) were followed by an upcmng to external c real GOP /otrew 8,S percem a year between 1977 and 1 980." It seemed that a wa), had been found to achieve national accu­ mulation hy breaking out of the confines of the national market-and, when the policies were undertaken under military rc.'gimes, of crushing popu!.lr ( 'sistance to rising levels of exploita­ lteJO, There was a similar SWIllf.; of the lIltellcctual pendulum as in the West and the former Communist states, with the wholesa le ..onversion of "'dependency theor)," econUllusts to the wonders of Iree markers. The conversions continued even as the Larlll American "'miracle" came unstuck. Growth after 1974 had come to depend on foreign borrowing las in Poland and Hungary In the same period). Many Latin American coumries gambled on amhitious growth targers by bor­

rowing hea,-il), in international financial market... The external �Icbt of Chile and Argennna almost trebled o,'er a few years, from 1 978 to 1981 .'" But thiS did not seem to maller at the tIme either TO the national governments or the inrernarional b3nking s),stem:

which h:ld long oriented themselves to the world market in adlle\ Ill): very fa..t growth rates. In Asia four bastions of anti-Communi�1ll South Korea, Taiwan. Hong Kong and Singapore-registered growth

Up to rhe second oil price shock ( 1 979-80) the gamble was worth taking. Export growth was Sllstained in world markets at favourable prices ... As a consequence the ratio of debt out­

rates easily as large as those in Stalin's USSR. And in Europe COllll tries like Spain, Greece and Portugal, which Paul Baran had lI1c1uJl'.1

standing to export procceds was more favoura hle for all non-oil developing counuies in 1979 than in 1 970.72. 1

218

Caplt.llism in tho: 20rh C..,nwr

fhe End of Ihe Goldrn Age

219

•

The IMF assured people In 1980. "During the 19 70s . 3 gem:r ..

alised debt managemtDt problem was avoided . .anJ the outlollk for the Immediate tumre does nor give cause for a larm" .*'" Th" .

was wrmen Just months before the second international recessiun. In [he early 1980s. caught a l l these states unprepared. As exrnn i ternational interest rates began 10 riM!. Ihl markets shrank and n debrs they had incurrro 111 the 1 970s crippled their growth, thrn\ them Into recession and blighted their economies right through thr 1980�, wh i ch became known as -the lost decade" In Latlll

America, with a fall III Gl\IP per person for the cominen t a� .1 whole of 1 0 percent-'� The impact on l ocal capitalists and mainstream politica l for(l' was nor, however. 10 question tht" new opening 10 the world market. Rather it was to insist, as

nd Eastern Euttlp, that the opening had nor gune far enough. The new doctrine W.h :Iccepted III one form or another by the late 1 980� hy populi", politi cians and even former guerrill as in L1tin America. by !Ill' politburo

III

III

Russia

a

China, by the Congress Parry leadership

111

I ndi a. hI

rhose who had unce proclaimed their comlllltmcnt to "socialism' Ln Africa and by the SUCl.:e��orl> to Nasser in Egypt. The COil versions were not always voluntary. The In terna l1on.l l Monetaq Fund and the World Bank intervened where they could. making offers. m... fia style, ro dt"bt-laden countries which thelT ru ler.. rarely found themselves able to refuse, since doing so woulJ rule out any sort of aCl.:umulation strategy. The various debt pro gr;1TTlllles were mort" concerned with protecting the Interests 01 Western hanks than with ameliorating conditions in the indebu·J countries. But more was involved than Jusr a surrender [0 impen allsm on the parr of the go\'ernmentS that accepted them. Tho�\ capitals, private and state auke, that had grown during the penod of state-directed "'development" did not see any way of cominu IIlg to e.xpand within the confines of limited national markeh They wanted access to markets and to rechnological lI1nOVatlO11� o utside 03tional borders. They might allow. even encourage. n.1

tional governments

to

haggle mer the rerllls on which capHal lll

the metropol itan counnies .1110wed this to happen, hut they would

not reject them outright. And in the process some of them wcr\" indeed able to develop more than a national profile. So the Argentinian steel maker TechNet tOok control of thr Mexican steel tube maker Tamsa in .1993, acquired the Italian �tl'l'l rube maker Dalmikne in 1996, and then went on to expand in to 220

Capnalism In Ihe 10th Ct-nrnr,

IIr3zil, Venezuela. Japan and Canada, adopting the name i a similar pattern for some f\.ll'xican companies. 1 Lna ris Lt.. There s In lhe late 1980s Alfa. the largest mdustrial group in ;\1exico, wilh 109 subsidiaries spanning automorh'e components, food. petro� ,hemicals and sud, embarked on a growing number of joint 'tpt'.fanons with foreign firms. The glass maker Vitro, which had hl1ught twO American companies. became "the world's IC3ding 11.1ss container manufacturer, with irs market almost equally split and Me'Xleo� . The logical outcome of this in I Iween the .

US

Mexico was for its rulin g dass 10 forget ils old nationalism :lI1d to 111m the North Amencan Eree Trade Area Jn d in<: reasingly to op� ,r.lfe as a subordlll3te component of US caplt3 l 1sm . Occasiolla lly the collaboration prodw.;ed positive results for WIder sections of local capItal provided some job opportunities ,

I'lf the aspirant n1"lddle dassel> (in Ireland, South Kore3, Malaysia.

'lIIgap ore, Taiwan and coastal Chin a), and even cre:Hcd condi­ tions un der which workers could boost their living standards through industrial action. All toO ofte n, however. it created still lutther indebtedness to foreign banks which the natiOllal statcs IIld to cope with . In such C
unchanged. A yuppie class lived III protected enc13ves as if i t were III the weal thiest parts of rhe industrialised world (and often went ), while Illuch of the � 'itep further and lived part of the year there population festered in ever proliferatlllg slums and sh3ntytowns. The assumption of the new economic ideology-most forcefully

addressed in the "neolibcral" notions of the "Washington ca pital t OllsensUS" of the lMF 3nd World Bank-was that if some to g3in 3 new lease J\" umu larion in some countries had been able " f life: by rei nsertion into the world system, it could do so any­ where if only the l:lsi reStriCtions on tr3de and the movement of

\.tpit31 were removed. But the reality proved to be rather different. A few areas 3ttracted new productiv t" investmem, bUl only a few. \\ the end of the century on l}' a third of worldwide foreign direct Investment went to the "emergmg markets" uf the Global SOUlh .md the former Communist countries, and (If this more than half wenl to JUSt four countries-China/Hong Kong, Singapore, \texico and Braz.il. A nother quarter went to l ust seven coun tries (Malaysia, Thailand, Sout h Korea, Bermuda. Venezuela, Chile and Argenrilla ), leaving 176 countnes to share o ut rhe remaming 25 ThI.. End Ilf du: Gulden AI!�

121

percent.'

And much of the investment was not new investmem II

all, but Simply [he buying up of already operatmg companic\ h multinationals based in the metropolitan countries. Thefoe prublems "cre most felt In the pOore'sl regions ot till world, eSpt"Cially AfrICa. However much they dismantled their ,,1.1, protectioOlst, imporr-subsmurionist pohcies, they s(lll rem l In, ,j ,

unattractive to the multinationals [hey wanted to woo: "5111.111 puor countries face Increased barriers to enrry

111

industries Ill( ,I

sub/eet to the global forces of comJX'tition". Much the same applied to exports. China and a few other WUl' tnes did continue ro break inro world m.lrkets. But rhe ('Xpllll orientation of these countries meant that their own Imernal lll.11 ket'> for foreign -produced COnsumer goods did not gf()W ,II

"

corresponding speed and that their expan sion wa�, in parr, at 111< expense of othe r countries in the Global Somh . �o African c()]m tries

which

had

begu n to enjoy Some

ex-porr grow!!l

1('

manufactured goods found themselves loslllg markers I() Chl ll 1 .

The "combmed and uneven d evelopment

"

that had characteri,,.,1

the long boom continued into its a ftermath, with the differelhC' that many economies actually contracted even as others gr�'\1 rapidly. It was as It the �Third World

"

Itself had spilt III tIl",

e"ccpt t hat Ilnmen'ie pools of poveny remained evtn in tnt' r.1 1 I that was growing. Those who rdn the local states could often feel ins('cuf{' ClCOIl when the developmcO[alist strategy was successful in ItS Own loll' Itat.�t or sta te capitalist terms. Their success depended upon a hl�h

level 01 domestic accumulanon-and the mher side of that, a hl�h

level of explOitation tnat could only be achieved by holding Jml II workers' and peasants' living standards. But el'en when the\ 'II< ceeded In getting high levels of accumulation

(which

;

w, � lilt

exception rather than the rule) they remained weak in tht"ir h.11 gaming po'iition with the multinationals. As multJnational� too� over local firms, their proportIOn of the local caplcal inv('Stllll'II' could rise to 4() or even 50 percent of the total. JIlcreasing th,.11 levc r;lgc over local deCision making. Rut states in the poorer r.ll, of the w�)fld di d not have anyth i ng like the sallle leverage \1\\'1 , mulrillanonals, slllce the slna ll size of their domestic eCOnOll1t,"\ .

meant they probably accounted for no more than I or 2 per..:elH oj the mul ti nationals' worldwide investments anJ sales. Huge gaps usuaJl)· opened up bern'een what those who r.1Il I ll,' state had promised the mass of people and what they could ddlH" 222

I I1gh levels of repression and corruption become rht' norm rather

,h In the exception. When the developmentalist strategy ran imo ion-the boi­ I roblems, something else accompanied the repress I ,wlIlg out of the mass organisations that used to fi e sections of !lu; middle class to the State and, via them some of the working ,

.IJ,>s and peasantry. The oppressive state became a weak state and I,M,ked to foreign backing to reinforce Its hold. i happened as problems of profitability in the advanced r\1I th s ­ lIuntries drove their capitalist!. [() look for any opport uni ry, how

, Il"r limited to grab sw-plu� value from elsewhere. There was nor much to be got from the poorest of the poor anywhere in the wurld, bur what there W
powers argued �ehcmen tly with eath other abou t how to s atisfy i terests. At a lower level, It meant conStr,lInlllg the I llrir different n 1111,;.11 ruling classes of the Third World ro act as collectors of debt i­ trpayments for the Western banks, royalty payments (or the mult r own l1.Hionals and profits for Western IIlvestors as well as for [hei ,Itllnesric capitalists. Debt servicing alone trlnsfcrred $300 bil ion

'�I

l

ad­ , year from the �developll1g countries" to the wealthy 111 the to defending US overseas I mced world.'�· A websue dedicated

1II\'CStmenr hoasted: e Most new overseas investments are paid for by profits mad overseas. Foreign d irect investment b)' US companies was only S86 bi llion in 1996 . . If you subtract alit the reillvesred earn­ ings of foreign operation'), the resu lt was on I}" 522 billion ... US .

companies' Overseas operations also generate income that re­ as turns to the us . . In 1995 , this flow of incomc-defined direct investment income, to)'a lry and license fees, and charges Jnd services-back into the US amounted 10 S I 1 7 billion. It .

111 I here cou ld be no end to the squeez ing. The share of foreign ange rose from ,-:,tors in the trading on the Brazilian stock exch 11.5 percent in 199 1 to 29.4 percent in 1995 ," and the share of 8 IItW Mexican government debt held by non-residents grew from I pl'rcent at the end of 1990 to 55 percent at the end of 1993 . " y Under sllch circumstances, the instabiJi t")' of the world econom n III the aftermath of the "golden age" found heightened expressio dly 111 the countries of (he Glo bal South. Even those expanding rapi be �r\d extolled by neoliberal media commentators could suddenly

r" End of the Golden Age-

223

faced with near Insuperable debt problems, deepemng slump l , lltl pO'islbly accelerating Lnllanon-as happened III Mexico in till carly 1 990s, lndonesia in the late 19905 and Argentina ,I[ till" h, Ainning of the 20005. And the fate of the mass of peoplr III c()untrie!> regarded as marginal by internatiollal c.lpiral. like mO'1 ot sub·Saharan Afnca. was deepening poveny, rcpeated fal1l1 l1' .Ind. all tOO often, recurreD[ bouts of ethnic conflict spilling 0\, into civil wars, often financed by foreign firms Interested I II lIlH trol of raw materiah-. There may never have been a golden :l!!t' I " �ueh part!. of tht world. But there was certamly a leaden one.

merged. The former USSR (CIS in the graph below) suffered an lIormous economil' (Ontr3(;110n, and output III 2000, even aher IWO years of recovery, was only 70 percent of the 1990) figure. The

picture was Similarly nuserahle for Romania, Bulgaria. Albania Ind the bulk of former Yugoslavia. 8y contrast. the cemral in the graph) onl} contracted to a little I uropean econOlllles

(eS8

,ner 80 percent of the 1 990s figure and reco\'creJ to beglO to sur­ ]0.1 it III 1998-alrhough tillS figure was \lill hardI) greater than .hat for 1980." --

I nd.. " ! 1990= 1 ()jlj

I

Restructuring through crises __

Global capitalism In the last qu:mer of rhe 20[h century \\.1 marked once again by lllany uf the features l\larx had descrihnl There were recurrent economic crises, and the restrucnlrln� through crisis of capitals, big and small, prlvatdy uwned ,l lld state owned.

-

-'

--

-

"

-- '

(SB ..ouniron

80 70 .0 � � � �--._ --� -� -JO --

(;roJpb: I;,C("'OI1/1' Gmu'lb of'lldu.dn,,1 CoulltneJ (-) As l\g" imt IAIF I'rt'II;ctiOIl$ (--J'

19!JO

1992

1994

]99&

1998

2000

All this meant continued. recurrent P;IIO fur those who laboured Inr and Ii, ed withm the sys[t·m . The big question. howe\·er. for the ))[cm itself was whether the re'itruuuring c3u�ed by the Crises would opcn up a new period uf expansion. ThIS we will look at i n

,

the next section o f this wurk.

1982

198�

1988

199]

199-1

All the 0l3jor industrial economies suffered at least three real fl cessions, except for France and Canada wlueh each expcrien... nl onc "growth recession" and twO real recessions, and Japan wludl avoided a real recession for nearly 20 years after the crisis 01 dw mld-] 970s, only then to enter a ] J-year period (If ncar stagnat\I III after 1992. In the former Soviet bloc countries rccessionary tendenuc\ 01 the late 1980s now turned into slumps. But soon different p,uli· olden Age lbe End of the G

1'J.rt Three

THE NEW AGE OF GL OB AL INSTABILITY •

226

, IlAPTER NINE

The years of delusion

Ihe new hype

-

"t\ substantial decline in macroeconomIc voiliulity" was "one of Ihe! most srriking earures of thc ecollomic landscape over the past

,t

I) years or so", declared Ben Bern:lnke in 2004.! Such had long

hl't'n the vicw of most mairsrream economists and polit1Ciam:

New Paradigm advocates received cautious suPPOrt from the US Treamty Secretary Larry Summers and chairman of the Federal Reserye, Alan Greenspan . . . Mr Greenspan said the recent economic prrformance was "not ephemera 1".1 Ihey spoke of the longest continuous penod of American economic ..:rowth for four decades and the lowe�t I('vel of unemployment for three. This was supposedly a new, unprecedented pcnod of non�lI1l1.uiol1ary capitalist expansion, baptIsed "the great moderation" or "the new economic paradigm". Stagnation. unemployment and in­ Il.uian had supposedly been left behind. For Bernanke, the explanation lay III the greater capacity uf rhe I;lres and central hanks 10 handle the money supply rhan in the

19705. For orhers it lay in the new technologies associated with the Illlcroprocessot: A new economy has emerged (rom a Spurt of IIlvennon and in­ novation. led hy the microprocessor. . . opening all secrors of the economy to productivity gains, .. The new economic par.\dlgm has brought us the beSt of all worlds-innov;ltive products, new jobs, high profits_ soaring stocks. And low inflatiun.) I he advances of what W:lS called "Anglo-S:lxon caplwlism ", �upposedly based on unleashin g "economic freedom" and

Menrrepreneursrup", were eonuasred witb Ihe laggardly ra tt'� p! growth in EuroPf and the ..tagn ation

III

J,lpan. In Britain !\ l \

1.lbour rnl
..

�u return

I.

l'lOum and bust" was the refrain n i every budget speech of Challt..l" lor of the exchequer (and furure prime mim!lan CrISis of 19q-r spread [0 about 40 percent of Ihe world. I h

nc-Brazil, Russia Induded with them in the new "BR ICS " ruh l states were to run IOd South Africa. Even if the old ind u..rria is[ growth wo uld IIltO problems, tbese new centres of capltal The fauhs that were mamtain the stabilIty of the world system. ed rather as Stalin's rer.:ognised in the global system were regard errors", as "spots on admirers used [0 speak of his �occ3sional Ihe sun , "

1'1I11mc",1 Times hdd headlines ahout an Mecunomic mehdo\\ 11 and

"J

hou.!.e (If (ards", while tbe BBe ran a speCIal Neft'smg/'

programme, "'s Capitalism Collapsing?" Bur the panic did n . . ! loJ.!. t for long. Within months the new par,ldigm was rislllg hl/.dl ag;lin; hoth P:mick �lmford, former economic adViser 1, M.ugaret Thatcher. and Meghnad Desai, former econolTm ,Id vi�cr [(I Gordon Brown, tn�isted in debates late in 1 998 thaI ,III that had occurred wa!> a passing StOrm of no significance, and ,III prohlems had heen solved by quick intervention by th e I ' , Federal Reserve.' There was brid panic again in the summer ' I t

200 I ;IS the U� went into recession. "The world econOlll\

I'

starting to look remarkably, even da ngerously, vu ln eraolt­ ,tated the i:.cQ1Iomist. '·1ndustrialists and bankers :lt their ann lI,ll get wgerher on banks of Lake Como did little 10 disguise thnr over-ridmg pessimi!>m '., reporred the Fmallci,,1 TUlles. But a),!,I Il! amnesia soon set In ;1nd financial commentators were desr.:ribll1� the er.:onomi" paille ot a few months earlier as "the recession th.u W.1�

o\('r before H b�gan"·--de!.pue, or perhaps because of, th,

lo!., of one m si x manufactUring lobs in the us. Renewed nom ir.: growth

111

[he us led to even gn·ater Optll111Sm dun

after year rhat the picture fur the fmure was of fast econOlli1 111

Apnl lOO-:-

,I

typical

IMF pre!.s release about

I"

mOM recem world survey read, �Global economy on track In! cominued strong growth". There \wre a fe\\

-

l or those commcntators prepared to look honestly and go a lin Ie �leeper than immediate appearances, there were disturbing signs. While the

I1\�F, for instance. was exuberant about prospects, re­

\Carch commissioned by the World Bank painted a rather dlfferem picture. Growth for the world :IS whole was well down on the levels not only of the long boom, but also of the first decade and a half after its end:

Gmph tI"u; u'l'Jrld GDP gmu'tIJ rut( J 96' ·2006

•

7 , 5

e(1I

hefore. The Interna[ional Monetary Fund ('Ould declare )"r.H growth. So

Ihddcn problems

malnSlre.1111

doubters, hut their worries were only ever discussed lTl order II'

be di!>ml'>sed,

, J 2

1

o,+-��--���������s 196j

The overall message was that capitalism was going (HIIII

1970

1I11S

1980

1 98j

1 9�0

1 99j

2000

200j

without media references to the " new giants", Ch im. and InJI.I.

conclusion . as an LM F It was only possible to draw a different d [0, by starting the Knl ph i n the April 2007 World Review seeme of the long boom.' 'lCries in 1970-with the beginning of Ihe end a long-term slow­ Parallel with the decline in growth rales went the IM F revealed (see down in global investment, as research for

and soon compliments were heing poured on the other COU\HTI�"

graph below).

Hrength to strength with supposedly record world growth (1).t ures. Even those sceptical about the claims for the advan�Td COUlltfleS often accepred a modified version of the optllni.,m when it came to rhe system as a whole. Hardly a day went p.I"1

230

The Nc.... Age oj GlobJl ln>I.lf>1I

Ibc Y�al'$ of l:Hluslon

231

"'Qrld IICCllmllilJrilm'

But rhe restructuring through cri�c.., did not have the fuJI effect il

�

� �

14

.

-

•

h IJ had in the "'free market" period of caplrali<;m from the early

\$ing

I 'lth centurv until the First World \\.Ir. It {lid not get rid of un­ I'rufitab le c�pital on a sufficient scale to rai� profit rates ro the II \leis of the 19505 and 19605. The l1eoliberal ideology may have

JnYtilnlt'O!

, , •

\

-

" --

, mhraced the notion of "creative de<;trucflon", WIth ItS Implication th.u some giant firms must be allowed to p.o hml In the interests of Iht' Qthers. Bur the practice of stah,.,-.JnJ ot the pressures which

-'\

• •

,

•

20

I'ro

I 'PS

1 98t

19115

"90

199�

-

200Q

2004

The fa/l m accurnulanun and the growth of output took rl,l u alungside a courinmng low level of the r3te of profit comp.lfnt wit h the "golden agc". Thert" had been som e recovery from thl low point at rhe carl} 1 980s, but on ly to rea ch about the level .,1 the early I 970s-rhe turning pOint that ended the "golden ag�' ' Ca lcu lati on s for the US suggest that rec overy of prof.ra bil 1!1 from the recession of 20 01- 2 through the year!> imm edi iltl" 11 preceding the cre dit crunch uf 20 07 again failed to raise it r" anything like the level of the long boom. Rober t Brenner sholl It moving margi nal ly ahe.ld of the ear ly 197 0s figure, on ly IIll'll ro fal l back. Da vi d Kotz show'S the profit rat e in 2005 .lS 4,/, percelll, compared WIth 6.9 percent In 1 997 . Fred Mo scl o shows a bigger reem'cry ot rccent profit rat es, but hiS cakul.l t111n) .,tit l lea\'e them at their high po int (i n 2004) as on ll mar�lnalh- abon· their lowest points In the long hoom.' l'ht over.111 pattern of the 1 990s and the ear l)' 200 0'1 was a conrinu :uion of that 01 the I 980s-of a certain rec overy of profit r,Hn, hut nm suffiCient to return the system to the long tefm J\ namism of the lon g boom. �Iarx saw restruCfurlllg rhrough crisis as ena bling capitalism I" recoup the ratt' of profit, and the " Ausman Seh oul"' of rna mStn',Hn economic) lIkewise saw cnses as rhe onJ} wa y to n'invigoratt? tlw system. Each crisis III the 1 980!>, 1 990!> and early 2000s did k,ld to Widespread re�lrucruring of industry, There were closures 01 factoTles, mines and docks in all the world's industrial heartlan d,. I ndustries which had characrerised whole regions decarnpnL others saw their workforccs shrink to ha lf or a quarter of "WH' former Size, as wirh the heavy industries of nonhern Chm.l. Defroit'� car plants, the Polish shjpyards and the Illeat rcfriger,l rion plants of Grearer Bueno!> Aires. 2U

Industry and finance put un SIJle�-\\ a., rather ditferel1l, The fear "f whal the collapse of the really bi� corporations and banks Illlght do

[0

the resr of the ..ysrem pcrw,led.

Hardly any hig firms had hecn a l lowed ro �o husr dUring the hr�t rwo crises of the mld-1 970� and early 1 98t)s. Governments tud continued to step In to keep them ,Ifloal, most notahly with

p

the US state's sup ort for the bail-olll of the car gmnt Chrysler at Ihe end o f the 1 9 70s, of rhe Contll1enrlll Illinois bank 111 1984 and uf the Savings & Loan� corpmatiom (the US version of building ..ueieties) in me late 1980s. Thll1g� changed to some dcgree from Ihe late 19805 onwards. As the BOllkru/Jtcy Year Book reports:

k­ Durmg rhe 1 980s and early 1 990s record numbers of ban . Oles cornp known well 1\tan}t filed. ruprcies. of all rypt.'S, were lthnes, filed for bankruptcy ... Included were LTV, Eastern A

�

Texaco,

Continental

Airlines,

Allied

Srores,

Feder.1ted

Department Stores, Greyhound, R H Macy and Pan Am . . . r! Maxwell Communication and Olympia & York,

rhe same story was repeated on a higger scale during the crisis of 2001-2. The collapse of Enron was, as Joseph Sriglit7 writes. �tbe " .11 higgest corporate bankruptcy ever-umil WorldCom came al�n�

ThiS was not just a US phenomenon. It was a characteristic of Uritain in the early 1990�, as bankruptcies like rhose of the \taxwell Empire and Olympia & York showed, and, although

Urita in avoided a full recession III 2001-2. twO once dOllunant ,ompanies, Marconi/GEC and Rover. went down, as well as scores ,,( recemly established dotCOl1l and hi-tech companies. The same

�

phenomenon was beginning to be Visible in cont nental E�rope, with an added twist in Germany that most of the big enterpnses of the former East Germany went bust or were sold off at bargain

basement prices to West German firms," and then in Asia with the (!isis of 1997-8. On top of this there was the bankru ptcy of whole rhc YC-31"5 of Ddu510n

m

states-notably the USSR, with a GDP that was at Oile stag!: I third or even half that of the US. Ilowever, go\'ernmenrs had certainly not completely given U!' intervemng to limit the impact of crises On J.lrge capitals, nor h.ld

the most important capitalist sectors stopped demanding such III tervention. This \vas shown b)' the way the US Federal Rese(\�' stepped In to save the Long Term Capital Management hedge hmd

in 1998 . A worldwIde sample of "40 banking crisis episodes tr1 2003 found that governments bad spent -on a..erage 13 pe rcent " I

national GDP to dean up the financial system .... , Government� .1 varied as those of Scandinavia and Japan had rushed to prop up

banks whose cullapse might damage the rest of the national fin,1 II cia! sySfem-even if this involved nationalisatton as a last reStI r!.

Governments look the COStS of writing off losses awa) frOill p.1! ricular individual capitals. But those COSts had then to be coverni

from elsewhere III the system-eitht.'r by taxation, hining the n',II wages of workers or the profits of capital, Or by borrowing whl

h eventually had ro be repaid somehow from the same sources. ., hI' ..

benefits for those capitals which survived the crisis were limited ,1\ 1 , resul(. The rising rate of bankruptcies only partially relie\'ed rill" pressure on their profit rates. Further relicf c"me from a slower rise in UlVcstmenr compared

I II

in most coumries" in the 1 990�. · But the (lId Iildustrial capi­ I lhst countries paid the price for .1 ..:omlnurod slowdown In rroductive accumulation and long-term ).tfOwth r,lIe.... Changes rn profit mtn ofsix da.tdts },fall"f;JC/"nrrg

.\'oor· toJ,,,,l""" ·mJ"

tary expenditure during tbe "'Second Cold War " of the 1980s undn Ronald Reagan, and agam with tbe "war on terror" under Bush III

the early and mid-1000s-and since US military expenditure \\' .•\ half the global roral, this meant an overall increase across

thl'

sy�lem. One estimate is that by 2005 US military spending h.ld risen 10 a figure equal to about 42 percent of gross non-residellll. tI private investmentI"_a big drain on resources that could other.\ I'" have gone into accu mulation. At the same I1me. unprodUCTive n pcnditures in the financial sector soared, as we shall see later. The effect of all of tbese forms of "waste" was much les� benr

ficia l to the system as a whole than half a century earli er. Thl' l could still reduce rhe downward pressure� on the rate of pruI tt

,\"".IlII
19-48·59

..o.25n

!l . I l O

0.143

1959·69

U.H�

0. 1 1 11

0,150

1969·73

O. I�6

0.109

0.108

'969-":'9

O.Il�

0.10-

0.103

0.130

0.0')4

OJI,)O

1990-1000

0.1 �

O.IOi

0.10\

2000-2005

0.144

1979-90

•

0.09 I

f.voiHtiOrJ of capital intensity lind .:apitiJl $tQd; ,

(�JlIe oJ",m;J1 growth NIt'I 1980·90

19')0·')8

/995-98

Capn')l 510d

3.0

2.'

l.I

Capnal/l�hour rarro

1.1

0.'

1.0

J.,..

Capll'i1! suxk

'.7

4.2

3.'

"

4.7

,..

Gamany

Capital Jlock

2.'

V;

2.3

CapnaViabour TallO

2.9

3"

l. I

C-lII"'u,! " ock

2.0

2.0

1.0

l..llpnallbbour r�lIu

1.3

2.3

2.1

Capllal 't101:k

2.8

2.7

2.7

C3[lllaVi.lhour (,1111,1

2.7

U

3.'

Capnal sul'I.l

1.8

I.'

I.'

UlI"1!Jlib hour rallo

"

1.2

1.0

!i'

pnx!ucmt' labour power (Marx's orgamc composlrion of caplt. ll I The �Iowdown in accumulation duc to lower profitability play ed .1 role 111 this. So did continued waste expenditure, panicularly mill tary expenditure. This absorbed a considerably lower level of worl d output than in the 1950s and 1 9605, let alone than during lil, Second World WaL But it still absorbed a much higher amoum Ih,HI in the pre- 1939 world. And there had been an incrcase 111 U� mill

lH

twm a rising organIc composition of capllal-il certainly does not tl as rapidly as it would have done If all 'iurplus value had gone 11110 acclUTIubnon; "The rate o f growth of the lapttai/labour ratio

Uruled S[ales

Fn�

haly UnJlcd KmgdQm

CapltaVbhour

r�no

I'wo other factors can haw some Illlpact on the level of invcsunent I,;,lpitalisrs have to undertake to remain competitive. There is the Increase in the speed at which capiral produces and sells com­

modities (what Marx called the "lUrnm('f time" of capital) as a result of advances ;n transport technology and of the computeri­ \.uion of warehousing and stock keeping (what are often called

1-'-' Ytan of DelUSIOn

135

tOO;I} "logistics"). An estimate IS (hat "capital sen'lces" �rew 2 10 1 pen:enl taSter than Ihe capital stuck In the latc 1 9805 and 1 990s 11'1

most ("oumnes.I' This would have reduced the COSts to capltar� 01 holding stocks of raw materials on the one hand and of goods 3\\,111 Ing sale (their "ci.rcL.ianng capital" ). But the second factor will h.n,

OfCO Empla)'l"ent UH1I00•. 2007. p 1 1 7 ·

80

worked from the opposite diroction--clte reduced lifellrtle fixed up

Iral had before if iK-'Came outdated (what is known a!> �mor.11' depreciation). Compuren. and softwarl' becomeobsole'iCem bt'l.:au'

of technical advances much more qUickly than other capital equip mem-in perhaps IWO or three years rather than ten, 20 or e\u 30-and [he n i creased depreciation costs cut into profirsY This was ignore
cheap compunng power was the basis of a new era ()f continuolI' growth. As we saw n i Chapter Three, rhe mon° rapIdly finm haw [I' repla!;e their fixed capital. rhe: more it cub into any innease in pwl Its the} gut from n i �ralling it in the first place. What is more, onCt' .1

--

Jd P:II' '" Il'l �

70

--

60

"""

-- ..

'--...---. � '

•

'

-

,-

- -,

new technology h.ls spread heyond the firms that fir�t IIltroduce it. II,

effect is to reduce the value of each unit of output: the late 1 9905 ,Ind the early 200Ds were a period in which the prices of goods produu:d b> the new technology rumbled, leading to increased competiml pressure on all the firms in these industries. A wave of mnov,\tIol! could no OlOte create an endless boom in the late 1 990s and carh 2000s than It could 111 the "new era" of the 1 920s. The must lmporranr factor in renving profit rates was nOi com puterlsatton, or the reorganisation of capital as such, but till" IIlcreased pressure capital was able to put on those who worknl for i[ as successive wa...es of restructuring disrupu."d old patlcrn, III

working class resistance. Capitals took advantage of the redun danc[es and dislocations caused by restructuring to put relcJ1(I�'�' pressure on workers to work harder while wages were held down, There was a decrease in the share of natiunal income gomg [II labour 1n all of the major Western economies. In rhe United Statl.... "productivity grew 46.5 percent between 1973 and 1998", whilt the median wage fell by about 8 percent'" and that for productIon workers by 20 percentll (with workers only able to protect th!;! ! living standards by an increase in average working hours from 1,883 hours in 1980 to 1,966 in 1997lJ.). Western Europe did nor see the same increase m hours (aparr from in Bntalll, where unp:'lIt1 o....ertlme soared) or a reduction i n real wages as in the US III lhl 1 980s and 1990s, but governments and firms began to pu,h

H6

1hc Nt'" Age of Global

In�t.:lhllll'

so+---�-�-�--�-�-�-� 1970

1 990

1980

1995

2000

2005

lor both in the new millennIUm. "R�al wages have fallen dram.Hi­ I;.dly and working hours are nearly back [040 a week", reporred the BSC on Germany in 2005.' It was oat only wages and working conditions that had to be put under pressure. So [00 did the variau!> services provided by the stare �and in some case by pnvate firms) that make up the "social wage-: healthca.re, pensions, education. During the long boom these had

l'lttn, as we have seen in Chapter Seven, hy and large, paid for out of Ihe taxes on the working class, as is shown by figures by Anwar "Ihaikb for what he calls -the net St:K:ial wage�-the difference be­ tween what workers pay III and what the} get out (see Graph A helow).�· But the impact of recurrent cnse�, rismg unemployment

. nd an ageing population had hccn to pu.!>h welfare expenditures up­ t wards (Table B). until even 1Il the US the cosr could no longer always he covered by the taxation all workerlo and therefore tended to hit l.:apitaL The figures show cnurmou� unevenness between the degree 10 which different states-and firms operating in those states-were hit by both the overall le,·el of the "net social wage" and the rise III the welfare expenditures

to

the 1970s and 1980�. They responded

by a series of "reforms" (in reality coumeNeforms) which, undl'! the lallel of �modcrnis.1.rion". aImed at rC\'crSJng thl� trend. Nd soaa/ ll\1gt as !>"Ctnt of GNP (Gr.rpll A)

1

'

,

1

''''

/ -

J

I'

'..

"

I

'..

v', ,

I

---

� /,

", ,

, -

,

"

1970

1965

1960

/

'

:

, " , , , , , , ,

1975

,

/

\

--'

-

1980

198;

Crr",:!n}. Canada, thr L t.., AII'lrJ"� and <'w",dtn

--

--- The US

U'tlf,Jrt txptllditurt �s p.m:tnt ofGDP 1979 U/rd 199�l'

COIml.)'

1979

199J

.'\lIslrah.\

13.2

16.1

( ;in,b u

14. �

I S.O

Fr�n�e

21.0

19.1

(,rrmanv

lH

2S.7

hal.

21.2

12.8

�wrdcn

25.1

34.0

linnI'd Krngd,)m

16A 13.8

Z2,5 1 5.8

Vnlle..! 'il,ll�

(T�blt /J)

Unc\'en competitiveness Each success any one government had in doing this put pres..urr tin other governments to do likewise. But real wages could nOf hi CUT, working hours prolonged, or welfare h�ncfit s curtailed wllh our causing popula r resentment with the poremial to explode into all Out resi<;tance. The level of resistance varied from country [(I l levels of working class organl country, depending on estabished satlon and the outcome of key attacks on it (like the defeat of thl long 1980s strikes of air traffic controllers in the US and of miner, 138

was that the and print workers 1I1 Britaml. The most vi�iblc result mid-1990s proportion of national output gomg to wcllarc m the 1 4 percclH higher than in the 111 France and Germany was about . The same contrast lIS and over 6 percent higher than in Bmam and Britain h('(Ween the success of [he capitalist offen�lve IIl lhe US for working and its effecls in Europe was shown by the tigures of the " Anglo­ hours. In these trends lay the supposed ad\'ant,,�e itals based '�"on " model over the European model lor the cap Within each.

Tht N",,,, A/I.f of Global lnSlabrlrn

KorC"3f1s

1.380

�1rxic;lns

1.8411

Americans

1.112'"

Brillsh

1,68�

French

1,441

Dll[ch

1,35-

not faced in European capital found itse lf facing problems It had half after It col­ the years of the boom or even in the decade and a had grown bpsed. Output per head in what is now the Eurozone cent 10 197 5, Irorn 40 percent of the US figure m 195 0 to 75 per the US in n n growth. like that of Jap:lO, exceeded that of and Gena to provide a the 1980s. In 1990 German unification was expected the oew rrul­ further massive boost. The mood by the beginning of els had long lennium was very different. Overall productiVity lev glllg the US �ince stopped catching up with the US. Those challen nsplant plants. JutO industry on itS home ground were Japanese tra t to the US Ul not Volkswagen and Fiat. Japan may have lost ou while Europe computers, but at least It had a computer Industry pitalist race did not. And coming lip on the outside 10 the imer
The Y ean. of DciuSLon

,

l39

that the Japanese aerospace mdustry could not. �panish and hen, h firm� had gobbled up many of Latin America's banks, and th, European Union sold and invested slightly more in the Merc()�\Il region of that contment than did the US. And for the moml'llI Chinese impom only amounted [0 1 percem of European GDP. There were, nevertheless, reasons for Furopean-bascd capn.11 Ism to worry and to nag states to take action on its behalf. Frendl and German based capitals faced the dilemma rhat although [hl'\ wcre more productive in Output per hour worked than capn.tl based 10 the US ' they lost Out In terots of merall productivitl hl cau!>c of the few hours they got from each worker III a ycar. European capItal therefore found itself under pressure from .11 least three !>ide!> in globJ.1 markets-from the US and Japan in hl�h tcchnology products and frolll China in lower [echnology prod uCts. Its respome was to push for copying the US approach nt imposing "flexible labour mJ.rkets" so as to get longer workinJ.: hours and marc intensive production (in Marx's terms absolutr and relative surplus value) lind to try to cut back on welfare c \ penditure. This was the rationale hchind "neolibera l" policie�. with counter-reforms of welfare and rhe use of marketiS3tlon and privalis3110n measures to gec workers competing wirh each other. German capital fullowed a policy througb (he Bundesbank (and then [he European Central Bank) in the 1 9�Os of sacrtficing cr.;u· nomic growth co hold down wages (which rose cumularh'ely 10 percent less than tbe European average) and so increaSing export.. and Iheshareofprofits. Theparadoxical outcome was that German� had a big trade surplus and good profits, but a reduced share 01 world investment and production. ThiS lay behind the pressure It applied successfully in the early 1000s to gwing thl." then Social O('mocrat-Green government to push through counter-reforms In the Agenda 2010 Programme. Irs main planks wl."re a drastic re­ duction of unemployment benefits by a third, denying any benefits at all to 800,000 people, forcing the unemployed to accept Joh� with below average pay, freezing pensions and charging for ViSlfS to doctors. Meanwhile, big firms threatened to move production to low wage sites in Eastern Europe if workers did not accept in� creased working huurs. Such �internal modernisation", said Chancellor Schroeder. was "tbe prereqUIsite for Germany's asser­ tion inro globa I politics."12 The overall result was that German rea I wages fell for the first time in half a century. The same logic lay behind the attempts of French governmentS TO cut back on public 240

Tht' Nt'... Agt' of Gluhal lnstabilu)

tor pensions, to reduce the rights of young workers and ro do ilVoay wah the 35 hour week. Sut this was an economic straregy that raised big political prob­ I"ms. For half a century after the Second World War capital and lilt' state sought to legitimise rht'mselves through the ideology of n
Hope i n the East? When people ltke Samuel Brittan wrote of the future for capital­ ism lying in Asia 10 the early 1 990s they meant the small newly � Yt'ars of Dt'Ju�ion

industrialising coumries of the region-the " tigers" of Soulh Korea. Singapore. Hong Kong and Taiwan, and the "tiger cuh.. of Malaysia, Thailand and Indonesia. These had experienced H'T' rapid rares of economic growrh, leading the OECD to write 01 .1 South Korean "economic miracle" in 1 996. By thIS time Kore.1 II IlymS standards approximated to those of the poorer WeSfl'rIl European coumries; some of the country's firms established theil' seh'es as global giams. Pasco, the world's third largest Sln'l producer. boasted that its Kwangyang steel complex, opened III 1992, was "the most modern in the world".14 But much of Ihl' growth depended on each tiger ho1dmg wages down to cOmpt'fl with the others for Western markets. I t was a classic case of bhlhl competition between rival capitals (or in thIS case state mUI1()I'Xll\ capitals) and evcnrually led to Output thdt was too great for the t':\ isting market to absorb. By June 1997 there was only 70 pen:elll capacity utilisation in Korea and 72 percent in Ta iwan," and .111 the coumries depended on foreign borrowing to finance rr'ldr deficits. Yet when financiers suddenly reacted by withdrawlllg funds from Thailand, forcing the devaluation of its currency, th(l�,· enamoured of the Mmir:1c1c" tried :1t first to th ink nothing senou, was h,tppening. The Thai crisis, wrote l\.lartin Wol f 111 till" Fill,mcldl Times, was "nothing more than a blip on the path 111 rapid East Asian growth " . Within weeks the CrISis had spread III aJl the tigers and tiger cubs. causing (.'(:onomic contraction, relianu· on IMF austeri!)' packages, the sudden impoverishment of mtlilorh of people and growth rates in the 2000s much slower than in thl· 1980s and 1990s. But this did Dot shaner the faith in many qU.lr ters thar capitalism in East Asia could see off any problems th.1I might be encountered 10 the West. Communist China became th,· new bearer of their hopes. Certainly the emergence o f Cbjna as an economic power \\.h one of the most m i portant developmems withm the world S),Sttrll al the beglllnlllg of the 21st cenrury. The scale of Chinese e�o nomic advance was awesome. Irs average growth ralC for tlK period 1978 to 2008 was 3bout 8 percem a year; its econolllll output was about nine times gre3tCr at rhe end of the period th.l ll at the heginni ng; its share of world trade had men from less th,1 11 I percent in 1979 to over 6 percent in 2007, until It was Ill'! behind Germany, the world's biggest single exporter; by 200S 11 was "the leading producer in terms of OUtput in more than l Oll kinds of manufactured goods", including 50 percent of camer.l�, The N�" Age of Globl1 Ins",.!>d!!

'0 percent of air conditioners and tele\lsion\. 25 percent of wash­ IIIg machines and 20 percent of refngeratof!.. thinese cities like l\elling, Shanghai, Guangzhuu or e,en Xlan III the imerior 110 longer bore mucb resemhlance [0 Thml World stereotypes. The tnrests of sk�'scrapers in Beijing or ShJIlgh31 made l ondon's much Iraunted Docklands de\'elopment look like To\ IOwn. while the vast mdu5trial developments 3round Shanghai h3d few comparisons in Western Europe. Dramatic chanF,es wcre tak1l1A place 111 what was rrcviously assumed to be a �b3.ckward" wuOlry of limIted eco­ nomic significance to the world �ys.tem. China, like most otber tndu�triali�ln� Thlfd World coumnes. h.ld suffcced a cnSlS lust as the long boom was r.:om1l1g to an end 10 Ihe West. A quartc:r of a cemury at what Marx had called pnmi­ live accumulation had transformed tem of millions of peasants UItO wage wo'lkers and budt up some of the base\ of modern 111llustry-but this industr}' was no match in terms of effiCIency for thar in many other parts of the world system. The sheer scale of c:xploiration of the mass of the population led to all sons of pres· ures building up from below, whrle the 1I1abllrty to keep up the !'lace of industrialisation led to repeated crises withlll the ruling "roup. These culminated in massive political upheavals in the \cars 1 966-75 (from the �Cultllral Revolution" to the rise and fall (If the "Gang of Four") whIch were only finally resolved after Mao ledong's death in 1 976. The resolution of the crisis conSIsted of ad hoc moves to a new �tructure of accumulation. A series of reforms pushed through in 1 978-8 1 began with relief for peasants through a raismg of the purchasing pnce paid by the state for thelT produce. The peasants were now free to deCide how to use some of the surplus left after OUSt about) feeding themseh'es. There was 3. huge rise in agricul. tural produnion. and the increased mcomes provided a market for .orne of the under·utilised industrial capacity. A loosening of state u)ntrols allowed It to samfv this demand, and mecall output •

!loa red ahe.ad. Increasing social diiferentiation within the peasantr)' led some to accumulate a surplu!> and then to w.e the new freedonts from ,tate control to mvcSt in establishing locally based ··village mdus­ Hies". Formally owned hy village governments, in practice these provided a means of self·enrichment hy those with connections to the local part)' apparatus. A ne\\ nltlfket capitalism grew up in the \Duth east of the counuy alongside the old state capitalism centred r'hc ,"un of nduSlon

mainly in the north. and rhe regime allowed the new industric'> t" link up with overseas Chinese capitalist interests in Hong Kun).! and elsewhere.

the world. What they meant for workers was portrayed graphi­

�illly n i the 2003 Chinese film Blmd Shaft, in which the degrading lunditiollS under wbich rhe millers work lead fWO of rhem to

The surplus passmg from the peasantry into the hands of thrn

lIIurder a co-worker in an attempt ro blackmail corrupt managers.

he closeness of reair l y to the fiction was shown n i a mining disas­

groups of capitalists (state, -village" and overseas) was still 111.1\

1

sive despite the reforms, while low peasant incomes meant a reaJ\

It·r in Guangdong (supposedly China's most "advanced " province)

supply of workers for the new indusrries, which did not even han

11\ the summer of 2005. As more than 100 mlllers suffocated un·

to provide the guaranteed minimum livmg standards and 500.11

Ilcrground, the owner fled when it was revealed he had paid our

protection (the so-called "iron rice bowl") of the old Stare-flill

IllllJions of dollars in bribes to take over the preViously shut down

heavy iuJu.stries. In effect, there was a new model of capit;l hsl .lt. .

\IMe·owned mine, and at rhe same tIme ro buy himself a senior po­

of exploitation 311.1

Ltion in the local police force. In thi., way he had been able to

repres�ion of the old state capitalism with a turn towards catetln).:

IKnore all safety precautions while parading himself as an exem­

for markets-and rhe markets came 1Ilcreasingly from expOrTll\).: i crr.h to the rest of the world system, while providing for the n

pbry "entrepreneur" for his role in suppl}'ing coal to satisfy the t·nergy needs o f .l booming economy. -

ingly consp'cuous consumption of the old state bureaucracy on [lw

AlongSIde th't attack on the old working class was a renewed

one hand and its children as they rook over priv'ltised industrin

upping of the level of exploitation of the rural workforce, who still

on the other.

made up fWO thirds of the total. One (banned) Chinese study told

cumulation, combining rhe high

level

The new hybrid economy had contradictions of its own, WI! II

r)f a fall of 6 percent in peasants' per capita farming incomes afrer

the ups and downs of market capitalism superimposed on rhe up,

1 997, and "given the rising COStS of health and education, their

,lIld downs of the old state capitalist accwnulation model. Thert·

real purchasing power bas probably fallen still furrher".J' But the

were wild fluctuations in growth fares. The scale on which the

,lVerage does nor tell the whole StOry. Class differentiation within

m'\�

industries competed with each other for resources created shan

the peasantry involved local officials using their powers [Q grab

ages and forced prices up, until rhe state tried to impose son1l'

money ( in the form of local taxes) and land off orher peasants with

order on the market by curtaihng funds for further investment. 1.,11

the aim of enriching themselves a_� perry agrarian capitalists-the

the growth rare could be above 20 percent in 1984, down It>

'
around 3 percem in 1985 and back up to close to 20 percent 1Il

Enthusiasts for capitalism claimed the rum to the market had

1988. There then followed a major economic, social and political

led to an unprecedented lifting of hundreds of millions of people

crisis in 1989 as growth fell right back and prices soared. This W,h

our of poverty. And rhe abandoning of the crude methods of prim­

the economIC background to tumultuous student and worker

Itive accumulation in the mid-1970s had permitted much of the

demonsrrations in 1989 in most of the major cities, most famousl\'

Illdustry built up through its methods to be used more produc­

in Tian;lllmen Squa.re in Beijing.

tively, with the result that not only the new mral capitalists bur

The regime found a way Out of the crisis from 1 992 ollward�

.1lso rhose from peasant families who moved to work in the cities

almost by accident. Unable to control things itself. it placed Ir,

i:Ould enjoy improved living standards. But for the great majority

hopes on unleJshing a new round of accumulation based all un

ot

controlled competition between different industrial concern�.

/lank admincd in the early 20005 that 204 million people, or one

Those who ran village governments were able co tum tbe new in·

III

dustries into their private property and link up with foreign

Ilmates suggested that "rhe vast majority of the 800 million

capital. as were the managers of the great state·owned enterprise.... . mtionalisation of old industries, with perhap, There was a mlSSlve

i comes at this level. '" peasants'" had n

30 million workers losing their jobs. These measures were ac­

of accumulation. The proportion of national OUtplit going into In­

cla imed as "progressive" hy pro-capitalist economists tigbt acro��

vesrment rose to 50 percent in 2006:010

244

The New Agl' of Glohal lnSfabll'1!

rhe population, they were !>tili low livillg standards. The World six of the population, still lived on less than $1 a day. Other cs­

The key to China's rapid growth rates was an unparalleled level

24')

In recent years. no OECD or emerging market economy h.1J ,I

U1C'n t o r private Amertcan consumption (graph"), whIch then pro­

r3r10 greater IhJn 30 percent (averaging over three year�

w

'01

,moorh om cycUcal effects) . . . Even compared to Korea and J.ll'.11

dUring their boom rears. the ratio in China todav looks hi�h.

The rising investmtnt was paid for out of to[al savings In the e":llll omy also rising to ov('r 50 percent of outpUi. Some of the was hy workers and peasants, who needed It

111

".1\

1,led all outlet for further Chinese exports. 10

Pn'-,ltco �On)UmplI(ln

flcon JellIco)

..

15

III",

-

10 �el expons

they handed over a ponion of their incomes to srare-run hank, ,

which havc then loaned it to Slate and privately owned enrerprr\I" III

- - - - - - - - - --

order to pay I .. ,

emergencies like medical care and for rheir old age. Erfecmd\

But

20

the early and mid-2000s an increasmg proponion of ..a'lflr,

came our of the profits made by companies, which rose by a huul �

IO

5

fright s.:akl_

--_-�----�-�-_+O 2002

2000

percenr of GNP In the e
:t

2006

200-1

house-hold consumption as a share of omput fell sharply. to IlIlh

\1,.L:umulation

such a rate created three sets of problems, aU of

about 40 percent," with the share of wage income falling (r011l (,

which Marx had been familiar with. F i rst It draws

percent in the 1 9 70s H) a((}und 56 percent in 2005 (see graph ).'

.I massive scale, creating shortages (hat push prices up. The impact

In

resources on

III Chinese growth in the early and mid-2000s was to absorb raw

70

materials and foodstuffs from :lcross the world. raismg their prices IIIternationally (aDd in the process giving an e(:onomic boost ro

6S

1.1W material producers in places like LatIn Amcrica�and even­ '0

wally the ming prtces fed back into China. �ond, il leads to a growth of output that cannot be: absorbed

51

hy a national economy in which w.lges constitute a dIminishing ,hare of output, except by still more accumulallon--or b)' ever

.10

Itreater stress by firms on expons.

41 40 191111

1984

1988

1992

199'

2000

2004

The decline in wage share did nor necessarily mean a dec1rnt III real wages, since it was a dedinrng share of rising output. What It did mean, however, was th:u China's economy exemplified M,lr\. \ pIcture of accumulation taking place for the sake of accumuhll,on The picture was even starker if the section of the economy devOll'l1 lO exports was taken into accollnt. By the turn of the mille1HII \! 111 80 percenr of new growth each year was going to in\'estmcnt alld exports as opposed to satisfying rhe needs of China's people. and, in a further twist, by 2007 nearly 1 0 percent of China's incol1ll took the form of a surplus of exports over impons that was thl'lI

8ur there IS enormous competition In export markets-nor just Irom enterprises abroad, but with other enterprises operating in l hina. The increasing pattern has been one of Chinese factories

h:.embl ing components produced elsewhere in East and South I ,1St Asia, wnh the final output then berng exported. This ties { hlnese based exporting firms Into competing multinational

�upply lines: "The percentage of exports produced by foreign­ !lased corporations grcw from 1 7.4 percent in 1990 to 50.8 fl('rcent in 2001·· ... By the early 200010 the result of such competi ­

tIon was a level of output that could not always be absorbed l,;ompJerely by the world market any more than by the domestic market. The National Statistics Bureau reported thar " of all ­ ( hinese manufactured products, 90 percent are in oversupply" ,' despite massive price cutting: "Among Chinese companies rhe

deposi ted in the United Stntes-cffcctively used to finance govern

price war is particularly intense because competitors often chase

24'

Ihe YC'3rs of DelUilon

Tho:' New Agr "f Global InJIJi,,\,

2-\1

m;nker share ralher than trying to increase shorr term profil'l hll Ity," :l rtfli.l1Jclal Times correspondent could repurt; " Rclenrk I;ompelltinll among local �uppljer'i keep� profil marginS alrnmr III \"isible for m,any firms',"'

h wa.. nO[ only Ihe output of export-directed consumer good,

that lended to gel OUf of hand . � Investment In many sector, including property, cemem, steel. cars and alum inum \\.1 "

�being overdone�, Chinese governmenr offic ials complained In a system constructed around the goal of accumulation for Ill'

sake of accumulation and then left ro run uself, top rnaIMAt·" measured ,heir success by [he speed at which their firms grt'\\

and the governmenr-run banks then rewarded those that �n"\\ fasre\t by allowing them TO accu mula te debls. U

A third prohlem, which exacerbated the previous twO, was th.lI

the r:wo of investment to workers employed-and to outpt l-\\.1\ J rISing. despite the abundance of labour. Whil e invcs nnem W,h 1 1 1

creasing by abour 20 percent a re
even in urban areas it was only about 3.5 percent. Tom l manu t.l\ wring employment fell from 98 million in 1997 to 83.1 millulIl III 200 I ,'J despite the massive fate of accumulation. The fall W,IS dllc­ to brge-scale redundancies in The old s[3te-owned heavy indus[ri�',. but it W,IS not compensated for by the increased employment in Ihl newer manufacfUnng enterprises-and employment in the "�n

olldary SeCTnr"'l as a whole remained more or less Static at round 1 5 - million. In other words. the organic composiTion of capital reN·

Researchers for the IN[F reponed, "The mCTease in mvestmel1l from the mid- I 990s to the mid-2DOOs had led to "a rise in the Girl

tal OUtput ratio and :1 fall m the marginal product of capital"." The dfecr was bound to be downward pressure on profit:lblllT\

Phillip O'Hara calculates the rare for the economy as a wholt ,I' declining from 47 percem in 1978 to 32 percent in 2000.14 Jt'"�U\ Felipe, Editha 1 3vina and Emma Xiaoqin Fan poinr to the S3n1l' Trend, but with different absolute figures, from 1 3.5 petcent I I ! 1 980s to 8.5 percent in 2003. They quote results from Lardy allli from Lin which show the same trend-with some of Lin's figurn

showing very small profit rates indeed for some industries (0.2 pt'r cent for bicyd es -0.3 percent for huses, 2.9 percent for washing machines, 2.5 percent for beerJ.H A Chinese study hy Zhang � I I and Zhao Feng seems to contradict these conclusions, showing [hI· overall rate for manufacturing as falli ng continually for the 2.u ,

24'

H�ars up to 1999, but T1SlI1g considerahly afTer that. ' The dlSl.:rep­ lIIey could be explained by the way the massive onslaught on lohs III lhe state enterprise sectOr Cut IntO ih operating cost.s. The greal lUunteracting factor preventing a catastrophic fall in profit rates was

the conrinudl fall m the share uf ourplll gOIl1& to wages. Bur

Ihl> necessarily pren�nted domestic consumption absorbing the fl,tIIwing industrial output, further mcreasmg Ihe dependence of "xumulation 011 further accumulation and on exports.

At. the same time. there was conSiderable evidence that the wllI­ lIIr,ness of the banks

to

lend to enrerpTl..es at low rates of interest

\umpensated for Ihe..\ow profit rales of many enrerpnses-and ,hat parallcl with this went a willingne�s nOI to push loss-making \

nterprises into hankruptcy, so loading the banking system with

\ "Sf,

ll unrepaya ble debts.

probab

As with any (.'aptfalist boom, there wa\ a hurgconlllg of all sorts nl speculation as enterpriscs and nch mdividuals sought to find qUIck

and

apparently

effortless

�ources

of

profitability:

" Investment in teal est31c grew by almost 20 percenT

:1

year over

lhe past four years lto 10051 and reached 1 1 percent of GOP n i 1005" .�J Everywhere in China's major cities Ihere was apparemly cndless building and rebuilding of luxury ;Ip;trrmenr blocks, rcla­ lively CXIX'nSlve (by Chinese standards) fasl food outlets, high class hotels, and shopping malls dedicated to selling dcsigner products leven t hough such srores often seemed Virtually empty of shop­ J"trs). And Ihere was the lure of international speculation to add If)

the lure of local profiteering. In March 2008 execuri,·cs of the

<- ITIC Group

m

Beijing were on the verge of Slgmng a deal to buy

" one billion dollar stake In [ile US b.:mk Bear Stearns when news "arne through that it had gone bust.,.

This cOmhll1atl0n of comradktions meant that a smooth upward path of growth was :1 most unlikely scenario for Chinese \'Jpi[alism. Certainly those charged with managll1g us economy were by no means confident [h;1[ they could control the tempo of \,ompetittve accumulation in a way that could aVOid unexpected L.ltastrophcs as malldgers of emerprisl'\, hoth private and state owned, sought to outdo each other. Or, as Premier Wen Jiab30 told the National People's Congress

111

March 2007, "the biggest

problem with China's economy is thru the growth is unstable, un­ .. halanced, uncoordinated, and unSuslaIl13ble ... The unpredictability of the Chinese l'Conomy had Import.lOt lm­ plicattons for the rest nf the world. It had replaced the US .1S

The Year.; of Dellllomn

Japan's biggest e:\pon market, while tf was in turn the secon d biggest exporter to the US (jUSt behind Canada and JUS{ ahead 01 Mexico)."' hs rol� in imponing components from elsew here tI. East and South East Asia and raw material from Latin Amefl\ ,'

and Africa made It central to all the. r economies, And, most 1111 portantly, the huge receipts from its trade-much of it w i th rll US-were deposited in tbe US. AJong with the simi lar surplml' made by Japan and the oil states, it provided the lending which l'n abled US consumers and the US government to keep borrow.. !):

until the Mcredit crunch" of the summer of 2007. Effectively II kill money to the US (and to a lesser extent to certain Europtan stalt' like Bmaln) to bu}' goods it itself made. This added 10 the appeal ance of stability of the world system. Yet those who believed Chinese growth coul d pull the world system fo rwa rd if something went wrong in the US and Eurol"

not only forgot that the unbridled markets unleashed in Chm.1 could not lead to stahle as opposed to wildly fluctuating growth They also failed to take into account the rel ativel y small wel!!ht China still had in the world system. In terms of current excham.:r rates, GOP in 2006 was $2,600 billion-iust behind Germa,;\,

IList ahead of rhe UK and less than a fiftb of that of e ithe r the li\ or the European Union. "Purchasing Power Parity" estlfnall'� (based on the buying power of incomes in the domestic currenn. the yuan) seemed much higher. at about 50 percent of US or I t GNP according a revised World Bank estimate in 2007.·� The c, change rate figures considerably underestimate the level III

Illdia, the NlCs and the BRICS I� bec ame commonplace to bracket India with Chilla as the

,'merging giants� by rhe mid-2000s. They had more or le� equal ,,,'puiations (around 1,300 milli on), hoth were nudear powers lid both suffered deep rural povert). But Indl3'� real lmponance ' I lhe world economy was m uch less than Chll1a's. It was about a tlurd of the size in exchange rate terms (consuJerabl)' smaller in PJ>P lerms; I�..t (han Britai n or France) and 60 percent \1l1;\l Ier 111 " growth rates were ani) a Ilftle aho\le 60 percent of that of perccm in ( hina in the late 1.990s., rising hrien) to Just Ie)!', th an 90

Ihe mid·2000!o; ItS share of total world expom In 1003 was only i 31st position. II.7 percem, putting it n There were some pa ral lels with the Chillese patrern: an early ar­ I, mpt at star�-dlrcctcd industrialisation (the period of so-called Nerllvian socialism ") was followed by a few years of stagnation in I he mid and late 1 9705; and then the Introduction of reforms aimed

a m uch more market based Illudel of accumulation. Bur there were significant differences. L'u:king the crude power of the Chinese I.lle, lndia's state and private capttalists were not nearly as SllCCesl>' lui in subduing other classes (on the one Side the old landowning I.l� on tbe other the workers and peasants) and SQ achie\'ed less in

.11

Ihe period of state-led pmllTflVe accumulau(1Il when the Indian II.rowth rate was probably three qu,merl> of Ch1l1a's, The) were

resources available for consumption by China's population (sin�r domestic prices of basic foodstuffs Like rice and basic services IIkl' urban transport fares cost a quaner or less of those III the We,t I. B ut it is the exchange rate measurement that is important in dl'

Ihtrefore less able IU benefit from a turn to the world market-ex· porting le.los and remaining much less artrac(I\le 10 foreign capital tlun their ChInese competitors. .. Refonns pushed up the care of ac­ 25 to 30 percent of GNP. But � umulation, with 1I1\estment rcaching fillS could only be sustained on the haSI!> (If a growlI1g portion of I)urpur accrUIng to the capitalist class and the upper middle class, al

termining the degree to which a country can imporr and '11 provide a locomotive to pull tbe rest of the world economy for wards. And it was a grave mistake to believe that Chill;,!, accounting for 4 or 5 percent of global buying power, could sonK

111 the 19905, the top of the population enioyed a 5uhstanndlly

.

how compensate for the effect of a maior economic crisis in mUl;n of the rest of the world system. The Chtnese economy was not yet big enough for it to be an :11 le rn
250

The N('w Age of Global lnstal:>ilu

M

Ihe expense of the workers, peasants and the poor. As a 2007 report fur the lJ\IF showed:

larger share of the gains from economic growth compared to the previous decade. This had significant effects on income Ill · equality which grew wirlun states, across states, and between ,

rural and urban areas....

An analysis of lIlcomes tax data �uggCSt!o up to 40 percent of growth ,nded up in the hands of the tOp I percent of the population.·' l"he Ytani of DdusKm

lit

Apulogists for capita lism tend to a�sume rising growth mu'>t .111 romaric.llly lead to falling poverty and quote various ofhd.ll stJmncs showing a decline in tbe proportion of people livlll).! III ah,>olure p<werry hy 1 0 percent in the 1 9905. But in the '1(1m, decade there was J fall in food consumption per head III the rur.11 .lteas, where twO thirds of Indians live. Abhi,it Sen, re-anah-..in '

�

the official figur�, concluded that the total numher l h i f! lit poverty probably grew in the 1 990s, that the pruporrion helo\\. til' poverty line only fell ver)' slightly. and thiS was .. "lost decade" III terms of figbting poverty." Tbe Dumber below the pm-erry lUll' III 2002 was JS percent of the lndian population, some 364 milluOl1 people. But even this underesnmated the degree of suffering.

H.III

of all lndJ:m children are clinically undernourished and almost ·H I )X'fcenr of all Indian aduhs suffer chronic energy deficiency.' I \\'11 i n the supposedly prosperous states of Gujarat, Karnaraka. Kt'r,l1.l. Maharashtra and Tamil Nadu, �more than 70 perccnr of the nlf.11 population consumed less than 2,200 calories per day"'" India's Il1sertiun into rhe world system means that industrl.11 investment, like that in China, has been overwhelm11lgly capll,d intensive, with the capital output rising suhstantially in thl I 990s, Employment growth was stuck at about I perce", a y�',H, 0.87 percent in rhe �organist'd" (ie formal) manuf'lclurul� sector!' even if growth was a little faster in the "ullorganised" 111 formal seetor where average firm size is less than two peopk, MOM of the people flooding from the countf)'side to the cifll" have ended up tr}'ing to make a livelihood in the service sectur, doing unskilled labour a t very low levels of producrivit\ III

Irial society In Mum bai, llyderabad or Bangalore would stili he parated by stretche!> of rural poverty bigger than most European ..'Ountries. And long before rhat rhe whole proce�� of rapid growth

u)uld be thrown off balance both by inrernal factors and by the Impact of instabilir} Internammall)'. We have seen what happened to the Mtigers" in the !atl' 1990�, and before that ro the Brazilian "miracle'" of [he 1960s and 1970s.

Ihere was therefore a lot of �mne!.ia I!l\'ulved when people

lumped together a \'ery disparare collection of countnes, Brazil, !tussia, India, China and South Afne,t, and d.lImed [hal somehow mgether they represented an alternative drt\er for rhe world

�\stem. In facl, renewed c�onomll: growlh In Brazil, Russia and \uuth Africa de-pended typically on an up�urgl' of raw m aterial ilnd agriculrur� l prices 111 a boom which was bound to come TO an ,·nd eventually-and whell it did so It would hit [hem seriously. The great mind s that extolled the system paid no greater :ltten­ lion to these contradictions 1Il 1iteir rosy picture of Asia than rhey

did to the underlying problems 111 Europe and North America. I.tpan had problems, they usua lly recognised, bur this was be­ i,:.luse of the lack of wisdom displayed hy a govermllent which had !lever really absorbed the lessons about how a free marker should

operate. As late as the auru mn of 2007 financial journalists, gov­ ernment ministers and the stars of academic economics were all "greed thar capitalism had found a new long-term stability-and �'teo some Marxists spoke of a "new lung upturn .... They were "non to look as foolish as those who foree,lSt endless peace io the ,·.trly summer of 1 9 1 4.

return for the 50 rupees ( S I ) a day needed to JUSt about keep ,I family alive-sweeping and cJeaning, working as domestic vants,

washing clothes, pushing

barrows.

'in

peddling C\dr

rickshaws. hawking goods. porrering. waitering, guarding. I Ill' much publicised call centres employed only 400,000 people !If 0,008 percent of the country's workforce in 2006:1 India's growth, like China's, means that by the mid-200(h II represcllIed a much bigger portion of world capitalism than SO III even 20 years earlier, and this had important implications for [hi system as a whole. Bur it was still quite small by the st;1ndard� I I I the US or even Japan, Germany and China. This could chanf:.�' ! I the rates of growth of the mid-2000s were sust;1incd for anuthn two decades: in dollar terms the Indian economy would end up being bigger than rhe UK. Bur the most modern centres of im.lu. 252

Th� N�w A!;.. ofGlohll InSlab,

'he Yrars of Dt'luslOn

, HAPTER TEN

Global capital in the new age

-

lIursring through borders I he decades � the great delusion were decades In which caplral hurst our of national confines in trade, Investment and produc­ linn. By Z007 international rrade flows were 30 rimes greater than in 1950, while output was only eight tLmes greatcr.' Foreign ,Ilrecr investment shot up: flows of it rising from $37 billion in 1�82 to $ 1 ,200 billion Ln 2006;' the cumulative stock of FDI lase from 4 percent of world gross domestic product in 1 950 (less than balf the 1913 figure) to 36 percent in 2007,1 The direct mganisation of production across national boundaries also took nif in a way that had been very rare in the past and the multina­ IlonaI corporation became the generally accepred stereotype of Ihe big capiraiisl enterpnse.' The movemenr of finance across national borders, which had tJllen sbarply since Ibe crisis of the 1 930s, now grew explosively, with governmenls dropping exchange comrols as part of rhe more general process of deregulation. By the mid-1980s rhe trend was tor Mbankers to map out new strategies which, for most of them", .Imounted "to establishing sizeable presences in the major finan­ ,-1.11 centres, London, New York and Tokyo, and some secondary

nnes as well".' There was a proliferation of bankll1g mergers. The old-established Hong Kong and Shanghai Banking Corporation look over one of the �big five" Brttish banks, relocated its head4uarters to London and moved on to buy b'lOks in a dozen (Quntries. The rwo big Spanish banks, Ihe Bank of Bilbao and Vizcaya, and the Bank of Santander, bought up a very large pro­ portion of the banking systems of many Latin American counrries, until they alone owned almost one third of the assets of the 20 2504

The r.;"" ASI: <>1 Cilohal ln\I,r)' n

25S

hlgge$t b.mb,' and then branched out into other rypes of Im!>I11..." Min\c!>tmcnt banking, Insurance and In p'lrticular participatiol1 lll pemion lunJ mJnagemenr", acquinng "mmority shares 1 11

�orH'

non· financial enterprises, basicaUy in sectors where other Spanhll Invesrors are \·el)' acme (telecommunications and energy) M. There was a parallel process of concentration of industri.lI .1, TJ\lties ac:ms'i national borders. The huge firms that had emer�' ,I In

the old industrial cOllntries in the previous period. ohen ullli.

the tutelage of rhe state, were now able to dominate not onh 1I11 ! national market but also carve our huge chunks o( the \\1111,1 market. Their competitors could on I}" survive If they looked to .111 Intern.trianal mobilisation of resources, that IS, if they roo bee,tll" muhllldtional, 11m only when it came to trade bur also when I I c;tme to production. The most successful firms in many ke) inJu, tTles became those With International developrnelll, produl.noll .\Od m::arkenng srrategles, based upun buying up, mcr�ing wilh

01

establishing 'itrmeglC alliances with firm� in other COUIltTlCS. In motors, the Japanese car firms establisht·d production faull

re­ 1I1fl!rnationa! takcO\·ers ,lIld collahoration agreements that were I'''rted b)' the Find1lcial Times e,er y day. If the typical capitalist firm of the 1940s, 1950 s or 1960s WdS

a domlllant role in one national economy, at thc ht'!�inrung of the 2 1 st century it was one that operated in a score IIf mort" Countfles-not merely selling ourslde us home eountry lml producing there a, well. The biggest deplo)'ed tJ.r more eco-

,,"l' whic h pla)"ed

st 1\llmiC resouree� than man)' states. "29 ot the world'� 100 large . �'Conomic entities are tran�national corporations ... reported 11NCfAD. The process of national firms hranchmg out mto tbe H·�t of the wurld was not cnnfined 10 the advanced mdustrial g nuntries. It affected the Third World and New l y Industrialisin previously l ountries where the Statlfic3tlOil (If industr) had Irnded to go even further than in the \'(fest, as we l-aw III Chapter

�

""-'ven. It Ult nsified with the restructuTing of IIldustry that rook s as firms rationalised production, lllace in each Crisis of these year

,hut plants and merged WIth others.

ties in the U�. turning uut more vehicles than the third bl��I" 1 American firm, Chrysler; the nationali,cd hench firm Ren.wl1 began a series of acquisitions in rhe U�. beginning with the �m.dl fourrh US car firm American Motors; Volvo took ovcr Gencr.11 Mowrs' hea\y truck production in the US; rurd and Volkswagl'l1 rtler�eJ their car production in BraZil; Nissan bUilt an assemhh plam in nonh east Fngland [() produce hundreds of thuusand, 01 C3r�

.1

re.1r. while Honda bought a 20 percent �tJ.ke in Rover. III

ryres, the hend firm J\t\ichelin made itself the world's hlggest pro dm:er by raking o,'er Umroyal-Goodrich

111

the US

III

1988. Thl

p..rrern contlnuoo 111[0 the 1990s and the earl} 1000s. MenTJl' Benz took O\'er Chrysler (before selling it again 111 2007); Ren.I,,11 formed an Malliancc" with Nissan (huY1l1g44.S percent of 11, Willi, Nissan bought 15 percent of Renault) wuh a joint dllef execumr; General Morars bought Saab, rook 20 percent stakes

111

SU7UI..I.

Subaru and Fi,lt, and acquired 42 percent of Daewuo; the inJI.w group Tata wok over the Anglo-Dutch steel firm Corus ((urmed hI a previous takeover of the privatised Bnrish Sted); h
Myths and realities Ihis whoil· process was haptlsed "globaltsdtlon" h)' me 1990s. It t1l1g a whole \\as bracketed together with neohberalism as represen new phase of capitalism-for emhu�iasts a phase very different to .Iny pre\·iously. They held not only [hat rhe world should be organ­

I d accord1l1g to rhe free flows o( capital, wlthour any lIuerveorion hy governmenrs, but rhat rhis had already come about.

We lived, it was saId. 111 the age of multinational (or sometimes transnational) capital, of firm� moving production at " ill to where,'er it could be donc most cheaply. It wa�, some influential �t)ices II1sisted, a world of Mweightles'.> .. producrJon. where cum�

more important than ruter sufnvarc and the internet were much "old fashioned metal-ha�hll1v.M industfles• •1I1d where the absolUte mobiliry of caplral had cOll1pletely delached 11 from any depen­ lienee on stares. ThiS wa� an IIllcgral pan of the new economic d),l1anllsl11 111 Ihe after· Il�radigm supposedly unieashlllg a new math of the failures of Keyne�l3ni<;m, srate dlreClion ,1I1d Soviet ,lyle "socialism'·. "Nation.tltties of (Omp.lIlles" were "becolllmg mcreasingly irrelevant', ded.ITcd the Brirish Tory milllster

Kenneth Clark. ln This wa� thc age of "the stateless corporation",

in a hid for AliraJia. These are just a random sample of rhe wave III

lledared

'16

{.Iobal CaplI.al In the New Age

BI/siness \Veek.l\ H7

l l\lany people who rejected the poitics of mainstream globali,.1 lion theon' nevertheless accepted many of its assumptions. �(' Vi,iane Forrester wrote of "the brand new world dominaled I" cyberneticso automation and revolurionary technologies" with " Ih' real links With ',he world of work"';1l Naomi KJein described .1 ..ystem of foodoo� factories employing footloose workers";I ' .1 11,1 John Holloway laid of capital being able "to mOve from one 'Id. of rhe world to the other within seconds"." The Vision of a glohal system in which states no longer pbyt·J .1 central part had as its corollary the argument that the wars Ih.1I had plagued most of the 20th century were a thing of the past. TIl!' wo �ld was entering a "new world order", proclaimed George Hu,h

senIOr after the collapse of the Eastern bloc and US victory in till' first waf against Iraq.ll Francis Fukuyama gave such talk an a(.lll emic gloss with hi� announcement of "an end to history". Even th inkers long associated with the left came to the cond ll sion that capital in the new period no longer needed the state. ,md therefore had turned its back on war. Nigel Harris wrote of " til(' weakening of the drive to war", since "as capital and Stall', becQme slightly dls'iociated. the pressures to world war are slight! I

weakened" , I . Lash and Uery went even further and did nOI inl'lud,­ any mention of military expenditure

m

their account of the "pO'1

modern" world of �disorganised capitalism ".'0 I.acking from all mese varied assertions about globalisatlon \1.1' any real grasp of how the relations between states and capll.ll, were really developing. For capitals were no more wil/ing, or ahk to hreak their relationships with states than they had been at tht time of rhe First World War. Such relation ship� may have be(;Ollk more complex, but ther retained their overwhelming imporramx _ ThiS should have been most obvious in the case of product III' Caplf31. It simply could not be as mobile as glohalisarion thl:on comended. FaclOries and machinery, mines, docks, offices and 'II on srill lOok years to bu ild up, Just as they had in the earlier peru,.l of capitalism, and could nor be simply picked up and carted 0111'.11, Sometllnes a firm can move machinery and equipment. nut thl' " usually an arduous process and, before it can he operated \.).,( where, the firm has to recruit or train a sufficiently skillnl workforce. In the interim, not only does the investment in the old buildings have to be wnnen off, but there is no rerurn on the III vestment in the machinery either. And, few productive proce....\" are ever completely self-contained. They are roored, as we saw 11 1

on inpurs from ( h.apter Four. in production ..:omplexeloo dependent sets up a car outside and 1mb to distribution networks. II a firm re arc sc..:ure ..our..:es 01 nuts and bolts. the ure ens to has It l, ,lan I t level of train­ It"el of the nght quality, a labour for..:e with rhe righ financial mg, reliable electricity and w,ner supplie'>, .I tru�tworthy ork capable of t�lem, frie ndl y b,-lI1ken., and a road amJ rail netw people, orner hlfting Irs finished products. It has lO pcr:.uade other process of hrms or goveromellls to proVide these lIungs, and the gainLng, 10nsembling them l:3n take months or e\'cn \tars of h.u ing trial and error .IS well a.. lorward pl,lI1nlllg. For this

voh'

of "grad­ r�ason, when reStruCf�t1ng firms u�u3l1y prefer Ihe road pmg intact . m"-moving piecemeal from old plant 10 new, kee u.a!s Ihe dislocation .,Id supply and di'i[nhution nerworks, IlUllillll'illlg two rears III the Hcoillplex" around them. So If took Ford ne,lrl), n its a�sembly plant 10 implement'rts decision III 2000 to dO!o,e duw ore. When 11\ Dagenham and move production elsewhere in Fur n" of ItS globa I ( 'ldbury Schweppes announced the " ratlonalis:uio it expected It to tille-ration including closures in Jun e 2007, if said

1.lke three rears to implement. ty. As Susanne Even with money capital there i� no pure mobili

dt' Brunhoff noted: are dall y cir­ Even though huge financial flows of mobile capual capital docs culating round thl." globe, a global smgle market of there are nOI exist. There is no srngle world rate of interest and ncial assets no single world prices for produced goods ... Fina nor "perfect are denominated 10 different currencies wh ich arc - II substitutes .

Dick Bryan made a slO ul.H pOInt: of the cen­ I nternationa l finance provides a clear .lInsrralion ion. The trality of nationality wlI hin global accuillular , nd computer technolf)gy has pro­ combination of satellite I neoclassical vided . . . all the technical preconditions for the return, "perfect market" of nllalll.:iaJ nows 10 equali�e rates of intains na­ transcending natIOnal boundarres. Yet . . . finance ma llly so as to lional characten�tic!o,. h docs 1101 move sys(cmatic; l system equalise savings and investlnent . . . A global financia signals that comprised of l1ationJlly-designated currencies t globalisalion cannot be devoid of ;I nationa l drnlension. 259

158

Every year UN CfAD provides a list of the' top 100 multination.ll · and their "rransnationality index"-the proportion of their �ak as!.Cts and Investmems which 3re located outside their "hol111' country. These figures arc sometimes said to show how little mulll natlonJls depend on a narional base. But ill fact they can be 1001...1·\1 at another way. In 2003 the rap 50 multinationals still rdied on rhl'll home base for over half their business. And the 20 with the hlghl�' ratios of foreign sales were mostly from small, open economies �u�11 ;IS Canada, Australia and Switzerland, or are members of the I I such as Finland, France, the UK, Germany and Sweden whose �.llt are orientcd to dose neighbours. None of the US multmanonals ti� ured in the lisr of the most intematjonal global firms.:b AJ.'I!rage '/hmsnatlU,utlity of th� II.'Or/d's largl!st tran$natiOl/a' corpomtlOllS

nNw) lOOJ

47.11

Those bJscd III

Unlltd !lrntes

H.I:\

United Kingdom

69.2

Japan

42.8

Fran<:t

�9. �

German)

49.0

!lmall EUfOpc'an (:ounmH

7!.l

The proliferation of cross-border mcrgers did not mean that tht·\ represented the only, or el'en the dommanr form of resfructunnf� They <':(luntcd for only a quaner of all mergers"-and many Wl'r�' unsuccessful.!! And only a small portion of gl()bal investment W.l\ ac(()�s na tional borders. Tim Kocchlin showed that although till' stock of Amencan FDI had "grown qUIte dramatically", from "511. billion in 1960 to $2,063 billion n i 2004", this represenred "a rd :nively small share of all US investment-, with the rallo of foreign direct investment outflows ro all investmenr at only 7.3 percenr" For manufacturing. the rario was higher, 3t 20.7 percent-"but \\.1\ down on the figure of 35.4 percent III 1994-.H He <.:Oncludn. "Although the invcstment process h3!o become i"cre(/si/l�h 'global' . . .capit31 accumularion remains an essenti311y natiOlwl phI' nomenon"Y What is more. foreign direct investmenr figures g.l I(' i pression of the mobility of productive cap;H:lt\ an exaggerared m 260

.

Iines.,so thar: FDI flows In manufacturmg are domin3ted by merger$ and acquisirions .. ,rather lhan by the creation of new capacity: and a big share of FDI is m non'produc!lve, speculative and financial ventnres,l. i a particular \loSt mulrinationals concentrated their InvestmentS n J\'anced industrial country and its nClghhours, and then relied on the sheer scale of investment, research and developmenr, and pro· ,Iuerion there ro provide an advantage over all competitors. The tllrcign ifl\'estm�nt that did mke place wa!o nor necessarily �global" til its character. �Sixry·six percent of the output of US foreign affil·

Htes" was "sold locally". that is, within the boundaries of the i whlCh a particubr aftiliolte was based," p.1rticular country n This was a trend which broke wirh the predominantly national I';lsis of production without, however, turning into the globa I pro­ Juction stereotype. A multinanonal could 'ieck to overcome

Top lOO TNCs Top m TNCs

IJther than of the ownership of it. UNCfAD figures bore out ,J. I'Cllnt Riccardo Bellofiore made at the end of the 1 990s Foreign in­ new t ,unenr mostly ifllolved buymg up existing enterprises, not

Th� Ntw Agt of Global ln�u",I,

Ilbstac\cs to expOrtlllg ro a particular country by estahlishing "Iants inside its horders-lIl a patlern which Ruigrok and van l ulder cal1ed g1ocalisanon.lI Even if it started off with "screw· driver plants" devO£ed simply to assembling componentS imported Irom the mulrinational's home country, it often cnded up turning In local firms to provide components. The mulrinat10nal gamed I ause local firms effectively became its satellues, supplying It

wuh resources and fighting for its interests against its local or re­ K10naJ competnors. It migbt even welcome protectionist measures hy the state m subsidiary was 10, slilce rhat would prOtect Its sales there from international <.:ompemors. Globalisation theorists failed to recognise such developments. Yet they often tried to bolstet their own case by refemng to in­ vestments like those of Japanese moror companies in the US and liritain which were precisely along these lines. Similarly, they 'tressed the "flexible production" characteri�tic. for lIlstancc, of

p.trt of the Italian knitwea r industry, and "just in timc" produc­ tion methods pioneered In Japan as typical of globalis.Hillll. .1Ithough, as �llichad Mann quite correctly nored, both implied 10· ..,llised or regional, r3ther than global, production..:J l.lobal Capital III Iht New Age

261

The " oursourcmg" m'erseas by .ldvanced cou ntry firms 01 p.1I (H,;UI,IC P.lrts of rheir production proces!>cs became an IIll po n,1 11I phenomenon, bur It wa� still a much more hmlted nne rhan \\ ,I Widely believed. Ar [he beginmng of rhe 2000 s, imponed �Ill,Hl'I I,ll mpUTs" (includmg raw materials) accoum ed for 1-.3 percent lIt total US OUtput. Koechlin estimated that "out!>ourcin�" .1. <.:ountt.-d �for �OmeWh3[ less tha n 4.8 percent of US gross dOlTlt·,r purchases and somewhat less than 9 per cem of apparent I.t, .. sumprion uf manufactured goods� .' Anorh er �tudy showed Ih,11 the hll In �payroll employment III manu facturing" III the e.lrl 2000s had "nor bt-en caused by a flood uf im ports of cuher gOtJl!' or services" hut was: primarily the result of inadequate growth of domesne demI , IlJ III the presence of strong productivity growth . . . To the extell l th.1I trade did cause a loss of manufacruring Job s it was rhe weaknl''' of US expom after 1000 and nor importS tha t was respom ihk .

�11(lbal, with "US-controlled firms responsible for only 4. 'i percent "I

EuropC!'an value added"." Chortareas and Pelagidis concluded in 2004: The increase in international trade flows is predominantly con­ fined within the three developed trade hines of the global economy (the USA, the EU, Asia-Japan). A large part of the world continues to be excluded from the tr:tde boom_ The emerging reality is more a process of deepening regional in�e­ gration (regionalisation) of particular groupslblocs of countries rather rhan a globaHncrease in cross-border trade flows and production interdependence.

,rrade", theY,argued, "has not come to be spread �ver a wider "lOge of countries, even compared wah rhe past. h iS enough to . rr�all that developed cOlJntries' imports from developmg coumfles .Ire still only about 2 percent of thc combined GOP of the DECO"." Their one exception was East Asia, which will have

The diffcrent configurations of global capital Nor only did the popular globali�ation accounts overstate dw degree of mobiliry of capital, they also provided a much dis[t)rInl view 01 what that mobility mvokes. Alan M Rugman polnteu UUl th:lI of the big multinationals;

IIlry-by 2005 Chinese exportS had expanded to reach to over 7 percent of the global total. Invesrment flows were simil3rl) concentrated wuhtn [he _

1 1 1 North America, Europe and Japan. In 2002·4

.

..

.

triad

..

FDI flows n i to

Ihe European Union a\ eraged ahout $300 nillion a year. The tot31 Inr the rest of the world-the "developing countries"-was only

Very few are "global'" firms, with a "glob al'" strategy, defined ,h Ihe abilay to sell the same products and/or services arounu till' world. im,[('ad, nearly all the top 500 firm s are regionally h,l\\.d In thclr home region of the -triad" of No rth Amenca, thc I I " or Asia . . . Half of most global firms were still opera ling m,unly in thf ll home region market at the begmnmg of the 1000s-inc 1ud illf,: Vivend i, Pernod RIcard, Thomson CorJ'Q ranon, Srora Ellso Ak I'l Noncl, Volvo, ABB an d Philips. Only six multinationals operatl'll in an }th mg like a balanced way across at least three c:onrinenh' NClotie, Holcim, Roche, Uoilcver, Diageo, and British Al11enl.,lIl Tobacc o." Most foreign-owned firms operating III EurOpt',llI Umon countries were based in other EU countries, where the prl' donunant form of mu ltinational ownershi p was "regional", nUl 262

"rown more inlportant after their research at the turn of [he cen­

The New Age of Glob;al lllslal>.I",

180 billion. of which China (including Hung Kong) rook two hhhs, and Brazil and Mexico a fifth. Some 89 �rcenr of the cu­ mulati\e stock of FDI worldwide in 2004 was III the developed economies (roughly the same proportion 3S in 1990), and two thirds of that was n i Europe. The pattern was not onC!' of capital flowing effortle'lsly O\'er 3 homogenous worldwide land�ape. II was " lumpy", concentrated III

some countries and regions, in a way that was not fully grasped

hy either the crude globalisation view,

,'I },

interpretati�ns that \Iressed regional blocs, or hy those who still spoke solei}' m rerms flf national economies. Tbe empirical material could be looked at nt

different ways-just as a bottle can be seen as half full or half

rmpty. But the reality of capitalism was that 1t could not be re,luced to any one of these facets.

. Different firms operated at differcnt levels. Some, the maJor­

Ity in simple numerical terms, 'itill operated within national (,Iobal Capnal "' the New Age

261

economie� from which they pm Out tentades to see what [h, \ ctluld gain by buying and selling to tbeir neighbours, O th � r !.InJUer in nurnner but enormously powerful, increasmgly or\'! ared on a regional lla'>i� and reached Out [() pick up wh:n Ih, could elsewhere in rhe world. And a small mlnurlty sa\\ t h ' l I future I n genuinely global terms. As capltal� with each pehpl t1\:e bought and sold. manoeuvred to expand markets, se
Along with these functions there is conti nued massive sup­ jlurr by any state for Its capItal's domestic accumulation-and Ihl$ was true long bdore Ihe most recent turn to Keynesi.m ism.

I the- Pentagon plaJ'ed a key role in resuscitating the American ml:Cochip industry i n the late J 980s by putting pressure on hrms to merge, to Invest and to IIlnovate -and received Strong InJustrial support:

for cheaper Inputs and for more p rofita ble places for 1 Il H' , 1 ment, they both mfluenced each other and trlpped over

l'.h

"In [(>day's glohal economy some central IIsion

I

industrial strategy for this countryM, agreed �J Logic's Corrigan.

mg, kaleidoscopK paltern which was upset every time II �ct'Il1.-.1 ,Iic"" as Marx had PUI II-bur nor ;n rhe way the crude gloh,ll. _� atIOIl theory held. For capa,ll's old companion, the '>1.11. entered inl'O rhe process at every point.

I he result of that strategy was that by the end of the 1 990s rhe

NEe

world's top

semiconductor compan� was no longer !I.lpanese) but �ntel (Amencan), widl Motorola and Texas Instruments (both American ) in third 3nd fifth position. The US \

Stales and capitals in Ihe era of "globalisation" All the advanced capitalist stares still maintain hi�to ril'al l} H'II hIgh levels of �tatc ex:pendirure, only surpassed h Istoricall y dUrlll1 the wne of total war. And although busine ..� often compbin about the level of t.lx:ation, it ne\'er seriously suggests guing h,l l� die Jel'e1 of expenditure of a cenrurr ago. The reason is that (.11' t lIal.. today. far from nor needmg states, require them as nHI.1I (0

as-if not more th.lO--t'ver before. The} need (hem first because the continued concentration til capitab In particular geographical locations nece�sitate5 facilllln thal are not automatically provided by rhe operation of th. market: police; Judicial sysrem�; a framework to linul the defr.lUd ing of .,orne capitals by others; ar least rmlllln.11 regulatiun 1)1 [hI credl! system; the provision of a more or less stable currenl \ Along with these they also need some of the functions fulfilled 1\\ the state during the period of the state-directed economy: rcguLl tion of the labour market; ensuring the repruductlon of the nt'\1 generation of labour power; the provision of an mfrastruclure tIll tr:msport, communications, wate-r and power; the supply of md, tary contracts. Even the big multinationals, With half or more 01 their production and sales located 3bro3d. still tely for much III their basic profitability on their operations in their home base, amI therefore on what a st.ne can provide for them. Th� N�w

reqUIred",

Hackworth of Cirus Logic explJined. �Sol1lebody has to haY{' an

other. The outcome was not some new model. nUl an ever shill about 10 atl.lIn some fixiry. � All that is saUd" did "mel! J Il l . .

s i

Age of Global ln51Jl'odll'

tatc also managed to bring about a similar ranonallsation of the

liS aerospace industry, culminating In the merger of Boeing and ,'''Donnell Dougl:ls into

a

firm thai controlled 60 percent of

�Iobal civil aircraft sales, .llld a turnover In military aircraft pro­ duction twice as great as the whole of the European industry. As the New York TUlles put

If,

"Presldenr Bill Clinton's admrnisrra·

lion" had '"largely succeeded In turning America's military \.onuactors into instruments of making the economy more comtitive globallyr ," The ;nrernariunailsation of firms' operations. far from leading

to less dependence on state suPPOrt, IIlcreases

It

in one very

Iln­

portant respect. They need protL'Ctlon for their global interests. A I,\,·hole range of things become more Importa!lf to {hem than

III

the

early post-war decades: (rade negOtiations for access to new mar­ kets;

exchange rates

between currencies; the allocation of

contracts by foreign governments; protection aga1llst expropria­ lion of foreign assets; rhe defence of intellectual property rights; enforcement of foreign debt repayments. There is no world 513te 10

undertake such tasks. And so tht.' power of any national state (0

force others ro respect the II1rerests of capitals based wilhin It has become more important, not less. Floating exchangt.' rates between malor currencies mean that me capaciry of a government to mIluence rhe v.llue 0 1 Its own currency can have an enormous effec"[ on the mternational compemiveness of firms operating withrn its boundaries. This was shown, for IIlst:lnce,

Global Capllal on thl: Nrw Ag�

26S

by the "Plaza Accord" of 19 85 , wh eD the us per�uadeJ th. European and Japanese governments [Q cOO perate with II III for... lll! up the \·alui' of me ren against the doUa r. In the aftermath sail·, ,01 U) firm� internationally "grew at thei.r fas test rate d u rmg the pml Wolf period shooting up at an an nual rate of 10.6 percent betWCl·" 198 5 and 1 990""; It was shown agalll wh en the political det;i�I()1I of the government brought ro Qffice in the aftermath of Il,. Argentinian uprlSmg of December 2001 to devalue the currenn h\ 75 percent ga\e a consider.tble boost to the industrial and agrl . r!.1lI capitals based in rhe country." .

A change in the excbange rare ahers the amoul11 of globa l \ ,111 1. whlt:h a firm operating within a nationa l eco

nomy gets in retur.. for the labour It has used in prodUCin g commodities. As DI l� Bryan ha.. PUt it: The eXl.:hangc rate is a critical determina nt of the di!>tributlon 1,1 surplus va lue amongst capitals. . . Becau se nation-!>tares ,If,· deemed responsi ble for the global comm ensurahility of (ht'J r" currem:)", globalisation . . . is nor about era dicating the natlOful dimension of accumulanon. Indeed, globalisation is nor cl,icn about the natiunal dimension "hangl11g on " in a process of slo\\ dis"olution. Global accumulation is actIJaUy reproduci ng rill" nationa l dimension, albeit in wars dif ferent to past eras'" "

Again the same cemralif) of states I� sho wn to international tr.llk negon,Hions conducted through the WT O. They gather ;IS the rt'r resenrativt's of the capitals clustered tog ether within their bordl'r,. Different firms ha\·e different interests and will look ro the andl vidu.!) states o\"t'r which they have inf luence to achieve these. Thl' is JUSt it:. true of firms who look to est abhshing glohal domination through free trade as of those with pro tectionist i.nclinations. All are dcpendent upon " thelr� stare to pe r!>uade other states to k-I them get their way. So the US nate is an ess ential weapon for firlm l ike MIcrosoft, GlaxoSmithKlein or Mon santo III getting the cnor mous royalty payments that accrue fro m world recognition 01 their intellecrual copyrights. Likewise the financial power it cxer cises thro ugh the LMJ-: and the World Bank has safegua rd ed till" foreign loans made by American banksand has helped U5.ba snl lI1dustrial corporations gain from the cri ses facing smaller state,:>. liS when Ford and General Motors ga ined (antral of two of thl· Korean car companies at the time of the Asian crisis!'

Neither do JIlternational mergers show that the Imponance of

I.nes is declll1ing. Part of their r.Hionale is for a multin:ltional to

1'C" able to extend its influence from its home ..tate to other states. 11\ and Ja pa nese firms Invest in West I:.uropea n countries so as [0

I,... able to "jump" natiunal boundaries and so Influence the policy

lit these states and the European Community from within: hence the spectacle n i the early 1 990s of US mult ina tionals like Ford and ( .cnera l Motors lobhying European governmenrs for measures to

f('strict the import of Japanese cars: hence al<;() the sight o f ,.tpanese car firms negotiating for subsid ies from the Briti sh s�te

In

set up car assembl y planrs. The giant cu mpany d<X's not end ItS �

link with the state, but rather muhiplies the numncr of states-and

n.\tional capitalist ne tworks-ttl which It I� linked. The continued importance of such l'onneCtions is shown most \·t\'ldly during financial and economic crises. For st tes alone can � ma rshal the resources to stop a giant firm or bank gomg bust-and "ulling down with it whole industrial or financial com plexes. The .

hIstory of such crises since the early 1 970s has been a history of \t..tes bailing out stricken corporatio ns or putting pressure on

\Ome firms for --Ilfebuat operations" to keep others llfloar. Because

the period o f globali sauon has been one of much greater crises than the post-war decades, the reliance of corporations on gov­ ernments for such rescues has heen much greater. As we wiU see in the next ch apter, the transformation ()f the credit crunch of 2007

IOto the great bankmg crash of 2008 showed how great that re­ hance bad become.

The overall conclusion has to be that corporations, whether

multinational or other, do nOt regard a state which will defend

their interests as some aftenhought based on nosta lgia for the paSt, but

an

urgent necessiry flowing from their present day com-

petitive situation.

. The successor to the Slate capitalism of the mid-20th century

has not been some non-state capitalism but rather a system in

which capitals rely on o;tbeir " state as much as ever, but try to �pread out beyond it to form links with capitals tied to other

<;tates. 1n the process, the system as
It is not as if individual firms have simple demands that they merely put on ind ividual states. As a �rm operares int rna­ � . tlonallv one of its divisions can establish relations with a

l:haotic.

;�

ran icll r state and its associatcd complex of c pitals, even \�hile � other d ivisions of the same firm can be establ ishlllg other relations

266

Global Capital m Ihe r-;cw AJilt

267

wilh Olher states and their complexes of capital. And parlllul.ll state apparatuses can lose a lot of cohesion a� their parts tn II,

cope wLlh the demands of dlfferem, cumpeting capitals. The gln!>.11 agenda, the region�1 agenda, the national agenda and, in the 1.:.1\1

of the larger states, the sub-national agenda (of particular loc
Tories, through the I 990s and early 2000s: ilS feuds reflected .l clash between those who saw Bntish capitalism's future as tied I"

the U� and those who saw It as dependent on integration 111'0 Europe (a clash which itself reflected British capitalism's pO)ltll '" having the mal(mty of irs trade with Europe, but half its OVl'r\L I\

I' with the implicit US threat to ,he West European power!. and

1,lpan '1O( to help them rmlirarily during the Cold War years unless Ihey acceded [Q U,!, obJectives. I!ut the violence of the stare re­ mained a vital hackground factor 10 such cases. I n thjs lies the

.untinuity with the imperialism analysed by Lenin and Bukbann. I ven today the rulers of Russia, China, India, Pakistan and North Korea-and for that matter Britain, France and the US see pos­ ,.c.'ssion of nuclear weapons as the ultimate defence ag.1inst enemies. The inreraCllon between the great powers is not the peaceful

,"c)Ocert of nations dreamt of by certain apostles of neohberalism ,lIId frcc trade. There are contradicrory interests. w)th mi litary Imce a weapon 01 last re!.on for dealing with them. But there is

investment in the US),

fill a difference With the first four decades of rhe 20th century, I"esc culminated In wars which r;lva�cd the heartlands of the great powers. tensIons Mnce 1 945 have led to massive accumula­

class" which will have as its correlate an "lIuemational capita",. st.lte" ."'They fall to take seriously Marx's point that once "it i� II"

In the Third World. One reaSOl1 for this has been the �dC'lerrenr" effect, the fear thar

Those who see tbe nation al states as archaic hangovers from l!'r past often speak of the emergence of an "interna,iunal capitJl1\1

longer a question of sharing profits, but of sharing losses . . . pr,l ul cal brotherhood of the capitalist dass . . .transforms itself lOW .1

fight of hostile brothers", the outcome of which is "decided 11\ power and craftiness"." And when it comes to the use of po\\rr,

(he national state is an instrument ready to hand. Imersrate 0)11 flier, to a lesser or greater degree, is an inevitable outcome Onll'

economic competition becomes a matter of life and death for gl,ll1l corporations. ThiS IS just as true today as in the time of Lenin .1Ilt!

Bukhann. even if the interconnectedness of national, regional and global circuits of capital accumulation Impacts on how the in�tru ment is used.

�uch applications of pressure by states on other states still r�' qUIres the deployment of larj!e "bodies of armed men". backed up by prodigIOUS expenditure on military hardware-alongside �t!th " non-violel1l" methods as economic aid, trade embargoes, offer, • ,I privilt."ged ,rading relationships and crude bribery. Much of til,

time [,he role can be passive rather than active. The force that sm rains a cerTain level of influence docs not need to Ix: lISed so long ,1\

no one dares to challenge it-as with the Mutually Assur('�l Dl,strucrion between the USSR and rhe us wbich prevented eithel

tions of arms that tould putentlally be unleashed against the heartlands. But hot wars have been fought outside rhem, usually

waging war on a nuclear power will lead to destruction of the whole domestic econom�' as well as most of its people. Another has been the very interpenetration of the advanced capitajst l f(onomies that puts pressure on states to exercise power outside their own boundaries. Few capitalists want their national state [Q llesrroy huge chunks of their propert), in other stares-and mosr of It will he in other advanced capitalist countries. Th.is does not rule our war completely. The capitalist econom)' "iaS highly n i ternational ised in 1914, but this did not prevent all­ nut war. Again, in 1941, the presence of Ford factories and Coca-Cola outlets in Germany did not StOP a US declaration of war after Pearl Harbor. But It does provide them with an incen­ live to avoid such conflicts if they can-and to settle [heir differences in less industrialised parts of the world. Hence the years since 1 945 have been marked b)' war after war, but away lrom Western Europe, North America and Japan. And often the wars have been "proxy wus" involving local regimes to a greater or lesser extent beholden to, but not completely dependent on, particular great powers. This was (he logic which led the US in the 1 980s to give tacit

moving into the orher's European spheres of influence during dll" Cold War. Again force can play an indirect rather than a direct wk

weaponry to the Mujahadin fighting the Russian occupation uf

268

(.Iob..l GpU31 1ll {he New Age

�upport to Iraq in its long war against Intn and to provide modern

'"

Afghanl!>t.m. A Similar logic worked Itself out In the Balkans in ilH 1 990�, when Austria's anempt to gam from Sioveni::m md�'rcll dence from Yugoslavia led to Germany encouraging CrO,III.111 Independence and then the US Bosnian independence, even thml):h the result was bound to be bitter ethnic conAICf. The worSt suffermg from proxy wars has prohahly been III Africa. During the last decade and a half of the Cold War tlw l " and the USSR backed rival sides in wars and civil wars as part .,1 their attempts togain a strategic advantage over each other. In Ilu 1 9905 the US and France vied for inAuence in Central Afn�.1 They backed rival sides UI the war cum civil war that broke (lut III the horder regions of Tanzania , Rwanda, Burundi and COIl)!O Zaire. They helped set in motion a catastrophe resulting o\"er.1 1I in 3 or 4 million dead. In such siruations freelance armies emer).!l"
;

meanr encouragement to local rulers to engage in the bloodiest ot wars and civil wars-and then occasionally the sending in "I \'Qestern troops [() enforce "peacekeeping" when tht' disord�'r reached such a scale as to thrcaten to damage Western intl'r�·�t� Contradictions which arise from the inter-lI11peflalist ant,lgll Il1sms of the advanced capitalist states in this way wreak thclr wor!>t havoc III the poorer parts (If rhe world.

From the new period of crisis to tbe new imperiaJism The patte.rn of the. old imperialism was one of coalitions of Slltl'� with comparable Ie.vels of economic and/or military capacity con fronting each other. Today there is great unevenness e\'en berwet'li the bIggest states when it comes to their capacity to advance thl' mterests of their domestically based capitals. At the top nf the III erarchy is the state which has the greatest capacity for gettm� 11<, way. the US. At the bottom are very weak states, hoping to be aoll' to beg favours off those above them. The states III the middle til ternatively squahble with each other over their position in dw global pecking order and form ad hoc alli ances in the hope of for� ing concessions from those above them. This cannot be a stable hierarchy. The unevenness in rates of eco· nomic growth (or sometimes contraction) in a penod of recurrent 270

I rI�S means that the balance of forces between the JIHerenr tdles is always changmg, leadmg [0 rival display!> of mIght be­ tween [huse who want to advam:e up the hierarchy and rho!>e who want to keep them in their place. Weak states get entangled III conflicts with neighbours whIch draw in powerful states to

which they are allied, while powerful stares see exemplary inter­ \t'ntions in weak "rogut''- SWtt's as a wav of gaining advantage liver other scrong states. The greatest source uf instability has come from the attempts of the US to permanently cement Irs position at the front of the glohal !,('cklllg order. This �em(>d unass.,ilable at the end (If the Second i the decades that (ollowed the US fedred succcs­ World War. Bur n Ive challenges from other srate� which were growing much more l ilpidly than it was. Ru!o.';itl was seen .IS ..Ill economic (as well as military) th�at IJ1 the 1950s, however absurd that might seem mday, J"panll l Ihe 1 980s, and more recently Chllla. The determi­

lI,nion of the US state not to fisk losing its position explains Its nlassive levels of arms expenditure and rhe wars it has waged in the Global South. The scale of the problems it faced first began to hit home i n the late 19605 when the US ruling class found It could not afford the escalating cost of tr}ing to achieve aU-out victory in Vietnam.

Ihe histOry of US capitalism smce h.lS been very much a history I)f its attempts to re.<;tOre its old pOSHion, amid a world marked h) repeated economic crises and generally declining rates of ac+ I.umulation. Its attempts have involved alternating phases of reducing arms spending as " proportion of tara I output in an

effort to ease economic difficulties (frolll the late 1960s ro the Idle 1970s, and from the late 1980s to 2000), and of incredsing it III the belief that this could boost US global power and the per+ formance of particular US corpora lions (in the early and mid-198 0s and 2000-8). In all the pha!>es the US state made some

,Kains for the capitals based III II. In nOlle of them were the Sdins ..ufficient fully to offset its long-term relative decline. The collapse of the military cha llenge from the USSR and the ('cononllc challenge from Japan might have been expected to re­ store the confidence of the US rulm!;; class in its global power in the 19905. Bur its strategists had worries llbout the future. They rea­ wned that without the fear of [he USSR to keep them in line, the European powers were more l ikely to resist US demand!> than in the past�as was shown by ver)' hard bargainmg at World Trade (,lobal Ot.paal m Ih� N�w Ag�

2"'1

Organisation sessions. And In the East. Chinese gro1Ath \VJ.!> II pla.:ing the older challenge from Japan. Writing in 1 994 . HUH \ "i��l!1ger expresM'd his unease:

� ,)mputer, software or aviJrion cnrporatluns. l , Ild to all increased ,.Iracity to dictate pulicles to other ruling da!->ses-and all paid

The US is actually in no bener position to dictate the gluh.11 agenda unilaterally than n was at the beginning of the Col.l War.,. The United States wil l face economic compef ltion 01 .1 kind it ne,er experienced during the Cold War. .. China

pl'f\sate fur losing 1(5 old lead in market compenrion by using the "lie thing it has that the other powers do not--Q"erwhelming mil­ IT.lfy mighr. Ir was an updated version of the logic of Imperialism

I..

011

the mad to superpowcr status . . . China's GNP will app ro,ld, that of the US by the end of [he second decade of the 2 1st '.Tn rury. Long before th:u China's shadow will fall over Asi a'" \'(Ihat IS more, a quarter of a century of growing inrerna llonah�.1 tion of finance. invesnncnt, trade and production madc \ . , capitalism vulnerable to evems beyond Its borders. Its great mu ll, national C()rpoflltions needed some policy which would enable !ill" mighr of the us state to exerci!->e control over such eve nts. Alrc.llh towards rhe end of [he Clinton Adm lmstration there wer(' mOH·� towards a more aggressivc foreign policy designed to .Khievc tim. With rhe push to expand NATO inro F.. l stern Europe, but rhi!> Jld l10t go far enough for a group of Republican politicians , bU!>lIIl'" men .lOd academics-the infamous neoconservative "Pr oject for ,I New American Century" formed In the late 1990s. The ir stMtlllg point was the I11Slstem:e that the war to srap Ha dechne in Amcrll.1II power" was a refurn to a "Reagamte" policy based on large 111 crca..es in defence spending. the building of a mis sile dcfenu· system, and acnon to deal with "thre,lts" from "dlctato rships� III Chlll,I, Serbl3, Iraq. Iran and North Korea"· "Having led the \X.l·�1 to \'icrory III the Cold War, America faces an opport unity and .1 challenge. We are 111 danger of squandermg the opp ortumty Jnd failing the challenge". ' The Republican electoral victory of 2000 and then the natioll,11 panic caused by the 911 1 destruction of the World Tra de Ccmn· gave them a chance to implement their policy.

It amounred in practice to further buildiJlg up the milit.lrl might of the US-and thcn USlllg It to assert US glo b'll dominanu· againsf all comers. Increased arms spending and mas sive tax ClU� for the rich were meant to pul l the US out of recession, just as Till "m ilitary Kcynesianism" of Reagan had two dec ades bdon· Increased arms spending would lead to recover) from recessiun, to further military handouts to finance technical adv ances tor m

lilt by even bigger Investment flows lOra the US as it demonstrated I" overriding power. The aim was for the U5. to more than com­

described by Bukhann in the early I 920!>, with the difference Ihat the rival capnalist states were not going to be forced mfO sub­ 1\

,('rvience by wars directly against them. bur by [he display of the lIS's capacity to wield g,lobal power through wars It and its client 't.m�s waged in the Global South. Hence the attack on Afghanistan and then, 1 8 months later, on Iraq. The "ncocons" helieved they had a perfect opportunity to Ilcmonstrate t� sheer level of US mIlitary power and to increase u)ntrol over the world's numher one raw material, oil. This would weaken the bargaining power of the WeH European states, '.Ipan and China, since they would be at lea�t parrially dependent nn the US for their supplies. The assumption was that the wars would be won by little more than a dl�play of US 3irpower at very little cost. This o;eemed a viable war for achievmg shared goals to those who r3n US-based cl)rporariom, and the Democrats in Congress voted for war. h was a gamble and hy the spring of 2004 it was clear thar the Mamble was going seriously wrong. Tht' US had taken control of Kabul and Baghdad eaSIly enough. But ItS forces on the ground were not able to prevent the growth of resistance in Iraq-and of growing Iran.ian influence there. Within another two ycars It also laced serious resistance from a resurgent Taliban in Afghanistan. The turn to military Keynesianism St.'ellled at first to be successful In economic terms. There was an unexpectedl)' quick recovery from the recession of 2001-2: "Official military expenditures for 200 1 · 2005 averaged 42 percent of gross non-residential pnvate 1I1vCStment" and "official figures . . .exduded much that should Ix- in� duded in military spending".11 All this provided markers, in the ..horr term, for sections of US industry. Bur the high levels of military expenditure soon showed the same negative effects they had �hown at the time of the Vietnam War and under rhe Reagan administm· lions. They increased economic demand without incr('asing overall mternational competitiveness and so ca�ed ballooning trade: as well as budget deficits. By 2006 the comhlllation of escalating military Global Capi1.l1

In

the New Age

27J

costs and the risk of defeat in Iraq was worrying important sel,;!n ,"\ of the ruling dass. A 2006 report fmm the Iraq Study Groul'. headed by Republican Party hea\'yweight Jame!' Baker ,111.1 Democratic Party heavyweight Lee Hamilton, bemoaned the 1m.... "

I

"blood and treasurc" with an estimate of the COStS to US capit,ll"tll 01 [he Iraq venture of a massive il ,OOO billion (equal to \l'\t" Illonths output from the British economy). 'J

thfficult for them [0 be succes,ful. l t is a wurld. I n short, beset bv " multitude of contradictory pressures and compelled, therefore, III experience onc convuls,\'e political eftsis after another. This ht'..:arne clear when (hc great economic dehlSlon gave way to a II.TI�at eCODomlC CTlSI!>.

Meanwhile orher :otates-and the capitals opcranng Ir,,'1 them-were able to take ad\3mage of the U�'s perceived wcaknt \l''>1 10 advance their own positions. The most ttnportam \ European st,lres, France and Germany, h.ld refused In hal,;k th. 2003 Jraq War, unlike the first lraq War of 1 99 1 . The French \1.11, III parllcular saw a weakening of U� influence in thc Middle 1 ,hI as an upportunity

10

advance the interests of French capilal 1ll rt

glons where its IlltCf{'sts clashed with the US·s. ChUla W,IS ahlr I" benefit from the US entanglemcnt in Iraq ilnd Afshani�tan I . . expand its own Influence, particularly in Africa and LUIII America. TIllS went hand in hand with growing Irade links, .h 11

-

•

looked to mineral imports from Africa and agriculrura l imporl\ from Brazil, Argentina and Chile. Soon Russia [00 was flexinp. II' rather weaker muscles, as increased oil revenue allowed it ttl rt' cover from tht: economic collapse of the previous decades and til exert pressure 00 some of the other former Soviet republics; Ir.m took advantage of the US's setbacks to increase its leverage in Ir.h( and Lebanon; the BRJCS formed an ad hoc alliance 10 advanL\' their common trade IIlterests in oPPOsition to both the US and Ih\' FU, so paralyslllg the Doha round of trade negotiations from which US corporations had hoped to get even easier access 10 lor eigo marken., The US discovered that when three of its client ,tall" launched wars for objects it supported-Israel in Lebanon 111 2006, Ethiopia

III

Somaha

III

2007. Georgia against OS5<:II.1 111

2008-il was not in a strual10n to stop [hem facing defeat.

CommentaTOrs who had not long before insisted the collap't of the USSR had created a �unipolar world" with one SUpl'f power were beginning to talk about "multipolartty", with the lI' ani), able to get its war by makmg concessions TO other power' Some thought this meant a more peaceable world. Bur the multi poJ::lr1tY is a world of states and their associated capitals whidl have different ilHerests and are our to impose them on the other'> when they get the chance. It is the lllultipoJarny in which old 1111 perialm imperatives are strengthened JUSt as it becomes

mort

The New A� of Glob:ll ll1s[�f.!I

lilohal Capllal

In

[hI' Ne..... Age

, IIAPTER ELEVEN

Financialisation and the bubbles that burst

Credit crunched

�

rhe mood wa$ ne of "exulx-rant OptlIllISm", as the world Imsiness rlile gathered in the Swiss reson at Davos In January 2007 to

"enjoy" what the Fi"QlIcial Times called "the opportunities hrought about by giobalis3tJOn, new technologies and a world

l,.'Conomy that is expandlllg at its filsresr pace for decades" , I The mood was rather different at their next gathenng in January 2008.

1 here was "gnm determination l_grim because the global finan­ (Ial system had begun to grind ro a halt With a �credit crunch"'; "

determination because the "rcal economy" was still expanding .md it seemed that appropriate government action would get the hanks lending again. Governmenrs took action in the momhs [hat followed, In lanuary central banks slashed interest rates, In February (he British gm'ernmcnt nationalised the mortgage bank Northern

Rock; in March the US Federal Reserve provided $30 billion for J P Morgan Chase to take uver the failing Bear Stearns hank; III April and May cenrral banks on both sides of the AriaD[Jc pro­ vided hundreds of billions to the banks to keep them gomg. and III July they provided hundreds of billions more; carl) in September the US government took over rhe giant mortgage lenders Fannie Mae and Freddy Mac

what the former government adviser Nouriel Raubini described as .. the biggest narionahSJtion human· III

ny has ever knawn",1 It was all to no avail. The Coll.lpse of one of the pillars of the US's financia l system, the investment b,Hlk Lehman Brothers. on 1S September cau.sed what was generally called a "financial tsunami", Bank after bank in counrry after counrry came dose to 276

Thf' N�· Ap,c of Gloh:al

lnsrab.tu,

271

collapse and had to he rescued by government ball-ours that 1,.1 "I further hundreds of billions and often IIlvoh'ed parnal nallOn.111 satlon. The credit crunch had become rhe most serious finanl,.l.1l

III the early and mld-2000s. Along With these went successi\l! Wolves of takeovers and m('rgers of giant companies, financed by fL'dit, from the buyouts of firms like RBS NabISCO JJl the late

IU�1 a financiill crisi... Tens of thousands of johs were belllg II "I nery day in all the malar economies; world trade was falling al .111

AIU'crnments. non-financial corporations and consumers alike. as

crisi!> the global system had known since the slump of the 1 91tf, By end of the year it was clear ro everyune Ihat II was more th.1II

annu,llised rale of 40 percent, and the L\lF was predlCung "Ihl sharpest recession since [he Second World War for the rich (:()lItl (ries.... Bul l( was not only rhe rich countries whICh were o1ffel,.'lnl

South Korea, Malaysia, Thailand and Singapore suffered .. hMI' economic contraction; 20 million Chin('se workers lost their I lIh as it.. exports fell and I(S real estate bubble colbpsed; Russian IlHIl iSlen. began to fear a new crisis; Brazil's industrial output Manni falling; the economIC recovery of Eastern Europe came to a sllddrt1 halt as mill ions of people found they cou ld not keep up with 1111'11 mortgage payments 10 West European banks, At Davos in Jo1nu,lf\ 2009 there were "cver more doom-laden prognoses" ,J

hJnk lendlllg rose much more rapidl)' in most p.urs of the world onomy than did productive outpUI. It douhled in the US and tre­ hl�d in Japan in rhe 1980s; the US boom of the mid-90s was

'I,.companied by an extr.l.ordinarily high level of borrowing by

firms and consumer..: rhc houslIlg and propen) booms of the mid� 1000s were similarly sustained by massm� borrowing 111 the US,

8main, �pain and Irel.lnd, The impact oftnance on the less induHrialised countries was al­ rcady very marked by the 1 980s. The h)an!o of Ihe IatC 19705 had I,.reared a never ending dependence on furrher borrowing from fi· nancial institutions in order to keep serVicing existing debt. By

2003 the total c){ternal debt of sub-Saharan Africa srood at $213.4 billion, that of Latin America and the Caribbean at S779.6 billion,

The rise of finance

ud of the South as a whole at $2.500 billion. I<

The crisis followed a quarter of a century in which finance h,lll grown on a massive scale [0 play an unprecedented role in IlIl· sy�tcm, The stock market valuation of US financial companies w•• , 29 percent of the \'alue of non-financials m 2004. a fourfold III crease over the previous 25 years;· the ratio of finan",ll

corporations' 10 non-financial corporations' pr06ts had risen frOIll about 6 percent In the early 1950s through [he early 19605 Itl afl)und 26 percent in 2001;· global financial assets were equal to

3 1 6 percent of annual world Output in 2005, as against only 1 114 percent in 1980;K household debt in (he US was 127 percent 01 [olal personal mCome in 2006 as against onJy 36 percent in 1 9'1., around 60 percent in the late 19605 and 100 percent in 2000: The growing role of finance had its impact throughou t rlw

global economy. Every upturn in the recession-boom cycle crltl'l the early 1980s was accompanied by financial speculation, cau'

log massive rises in the US and British stock markets in Ih" mid·198 0s and mid-1 990s, the huge upsurge of Japanese sh:m­

and real est:lte prices in the late I 980s, the dotcom hoom of th,· late 1 990s. and the housing booms in the US and much of Eump,· 278

1 'I80s Ihrough to the wave of takeo\ers of old'l'stahlisbed campa­ Ill'') by private cquit} funds in the mid·2000s, \teanwhile general le....e1s at mdebtedness tended ro gm\\' for

The New Agl' of GI..hal

lnqahlln

Overall rhe role played by finance within the system was much Rreater tban in either the depression years of the 1930s or [he

boom years of the early pOSt-war dc(:ades, In those decades the hanks had certainly not played me central role Hilferding had as­ uibed to them at the begmnmg of the century with his concept of "finance capitalism" (sec Chapter Four). In the US the big mdus­ Ulal corporarions relied on their own Imernally generated revenues for investment funds; in Japan and Germany the banks played a greater pan, bur it was one of aiding the expansion of favoured sections of industrial capital. It was with the ending of

the long buom th:lt finance seemed to break the bonds that had . hound and subordmlted 11 to mdusrnal capital. By the 1980s tunds worth billions-and later hundreds of billions-of dollars

were moving imo and our of economic sectors and particular

,oumries, cherry picking [he most profitable outlets for investment

before moving on elsewhere, often le;lving economic devastation 111 their wake, Finance began to impact direclly on the lives of the world's workers in a way in which ir had nor previollsly. Most people unlll

the 1980s were paid wages in cash evcry week; now the norlll was hnallclahsauon and Ihe' Bubbles

Ihal BurS1

2""9

payment 1I1tO bank accounts. The spread of homc purchaw III

.. nJ US overseas military expen diture associated with the Vietnam

count TICS like Britain or the US from a thud to twO thirds of ho u'!'

holds provided a new destination for lending-and the dL\'l'r�IOII

Wolr-led to pools of finance ( kEuromoney") which had escaped the of nanonal guvernmen[S. The next big growth came with the

t

of part of wages and salaries into mterest repayments. insuran.1

,

r

and private pension schemes likewise spread the tentacles 01 h

;ycling of massively expandcd MIddle East all revenues through

Iht' US banking system-revenues that were a produ(.... of [he m­

nanl;e Into wider sections of the population than ever bdorl Credit in [he form of morrgages and hire purchase agreement

already important in the I 930s, but it was on l y

III

reased dependence of productive capital on Middle E.'St oil.

\\.1

the 1 980, th.ll

Indebtedncss began to become cenrral in mainta ining people'!. r{'

II we have seen, across nanonal borders, e\'en if mostl)· If was re­ ItIOnaJ, not global in scope and did not measure up to much of the hype about globalisation. But industT) could nor fI.·structure 10 thiS

Bnr:un, the murtgage and [h� cr�dll card became part of evend.n life, whjle governments dlmost everywhere preached the vlr!ue\ III depositing regular savings into financial mstitutions as the wa \ 10 11

woly witholl! ha\ ing finanCial connectlol1'> across borders. It re­ tjulred mternational financial networks if II was

to

rcpatriate

Iltofirs or estabbsh ..ubsldlaries elsewhere in the world. An impor­

thc wurke" and middle classes [0 provide themselves with p�'11

siam in the ir old age. As Robm Blackburn has shown, pcmLnll

cOtllrihutions fed mto the mushrooming expansion of a finatl�l.ll system over which rhe conrributors had no control.I I This rise of fi na nce was accompanied hy a great incrca�e in ! ll t

"

frequency of financial crises. As Andrew Glyn said in CaPIl,llislII U"ICdshed, "Crises involving banking crises. which had allllO\! died (lut in the Golden Age. reappeared in strength from 19-3 011 wards and became practically as frequent after 1987 as durmg tht

period . I: Martin Wolf noted " 1 00 significant banl..lllt-: ...

crise!> over the past three decades"." Yet after each crisis Iht· system as a whole seemed to revi\'e aga i n, m that on the eve 01 11' ' greate�t cnsi<; there was talk of record growth rates and preJIL tions of ever faster growth in future. Fmance '" fact acted lik�' .1

drug for the system, seeming to give It great ene.rgy and creating 1 .

sense of euphoria. with each bnef hangover being followed In-

The restructurmg of productive capital took place increasingly. ,

ular living stand:uds. For the majority of workers In the lI'
I mer-war

"erol

.1

further dose until the metabolism as a whole suddenly found It..dt hems poisoned.

t,.m source otprofit for some SCCti UIH, of financial capLtal la)' in the kcs to be gamed by overseeing acquisitions and mergen of pro­

ductive firms, and that mean! there was a ga in to be made i n l IJX=rating mul tl1lationa lly before they did. As ill Marx's dcscrip­ Uon of finance in hj� day, Lt led the WolY in encourag.ing productive lApital to reach Out beyond its cstahli�hcd bounds. Multinational pmductive capical, in rurn. opened up new vistas

lor multinational financial transaCtions. The success of the Jolpanese car IIldustry in penetrating US markets In thc late 1 970s !.tid the ground for the flow of Jap,mest' fin;mce IOta both produc­ tive investments (car plants) and real estate speculanon in the US. \nd the flows of funds and commodLties withm multinarional cor­ rnrations provided condUits hy which financial transactions could LI necessary escape governmental control.

M chains of huying and selllllg grew longer than ever., so did rhe ,hains of borrowlIlg and lending-and With them rhe opportunities

t;rew e\'er greater for financial institutions to make profits through Mrrowing and lenJing that had no immediate connections with processes of production and explollatiun. This rook place in a wide.r cuntext which made the search for profit through finance in­

The debt economy and the great delusion

creasingly arrracme to capitalim of all sorts-rhe fall in profit rates

The growth of finance was never something separate from Wh,11 was happening to the productive core of the system, but wa, ,I product on the one ha.nd of in. imernarionailsation, on the othl"1 of the long drawn out slowdown in accumulation. i finance in the 19605 wa.. 1 The first big growth of nternational .

result of the way me growth of international trade and invesrment280

The l"ew Age of Glob;al lnsfJI>.Ju

tram their level in rhe long boom (as described in Chapler� Eight ,1Od Nine). Capitali sm inte rnat ionally went through nearl�' four Jecades n i wruch profitability was �uhstantially lower, even 111 liS I'lCriod uf recovery, than Ihat which had enabled it to expand pro­

duction and accumulate so rapidly previously.

Profitability did not collapse completely, and rhert' was a contin­ uous growth of a mass of pa�t surplus value seeking opportunltLc� 1'H1i1l1Clahsanon and the Bubbles that Burst

281

for fresh profitable in vestmem. But there wefe not nearlv as m.m' •

of these in productive sectors a� previously. One consequem:c 1' we have seen, was a general slowdown 111 the level of accumulatl"ll • .

and dedme in average gro\\'th rates. Fairly fast growth of proJu< tI\'{' sectors would occur in one pan of the world econnnn

I

>I

another-in Brazil and the East Asian NICs tn the late I 970�. III Japan and Germany in the 19805. in the US and the East A\I.Ul NICs again in the mid to late 1990s. in China and to a lesser e_"�'1II the other BRlCS in the 2000s. But profitability was not sufficiem I" raise productive accumulation throughout the system as a whoic I I '

its previous levels.

Globally this meant there was a growmg pool of growth ot money capual-money in rhe hands of prod ucti ve as well as non­ productiv e capltals-searchmg for out1er� that seemed to promise Iligher levels o f prufitabiliry. He nce the pressure on firms to delil-er hon-term rather than long-term profits. So tOO the succession of

recularive bubbles and the repeated M Minsky" shifts from specu­

I tlon to PonZI schemes iO which financiers used the monev•

1 ntrustcd to tbem by some 101 estors to pay off orher Invcstors and

hne (heir own pockcts." All sorts uf speculativ e unproducnve ac­ IIvlties flOUrished, from poUring money Into Mock markets or real I ta te co buying 011 paintings by old masters. In each case. tbe rush .

There were Increased competitive pressures on individual tinm

III specu lators into buying thmgs 10 the expcaation of ming prices

to underlakc large individual investments so as keep ahead of ril ,d fi rms. bur there was less certainty than before abOut being abh: I" make a profit on those im'esnnenrs. Firms, wealthy individu .l l,

other, prices did indeed [1St'. In thl!> way the ups and downs of the

and investment funds reacted by being cautious a bout commit Iltl.: themselves to such investments lest it leave them without readl cash ( " liquidity" in financial parlance) next time there was ,I CfI\l\ The result was an inel·itable tendency for tbe average level of pw ductive Itlvestment to faU.

19�O--9

4.2 �rccnt

19110-89

1.1 per(ent

199 1-2000

'.J �rc:cnt

l'I.1nded as a consequence, sillce it played a key pan in collecting

IIIKCthcr rbe funds for specularion, and could (hen usc the J.ssets whose value had Increased because of speculatl(lIl as coll,Heral for horrowing more funds.

looking for any opportumty where it seemed there might be prof­ Ill> to be made. Already In the eConOlTliC rcc overy of the lare 1980s:

cauntrits"

5.0 �rccnl

p

productive an of the systcm found a magnified reflection in tbe lipS and downs of various othcr as!>ct!o. The financial system ex­

There developed a mass of ca pi tal wandering round the world

Grou,tlJ offJril'41� stelar "'01 non-rr'sitU"tial cofJital stock In ImluJtnoJl

1960-69

was, for a time, a self-fulfilli ng prophccy. As the)' outbid each

Financial activity became frenetic, wllh stuck and share and prop­ erty values soaring upwards . . . Property speculation rose to new

heights, and private borrowing reached record levels in the US.

Britain, and Japan ... There WdS real lndustnal growth, bur It was dwarfed by thc ex pJ.nsion of thc property markcts and by various

ductive lO\'csrment, since a growing share of investlnenr wem 111111 rhe non prod uctive financial sphere. And it was not only in the old

fonns of speculative activity .. General business lIl\'estmcnt grew considera bly faster than manufacturing IOvestmCnt-Ul sharp contrast to the 1960s and early 1970s. when manufacruring grew

Industrial counrries rhat a falling share of surplu s value went i nru productive 1Ilvcstment. The " tigers", the NICs and the BRit "

about a third lower 111 the US and Japan, and about cwo rlurds

These figure!>. It should be noted. understate thc slowdown in pro -

drew a sharp 1<':550n from the Asian crisis of 1 997-8. They were 111'1 wil li ng ro risk being sruck again with a shortfall of ready cash tlll"

next time international instabil ity hit their markets, and hUllt lip su rpl uscs on foreign trade that they saved rather than invested do mesrica l1y. Even China ended up with an excess of saving

at the same speed. The growth of manufacturing invt..'finnenr was lower in Europe. than in the earlier period.'· Boyer and Agliett:l ha ve accurately described what happened

Juring the next US boom

,

III

the mid and I3rer 1 9905:

OIl"!

1Ilvestment cqual to 10 percent of its national income despite 1(' virtually unprecedented rate of accumulation. ,

282

.

The ��" Age 01 GlobJl lnsrat.dl

Overall demand and supply are driven by asset price expecta­

tions, which create the

possibility

1 1ll2noahsatton and the Rubbles that Burst

of a se l f- fulfilling l'irtllOU!o

circle. In the global economy. hIgh expectations of profit... trl)� ger an IIlcrease III asset prices which foster a boost In conSlltlll'l demand, whIch In tllrn validates the profit expect:uions . . . 0111 IS left with the Impression that the wealth-induced gro\\ th re�1Il1e rests upon the expectation of an endless asset-price ,IP preclanon ... ,­

hy ... making good any unexpected �hort(all with last-minute 'ales of assets held by the firm's notoriously opaque fin;lI1r.:e Arm, GE Capital," which was responsible for "40 percenr of (JE's revenue".lV As capitalism

In

all its forms turned ro financial operations to

The growth of multinational finance increased the lOstabiliry 01 tilt'

I;omplement productive oper:ltions (rom the early I970s, gov­ rrnments came under pressure to abandon controls imposed on financial transactions. For a time governments still committed to

s)·stcm. but dId nOt cause it. Enhanced insrabihry in rurn encol1ra�nl producrive firms to seek specuJative profits in a way that furthl·t boosted the financial sector and added still more to the instabilit).

the state capitalist or Keynesian notions of the previous period IIIttempted to hold the line agall1st the WJy finance could well "'o'er narional borders.�But one by one they gave up the attempt,

A pnme example of this was the risc o f the derivallves m,tr kers. Their original function was to provide a son of inSUr,\l1U'

partly beca use they saw old comrols of currency and capital movementS as ineffective, partly because, accustomed to adjust­

against sudden changes in interest or exchange filtes. This wa) ,111

Ing their horizons to what capital said was possible, they were won over to e idea thai this was the only way to achieve a new

extension of the long established practice of buying and sclhll� " forward"-agreeing now on a price to be paId at some specllll'd point in the future for some commodity. Now derh'ative!> den·l oped into elaborate systems of payments for options to buy .1 I1d sell currencies or to lend or borrow money at various rates:u lid ferent times in the future. In doing so, they prOVIded productl\(' firms with some protection against their calculations of futurl' competitiveness and profitability being upset by sudden chan�f in varil)us markets-and became an integr,lI parr of normal 1'111" ness for man)' companies. II Bur that was not the end of till matter. The derivatives that provided tbat protection could tht·tlI selves be bought and sold, and it was then possible to g;lmble 011 ch,mges thar would take place in tbelr prices if exchange (lr III

terest rates wenr up or down. Hedge funds. worktng with monn pro\-ided by rich indi viduals purring in a few million doll.n, each, found they could make ver)' large profits by borrowing III order to mnke 'iuch betS, assumll1g (as every poor gambler dOl.'�1 that they were bound to win. The rcliance on derivatives was nOt the onJy way III which thl' boundaries between productive capital and the financial sector Wl"ft eroded. Many industrial concems began to look to finance as a \\.'.11

of profit making. In the 1990s both Ford and General MOTOrs fUrTlnl towards fin.tncial activities such as "leasing, insurances, car rcnt,ll' so that "during the boom 1 995-98 a third of the !FordJ group's prohl accrued from services·'.I� The ECOllomist has told of the US's nIT

•

rentlr higgest manufacturing firm, General Elecrric, that its "profit, grew with the son of predictable consistency . . . made posslhll ,8<

Thl" �cw i\�l" of Global [n�IJ.bt1

�

\':ycle of capital accumulation. The approach of those who had 'itarred off on the social democratic left was that if you could not heat them. then join them. USlially the speculation was in non-productive spheres-repeated ...tock exchange and real csraTC hubbies. But occasionally it focused un some area where they bclie...ed there was profit to be made by productive n i vestment. As the Final/emf Times told of the late 1 990s: Spendmg on telecoms equIpment and de... ices in Europe and The US amounted to more than $4,000 billion. Between 1996 and 200 I banks lent S890 billion in syndicated loans... Another $415 billion of debt was provided by the bond markets and $500 billjon was raised from priv,He equity and stock marker issues. Still more came from profitable blue chIps firms that drove themsekes ro the brink of bankruptcy or hcrond in the belief that an explosi\'e expan'ilon o( Internet use would create aJmosr infinite demand for telecoms capacit),. The global finan­ cial system became addicted to fuelling this bonfire. Nearly half European bank lending in 1999 was to telecoms companies ... about 80 percent of all the high-yield. or junk, bonds is<;ued III the US were to telecom!> operators. Five o( the ten largeST merg­ ers or acquisitions in hlstor} involved Telecoms companies." I he fact that there was a productIve e1clllent to th is boom ndded ro the great illusion that It could go on forever. But the bool11 W.IS hased on speculation, a�rihing massive exchange value to produ<:t� I In:lnct.alts.i.uon and Ih" Huhhtn Thai BUrsl

fm wh ich the current use value wa!> very lmuted. So mu!;h -tl.ll1.i widlh� had been (reated. rhe fit/uncial Times solid. that: i t rhe world'�

billion people were to talk solidly on the rd, phone for the next rear. [heir words could he transmitted (1\" the potenuJ.I \.·Jpat:I�' within a few hours. . . jonly) 1 or 2 per\.\III of rhe fibre optK. cable buried under Europe and North Amenl.1 6

h,15 e\ien been lurned on."

heaped with praise for us skills in fin:u1l:ia I mnovatlon".:< Gordon I\rown praised the "contribution" of Lehman Brothers "to the prosperity of Britain"!' Ramal mga Ralu was named India's "Young Entrepreneur of the Year" and awarded the Golden I'eacock award by the World CounCil for Corporate Governance

The telecoms boom mevitably collapsed, causmg widespread (h, array. By the begmning of September 200 I (before the 9/1 1 an.ll � which is usually blamed for thar year's recession) the "�IIk.l market value of all tclecom operators and manufacturers" 11.1.1 "fallen by $3,800 billion since Its peak in March 2000� ,111.1 " p robably $ 1 .000 billion" had gone "up in smokc",H Faced with the collapsl' of this bubble 11110 produCllvc in\t,:\, mem, it is perhaps not surprising th:1I the nexI hubble w()ulJ Ih ,Hound something that seemed to be . . . "as safe as hou�n During the recover}' from me 2000·2 reccssions those with l1l(llll"l (old fashioned banks, newer finandal groups ...uth as hedge fun,i-. and m.:h individuals with a few million i n ready cash) found t I,..\ could expand their wealth b}' borrowing at low Imerest nul''> III order to lend to those prepared for, or conned into, paying hi�lh I IntereSI rates. Birs of various loans were then parcelled togelhl'l

into "financial illstrumenrs" to be sold 3t a profit (Q other fin.lII cial insmutions which 111 rurn would sell them 3gall1. Those;1( 0111 of end of the chain of lending and borrowing would not haH' Ih, remotest idea where interest was coming from at the other end. III fact, many of {hose expected to pay it wcre poorer sectluns 01 111\ American population desperate to get somewhere ro live bUI pT' viously regarded as u ncredltv ..onhy. They were lured mto t.lkHl� out mortgages with -ncklern fixed term low rates of illler",1 which could then suddcnly be increased after two or three yl.:.11 Rising huuse prices werc supposed to make lending to thcm .. 111 . since If they defaultcd on their loans thetf homc� could be rl'\'D' sessed and sold at a handsome profit. The fact that ir \\ 1 ' precisely the willingness of financial institutions to bid agJ l lh! each other to offer loans to buy houses that was raising lht prices-and that prices would inevitably fall if they all beg,1Il r,' possessing-was something tbat escaped the notice of I1lf geniuses who ran these institutions. .

286

The more corporations inflated rheir wealrh by losing touch "lIh reality the more the)' wefe honoured. The British bank Northern Rock was " the toast of a gllt7y Oty dmner where it was

The Nev. Age of (,lobaI 1n.I,

lU'it months before Jr was revealed th.1I he h.ld detrauded hiS own �umpany of one billion dollars. Again It has to be stressed th,ll the speculatIve ventures of these years did 110t JUSt inl'olve financial (apl whsts. Industrial and com­ mercial cap Ital ists rook part. More than ha If the supposed growth 11\ the worth of the whole of the non-farm, non-financial corpo­ r.lte sector o the US in 2005 had been due to inf1ation in its rcal

f

(·,tate holdings.c, The finance-led bubbles were not, however, JUSt important as a ourcc of profits for the supposedly productive sector of the econ­ umy. They were also central In ensuring it had markets that neither m own investment nor what it paid its workers could provide. Ihis was rru(' of the bubbles of the 1 9805 and 1 990s The combi­ .

i1ation of reduced investment and attempTS IU hold down wages in Ihe old ind ustrial countries (.lIld success in cutting them in the US) lIlade consumer debt increasingl)' important 111 providing demand lor Output. It was even truer in the early and mid-lOOOs. Without the "housing" and "subprime mortgage" bubble there would have I n very little recovery from the recession of 200 1-2. These were years in which the real earnings of workers in rhe liS, Germany. hance and some other countries tended to fall. I hey were also years n i which producri\-e in\cstment was low in JII the "old� capital isms. "Investment rates have fallen across vir­ i dustrial country regionsn. ..aid one IMF study.­ tual ly all n Another report, for JP J\lorgan, raId 11\ 2005: The real driver of thl" savlIlg v,lut ha� neen rhe corporate sector. Between 2000 1. nd 2004. the ... witch from corporate dis-saving to net saving across .he (;6 j France, Germany, the US, Japan, Britain and Italy] econOllllCS amounrcd to over $ 1 tfillion . . . The rise in corporate saving has been truly global, spanning the three maior regions-North Amcrica, Europe, and Japan.lI hn.ncialis.mon and (hr BubblC!l th.u Bum

187

In other words. "'lIlstead of spending (hell' past profiu", U� blbl

profits a t the expense of wages were responSible for tbe IllcreaslIlg

nesses were " now at.:wmulating them as cash" .1.

tlt'pcndence of consumption on debt. It was also the attempts to

A Im\ level of Investment combined with falling real wagn

mJincain profitability in the face of an ever greater piling up of

\\ould, In normal cir�umstaJlces. have resulted in conrinued rCLr�

hxed capital that led to the holding back of consumption in

sion. \Vhat prevented that was precisely the upsurge of lendinp. 1 1.1

( hina-and, as part of doing so, efforts to srop any rise in the in·

the financial system to American consumers, including rhe reClpl

It'rn:ltional value of the yuan. And the memory of the crises of the

ents of suhpnme mortg:lges. It created a demand for tlll"

1 9905 taught [he other BRICS and N1Cs thar their own economies'

construction :lnd consumer goods industries-and vi:1 them h l l

profitability was not high enough to protect them from global in­

heavy industry and raw materials-that would not otherwise h.1\1

lability, leading them too to pile up surpluses. In general, it can be

existed. Recovery from rhe recession depended on the buhhll'

,lid mat the different sectors of world capitalism wouJd not have

what the Ilalian Man:iH Riccardo Bellofiore has aprJy called " 1'1 1

become dependent on th� bubble had profit rates returned to the

vatised Keynesiani-sm" . .

ll'vels of the long boom.

The product!\{, capitalists who were the beneficiaries of the 0['

Financialisation provided a substitute motor, in the form of

eration werl' not just [() he found in the US and Europe, hut ,1 1,"

\lcbr, for rhe world economy in the decades after rhe US arms

across the Pacific

Iconomy lost a

m

Easr Asi:l. Japanese industry. still sufferlllg

g60d part of its effectiveness. The permanent arms

from rhe decline in profitabil i ty in the earl) 1990s, staged some fl'

l'..:onomy had to be supplemented by the debt economy. But by its

covery by exponing hi-tech t'quipmenr to China which then used II

\I:rr nature a debt economy could not be permanent. The massive

(along with components from the other East Asian states ,Iud

profits that hanks make during any bubble represent claims on

Germany) 10 build up ever greater exports to the us. And it

W,I\

v.llue produced in the productive secnons of the economy. When

the surpluses on their trade wirh the United States that Jap.lI1.

there is a sudden decline in the prices of the assets they have previ­

Chma and the other East Asian economies dcposlwd in the l l\,

ously bid up

which helped finance the nubble and so provided a boost to till"

markets) they discover those claims are no longer valid and that

whole world economy. including their own part of it.

Ihey cannot pay their own debts unless they get cash from else·

A� Martin Wolf rightly commented, "Surplus savings" creatnl

(ill

the housing, property, mortgage and share

where. But tbe very process of trying ro raise cash involves selling

"a ueed to generate high levels of offsetting demand"," and lcnd

lurther assets; as all banks do so, asset prices decline still more and

ing 10 poor people provided It: "US households must spend m(II'l'

their n i dividual balance sheets deteriorate further. TIle bubble

than their Incomes. If they fall to do so, the economy will plungt·

hursts and the boom turns imo a crash.

into recession unlc�� something changes elsewhere ":'] "The h·d

As Marx put it:

could h:lve avoided pursuing what seemed like excessively e"p.1 I1 ,\

All this paper actually represents nothing more than accumu­

prolonged recession, possibly a slump".]] In other words, onl� till'

lated claims, or legal titles, ro future production whose money

financial buhhle stopped recession occurring earlier. The implll.1

or capital value represents either no capital at all. . . or is regu·

tion is that there wa(' an underlying crisis of the system as a

lated independently of the value of real capital which it

sionary monetary policies only If it had been willing to a�cerl

\\

hllll·,

which could not have been resol\'Cd simply hy regulating financln, Wall and others who emphasised the imba..l3nces in the glnh.11 productive economy did not locate their rOOts in problems of rro!

represents... And b}' accumulation of money-capital nothing marc, in the main, is connoted than an accumulation of these claims on producrion.H

irabiliry. To have done so would ha\'e required at least half I, TIll II from neoclassic:l1 economics to classical political econom)'. :lnJ

t"

What happened through the early and mid-lOOOs was that the

pccially to Marx. But low profitability was, as we have seen, behlll\l

banks assumed that these claims were tbemselves real va lue and

the slowdown in productive accumulation in North Ameru . . 1.

l'lltered rhem in the positive side of their balance sheets. A chas­

Europe and Japan. while the partially successhi I attempts to SU<'[,1 111

tened Adair Turner, former head of the Brimh employers' CDI and

288

11fI;)J1�lajJSat1Un and th� BlIhbles that BlIr�1

Th� N�w Agt of Glohal [n�rJh,I'1 \

289

fmmer vicc-chairman of Merrill Lynch Europe, recognised ,I I I " , the event, �The sy�tem III total bas become sigmficantly mort' r

hant on the assumption rhat a "'ery wide range of assets coulJ I.. counted as liqUId because Ihey would always be sellable in liqUId markels".

Profits were measured according to �mark to markl'l' vdluallons of assels-that is, according the levcl lo which cumI'd r(1ve bidding had raised them. BUI once there was a decline III rI .. mortgage and property markets, financiers had 10 try to cash thnr

assets In if they w�re nOI gorng to go busl-and found they coulll nol. ThiS is what the process which goes under the name "I

�deleve.raging" was about. Manin Wol f again described what was happening accuratch

In Britain, Woolworths and MFI went bust. The toll at sackings 111

very sector began to compare wrlh the haemorrhagmg of Jobs m tht' crisis of the early 1980s. And the paIR was felt not merelr on hntb sides of the Atlantic, but on both sides of Ihe PaCific too. In [he spring of 1008 rhe donunant theme in mamstream eco­

nomic commemary had been thai a "decouplInS" of different IIJliooal economies would enable Asia to kc..-ep expanding ar its old

reed while Europe and America suffered. By new year 2009 the re­

�

IU

ion had spread

to Japan.

where car output fell at
China, where ther..e were thousands of fJcwry closuTt's in the

..outh east,;· and to India. where a bU!.tn� lohhy group warned thar

The leverage machine is operatlng in reverse and, as It gcnrr ated fictitious profits on the way up, so it takes those prot rh away on the WdY down. As unwinding continues, hl �h \ l indebted consumers cut back, corporations retrench and ull

emplo)'menr soars:"

1 0 million manufacrunng Jobs could be lo..t as exports collapsed," 1 he victim� of rhe A<;ian criSIS 01 1 997-Thailand, South Korea. "Iabysia, Indonesia-were bartered once agam. So tOO "'mgapore, J\ were the \'ictims of the slump which �wept the formt:r Eastern bloc Irom [he lare 1980s onwards-the Baltic statts, Ukrame, Hungary, Hulgaria, Romania. In Russia the colbpse of the record world oil

Hence the fir�t moment of truth of August 2007, when some of lhl' hedge funds controlled by banks discovered they could not p,.� their debts and banks stopped lending to each olher out of te,lI they would not get their money back. Hence the failure of the hUll

dreds of billions poured imo national banking systems to pren-III the second moment of truth in mid-September 2008 when the 1.:01 lapse of Lehman Brothers was followed wirhin days b� tilt" Ihreatened collapse of banks in nearly all the malor Western Slall"' (AIC IR the US, HBOS in Britain, Fortis in BelglUm and thl'

Netherlands, Hypo Real Estate III Germany, the three major In,h banks. the Icelandic banks). Hence the way in which In the t\\U

months that followed even banks whICh thought they had ga l llni from (he problems of their competitors were in dire trouhle­

Citibank (the world's biggest) and Ban k of America In the U... Lloyds In BnlalR.

Illd Ford Joined in askmg for a $.14 billion government handoul,

.

Hence, finaUy, It was clear the criSIS was no longer Just one 01 n nance. The vast expansion of finance had created thc illUSIOn ot .1

new "long upturn" in productive a,cumulation; the crisis 01 n nance made that illusion disappear with traumatic effects, Thl'r l' was "a week of living perilously" in November a) �panic sel7l'�1 the markets",'" In the US Chrysler lost millions by (he day, GCIll'r,11 Motors said it needed $4 billion immedi.ucly to avoid bankruptl \

prices of only SI:I. months before led to a fall in the \'alue of the rouble, escalating inflation and a renewed spread of poverty. Financialisation and the debl economy had proved incapable of moving world accumulation forward al its old speed In the 1980s, 1990s and mid-2000s. It had fahered en'r), few years and, at the end. threatened to fail completely, leading ro a cnsls of unpre­ "hctable depth. Governments whICh

m

words. if not in practice,

had insisted that the free market could be left (0 cure its own faults, were now faced with the grim reality thar left to itself capi­ t.llis� could, as In rhe 1930s. threaten to fall into a catastrophic �ll1mp, with the collapse of each giam firm ricocheting through the economy and leading to rhe collapse of Q[hers. Urged on by some of the giant corporations, �tate!. saw no al­ ternative

but

to

intervene

m

the

economy

on

a

scale

unprecedented e'(cept under cirr.:um�taT1Ces of tQ[al war. So It was the Bush admllllstr;ltion. the most nghl wLng III the US for 75 years, ,hat cftectively nationalL�ed the mong.lgt' corporanons Fanny Mat: and Freddy Ma1.: carl)

III

September, There was one

laSI attempt to rely on the market when LI allowed Lehman Brothers to go bust-a deciSIOn pra.!.ed by Ihe Fmaf/clOl Times editorial as a -courageous" and:1 "risk Ihat might well pay off".'" The disastrous outcome k·ft states with no choice not only (0 at­ tempt one and half trillion dollar hall-outs. but in effect to Ftn:mc'alli.at,on :md [he Bubblf"ll�[ Burs!

291

partially. and sometimes comp letely. nationalise not just rel
Britain, bur some of tbe giants. As they did so. their advisers beJ.:.I I I to ponder whether the only solurion to the crisis might he the n.1

tionalisation of whole banking systems. State capitalism, anJ 1 1 ' ideological correLae, Keyncsianism, was making a massive cnnh

back after being hidden in an Ideological closet for a generation

nl "finance'" or "finance capital" as having distlflct interests trom IUlxiuctive capital. The French campaigning orga nisation ATIAC hlld started life i n the late J 990s committed to opposition to finan­ , I,d spccul:nlon, not to capitalism as such:J Irs central demanJ was

[lir a "Tobin tax" on movement of financial funds across national h�)rders. This, it was claimed, would counter financial crises. Such "tinance is to blame" arguments found

3

resonanct' among many

', Idical Marxists. Dumenil and Levy wrote of "neoliberalism" as

"the ideological expression of the reasserted power of finance"

Finance and ufinancialisarion"

which "dictates Its forms and contents in rhe new stage of interna­

The great cri�is thar erupted In 2007 led thQse who had rejoiceJ .11 the wonders of capitalism during the great delusion to try to 1'111

the blame on something other than capitalism as such. The t'a�It"�1 way to do this was ro see the "the banks" and ""fin3.nce" as lit·

tached from the rest of the capirabsr system. French prcsiurlll Nicolas Sarkozy went to a G7 meeting in January 2008 declarll1)� that "something seems our of control" with the financial SYSII.:I I I

and calling for increased controls over it." All accounts oi tlu' Davos World Economic Forum III 2009 told of the deep unpopll larity of [he banks with the reprC!>entarives of multinationah ,lilt! governments: "The audience cheered in Onc debate when NaS�lfll

Nicholas Taleb, author of The Black Swal/, said it was tIIne I I I punish hankers br forcing them to hand back bonuses""l Such argumenrs led to a simple conclusion: the way to prevent furure financial crises was greater regulation of fin:mce. Such \\ ,1\

rhe response of many mai nstream economists-former Illone rariSTS and moderate Keynesians alike. with repeated discussinn�

in the pages of the Financial TUlles over the degree of regulanClIl that was possible and necessary. This was also thc response o f

some anal,sts on the reformist lefr. Rohert Wade of the LSE cfluld provide riveting accoums of the absurdities of finances that led to

the crisis and then conclude that greater controls could stup them." Larry EIl]()[ and Dan Atkinson i n their hook The Gods [11.11

Failed blamed "the gods of finance", called for increased regul'l tion and a breaking up of the gigantic financial institutions, and

then saw some hope in a meeting of G7 polic y makers early III 2008 that contemplated "measures to rein in the turbo charged h nancial interests" ." Rather further to the left the rise of finance had alread}' led to thl" re-emergence of the old notions of Hobson, Hilferding and Kaut� 1... \ 292

The New Age of Global In,I,}.],,],1

I1rmal isation.'· james-Crony's tone was v�ry similar, argulflg that 'financial interests hase become much more economically and po­ litIcally powerful, and . . . these trends have been coterminous with a Ilt'rerioration in real economic performance""- Francois Chesnais wrote of "'a

�Iobalis('d regUTle of financially dominated accumula­

uon" /' in which "the movement of money capital has become a

lully autonomous fmce vis-a -vis industrial capital", forcing it either

tll

accept a "deep interpenetration with money capital. or to submit

It· If to irs exigencies" "� He took up the expression of Mable, Barre IJId Boyer, according to which " bad capitalism" had been abl� to I..hase out "good".'" Chesnais as a revolutionary socialist did not himself regard the old form of capitalism as "good" (hence his I)Uning the word ben't'een quore marks). Bur he did argue that fi­ n,lncc was to blame fm the "mediocre or poor dynamic of uwestment .. :'" A similar emphasis on finance baving interests �trongly opposed to those of productive capital was to be found i n Prrer Gowan's The Global Gamble, a very useful account of US I..apitalism's attempt to maintain global hegemony. He argucd that "some of the sharpest conflicts within capitalist societies have 0(:­ �Uf[ed ... between the financial sccror and tile rest of society". J1 The accounrs of "financialisation" varied considerahly in their detail. But they all shared a contention that the -dommance" of uhnance" led to a shift in the dynamic of the system. Productive ,apical, it was argued, was concerned with productive accumula­ lion. In the carl}' post-war years this had occ urred across the mdustrial world, even if it was organiscd differently In the US and Britain, where industrial corporations bad used internally gencr­ .Ited profits in order to undt:rrake long-term investments, and in lapan and West Germany, where collaboration w ith tbe banks had provided such investment. But tbe rise of big investment fund� and the '"'dominance" of finance had changed that. The situarion now hrulnC,ah�an"n and the Bubbl� thaI Bursl

I91

The "shareholder value" version of the financiahsauon ar�u

wa� that all the pressure was on firms to deliver quick relurn_ I, shareholders ("shareholder valueM) Through high dividend r.I'

UlCTlI

ments and measures Ihar ensured a high share price (so hO()�I I III' shareholdt'rs' capltJI garrlS). and on governments and narum.rI

bas often been taken for granted. But I t contains hig gap...

I )u.:k Br}'an and Michael Rafferry have pOInted out that:

hanks to keep mterest rates hIgh. Ve rsions of thIS standpoint h.I,(

the srock market should not be so heavi ly emphasised. It is,

been presented by Kernesian writers like Will Hurton and \\ 1111.1111

.. ker all, a relatively minor forum for raising funds. Even

Keegan

rhe 1990<; to counterpose the �shof(-termism " " I

so-caUed market-based s),stems such as the US, UK and

"Anglo-Saxon" capitalism to supposedly long-term. more lnH I

Australia, retained earnings, loans and bond issues have been

menr orienrcd approaches of Japane�c and German capit.llIslll·

far more imponant . . .

m

m

the

Now It was extended to all the advanced industrial counlrh:,

I urthermore, pension foods etc:

WIth the pania( exception of Germany." Crotry. Epstein and jayadev referred to this as a growth ot rl'l1 tier incomes and "remier power". They were harking had.. 10

rarely if ever play an active role m the managerial deciSIons of

Keynes's application of the term remier to idle "gentlemen'" \\ I",

firms. lruti�tional shareholder pressure on company boards . . .

wcre recelvll1g imer�t or dividends p.lyments through the PO'>t

is the exception rather than the norm . . .6&

I, 'I

doing norhmg. But nuw the rentlers were "mutual funds. puhlh and pri\'ate pension funds. insurance companies and other 11151 11\1

r he fact that firms hand out a bigger porrion of their profits as diV­

tiona I investors". II

Idends need nor in itself slow down the level of investment. The

Costas Lapavitsas. who provided excellent factua l accoum, 01

"rentier" shareholders can themselves lend a portion of their in­

thc dcvelopment of the financiaJ cmrs of 2007-8 neverthcle�� rill

�()mes back for further investment-and will do so if they think it

the stress i n explamlllg it on purely financial aspects-in panrul

1\

lar the changed behaviour of the banking system, which h.• d

"�hareholder value" Interpretation. Stockhammcr, admits that

shifted ItS lending from industry to lending 10 mdividuals and fl'

most economists hold that:

..

liance on

new

computerised technologies. He

a

going to be profitable enough to do so. One proponent of the

rgued th.lt rile'

"direct exploitation" of consumers by the banks had bccum�· .1

Financial investment is a transfer of assets, not a lise of

major new source of surplus value and influenced the dynal1lj(�

1

income. Bu}'ing stocks transfers liquidity from one economic

the <;yliTem.... But this form of McxpI Oltauon". like that caused JlI

agent to another, possibly from firms with bad investment

supermarkets forcing up prices,'- is only significant in so far .h

opportunities to ones witb good opportunities. Thus macro­

workers do not fight to protect the buying power of their wage, .11

economically finilllcial

the point of productlon-someming unions in Britain have l"lt

physical investment.·'

..

investment cannot su bstitute for

al l}' tried to achieve by demanding wage inCf{'ases linked I'll .1 Retail Price Index that includes mortgage Interest paymcnts. (h.

And Crony suggests at one point that �financiaJisation"', by in­

as Marx would have put It. tbere is ani)' increased exploitallon III

(;teasing compemion between firms, brings about more, "coerced",

so far as the capitalists " ho employ workers get away

I[h

mvestment.": Cenain l)'. big financial institutions h3\-e nothing III

bu}ing labour power at less than ItS value." It is also wunh

principle agamst productive im'cstmem, even if finance did come to

addrng that on Lapavitsas's logic It is It not only w(lrkers who

Jbsorb a peak figure of 25 percent of total investment in the US in

\\

.u�'

exploited by the banks but also indebted members of the capn.t!

1 990 as against only 1 2 percent in the mid-19705'1 and rose to close

ist class and thc new middle class-the median debt of householll�

i Britain to half n

in the us with incomes of more than $ 1 00,000 in 1003 was .t bOUI

1990s when the dotcomlnew technology boom saw indu�tria[ 111-

four and a half t,mes that of households with incomes in th('

\'estmcnt in the US financed b}' borrowing from tbe institutions ..s II

range of S25,000-S50,OOO.IY

soared ahead of savings. hnandalisanon and

III

the same period." This was shown in the late

'he Subbt� Ihal Bul'>!

The supposed dominance of finance over production is utl< II traced back to the US Federal Reserve under Paul Valeker ral�III�'.

IOtereSt rates �harply in 1979. Boyer., Crotty. Chesnais. Dumnlll and Le\y all see this RVolcker coup� as a deCls,,'e pOlrtt. DunW1111 .lIld Levy regard It as the great victory of finance, and argut,> till was why high ioreresl rares were �maintained through the 19){o and 1 9905 .·' Impl icit in such arguments IS [he suggestion Ih.1I ..

somehow finance in general and sbareholders in particular h.l.I suffered through the decades of the long boom bur were only ,.111,

to express

theif feelings with rhe "coup" ()f [he late 1970s. Thl" .11 gumeor simply does not fit the hisrorical faers, The posr·\\ ,1r decades were ones of l'normous self-confidence am()ng all sectIUU'

of capitalism. The "golden age" for ndus i. trial capital was IH n. . means a hving hell for Its shareholders and financiers. All g
inflatiun and t.k\'alU:ltion of rhe dollar. But, as Robert Br�[1Il\'l points OUt. had sllch a policy solved the problems of profila ltlllt\

and industrial overcapacity for [he rest of US capitalism, "If " quire cOllcei\able Ihat even the powerful coalition of imern,1

tlunal and domestic llHerestS arrayed against II would h.H, failed". In fac.:1 [h� Keynesian approach did not achieve thnl' capitalist goals. Limited economic recovery from the receSSion CIt 1974·6 inc.:reased the 1C\e1 of inflarion. which reached 13.3 pn

cem, This had [\\10 negative consequences for all sections ot l:" caplm!. It was hkely to encourage workers [0 struggle over waf.l·'

And II was undermining Ihe capacity of the US dollar to act ,h 1 measuring rod for US capitalists in their transaction!> with ea� h other. Forcing up interest rates was meant to solve both pruh .

lems-by reducing the level of economic activay to scare worker, 11110 accepting lower wage increases (which it did) and to redUll'

inf1.ltion (which it also did). This enabled some sections of finan�' to gain and induced a recession that damaged somc !>ccti()n� (It American productive capital. Bur it also served the general inler

Raising interest rates . . .can be carried more or less to exm:me!. by mistake, based upon false theOries of money and enforced on {he nation by the Interest of money lenders ... The basis, how­ ever, is gtven with the basis of the mode of production itself. A depreciation of credit money would unsertle all existing rcla­ rions. Therefore the value of commodifies is sacrificed for the purpose of safeguarding the fantastic and mdependent existence of this value in money . . . For a few million in money, many mil­

lions in commodities must be sacrificed. This is inevitable under

capitalist production and consfltutes one of ItS beauties.',

I he suffering of many hundreds of millions as a result of the Volcker interest rate hike was a price worth paying to restore a rel­ ,ltively stable measure of value as far as US capitalism in its ennrely

was concerned�and helped cement its control elsewhere III the world. The "coup" by Volcker (and the turn to monetarism under Thatcher in Britain ) consisted of turning away from one policy that was supposed to help restore the profitability of productive indus­ try-expanding the moncy supply so as to allow prices and profits to rise-to another pohcy, that of encouraging interest rates to rise

�o as to squeeze out unprofilahle firms and 10 put pressure on workers through unemployment to accept lower pay. Capital-and nOt just financial capital-was rcc.:ogmsing that the Keynesian or­ thodoxies of [he long boom could not cope wllh the new phase in

capital (including, nOl le3S[, IIldustrial capital) found itself. . ....hich When [his manoeuvre produced only mimmal results and it became clear that lhe high interest rates were beglllnjng seriously to hurt US industry, Volcker cut them-not only under pressure from industrialists. but also from sections of finance." The trend of real long term Interest rates for the next quarter ccnrury wa� down, nor up, althuugh they rem:tllled above the level of the long boom until the ycar 2000. after whICh they fell to around 1 per­ cent in 2003. The whole claim that there are [\\'0 distinct Sl.:ctlons of capltal­ finance capiml and mdustrial capital-is open to challenge. Many important financial institutions nOl only lend money. but abo borrow it, since [hey are involved in "intermediation" between

em of ;11l US capitalists.

lenders and borrowers. What matten; for them ;s not the absolute

As Marx had noted, capitalism needs money to act as a fmrh stable measure of value, even if damage is done to society a!. .1

level of nterest i rates but the gaps that open up between different rates. particularly between long-term and short-term rate!>. And

29'

FinanClaliSll:lOn and the Bubbles IhJI Bursl

whole

111

order to achieve it:

111-

dustrial concerns lend as well as borrow. Typically they accumulate

surpluses berween boUis of ne w investmem, which the., lend OUl III . return for IOterest (see Chapte r Three). They also advance crcU II I" the wholesalers who take their produce off their hands. In shorl. 111 du!tlrml capital takes on some of the anriburcs of finance ca piLlI As hoh and L.pavitsas point ou t, "Revenue in the form of IIHcr nl tcnd.. alw [Q accrue ro industr ia l and commercial capitalists, .lIhl cannot be the exclusiVe" foun dation for a social group�.·· T hul11.1 Sablow5ki-who olccep� pa rt of the "shareholder value" P"'I flon-makes the POlOt: At the level of the common sense, it seems to � no problem I" talk about finance and indust ry, like they were objects ea51h In distingUish. However, the defin ition of the concepts of industrl, 11 capital and financial capital is no easy task . . .'" But if this is true, then it is difficul t to see how the recurrent cmn of the last four decades-fin ancia l and indusrrial--o -c uld Sl rnpl)" hr blamed on fin
t�

Irresponsi b le lending practices, laxllY III them and problems 01 ' In this way. the reality of 180 years of periodiC rcgulation".Irt�S

was shoved aside, in a desperate attempl to connnue to

('<:tol the virtues of capitalism. Tho� radical economists who put the stress on financialisanon 111

creating the crisis risk opelling the door

to

such apologies for

Ihe system. Their characteristic argument has �en to cl? lm that profit rates had recovered in tbe 1 980s and I 990s suffiClen�ly to

h.we brought about a revival of productive investment were If not tor the power of financial interests. Such was the argument of [he hench Marxist Michel Husson, when he claimed in 1999 that there were " higb levels of profitabi lity" ,-1 and Stockhammer and I)um�nil were saylOg much the same thing iO the summer and .1Utumn of 2008.·J If they were right, the CflSCS which broke in 2001 and on a �uch bigger scale in 2007·8 would indeed have had causes very dlfferellf to prevIous ones, including the inter-war �Iump, and greater control by the existing st
�

lour of the financial sector would in the 2 1 st century be suffiCient to SlOp such crises. In accordance with such an �pproach. Dumenil and Levy described the �Keynesian view" as ··very sen­ 'Ible" and looked 10 "socia l alliances" to �stop the neoliberal offensive and put 10 work alternative poliCies-a different way of managing the crisis".-' Yet. as we have seen from the vanous profit rate calculations in Chapters Eight and Nine, there seems little to justify clamlS that I:nses today have different roots to those in the past. The form of the crisis might be different each time to (he last, but its m i pact WIll be just as devastating. No amount of regulation of finance � lo�e will prevent a recurrence of crisis, and the COSt to the capita list

Ideology and explanation Any great cri�IS does not ju st have economic consequenc e,. I t turns capitalist against capita list as each tries to offlo

nate of trying to stop this can become almost unbearable. it is true that "financiaJjsarion", having risen out of a situation of low rates of profit and accumulation, fed back into both. There was enormous waste as labour and skills went into moving money from one pocket to anuther; as potentially productive material re· S()urces were used to build :lIld equip ever more grandiose office buiJdings, and as the financial "Masters of the Universe" gorged themselves in conspicuOus consumption. It may also be, as Ben Fine has argued, that financialtsation had the effect of driving a Mwedge... between real and fictitious accumulation":' mOl kin� it difficult for capitalists to see through the fog of the markets and recognise productive investment opportunities. But, ultimately. It FinancLahs:mon and Ihe Bubble� thaI Rur'l

was the deeper problems facing the producrive secmrs of !.:aplr.IJ

I'\;onomisu offering advice debated with each other whelher I I

that brought this situJtion about. Finance is a parasite on (he h.1\�

would be enough to halt the transform ation of recession into slump,

of a parasite. nor a problem that can be dealt with in isol,l 1ll1l1

whether governments would be able to raise the money withOUI

from capitalism as a \\hole.

Inrcing up the interest rates they were rrying to lower, whether they o.hould tum ro "quantitative easlng"-that is, printing maner-and whether any success with thiS might not risk bnnging aOOm a new

The contradictions of the new Keynesianism

lI1i1ationary spiral and an even greater slump.1O

The problem did not JUSt lie with the size of Ihe banks' losses. It The way the CriSIS W:I.S rooted in the economic system as a \\11lI11 was shown by the sheer difficulties gO\'crnments had in reacllnJ.,: II'

it. ThiS was a crisis that hurt big capitals and nOt just those \\ho laboured for them. Humpry Dumpty had indeed fallen oft rht wall. Yet it seemed that all the klng's horses and all the king'!> n1l'n

,lisa lay with the massive internanonalisatlon of the system com­

I,ared with eimer the 1930s or even the 1 970s. The Keynesian

r('medies which were supposed ro deal with the Crisis were reme·

Jles to be applied by national governments. none of which had the r�sources to pay for all the losses of the global system of which

could not PUt hun together again.

tbey were part. The biggest states might conceivably be able to sal­

The response of \inuaJly all governments to the crisi� 111.11 erupted In 2007·8 was to turn away from tbe free market pollul:�

\':lge a good

they had proclaimed for three decades as the only ones that would work. Overn ight they ditched Hayek for Keynes and kept nnll

tn,1t bit of Friedman th:n urged increasing the money supph tl' ward off deflation."

But the conditions for applying Keynesian policies with al1\ hope of success were worse than they had been when they h,ld been tned and abandoned 30 years before. The known scale of till' losses made b) the banks dwarfed those of the mld-1970s-and 1111 one knew, a!> each hank went bust, which other banks were owc:J

�art

of their national financial system. But the

problems even here were vast, and rll
The system in a noose The crisis had revealed one of che great fault lines running through l:apitalism in the 2 1 st century. The complex interaction of states and capitals which had been simplistically referred to as globalisa­ lion makes it much more difficult for national states to fulfil their

money by it and might go bust too.

function of aiding (he gigantic c.lpirals based within them JUSt as

The promised bail-ours were massively bigger than those ,1 1_ tempted hy Roosevelt's New Deal in the 19305. US fedl'f,11

rhe need for that aid becomes grcatesr. As Paul Krugman putS it,

expenditure then peaked at lust over 9 percent of national ampul in 1936. This time round J[ was already 20 percent before the cml"

began, and the Bush and then the Ohama administrations raised II se\-eral percentages more. Bur the levels of debt in rhe system rh,1t somehow had 10 be covered were also much greater if the finam:i.l l SySTem was ro bcglll to function again . George Soros calculated " rotal credit outsnmding" dt 160 percent of gross domestic prod

lIct in 1 929, rising to 260 percent in 1 932; in 1008 it was 3 6 ) percent and "hound to fise to 500 percent". The Bank at England estimated in the aurumn of 2008 the glohal losses of thl: financial system ro he as high as $2,800 billion:' Nouriel Roubll1 l

there are ;';maJor policy externalities", Since -my fiscal stimulus helps your economy, by increasing your exports-but you don't �hare in my addition to guvernment debt" and so -the bang per buck on stimulus for any one COUntry is less than it IS for the world as a whole".'L It was a contradiction that me\'irably led to deep polincal fis­ .o.ures within nariunal ruling classes and to hitter diviSions hc{wcen the states which were supposedly cooperallng

to

deal with the

crisis. Domestically, sections of capitals complamed bitterly in 2007-9 at the potential COSt of bailing out other sections of capital. and internationally govcrnmenrs quarrelled With each other as Ihe concentration of each on efforts In prevenr the collapse of

us

estimated rhe losses of the American banks alone at $ 1 ,tWO billion early in 2009:' As governments poured ;n the money, mainstream

nationally based capitals led to accusations of " hnanci31 protec­

300

FinanClalis.ation and th.. Buhble) thaL Burst

Tltc :-....w Ag.. of Global lllSfahllu,

tionism". As onc observer told the r"na1lcwl

Times:

101

There is a very nrong law of unintended consequences t,lkllW

tlt;cumulation even If the rate of profit cominued to fall. ThiS. hm\­

place after all the bank bail-outs. We will see more and more .1\

t

t!Vlst government policies that distingUish economIC aCtl\'1111

Ihe drive to accumulate collided with the restrictions imposed b�

according to the nationality of the actors. 11 should be a big 1.:1 III cern to everybody,1Il

\cr, was a policy that could ani), work up to the point al whu;h

the narrowness of national boundane\. This limnation showed Itself in the dri\'e of Germany and Japan to expand their nanonal

'�t)undaries through war in the mid to late I 9 30s in the decllllmg ,

At the time of the World Economic Forum In January 2110'1 Gordon Brown warned against "financial protectionism", and II!

tf«tiveness of the US arms economy by the early 1970s and in the

t;risis that tore rhe USSR apatl in 1989-91.

was then denounced in turn for that very sin as he pressun ..nl

Today the sheer scale of integration of national econOffiles

BritISh banks to tend domestically and not abroad;" the Germ.1I1

means that serious Implememation of state capitalist solutions

government was criticised for nor boosting its domenic ('CunUIIII

would cause enormoWi disruption to th� system as a whole. Yet for

but relying on exports to the countries that did; It In turn Ctl(KIWlt

national states sunply to sit back and leave giant firms to go bust in

the French and Bmish rescue packages as a form of subSidy I"

the hope of crises liquidating themselves, as the Hayekians preach,

thlnT firms which would damage German interests; the new U\

would do even greater damage. The twO long-term tendencies

government dcnowlced China's government for "man lpulanr1f.,:'

JlOinted ro by"'Marx-for the rate of profit to fa ll on the one band

irs currency to aid ItS industries; the Chinese government relOrlnl

.Ind for the concemrarion and cemralisatioo of capital on the

that us finance had caused the whole mess;" and " Iess wealth,

mher---(;ombine ro pur the whole system in a noose. The attempts

countries fretted" that the us would �use

of capitals and the states iII which they based to wriggle our of it

up capital"."

(orC£'

maJeure IU �cJ.lk

t;an only increase the tensions between Ihem-and the pain they

The ideologists of free trade wamcd that prutectionism rish.! deepening the recession as the Smoot-Hawley Act in the US !>ul'

Ulflict on those whose labour sustains them. As states stepped in to intervene in the economy to cope with

posedl)' did in the summer of 1 930 by raising tanffs on Cerr;llll

the crisis after October 2008, some sections of the left believed

Imports. As Peter Temin has noted, "The idea that the SmuU1

that the resurrection of Keynes meant the resurrection of the wel­

Hawley tariff was a malar cause of the Depression is an endu(Jn�

lare policies of the long boom. In Britain, Ken Livingstone, former

conviction ... and has found irs way inro popular diSCUSSion ami

mayor of London. declared that the �econt)mic assumptions of

general histories"." But he adds. " Despite its popularity, thilt

!\'ew Labour's thinking... ha\·e been abandoned". pony Toynbee

af

gument fails un both theoretical and histOrical grounds." Expom

proclaimcd, "At lasr, the party of social justice has woken up...

only fell b)' 1.5 percent of us GNP between 1929 and 1 93 1 , whlk

The

"real GNI) fell 1 5 percent in the same years" .• And the first re.ll

tary of the biggest UK trade lIllIon, Unite. saw the pre-budget

-

ew Labour era is over." Derek !:tImpson, lomt general secre­

movement from the depths of [be slwnp twO and a half years tarn

report as "a welcome warm up exercise after 30 years of inaction

carne after measures by Roosevelt which included putting nation.1 1

olnd neotiberal economics". Yet reality soon proved otherwise. The

capitalist mterests firSt with an effective devaluation of the doll.1T.

governmenr aimed to pay for a short-term economic boost with

Even more effective, as we have seen, were those measures takl'lI hy the NaZI state 111 Germanr

long-term cutbacks in expenditure on education, health and social

For those firms that produced mainly for the national markl'! (the great majoriry in early 1 930s), it was better to be in a protel

'iCrvices. The l1t:w Keynesianism fur capital was comhmed with a continuation of neoliherali�m for those whu worked for it. This was not a peculiarity of Bmain. In every sector of Ihe

rionist st:lte than a non-protectionist one. That was the ratiOtl3lr

world system the attempt to deal with long-term downward pres­

for stare capitalism and Its ideological correhHes: Keynesianislll.

sures on profit rates continued (0 mean cHUrlS to push through

dependency theory and Stalinism. If the state could get control n!

counter-reforms in working home;, welfare provision, w3ge rates

the most important investment decisions in the narional econnnn.

and pensions. The push was intensified as global economu;

it could assure that the mass of surplus value was absorbed in 01:\\

growth fell to zero and threatened to fall further. The turn [U

302

huncialisauOfJ and lhe

Th� N�w Agt of GJah"l lnstabll",

Bubble51h;1I Bum

101

Igntlt nor serve the imerests of the workers. the peasams and the POI" Keynesianism could neither reS[Qre the system to its old

\

IIMl Four

The system was only able to recover from the CrISis of the il1l11 war year� after a massive destruction of value through the WOh' ..

lump capitahsm had ever known followed by the worst war. Thl

gre;uer siLe and Interconnectedness of capitals [Oday means th.1I the destruction of value would have to � propof[]onately gre.lIn to fetllen the system to a new "golden age". After all, even tll\ bankruptcy of tht world's second biggest economy. that of til, USSR, twO decades ago had only marginal benefits for the reM 1,1 the sysrem-a lower global price of oil rhan would OIherwise h,1 \1

THE RU NAWAY SYSTEM •

been the case and some cheap skilled labour power for \Xl'" European firms.

h is necessary ro repeat that this does not automatically me.1 I! endless slump. The hmits on the degree to which some capitals .. 1Il .

gain from the destruction of others do nor mean that no gams .It all ;lfe possible. The wiping au{ of man}' small and medium sin·d firms can provide some relief for rhe giant firms thar states prop up. New bubb les ;lnd periods of mpid growth

III

one part of tilt'

world or anorher are n(lt only possible but likely. Bur they will not involve the whole world economy moving forward uniformly anll will anI} prepare the way for more burst bubbles and more criSl'�_ And the consequences will not only be economic.

Thr Nrw Age 01 Glohal lnstabdll.

•

, flAPTE.R TWELVE

The new limits of capital

-\ system that undenpincs itself ( apitalism became a global system 111 the 20th century in a way it Iud nor been before. Not only were there global marketS and global Imance bur'lllocapitalisl industry and capitalist structures of con­ \l1mption arose in every region of the globe, although unevenly. As Ihat happened a tendency noted III Its embryonic form by only the most far sighted thinkers of the 19th cemury, including Marx and !"ngels, developed until by the end of the century it was visible to everyone who cared to look. This was the rendency for the system to undermine the very process of Interaction with narure on which II, ike l

evcry other form of human SOCiety, depended. The most dramatic expression of this has been the way the ae­ \:umulation of certain gases In the atmosphere are raising the Klabal temperature and producing climate change. Capitalist industry and its products always had devastatmg en­ vironmental effeers. Observers of all sortS bemoaned the pollution of the water and atmosphere in the industrial areas of Britam III the mid- 19th century. Charles Dickens wrote in 1854 of his fic­ tional (hut all toO real) Cokewwn, "where Nature was as strongl) hricked out as killing airs and gases wefe bricked in";1 Engels raid of how, "Bradford lies upon the banks of a small, coal black, foul­ �melling stream. On wt.'ckdays Ihe town is enveloped n i ..l grey doud of coal smoke".! Epidemics of cholera and typhoid would �weep through cities; tuherc ulosis was a curse rhat mo�r working class families were acquainted with. But the disastrous environmental effects of capitals' blind self­ expansion were local effects. II was possible to esc. 1 pc from the \mog filled CiteS, the rivers so pollured that fish could not surv;\'c 111 them. rhe slag heaps and the open sewers. The bigger scale oi l.:ap­ ltalist production and accumulation in the 20th century meant '07

bigger environment.!1 destruction-the transformation of agn� I I I rural land into a du�t bowl i n pans of the US in the 1 930�. 1 1 1 1 horrendt)u� e..cape (If gases that killed thousands in Bhop,ll III Indl,l in 1 984. the nuctear accidcnl:!> at Three Mile Island III Pcnn"yl\.lnl.l and Chernobyl in Ukraine. the de\'3st:nion 01 ,Ilt Jives of the people

ho lived around the Aerial Sea as the) 10)( 1 \\ . ,

\\

[hlrds of their water ro conon production and salinauun SCI m. 111' collapse of cines built on earthquake fauh lines. These were, ho\\

_"Wng i n earher. as, for instance NASA's James Hanson argued 111 I\llriI 2008 ): To avoid that point being reached. cMbon conccn­ trl1uons have to be kept down-the IPee argues to between 445

,Uld 490 ppm but even 400 ppm might push the temperature up 10

dl� 2 degrees threshold.'

Over the last n\'o decades governments have come to accept th,lt global warmmg is a threat to much of humanity. Tne Stern ish govemmenr, for Instance, concluded in 2006: • port for the Brit

ner, still local disa�rers, desplle the scale of the human loll Suppurter... (If capitalism-and of tbe state capllali�m U,(I,1I11

All countries will be affected by cltmate change. but the poorest

called " socialism"--
counrries will suffer earliest and most. Average temperatures

denrs. Critics of capitalism wouJd denounce their horrors, hut flnl

could rise by

see them as having a systemic impact.

goes unchecked. Warming of 3 or 4°C wlii result in many mil­

soe from pre-industrtal levels if climate changc

II' was not until the end of the 19505 that SClcntJ�rs found thr

lions more people hemg flooded, By the middle of the cenrury

first evidence that man·made gases were beglllmng to crC.lIr ,I

200 million �ay be permanently displa.ced due to rismg sea

globa l catastrophe by causing average tempcral'ures to rise-.lIltl

levels, heavier floods and drought, Warming of 4GC

nor until the late 1 980s that definite proof emerged of how loCnOU\

likely to sertously affect global food production, Warming of

rhe situation was becoming.'

zoe could leave 1 5 to 40 percent of species facing extinction.�

The scientific conclusions are well enough known (or a mrll' summary here to suffice. The most important of these ga...c�

•

1\

.

most people now know, is carbon dioxide, produced by burnll1� carbon hased substances such as oil and coal to obtain energ\ although gases such as methane and nitrous oxide also have [(J h, taken inro conSideration. The concentration of the�c gases In lilt' ilflllosphere is measured in terms o( pans of carbon dioXldl' equivalent per million. or ppm. In pre-indu!ootrial times it was .2)om ppm; it now stands at 385 ppm and is rising by about 2. 1 ppm .1 year. �o tar the change has been sufficient to raise the aVer,l�1' temperature of the Earth by about 0,8 degr�s celsius. and if enm slons conrinue at thc'Ir present rate. there will be furtlwi temperature rises of about 0.1 degree!. a decade. This is if mlll'l things remain as at present. But there are various feedback melh anlsms produced by risin g temperarures that would le;IJ III accelerated change-the melting of ice caps, the reiealoc uf r.:arhnl1 dioxide in the sea or of methan(' from arctic tundra. the desenitl catton of forests, There is no final scientific comcnsu� as 10 th\' telllperature� (the "tipping points") that would cause these fenl back mechanisms to take effect, but it was widely accepte(i 111

2007 that "ome would be likely to set in If the temperature

ro�l'

1

or

more is

rhcre was agreement as carll' as 1 992 at Ihe Rio Earth Summit on Ihe need ro srart negotiations on measures 10 reduce emissions, ..nd the Kyoto conference five }'cars later produced a general

tramework for action. By 2007 even US preSident George W Busn hacktracked and accepted rhe prmciple of global wannlng. The significant thing, however, is that such verbal agreement

has not been Iransiated into the sun of action likely to prevent the 1 percent limit--or even higher figures-being reached. It took an­ mher four years after Kyoto before a conference III The Hague ..greed on its implementation. The final agreemenr was -weak, un­

rnforceable and full of market loopholes".- 11 was not only that Ihe US and Australia had refused to sign up. The European powers, who were supposedly keen on rhe agreement, did not keep within [heir targets. There was no reduction in the speed at which

dlmare change gases cominued to build up in the armosphere. The t;lobal Carbon Project reported a record 7.9 billion tonnes of Larbon passing into the atmosphere in 2005. compared wirh 6 , R

eo;

emissions fr0111 hillion tonnes in 1000; the growth rale o f 2000 to 2005 was morc thall 2.5 percenr a year-in rhe 199010 II was less than I percent a year.'

that at present ( that does not preclude some o( these mcchalll�lIh

The G8 meeting in Ro�tock III rhe summer of 2007 was paraded ,IS the occasion when more decisive acrion would be forthcomln�.

10.

The New L,m,[5 of Capital

degrees above the pre-indusrrial levcl-about 1 . 2 degrees tlbt)\ r

10'

But declaring there was a maJor problem, the world's leaders rn,1

poned even beginning to do anything about it for two year<;. :\11.1 all they agreed to discuss at thai date was an attempt to h.lhi' greenhouse gas emissions by 2050, whereas even an 80 percelll � u r III emLssions would not be enough to guarantee keeping glo).,11 warming below2 degrees.' Governrnenn which hal'e proclaImed averllng climate ch.lI1):i· to be at the tOP of (heU" agendas have proceeded to act a:. II tlu appearance of doing something was more importam than Ih� n aliry. Tony BlaLr spoke of cli mate change as the �most scrwlI issue facing mankind�.u His government committed to aml .1I .1 global figure of 666 ppm carbon dioxide equivalent (a fillll1� figure). Yet the Stern reporr commissioned by If estimated Ih.l1 with 650 ppm there was a 60 to 95 percent chance of 3°( lIt warnllng. and an Enviro nment Department report In 2003 h.lIt found that with "with an atmospheric COl stabilisation COll('TII (ration of 550 ppm, temperatures are expected to rise by hetwct'll rc and 5°C"." Watching such behaviour is a bit like watching a car crash III slow motion, WIth the driver aware of disaster ahead but plou�h ing on regardless.

But they have faced some oppositlon Irom orher capitalLsl nreresrs which du have a direct financial intereSt III trying to VOid clilnate change-the Insurance corporations, for Instance. What has to be explained is the relative ineffectiveness of these rdrs.

IIUnter-pressu res. The Issues go [0 the heart of [he system as it is currenrly struc· IIr�. H.igh levels of carbon-based energy are central to virtually Ycry productive- and re-productive process within the system-not II I'It to manufacturing industry, but to food production and dIstri­

bution, the heating and functioning of office blocks, getting labour to and £rom-workplaces, providing it with what it needs ro ! p)wer replenish itself and reproduce. To break with the oil-coal economy means a massive transformation of these StruCtures, a profound re­

.haping of the forces of productLon and the immediate relaoons of rroductio� that flow out of them. Some people argue thaT such restructuring rakes place all the time under capiraiism, and that it is simply a question of gov­ trnments encouraging it to go Ln one direction rather than another. This essentially was the case put by Clive Hamilton. de­ lending the market approach of the Stern report in 3 polemic with George Monbror:

Competition, accumulation and climate change

Stern is confident that once a powerful signal is sent to the market, then the market will find a way to carry out the re­ structuring of the energy economy. There are reasons to believc

What explains this behaviour? The easy answer from part of tin­ environmental movement has been "'Grecnwash" , that is, govcrn

[hat Stern is correct. In fifty years time the world will be dra· matically different: if a strong signal can be sent now, there are

ments arc simply pretending to care abaur the Issue for reason� lIt populamy. That will be true of some politicians. But it doc!; nOI expl:lIn the behaviour of all the maJor players in the s)'srem. iIot.m\

of them. perhaps even most, have come to see that climate ch.l1l�r will wreak havoc on the physical and biological environment tll.l1 the system operdteS in and therefore on the system itself. They WI'

the need to take aCtIon, yet are half paralysed when it coml'� to doing so.

Neither is the paralysis explarned simply by the pressure on Ihl" politicians by lobbying, brihery and blackmail by particular hi).: corporations which fear a loss of profits from any shift away Irom

carbon· based production and tmllsportation. These corporation arc often powerfully placed and could, for instance, delay {'VCil recognition of climate change by the US government for sevcr.11

310

Thr RunawllY SHit'''

grounds for optimism. While we currently have the technologies to reduce the world's emiSSions sharply ovcr the next decade or two, by 2050 the marker-suirably guided-will present a set of possibilities we cannO( foresee. U What is ignored by such arguments IS that even If gm'ernmems do develop effective price mechanisms as signal:. to encourage InveSI­ ment and production in one direction rather than anuther, they arc \Ignals that have to compete with orher Signals-those that come from the pressure to mailltain profitability from existing carbon­ energy inu'nsive IIlvestmellt. An oil company may begin

TO

establish divisions almed lt : de­

veloping carbon free or low carbon energy. But ir will also seek to find profitable uses for its existing massive Investmcm III ]II

carbon in tensive methods (p ipelines, refinerIes, crackers, dnlllll� equIpment). The same goes for manufactunng and rranspOfI.l tion companies. They will stick with their eXlsling heavy enl'r�\ using equipment and building!> at last until they have more th.11I cO\'ered The cost of their investment In them-and will inve�[

HI

more of the same. unless the counter+signals from the gOHn, mems arc very powerful. The bt'haviour of consumers cannot be changed by a nhl' wave of a price wand either. Price signals alone afe not gaUl/! to deal with the 10 percent of carbon dIoxide produced by 1.1I journeys, or (he 18 percent used In heating and lighting hUlI,1 ingsll-except possibly until temperatures have nsen mud, above the 2 degree leve1. People are stuck with their existIII/-:, poorly insula ted homes and patterns of dwelling and work Ih.1f make them dependent upon car travel unless governmcnt<; dll much more than provide "signals". There is an even more assertive version of the argument ,l l1mll the capacity of capitalism to successfu lly reshape itself than Ih,lt put by Hamilton. It holds that the complete restructuring ot I I I dustry to counter climate change would be beneficial to capltalt"", since it would �create invesnnenr". The economic problem leu capitalism in the 21 St century is not, however, that there is SOIIli shortage of possihle ways of investment. It IS that such invcstmctll' are not profitable enough. The system today, as we have seen in the previous chapter�. I' dominated b)' gianr firms based In particular states but operatll1� acros.. several states and sometimes the system as a whole. r.,d, firm is caught berween the need t() undertake big and expensin· 111 vc�tments in order to remain competitlvc and uncertamties aboll! the profitability of such investments. Investi ng in new furm\ (,t energy or more energy efficient eqUipment and products

� i

nul

going 10 overcome that contradiction. Indeed, dOing so \\'0111\1 make it worse for man} firms, probably most. They can be rehl'.j on to pressunse states-and to threaten to relocate if necessan to

minimisc

price

signals

that

clash

with

profirabllill

Govcrnments themselves. identifying with nationally based ,\(';"-11 mul:nioll, will resist 3nythtTlg that interferes wllh n.l ttOIl.11 competitiveness and go a fair hit of the way with the demand, made by firms. This is why the "signals" are so weak, and \dll those who rely on influencing governmenrs, like Stern, end up \V,I terlng down targets in order to make them seem "realistic".

As George Monb,of <;ays, "�Ir Nichola� Stern spells out the .t,te consequences of tWO degrees of warming" hut Mthen recom­

use mends a target fat atmospheric concentrations of greenho of 550 partS per mill ion" which would produce Mat least a ",,, �., percent cbance-and perhaps up to a 99 percent chance. de­ age II(·ndmg on the climate model used--of a global aver that li'mperarure rise cxceeding rc" and "a 24 percent chance Innperatures will exceed 4°C".1' Stern was uDwilling to advise cuts all the scale necessitated b)'

is­ 11I.s own calculations because �paths reqUIring very rapid em any 'Ions cutS" were �uR likd)' to Ix: economically viable". as was

urget lower than 550 ppm.I' ises The Obama election campaign in 2008 made many prom ,Ihout dealing with climate change. Mainstream economists ' 50 Irgued tbe recession itself prOVided an opporrunity for doing e through the stimulu� packages. But when the packages wer pro+ ,Iuced, the picture was rather different: The packages of tax cutS, credits and extra spending have been trumpeted for their environmental credentials by the govern­ ments proposlllg them, bur a closer look shows thar green es. spending accounts for only a small parr of the bigger inItiativ

Much of the spendlllg will go to prOJccts that will, III fact, in­ crease emissions, such as new roads or fossil fuel power stations, while tOO little money will be devoted to low--carhon projects to make a real diffcrence, experts betieve. For instance,

Baraek Obama, the U president. wants S27 bIlli on ( E 2 1 bil­ lion. £19 biLLion) to be spent on new roads, which will raise traffic emissions. Although some funds will he spent on devel+ oping low--carbon vehicles such as electric or hydrogen cars, the benefits gained will be out\vcighed by the emissions generated l by the extra pl·trol+drtvcn cars. o

r. Todd Stern, the US president's new chief climate negotiato claimed that ir was "not possible" for the US to aim for 25 to 40 percent cutS b)' 2020, despite the Intergovernmental Panel on ons Climate Change (lPcq calculating rhat "developed nati s �hould aim for 25 to 40 percent CUtS by then to avoid dangerou climate change". t' In Bri tain "Green companies" were "in retreat, with a wave per of staff layoffs and production cuts" with "'Siemens, Clip The N", Lun,n;

nf CaplfAI

111

Wind power and even BP among the big names . . . rcacting I I I ,I slowdown in the dean energy sector". Thr "credit crunch " \\.1 �sta rvln g \lind and solar developments of urgenti)' need . ,I

cash" and the situation was "being exacerbated by prices I:r.I, 11 Ins to record lows In the carhon trading market"'.'"

�one of thiS means that government "signals" have no eH('� 1 .11 all. They art encouraging new areas of imestment In thing) Ill(" wind and photoelectric power (but also In energy-:lh)lH h1lL�

blodiesel ). New capitals-or innovanve old capirals-are eml' f.� ing that will fight for more space and more resources for 1111"11 wares. Emissions will probably rise less rapidly than otherwi!>(', .11 though it is unlikely they will decline lT1 the short term. But 111(" equivocarion will persist with governments and industri:llists pfI' cialining their commitment to resist climate change one day .1 1ld their determination to extract the maximum amount of oil or 1;(1.11 from the earth the next.

11III in doing so, capirali:.m shortens the " duranon·· of the ··lahour I,nwer" of the individual worker, so making It necessary to replace

1111", more qUickly than orhen'lise, so that: the sum of the expenses for the reproduction of labour power

will be greater; Just as in a machille rhe part of It.S value to be re­ produced every day IS greater the more rapidly the machine is worn out. It would seem therefore that the interest lofl capital Irself point!> in the dlrecllon of a normal working day. '. IIld this mean .:hat capitalists flocked til campai!!n for shoner \\orking hours and mure humane condirions in the factories and ....arking class localities? A few. more far..ighted about the long \, rm

needs of capital as

\\

hole, did. Mo!>t. however, campaigned

'I�ains�any restrictions on hour'>, even for children who would one ,by become more producti ...e, adult, labour power. Again Marx <;ummed lip the capitalist logic at work:

The needs of capital and the needs of capitals The expansion of capitals in competition with each other-o r .1\ Marx put it, the self-expansion of capital-leads them to .HI or�, of carbon energy use just as they recognist it as self·destructive. The phenomenon of capitalism damaging its own envlronn Wll tal baSIS is not completely new, even if it has never occurred on Iht" "Cale It is today. In early 19th century com�titive accumulation III

Britain led to a lack of concun about the physical health, even Iht' phys ical survival, of capitalism's workers. It was a neglect th,lI would inevitably be damaging ro youthful industrial capitalism .1\ well as to the working class, since it threatened to exhau'it Ihl" supply "f fit and able labour power for exploitation. l>.larx summed up what was happenmg:

The capnalis-ric mode of production (essentially the prod ucrl tlll of surplus value, the absorption of surplus--Iahour), pf()du�l" rhus, with the extension of the worklllg-day. not only the dell'

rioration of hum an labour power by robbing it of irs norrn.l l . moral and physical, conditions of development and function. It

produces also [he premature exhau�rion and death of thl' labour power itself. It extends the labourcr's time of prnduCll flil during a given period by shortening hiS aCfual lifefime.

In every stockjobbing liwilldle everyone knows that some time or other the crash must come. but e\'eryone hopes that it may fall on the head of his neighbour, after he hunseli has caught the shower of gold and pbced it ill safety. AIJres mOl

le diluge!

IAfter me, [he floOdl is the watchword (If every capitalist and of every capitalist nation. Hence CapItal is reckless of [be health or length of life of the labourer. unless under compulsion from society. To the outcry as to the physical and 1O{·mal degradation. the prem.Hure death, the torture of overwork, it answers: Ought these to trouble us since they increase our profits?: It took concerted pressure on capital from the outside. by succes­ \i\'e actS of legislation enacted by the state-Ill p:Ut

III

response to

workers' agitation-for the reproduction of labour power to be protected from the ravage� of those who exploited it. It took some 80 years before anythlOS like fully adequate prOtection of such re� production was in place-and a<; we saw

III

Ch:lpter Five it

required the difficulties in militaq' recruitment to bnng home to the state the harm which capital had done to its cannon fodder b)

Its lack of concern with supplies of labour power. Exactly the same logic as that described by Marx IS found III the anirude of capital to the pumping out of climate change gase!> today. Capitahst politicians make beautiful speeches abour the 1bc New Limn,; of Capn�1

,I<

I

need to do something. set up commissions and inrergovernllll'1H ,II meenngs, promise to reshape theirown behaviour-and then hn\\ down before mterests which S3Y that this or that measure to d\ . d with climate change will be £00 costly for the economy to hcar. However. there is one hlg difference between the rendenl.:l * " desrra)" the source o f labour power in (he 1 9th (emury and dl. devastation of tbe Eartb's climate roda\'. The destructlun . I .

labour pO\ler was within the indusrrial areas of one countn It

�

could be repaired by the Importation of workers from the C lIli rrysidc and Itdand. And ('\cnrually the nanonal state CQuid all I. police the behaviour of individual capitalists in the Intere'>t� " I capiral as a whole.

.

I

There is no global stare C:lpable of enforcing irs will on all thl capitalist firms and national <;tat{'s that make up the �ystem. l-aLlI is afraid that taking tht' drastic measures needed to maSSL\ \"l1 reduce gas emissions will result in other firmf> and states sei7 1 1lg 1111' oppOnUnil) to lntrude on its markers. The Issue of climate chanJ..:i becomes inextricably linked with the other struggles within thl world syst{'m-thc struggles betwc{'11 different nationally ha'icd capitalist interests, between national smtes and between classe\, There will be more attempts at IIHernatiC)nal agreements, prr hapf> with a few more teem than in the past. It could hardh hi ' otherwise as growing numbers of the system's capnals begi n to experience thc pain of climate change. But the agreements wil l always been riddled with weak SpOtS because the different St;lIr, wdl go into them wi th matkedl}' ddfetem shon and medIUm term mterests. The national structures withm which accumulation takes piau' depend to very diffl'rcnr degrees upon carbon energy. The US

W3'

self-sufficient in oil umi l the early 1970s. Irs structures of aCCUIllLl larlon and consumption became very highly dependent on 011 dn\l that means that today i t has 20.2 rons of carbon emission pcr person; the main West European states lacked domestic oil n: sources, developed rather different structures of accumulation anJ consumption (with petrol. for instance, ubout three tlflles the co\. It IS in the US), and so have far only 8.S tons of emissions pcr person; China's rapid industrialisation and urbal1lsation are basell on massive amounts of coal and its total emissions are close to th,lt of the US figure, even tbough its emissions per head in 2004

wen'

only a little over a sixth of the US figure and 40 percent of the West European figurc.11 316

These enormuus differences mean that measures that seriously tne<, ,lit back on emissions would hll firms hased III different cOlln n try differently, It this which explains why the European Unio in the l'med more comlmned to action against climate change mea· ,.uly 2000s than the US: ns national states stood to gain &om than Ilres that would proportionately hll US,-based mdustries more tional lll­ ,t\clr own. The US figure IS Immensely importilnt. -Lnterna ctive IItutions" for controlling tbe global system can only be effe i ercSts of the US­ III'K)far as their programme!. coincide wnh the m ncial I , d capital, with ItS immense military power and fina tern ntluence. Regional powers like Russia, China, India or Wes reslS. uropc mIght sometimes be able to block regulation III US tnte

The Runawav �\'sle,

. This Ittlt they (:1nnO{ substitute for it with regulatIon of their own lation Ipplies as Illuch to carbnn g.t S regul:lIIon .IS to financial regu the lill or trade regul,won through the 'hrou ld s},stem 1((Cognition by those who run thc various parts of the wor tice to Jh¢ut the dangers of climate change will tran"lare In prac ns in which each major state will : Iraught international negoti1fio rests of �ubordinate fighting clI mate change (0 the competitive inte . in­ the capitals based within it. Regulation will connnue to be slow carbon i,tfective and insufficient 10 stop the deslablhsing effect of KJSCS, not only on {he dimate, but on the system as well. ge arc Some of th" immediate short-term effects of climute chan result Ilready with us. The mo<;( immedl.nely vislhle aTe [hose mat that glac­ Juett ly (rom rising temperatures: for instance, evidence ain are Iers are getting smaller. or that many species o( birds In Brit e of laying their eggs about a week earlier than in the 1950s.u Som e. Climate Ihe most important effects will be less direct than thes , in models suggest global warmmg C
�

.\reas, as well as shifts in patterns of cuhivation.

The New umltJ; of 0.,,,1;11

wro.

Peak oil

FHecriveiy. whichever set of figures one accepts, the blind ex­

One other growing ecologlCal limtt to capita lism is, par;ado_,tLllh, tear [har the mam source of carbon gases at the moment, PI' I I " Icum. mar be runnlngoUl. The nonon 01 "pe ak oil" has been 1.ll " ilKrea'illlglr seriously-that the point ma}' be at hand at whll,.-h . .,I rroduuion cannot rise any further to meet growin g demand. The issue hrst came into prommence back in 1 998 . ;Jfter an .1'I I de appeared to the SCIentific AmerIca" whi ch predicted ",I producnon would peak wlthm ten years. Since the n there han' h\'\ II re urrals and coumer-reburrals. wnh various «:o nomlsts and �l'Hl oglStS presenting very different scenanos for wh at is happellllll! I" oil reserves and potential oUlpur!' The ,lfgum ents have to ,1 lOll siderable e"tent reflected the impact of different mterc..�ts. The �I,I III oil firms tend [0 exaggerate the extent of the long-term SUppJIl , smce their share prices depend on these. Thtir figure� then WIlli' under question from those worried about the IonS-term future 01 the energ}' needs of nationally based capital isms as well ,IS Irolll muck-raking critics of the system as a whole. An d there arc clllNd erable difficulrics n i coming to any exact conclusion as to the r.,d pICture because the big oil producing states con ceal the real eXlnll of their reserves as ther bargain with each oth er within OPEC ,lIdI with the oil companies. As one critical report pOi nts out:

�

One of the hig questions snll waiting for an ans wer is (he St;l(l' " t the 011 production i n rhe Kingdom of Saudi Ara bia tKSAj. \11"1 likely, thiS iss-ue will decide the tlmmg of world peak oil . . . lx'l,:.lu,,' of the secrecy surrounding the 011 production in the KSA.l' Bur If is possible to draw tWO firm conclu sions from the deb.w' �ir5t, peak o]I IS likely within the next quarter cen tury, and may hi' reached wlthm years rather than decades, forclIlg reliance on Ulhn energy supplies. The International Energy Age ncy, the OF(.j)\ energy organisation. long resistant to the peak oil argument. '1tI\\ accepts that there wiU be "an immll1ent 'oil cru nch' in a few \'t�,lr\ ; lime"!' The Energy Information Administratio n (EI A) of tl (· l" .. Deparuncnr of Energy concluded in July 200 0 that "world (;(11 1 venrion,ll oil production may increase two dec ades or more befon' il hegins to decline", But John Bellamy Fos ter points out, "TIl\" analysis itself, however. . . suggcstcd that a world oil peak could hl reached as early as 2021 ".l� '"

The Runaway Snl.-"

I' n,.ion of capital is dose ro exhausting the supply of Irs most llI1portant raw material. one on which almost all ItS production .lId consumption depend. Peak oil does not signify irs immedi:lte II appearance: it will confll1ue to be available for many decades, I III the cost of getting It will rise and the conflicts over who has it

lind who does nOl will get more Intense.

Regardless of whcn the peak will be reached, states are warned

In

{he bere and now about future "'energy security". So there have

Ilt"t:n repeated reports in the US expressing such concerns, going IIRht back to the Infamous National Energy Policy report in May 1110 1 drawn by a task force headed by " ice-president Cheney. Without mennol1l11g peak oil, it stressed concern about guaran­ u"t'lI1g US 011 supplies and urged, .. Make energy securiry a priority "l our '-rade and foreign policy"." I tOvernment

A February 2007 US

Accountabi lity Office report "argued [hat almost all

,wdies had shown that a world oil peak would occur sometime hefore 2040 and that US federal agencies had not yet begun to ad· Jress the issue of the national preparedness necessary to face this Impending emergency" .1' Tht: term "energy security", like thar of "defence", has a double meaning when used by governments. It can mean protecting the t'oergy input of domestic and mdustrial usc. But it can also Olean clperating policies that allow added pressure to be applied to orher ..tates. So, for n i stance, control over oil oudlows from the Middle

tast, one of the goals of the US invasion of Iraq in 2003, i s more ,1 OOut control ovt:r oil supplies which potential regional cha l­ lengers to US hegemony depend on than abour the US's own \uppLies. Only about one eighth of these come from the region (
happened in the case of petrol consumption when oil prices ,hIli

up in middle of 2008..' But there is no automatic cancclhnc "I one e£fcci h� [he Q[her. Peak oil is compatible wllh a level 01 �'''I

sumprion of oil a!o great as al presc::n r for many years, with I correspondlllg budd up of carbon gases. Meanwhile energy

!on

II

lI�ht through to the end of the 20th cenrur)'. There were hurrttit: I�mlnes and persistent long-term malnutrition for hundred, 01

nlillions of people, but these were a resuh not of under-produt:uon

hili of class-induced poverty.

Signs of im�nding absolute food

hllnagcs in South and East ASia in the 1 960s were overcome by

rity fears are leadlllg 10 an inremified search for more oil. III,

111(' "Green Revolution"-the introducrion of ncw gram types de­

expansion of dle olher carbon gas source, coal, and the

I'cndem on big mputs of fertiliser and increased irrigation. The...e

mi'

"I

maize or vegclable Oils ro produce ethanol and biodicscl for Ir.III'

l\t're normally combined with rhe spread of variOus forms of cap­

port fuel processes which can even increase global carbon �.I

II.ilist agriculture in place of the subsistent peasant farmer, The n i creases m food yields were very real-it is stupid ot some urganic'" critics of modern agriculture to claim otherwise-with

enliSSlons.

wheat yields grnwmg beTween 3 and 4 percent a year between the IIl1d-1 960s and the mid-1980s, and rice yil..'lds hetween 2 and 3

Food and capitalism

I rcent_ BUI o,'er the last tWO decades the increases baH" fallen

The years 2006-8 provided a hint that capitalism is creatill� .111 orner ecological barrier to Itself-that of not being able fa prodUH

l1mil rhey are �:lTcI) ahead of (declining) population growth: Output from the Cireen Revolution has reached a

'pI:Hl.'au"'. .

enough food for those who live within it, Soaring food PflU"

I \'er greater quantities of ferti liser a re required to increase output.

r:llsed questions as to whether it was beginning to exhaust 1(\ �.I

water sufficiency becomes a growing problem, conccn tration 011 a

rapidly declining rates of global food output growth.]]

H ' ry narrow range of crop types increases the dangers from plant JI ases, and world acreage dcv()[cd to food IS nor growing. As a

paciry to keep food production rising. as conunentators pointed II' This WJS not the first time there have neen such eonccf1I'

\""orld Bank Development Report admits:

Mahhus had argued in the earl}' years of IIldustrial capitalIsm dUi there was no pomt in raiSing tbe living standards of the mass 01 ,11,'

Many agriculture-based counrries Mill display anaemic per

populatIOn, sillce this would prompt them to have more chilJrru

capira agricuhural growlh and little structur.ll transforma­

at a faster ratc than food production would rise to feed them

tion . . . The same applic... to vast areas withm countries of all

Marx and Engel� rejected rhis view that a natural barrier to hUlll.H1

types. Rapid popul:lfion growth, declining farm size, falling soi l

welfare exi...tcd as 3n apology for exploitation by a defender ol !l1\"

fertility, and missed nppommitles for income diverSification and

system. But they did hold, as we have seen In Cha pter Three, th.11

migration create distress as the powers of ag.riculture for devel­

c:.1pitahsm Itself cre.tted obstacles to food provision once it had J,.

opment remain low. ...

vcloped beyond a certain point. This was because capital,,! agriculture removed the nutrients necessary for fertility from till" soil more rapidly than it replaced them.Q

1 he problem is not that somehow. after 100 rears, Malthus has n vindicated. Mean.:; eXist to raise food output to cope with

Marx and Engels did not put the issue at the cenrre of thl'''

world population, expected [Q grow another 50 percent and then

analysis of capitalism for me simple reason that they could set' th 1 I

\Iowly dccline. 11\e problem is the existing " structure of Jgricul­

.

tural accumulation",'· Glohal agriculrure since the mid-1970s has

the depredations of agriculture in its old established lands by till

heen increasmgly structured l>y a handful of agribusmess corpo­

.

by the J 860s and J 870s the sysrem was capable of substituting II

.

production of foodstuffs in North Americ:l, with the opening lIl'

rations, mamly based m the US, that control agficullur.1I

of the prairies to agriculture. The issue became of marginal COil

IIlnOVatiOll, supplying the inputs (seed varieties, fcrriliser�, pe�ti­

cern to most Marxists after their death because the use of m.iner.11

ddes, agriculmt3l machinery) for the world's f'l rmers. big and

fertilisers was able to compensate for the loss of natural nutrient'

,mall. Their interest is in keeping those inputs standardised (so

Worldwide food production kept ahead of population gruwlh

keeping down their own costs of production). with as little regarJ

no

The Nr-o.· 1.lmllS 01 Capual

'21

for particular local growing conditions as possible. Their rC�l'.1!, II has "focused on inno\'alions thai reduced COSIS ralhcr tn,III I I' ham:ed Yields " . ' The result has been litrle in the \\'.1\ "I i nnovat ion to

!tuit the needs of the world's 400 million �nl.ll1

farmer:.--except to preach GM crops as a magic solution, rq!..H.t less of their pmemial side-effects on local ecologies and alu inapplicability of those so far de\'eloped to conditions

III \

'I\'

wide partS of the world. Meanwhile, individual dcvelop1llg \.IIUII lrIes have reduced agricultural mvestmenr to around 4 peru'llI "I GNP compared with 10 percent in 1980. ,. Yet. as Ronald 1 TI)" I, of [he US Dcpartmem of Agriculture's economic research 111111 says. "it was always publicly funded research thai was more

h�rh

to concentrate on innovations that would increase )'ields and r"' ductiun, particularly III pans of the world \\here farmer� . H ' unable to pay royalties for new varieties of seeds " .11

The dangers to the world's food supply wcre brought hOlllf sharply in 2007-8 when grain prices internationally surged, nr,lI

\ult of the exhaustion uf the benefits (If the Green Rnolutloll. I t Wih also a produCT of the probahle effects of clim;lte chan�c. Wit h t.lp failures in Australia due to drought and in Europe due tn Inoding; of the typically perver!oC capitalist way to otfset dll1lJ.tC ";lnge and energy secum)' by devoting a th i rd of thc US maize fUP and half [he Furopcan oil seed crop to the production of blo­ ucls;.u of the rising oil prict, which forced up the COStS of I I rtilisers and fuels on which 2 1 s t ccntur� fafllling depends: olnd II [he sharpness of the boom part of the capnalist cycle In the lrly and mid-lOOOs, which massivel) increased middle cl,lSS m'.u

comumptlon. especially in Cluna.

It is the sort of interaction of the economic, the envmmmenral .lIIJ the political we should e.\:pect to �cC repeated again and again IlI lhe 21ST century, producing recurrent, very deep social and po· itllcal crises�hat frame tbe choice between global catastropbe and It'volutionary change.

ing the risk of starvation for hundreds of millions of people, R"IIIK food prices were hurting many of those small farmers who OOU!:111 as well as sold food, MFood security" suddenly joined energy �nll riry as a concern for governments. In the short term Ihe abilm "I farmers in E.urope and North America ro culti\'ate land whll:h 11.Id been left idle under �$et aside" schemes raised the pos!>lbili{\ "I filling some of the gaps in the global food supply and there \\,'r,' li g of 2009-a1thu\l�h limited falls in sOme prices by the beglllln

not (0 the level of twO years earljer. The crisis was more likely to be an omen for rhe future-III" threat of immense hardship to hundreds of millions of peopll' rhan the Immediate onset of global carastrophe.'9 The "real

m�

remained of a "food crunch at some point in the future. \\hl�h would bll parricularl)' hard nn import-dependent cOUiltrie<; ,111,1 on poor people everywhere''. reponed one srudy..a Indica I!"'" were thai the food pnce rises of 2006-8 had not simply JUSt b�'�'" I rc�ult of spccu1.lfion duting the last phase of the mid·2000s b01l1!\ Early III 2009 a repOrt could tell how "food prices ;Ire poi!>�'d III rise again" as long-term '·resource scarcity trends, notably chm.llr change. energy security and falling water availa bility") wou Id 1'111 pressure on prices and production.�' The food shortage of 2008 showed the way in which thl' .Ii! ferent elements of crisis endemic to capnalism in the 2 1 st ccntlll

\

can interact with each other. For the shortage was not JUSt .1\ .1

m

The RunawJ' \"

Ihe New umlt5 ....f Capital

111

, IIAPTER THIRTE�

The runaway system and the future for hum ani ty

-

•

·\nthony Giddens published a book wlth ;l mange mle in 1999 at the rugb point of illusions in globalisation and the "new economic paradigm". He was (and still is) Bnrain's best know academic ad­ \,locate of the "third way" that ditches old social democratic .Htempts to tame c3pitalism and was aptly described as -Tony l\lair's court sociologist".' Yet the mle was The Rllnaway \Vorfd. It ,onveys the image oi ;I bolting horse, which governments, social movements and indi\idu als alike cannUl StOp but have to try to halance on precariously. The nest they ,an do is to try to influence where it is taking them by spurring It on It with investments in

ial capItal on the one side and reining it in with cutback5 in wel­ fJre expenditures on the mher. Yet rhe succession of crises and wars that have punctuated the last four decades show the futility of such efforts. The runaway world is, in fact, the economic system as Marx de­ ,,"ribed it, the Frankenstelll's monster th3f has escaped from buman ,onrrol; the vampire that saps the lifeblood o f the living bodies It leeds off. Its self-expansion has indeed led It to encompass the whole globe, drawing all of humanity ioro its cycles of competing in order to accumulate and �lccumulatlllg III order ro compete. Its expansion has been marked. as much

III

the 21st ceorury as

in (be mid-19th century when Marx did his research for Capital, hy fits and srart!>, by frenzied fonvard motion suddenly interrupted by deep crises. Running through the cycles of expansion and re­ ..:ession has been the other feature Marx pointed to: downward pressure on profitability causing capitalists to try

to

cut back on

wages and welfare benefits at the same time a� pressuring people 324

to work harder. en:n though in doing so this cutS II1to the nl.l l �' 1 for consumer goods produced by other capita lists. We Jun' I I I how these eic-ments came rogether to produce the great �Iurnp " the inter-war )ears. renewed cnsi\ in !.he mld-1 9�Os. and rhl: I" "

t

dr,lwn outJapanew crisis of tbe 1990�. We saw also how thl'\ I duc£:d the debt economy bubble culminating ill the gUM cr.l"h ,t 200"'-9. We will <;ee this happen again repeatedl), in one form " uther. in the dccadt"S abead. In some import,tnt ways, the syltem i.. elen more chaoTh.: II ,III III i"klrx's accnunL The \'er} siLl' of the IInits that make It lip Illl·.II! that it has lost some of its old flexibility. The desrruction ot "Olll capltJls through periodic crises which once gave new life to th" ,

The problem is acute fur the US. at the top of the global hierar· hy. Irs position had depended on ItS being the policeman far the whole system, aUenng general protection, Mafia style, to the other ruling classes, while using that position to privilege the position of lJS based capitals. Crises make those caplrals need that privileged position more than ever. The fallurcs in the "war on terror" meant ,hat already 111 the mid-20001o other states felt more empowered to lhallenge such privilege, shown by China's increased sway 111 Africa, Russia's in parts of the former USSR, and the BRICS in

J,lobal r.rade negotiations. Then came the crisis that began in 2007 with widespread predictions that it would dent US global hege­ mony e\'en more just as many of ItS great corporations looked to

from complete collapse but cannot restore it to long-tefm nf.\lll1l

that hegemony ro help them out. US i �perialism might be temporarily chastened as it contem­ plated rhe way in which some of irs recent adventures have

At best they provide a feverish !opell of brief exhilaration betofl' \ , , another collapse. And COSt rhe of providing rhe li fc suppUrt � \ "

rebounded to Its disadvantage-just as the Vietnam War did. But it (an not abandon its global position, e"l'n if defending it leads to

tems sooner or later stretches the resuurccs of the state close '"

fu(ther assertions of military might in other poorer countries, with

breaking pOUlI. Modern �tateS are creatures o f the capllalist system, eVOhlll� to service the needs o f rhe geographical dusters of capit:lls th.1!

devastating and destructive consequences. Increased troop deploy­ meors were meant to ensure the retreat from Iraq did not turn into

that remained now threatens to pull these down as well. Lifl' "til' pOrt systems provided by the stare m:ly be able keep the �y"II !II .

constirute

The more rhese dusters depend on thclr reiatmm With the rcst of the global system, the more they need the PO\\I" of states to provide for their interests withm It. Yet each SI,II\ u.

can only achle\'e rhis goal by pressurlSing other states, and III the process adding to the instability of the system as a wholl The measures national stares take to aid the capital!> h.I'nt wlIhin thcm during a crisis necessarily 1Ilfnnge 011 the inren'''' of c')pltals based in other STares, increasing the I Ost:l h.J I IY ,,"I furrher. Their significance is not lmllted to a panicul3r l'�" 110mil": crisis. They provide a fon'la!ole of what rhe rest ot \hl 2 1 St century is gomg to be like.

Capitalism is a restless system. Whether in boom or slump, III peace or war, in a great city or the remore countrys,de, It nl"\l'1 !>Iand!o still. Competitive accu mulation remoulds everythlll/! II touches and then. when it has hardly finished. remoulds II .ill again. The very speed of change itself has enormou!o importanl(·. II means that the relative economic weights of the differelH St.ltn withlll which the umts of capital are based are continually 11l tlll\.

rout in Afghanistan. Significantly, Barak Ohama's first budget in­ (Teased, rather than decreased, military e.xpendirure. And so did the budgets announced in the same month for Russia and China. The blood)' road which led from Korea ro Vietnam and from Vietnam to Iraq is not yet at an end. But that is not all. The �new", environmental. linllls of capital will react back upon irs old �onomic limits. Climare change, peak oil and global food shortages will add to the overall economic insta­ bility of the system expressed 111 the boom-bust q-cle, the dOYlJ1\\'ard

pressure on the rate of profit and the flows of capital from indusr.ry to industry and country to country. We had a glimpse of this in the first half of 2008. Rising food and em'rgy prices produced an mfla­ nonary surge which added to government difficulties 111 dealing with the credit crunch ar the same rime as causing prurests, riors and

saikI'S in a score of countries. We can expect many Illore dashes within and between stares as problems of fnod security and energy security lead to shifts in surplus value from some sections of capital to others and provoke popuhtr outrage. And all the time dimatc change tipping pOiilfS can suddenly impact unexpectedly on hun­

11I'>t a� the states have to try to intervene to prOtect their capltall�1 from rhe recurrent convulsions of the global system.

dreds of millions of people's lives, in much the sallle wa" that economic crises and wars do, but even more destructively.

326

The RUl\.3way 'iys[�m ..nd the Future tor Ilumdnlt)

The RunawJ\' SHh

127

The starkest recog11lrion of the possible conr.cquences caow from the US, Department of Defence, the Pentagon , at the timl' when the of ficial position of the US govern ment was still to refuSl In

recogn ise the reallry of climate change. It warned of the dangel

ot "food shortages due to decreases

III

. "....PTER FOURTEEN

Who c a n over c o m e ?

net glohal agncultural pru

du('uon"', decreased a vailability and qU.llity oi fresh water in kt'\ ..

regions due to sh ifted precipnatlon patterns, causing more fn:­ q uem floods and druughb", and disrupted access to energ\. "'

supplies due to extensive sea ice and storminess", The out(.;()me, as If saw it, would be

an

increased occurrence ot

resource wars and civi l wars: As global and local carrying capacities are reduced tension .. .

could mount around the world leadlllg to two fundament 1 1 .

,

strategies: defensive and oHensi\·c. Natiuns with the re�our(.;t'.. to do so may build virtual fonresses around th('Ir countries, pre

servlllg resources for rhemselves. Less forrunate nation�. especially those wirh a ncien t enmities with their neighbou rs

.

may IOitiare struggles for acceS3 to food, clean water, o� energ�. Unlikely alliance!> could be formed as dr:fence priorilles shil t and rhe goal is resourccs for survival ra ther than religion idl'ol .

ogy. or national hono ur. .

.

There would be �an I ncreasingly disorderly and pOIemialiy \111 lem world . "

This wiJl be disorder In a world

111

which eight of the bigge�t

stares possess nucl ear weapons that are targeted at others, scorl·� have "cunvenrional Wl'apOnty- much more destructive and hor rific than that of rhe Second World War, a nd proliferating cinl nuclear energy can pro\'ide convemional wea p ons wuh deadly tM­ getlo. The runaway system threatens more than dcvastOlnn}: peflodl � sl umps al1d horrific wars. It puts IIltO question Ihe yen .

POSS iblity of susraming human life 011 Eartb. The s)�tem of aliel�­ ,

ared labour I� approaching its highesr pOJllt of de!>tructivcness Tht. .

que�tion is whcth�r those who produce that labour are ca pable ot

seILIng control of Irs wealth and s ub lectmg it to conscious COllimi.

l'he decisive question. sta ble, which breeds economic un IS ich wh m ste sy a in e liv We up the very environmental g i n l ea is hich w d an rs. wa d aises an onent national sec­ mp co its d lea to ing go is is Th . on basis it standl' ical crises in the course of Ihe lit po d n a l cia so d ate pe re o t n i IOrs il :1 century of wars, civ s wa ry ntu ce th 20 the as st Ju y. li st centur he 2 J Sf cen t ury. But this leaves is t O to so , ns tio lu vo re d an rs wa n. What forces exist that arc tio es qu ive cis de the ive cis de optn a d transforming the world? capable of taking on the system an er was simple. The growth of sw an e h t , sm xi ar M l ca ssi cla r Fo by the growth of tbe class d e i an mp co ac y ril ssa ce ne s wa capi talism and this would be at the centre of ss, cla ing rk wo e th d, e oit pl ex 11 not the first exploited and op­ s wa It m ste y s e th sr ain ag olt the rev om the 200 or so fr ed fer dif It t Bu . ry to his in pressed class that preceded it in very impor­ s ve sla d an ts an as pe of ns i o t a er gen s concentrated in huge wa n o ri ta i o pl x e st ali pit Ca . tant respects nurbations, giving the working work places in giant industrial co ty in wbich it found itself. cie so the III s int po v e is i c de at r we class po gene ity in rhe con di­ mo o h e duc o r p to d de ten n tio �uch exploita eatedly red uced differem forms rep l ta pi ca as s er mb me irs of ns tio capital required an ex­ d An r. ou lab t ac str ab to r ou lab of concrete re of literacy, numerac), and ploited class that has a level of cultu than preced­ -greater n ot merely ge lar at rld wo e th of ge knowled ecedi ng ruLng classes. r p st mo an th o als r bu es s clas d IIlg exploite potentiality for it to take COIl­ the ate cre to d ine mb co s tor fac These s in a way th:n was nOI nd ha n ow ItS o int ole wh a as ry rcol of socie .

,

true of its predecessors. The development of ca pital­ . ty ali tu ac t no s wa ty iali t en t po Bur ess that had irs Impact oc pr rd wa up th oo sm ple sim a ism was not ere was unevenness o\"('r time Th . ted ea cr it ss cla ted loi e p x e th on

.

The RLlnaw�� "o)\lnl'

with the concentration of workers into centres of exploll.lIl1,jj dUring booms and the expulsIon of some from those ("l'1lI1I during slump. There was geographic une...enness. with SOIlll' �l lI tre!> oIfising in ("onnection with national srares before other... ,lIl.1 then !>Omctlmes declin ing as new centres supplanted them. "I h, ,. farlm ot capitalist unevenness led to unevenness within the \\ III � mg dass, wIth different le\'els of skill and payment aris ing. \\III! competition for Jobs and secunry of employment bclween Jilin ent groups of workers, with seeriOns of workers identifying \\ 111, the particular state that conuolled them because It seemed a 10< 1 1 for achieving reforms of the system. Nevertheless, for da��ll,d Marxism, this was a class which would be driven to unite perJ" d l cally by the very pressures of the system upon it. Skill dlfferenll .1 ]' which had arisen at one point would be eroded ar anolh('l Compention between workers would fade as they fought togedll1 to achieve overriding common goals. National ideologies would lose their hold in the face of the horrors of imperialist wars. This notion, rhar the working class provides the agency that l,1!1 change society, has been chalJenged even more than Marx'), ,H count of rhe economic dynamic of the system. M:lrX was a brilll,1111 economist and a pioneering sociologist, the argument goes, but it'll into an apocalyptic viSion of the future which ascribed a mel.1 phYSical role to the working class. The spread of modon capitalism, the argument continues, has nOI been accompanied hI the growth of the working class, the conditions of those work�'r� that do exist haye not been homogemsed, and they do not de\elop a consciousness In opposition to the syst("m. Such contenrions were already very widespread durlllg ,hl' long post-war OOom. As a notable sociological study of Britl ..h workers told: '

A malor and recurrent theme--and most notahly In liberal qU,H tefs-lwasJ thai of me incipient decfme and decom/Josltl(J/I lit rhe working class. As the development of mduslrial socic.'tlr� continued, it was sugge�tcd, the workins class, understood ,I" .1 social Stratum wirh its owo distincrive ways of life, value� .l1ld goals, would hecome Increasingly eroded hy the main current.. of change. The very idea of a working cI,ISS had been formed ill. and in facr belonged to, the infancy of industrial society: in th, era to come it would steadily lose its empirical referent. SOClal l., equalities would no doubt persist; hut these would be moditit·ll no

The Runaway \)'n,,",

uld .lI1d structured in such a way that the society of the future wo whICh the he an overwhelmingly "middle-class" sociery, within dIVisions of the past would no longer be recognisable.' the rlunk­

\0.) pervasiYe were these arguments Ihat they influenced Mills' IIIg of radicals such as the Amencan sociologist C Wright

able SOCI­ ,1l1d revolutionaries like Herben Marcuse.) while fashion society" ,,[ogistS generalised the argument aoout "post-Industrial ked rather fool­ 10 the advanced countries as a whole. They all loo eral strike in I..h when French workers undertook the biggest gen swept hl\tory so far in May 1968 and waves of industrial struggle years through italy, Britain, Argentina. Spain and Porrugal in the s as the 1 969-75. Yer the argument revived Ifl the 1980s and 1 990 old es­ rctotructuring of capitalism through crisis decimated many led to a labljshed s�ctors of the working class and mdustrial defeat waning of class combativity. tual Ladau and Mouffe were swimming with the ride of intellec midl)pinion when they asserted in an infl uential work in tbe neity of 1 980s, "It is impossible today to ralk about the homoge d in the Ihe working class and to trace it to a mechanism inscribe and logic of capital accumulation"" So too were Michael Hardt ustrial Antonio Negri when they claimed in 2000 rhat "tbe ind has not working class" had "al l but disappeared from view. It posi­ ceased [Q exist, but it has been displaced from its privileged tion in the capitalist economy ",' loso­ Yet, not for the first time, the common sense among phi of the phers has departed from empirical reality, A detailed study ulated world's workforce in the mid-1990s by Deon Filmer calc non­ thar of 2.474 million people who participated in the global salaries, domestic labour force, 889 million worked for wages or the land, 1,000 milbon people main ly for their own account on ices.· and 480 million for their own account in Ifldustry and s("rv e been Probably about 1 0 percent of Ihose employed wil l bav e tban members of the new middle class wh o receive more valu kers. they creare in return for helping to control rhe mass of wor h about a This means there were around 700 million workers, wit l size of thl' thi.rd in "industry" and the rest ill " services ". The tOta have re­ working class including their dependant" and those who recent tired muSt have been between 1 ,5 and 2 billion. More sugge!>t figures from me United Nations Dc\elopmcnt Programme her than a global total for those in industry subsranriallr hIg Who Can Ovuc:omc?

311

Filmer's.' Anyone who believes we have said "farewelJ" to t i l l class IS not living III tbe real world.

}.tarx made a distinction between a class which exists /II 1t.\I·/1 al> an oblective element in the social Structurc=, shaped by rhe rd .•

tions of people ro the means of making a livelihood, and a <:I;w. ,. 0 ' itself. wirh a consciousness of its position and of its mterests in 101' position to those of another class. The key conclusion ru Jr.1\ \ from all the figures IS that the "'orking class exists as never 11<:1,

3S 3 class

itsdf.

11.

with a core of perhaps 1 billion people. HI .1 third of the global population. On top of this there are verr I.u�', numbers of peasantS, up to 50 percenr, who do some wage labour Iff

and so arc subject to much of the same logic of the system ,1\ !Ill workers. The glohal proletariat and semi-proletariat comb.ne J .11 c the malomy of rbe population for the first time in history. But we need to go beyond these gener31 figures if we arc

teo

gr3sp the potential for the world's workers to ch3lJenge the S}'�[CIII It is necessary first to look how ch31lges in the system are changl l l � different secrors of workers.

Ihe world's biggest single centre of manufacturing. wuh .l fifth of world output (the combined old European Union of 1 .5 stares wa� Ahead wuh a quarter)," despite much talk of manubcluring lIIuving to the Third World

111

its entirct)'.

The Japanese figures were even more aSTOunding. The mdustrial Yoorkforce more than doubled between 1950 and 1971 and was

..nother 13 percent higher in 1998. The fall in industrial employ­

ment in a n umber of countries over the last three decades does not I�nify deindusrnalisation of the whole of the old advanced indus­

lfIal world. It bad 1 1 2 million mdustrtal jobs in 1998'°-15

t1l1 l1ion more than m.195 I and only 7.4 million less than in 1971. loni Negri's Italy may not have been in the same league as the US nr Japan, but industrial workers had cert3.lIlly nO[ disappeared.

1here wece 6.5 million in 1998, down only one slxth since 1971.1} These figttres for IIldusrrinl employment, it should be added, un­

derestim3te the economic importance of industry in general and manufacturing in particulat. As Bob Rowthorn has rightly noted: Almost every conceivable economic activity m modern society

The "adv3nced" countries: the effects of restructuring The repeated restructuring of production means that the worl-lIl,l.: cb!>$ 10 the advanced coumries today is different in many resp ru to that 40 or .�o years ago. But this does not justify the claIm 111.11 the working class ha� disappeared as a resuh of "demdustriall '.1 tion ", the "post-industrial society", or the "weightless econOIll\ Take, lor instance, the world's biggt"St Single economy, that

CIt the US. There was much panic about "deinduslriaLisation" III !Iu· 1980 s in the face of challenges to US industrial pre-eminence II[

fields like car production and computers. But in 199 8 the numh n of workers in Industry was nearly 10 percem hIgher than in �-I 1 roughly 50 percent higher than n i 195 0 and nearly three rimc=� thr level of 1 900. Baldoz, Koeber and Kraft noted at the bcglnnln A CIt this century, "More Americans are now employed tn m:lking C:lr�. buses and parts of them than at any rime since the Vietnam \'(I.\ r" Even after the recession of .2.00 1-2 had led to a massive r,1I10

nalisatlon of industry, with rhe loss of abour one III '1\ manufacturing Jobs, the industrial working class bad fa r from d" appeared. lndustrial production in .2.007 was 8 percent high er th,11I in 2000 and 30 percent rugher than in 1996.'� and the US rema tnrJ m

makes use of manubctured goods ... Many of the expanding service industries make use of large amounts of equipment." The small declme in the total industrtal workforce is not because mdustry has become less important, but because productivity per "mployee in industry has risen more qUlckl}' than in �services". \lightly fewer manufacturlllg workers 3re producing many morc goods tban three decades ago.· The industrial workers are portant for the capitalist economy today as

III

as

im­

the early 19-0s.

Glib statements like those of Hardt and legr; about their declin­

IIlg significance could not be more wrong. The usual distinction between "industry" and �services" ob­ sCures more than it reveals. MServices" is a catch-all residual l:ategory of everythlllg that does not fit into the sectors of industry and agriculture. So some of the shift from "industry" to the "ser­ vice: sector" amounts to no more than a change in rhe name given

to essentially similar jobs. Someone (usually a man) who worked a

typesetting machine for a newspaper publisher 30 years ago would have been classified as a particu lar son of industrial worker (.1 "print workerM); someone (usually a woman) working a word processing termmal for

,1

newspaper publisher today will be claS­

sified as a "'service workerM. But the work performed relTlalll� Who Can Overcomd

'"

Rowthorn undertook a statIStical breakdown of the total ��n

Two relat ed processes are taking place in all " ad\,.lIKed" n:Onomres (and many "nOD-advanced " ones). The tradmon,ll

vice" category for the OECD as a whole. There was a small fall III

manual workmg class is put under more and more pressure as cap·

"total goods and goods-related services"-from 76 percenr 01 ,111

1I.1I tries to squee7C ItS directly productive labour so as to get more profits from II. At the same time, the new "non+goods-producin�

essentially the same, and the final product more or less idenri1.,11

employment in 1970 to 69 percent in 1990.16 But thS i wascenalll!\ nor a revolutionary transformation in the world of work. There are many Other jobs characteflsed as "services" that .HI essential to accumuJation in the modern world--especially, a,> \\1" saw In Chapters Five and Seven, health provision and the edul.,l

hea l r h i tion service. Today there are over 1 0 million employed n and educational services in the US (around one 10 t3 of the worl. force), and US capitalism could not function without them. And the long-term trend IS for most of them to be forced increaslll�h into condition!. comparable to those of industrial and routllU office workers, with payment by results, assessment and appral�.d systems, Increased concern with timekeeping, and enhanced dl\ll

""'rvice" working class is subject to proietarianls3tion as caprtal \ClS OUI to reduce the COSts to it of non+productive and indicecd)' productive functions. Each CrISis in the last four decades has involved sudden io­ "reases in unemployment-in some cases permanent-and the Wiping out of old established centres of production (factories, Jocks, mints, etc). Capital and its apologists have then tried to I.lke advantage of workers' feelings of insecurity to remould their Irves around its own continually changing reqUirements. Its slo­ MIlQ.S have become "flexibi ity" l In labouring time, methods of work and l abour marken.. all justified by the claim that "lifetime a past age". Much academic research bas

pline codes.

employment belongs

There is the myth that the "service" sector workforce is m,Hit­ up of weU paid people with control OYer their own working SltU.1

,lCcepted its message, and " Thud Way" social democrats and those

ro

un the "autonomist" left have taken it for ao unquestionable

tion who never need to get their hands dirry. So Guar,1t.m

truth. Typical-and excessively Influential-IS the sociologist

columnist Polly Toynbee writes:

r.,'lanuei Castells who argues there is:

We ha\'e seen the most rapid change in social class in recordnl

Strucfl\ral unstability [sic] in (he labour markets everywhere,

history: the 1977 mass working class, with twO third!> 01

and Ihe requirement for flexibility of employment, mobility of

people in manual johs, shrunk ro one third, while the rest 1111

labour, and constant reskilling of the workforce. The norian of

grared upwards into a 70 percent home-owning, white coll.n

the stable, predictable. professional career is eroded, as rela­

middle class.'+

tionships between capital and labour are individualised and contractual labour conditions escape collective bargaining."

If Toynbee had looked at the Office for National Statistics' Ul'/II� /II Brita", 2000 she would have found 5 1 percent of men and 38 � I

cent of women in its various �manual " occupational categoric". This is because the �service industries" include refuse workers, ht"

pita1 ancillary workers, dockers, lorry drivers, bus and train drl\'l'r�, and postal workers. Alongside them are a huge number of women50 percent-in the "intermediate and junior non+maou.r 1 ·

categories, where wages are typically lower than in most manual 01. cupations and working conditions otten at least as hard. In the LJ\ 11\

2001 , 50 percent of the 103 million employees in service related If<

rhe claim about the ability of capitalism to destroy industrial jobs i happenrng with Instantaneously is a vast exaggeration of what s

rcstructurlllg. As we have seen 10 Chapter Ten It takes time and dfon for capiral to liquidate industrial investment in one pan of lhe world and shift it to another-and new investment is still pre· dominantly within the triad of the advanced countries, although Ihe emergence of China as a manufacturing centre is adding a new twisr to that pattern. Even

In

rhe electronics IOdustry, in which

components and most final products are very light and cheap to

cupations had manual or rounne clerical or Similar jobs.19 Togcllwr with the 33 million workers in traditional manual industTies thn

move, there was not an unambiguous move from centralised pro­

made up three quaners of the country's workforce.

�outh in the 1990s and early 2000s:

334

Who Can Oven;:()mr�

Juction in the advanced countries to contracting out in the (.Iob,ll

Although the proportion of production beyond the Triad " t Europe, North America and Japan was high, and was Indet'J .1 socialcd wilh international ramer than local markets, il \\ .1' confined to a few East Asian countries. AI the same time. fill

The evidence simply does not sustain Ihe view thaI we are Wit nessing the emergence of a �ncwn kind of employment relatlon�. seen in tbe "end of the career" and the "death of the permanent job for life".l•

�domest1(:" production workforce in the UScontintttd to grim In general, capital still finds It more profitable to locate Itself In 1111 regions which had mdusuiaLised by the mid-20th cemury. Worl..n may usually be bener paid there, but a combmation of establi�hl"\1 skill levels and existing investments in plant and infrastrw.:tufl means they are also more productive, providing much more \UI plus value for the system than mOSt of their poorer brother.. 11111 sisters in the ThLrd World. This explains why the picture for I11ml of Latin America in the 1990s was one of very slow aver.l).:1 .

growth or stagnation, and for most of Nrica of absolute decliut'. The mos( Importan( impact of offshoring and rising Imports h.l� destroying jobs, but in helping employer\ II' destroy workers' confidence in their capacity [Q defend condltlon \, not been their role

In

wages and working hours. A study by Kate Bronfenbrenner found that during the el.:n nomic upturn of the 1 990s American workers felt more Insecurt· about their economic future than during the depths of the 1991) I recession. "More tban half of all employers made thre:us t" close all or part of the plant" during union orga nising drives. But afterwards "employers followed through on the threat and shul down all or part of their facilities in fewer than 3 percenrP 01 cases.ll In orher words, it is in tbe interests of employer!> III o\'eremphasise how precarious jobs are in order to demorali\t workers and lowl'r the level of resistance. Those voices on the Idl who exaggerate that insecurity can add to rhat demoralisation. rather than countering It with a recognition of the counter-factor, that provide workers with continued strength i f they have tht confidence to deploy it. The evidence does nor justify a picture of a uniform, relent I!.'" spread of precarious jobs. The crisis of the early 1990s did cause .l substantial increase in "precarious" jobs III Western Europe. Blil that still left 82 percent in permanent jobs, as against only 1 8 per

t)ne survey i n 2000 showed only 5 percent of BTltlsb employees (III temporary contracts,l. whIle the number of people who had worked at the same workplace for more than ten years bad risen Irom 29 (0 31 percent.I' Even i n Spain, whIch has the highest level of Mprecariery" in Europe, 65 percell! of workers have permane.nt lobs. Capital cannot manage without workers who have certain skills .md it prefers workers who have some sense of responsibility for the job. It rakes employers tune to train people and they are rarely •

keen to" 'ose them if they can avoid it. They therefore do nOt always treat workers as "disposable, even when it comes to semi­ !lkilled and unskilled labour. They can benefit from a generalised msecuriry making the majority of workers WIth relatively secure Jobs fear that they may lose them. But that does not mean rhat cap­ ital can really dispense with such workers. And that means they have the potential to pur up resistance to its demands, even if they are often nor aware of It.

The new working classes of the "Third World

Of

Around 60 percent of the world's industrial workers are outside tbe "advanced" countries of the OECD. with perhaps 25 percent in China, about 7 percent m India and around 7 percent in Latm America.1" Such statistics do no more than provide a snapshot of the enormous change brought about by the sweep of capitalism'S self-expansion across the world. Sixty years ago 80 percent of the world's population lived in the countryside; and 3D, 40, or even 50 percent worked on the land even in counrries thought of as "advanced" like France, Italy (lr Japan. Today d()!;e to half rhe world's population live in towns and

cem in non-permanent jobs-a proportion that remained ahllO�t unchanged between 1995 and 2000. There has a huge variation ben'Veen countries,» but a 2001 lLO srudy of Western Europe as .1 whole concluded that:

cities, and (he urban pC)pulation is a majority even in countrie� people ofren think of 3S rural-84 percent in Brazil, 76 percent III Me.xico, 63 percent in Ecuador and 63 percent in Algeria.�· Urbanisation and the spread of market relations are not nece.,­ sarily the same as the growth of wage labour.l' People worldwide

336

Who Can O,C'ccomC'?

J17

have been leaving the countryside at a much greater rate rh:w II,. growth of stahle livelihoods for them

Jfl

Illodern ..ectors ut ill<

econom,. This i.." especially True in countries where econOl1lh growth IS slow or negative. Thus wage employment fcll in ab\ollll< terms In �C\'eral African coumries during the I 9!Ws,JO and halt 1110 non-agriculture workforce of Africa IS self·employed.Jl Fven III Chma, with ItS rapid rate of accumulation, [he employed worlll1): class has expanded more slowly than economic growth.'l But III general. the slowness of job growth should not be identified Will, "deindustflallsanon " . There has been growth of wage labour 10 much of the Gloh.1I South but it has been spasmodic, a product of the chaotic up,; .1nd down of capitalist industrial growth. And growth

III

111

very many cases . 111\ .

modern industry with "formal" employmenr has blT!1

overshadowed by what has been happening in the "lIl form,II ' sector of very small businesses. The joinr share of informal .mll small busilless activities of non-agricultural employmcnr in LlIlI1 America as a whole rose frum 40 percenr in 1980 to 53 perceTH III 1 9 90," while in Brazil half [he occupied urban popul'Hion \\en' nor "formal employees". although more than half of the inform.11

workforce were wage workers.It

In India growth has been even mOre concentrated in the 11\ formal " u norgarused " secmr, withour workplace rights, ,.. llIk 40 percent of rhe urban population is self-employed-workl11l.! in family businesses, usually without their own premises, o r . 1 \ vendors. rickshaw drivers, cart pullers and the like." I n ClUIl.1 roo the informal sector has mushroomed-with the number tit urban workers not officially classified and doing things "in til\" informal sector (such as street vendmg, construction • 1IId • household services)" growing b)' 79 million between 1 995 and 2002. By 2002 they amoumed to 40 percenl of urban emplOl ment.' In addition to-and often merging into-those in rh\' mformal sector, there arc evef}"",hcre those denied any oppOrtu nities for employment by modern capitalism: the unemployt' ..1

IIlform
of �the active Ihis dynamic produces a "stagnant" component IJbour army" With "extremely irregular employmenr": l of the Its conditions of life sink below Ihe average oormal leve cial branches working class; Ihis makes It at once the basis of spe work­ of capitalist exploiwtion . . .charactenscd by maximu m of with the ing time. ltnd min imu m of wages. . . Irs extem grows, as lus-pop­ extent and energy of accumulation the creation of surp ulation advances..fIl urban masses In general, the suffering of a very large chunk of the er-exploited by in Third World countries comes not from bemg sup s not see a way large capilal, bm from the fact that large capital doe all. This is of making sufficient profits out of exploiting them at After squcez­ most clearly the case in much of sub-Saharan Africa. the onset II1g wcailh om of Ihe comment durmg the period from rhose who run of the slave trade to the end of empire in the 1 950s, e their own (he world system (including local rulers who mov to write money 10 Europe and North America) are now prepared ments except off most of its people as Ymarginal" [0 thelt require materials, especial ly 111 the all-imponanr local enclaves where raw oil, are to be found.

The rclarion of the formal and informal sectors

quire massive numbers of new workers.

mushrooming of The unevenness of industrial expansion and the paciry of the informal sector can lead to condmions about the inca l the orlho­ workers to organise and fight that very much paralle countries. II is doxies about "precariousness" in rhe old industrial le jobs III assumed on the one hand that those workers with stab s one report the formal sector arc privileged labour aristocrat!io-a d is almost a on north east BraZIl puts it,l O "be formally employe

J38

Who Can O\"er(:t)me�

who typically make up 10 percent or more of the workforce III Third World cities.'" The failure of regular employment in the cities to absorb Ih�· vast influx of l:lbour from the countryside follows from rhe I()�I( of capitalism. Competition on a global seaIe has caused Col pita li�t� to turn to "capital imensive" forms of production which do not re.

The Runaway S�SI"",

J39

privilege, since less than half of those who want such a SL[UJII"1i are

H1

fact enl0ring Lt '

'

.. .. .

Ar rhe same tune Lt is assumed (hat th""

in informal '\ector suffer from "social exclusion" and are nOi

�.'

ranle of self-organisation. \'(Iorkmg

111

the formal sector certainly has advantages 0\ t"I

wo rking in rhe i nformal sector. In India workers In the "organ ..." , sector" get paid a good deal more (30, 40 or even 100 per":t"1H more than tho'5f" m the �unorganised sector..." [n China, workl"! In large-scale indusrq' were provided until the late J 990s with ilit � iron rice bowl" of a guaranteed income plus cen,lin hamULI-: sickness and pt"nsion benefit..<;--a1J thmgs demed 10 people mi�r.11 ing from the countryside to seek lobs. Employers ha�'e not, however, provided such thmgs out 01 !II< goodness of their heart. They need a certain stability in {h\"ll labour force, particularly when It comes to skilled workers \\ 11" they do not \\anr to be poached by rivals during times of buom. In many industries, the mnre stable and experienced :1 work forl" the more product i ve It is. Capital is prepared to concede highl"1 wages to certain of the workers in those indu!>tries bcca u"e h\ doing so it is able to mak e more profits out of them. Hence the .1 Jl p:lrent coorradinion-some sections of the world's workers .In bmh better paid rh:m others, and more exploited. Bur by tne sam\' raken, workers in the formal sector bave the capacity to fight b,h � ag,HnSt capital in a Wily which i t fears. The growth of tbe mformal sector rarely l11eJns the dcstrul tlon of the formal onc. The in formal workforce in Brazil's mo,\ imponanr industrial city, Sao Paulo, grew by nearly 70 percelll In the 1 990s, but the number of "formal" workers em ployed 111 rhe private sector still remained more than four times hlghtl' than the number at "informal � w{)rkers.... It is wrong, as peork like Paulo Singer did, to write of "'dcprolctariamsation'· . Rather whn is happening is a restructurin g of Ihe workforll', with the hiVing off by bIg firms of some tasks (usually relatlvel\ unskilled and therefor e easily performed by a floating work force)

to

small

firms,

labour-only

contractors

and

thl'

supposedly self-employed. Far from the growth of the informal workforce benefiting thl" workforce

In

the formal sector, It has been accol1lp:lIlicd by an i n

crcased exploitation of workers in this sectOr-and in many ca�t.:' by a dererioranon in wages and conditions. ThiS has been mo\\ marked in Afnca, where the scale of the decline In real wage!. tor

340

gar belle/. A those with lobs i.n the 1980s was so grear as to beg report in 1 9 9 I told of:

hne be­ a sharp fall in real wages . . . an average 30 perceor dec rage rate eween 198 0 and 198 6 ... In several coumries the ave rage the has dropped 10 percent every year since 198 0 . . . On ave minimum wage fell 20 percent over that period." In Latin America real industrial wages fell by more than 10 per­ f.:ent in the 1980s, while they did so in the formal sector in India in , the late I 990s.4 the formal The usc of the informal stetor to batter workers in rmal sector ')CC["or has led to the widespread assumptIon thar II1fo here toO_ The workers are powerless. But capItal faces a problem y to resist more it relics o� thetn, the greater their porennal capacit or that have ItS demands. In India those pans of the mformal sect ediate goods hecn raking on wurk from the formal sector-�imerm chemicals, producing activities in the unorgarllsed sector, eg basic equipment non-metallic mineral products, metal products, and tlvity" -in­ sectors, have witnessed rises in wages as well as produc . IS not ts men dicating that "workers' bargaming power in these seg as bad as it is made Out to be":ns new in The phenomenon of casual employmem IS by no mea n played a n the history of capitalism. Casual employm ent has ofte tract labour Important role i n certain industries. And forms of con of the indus­ are very old-it was common in the textile factones

am in the 19th trial revolution. In the mines in both the US and Bflt uit workers cenrury overseers or foremen ( " butrymen") would recr e owners. Sut:h and pay them out of a sum given to them by the min to be parr of casual workers may nor always have felt themselves struggles of the working class. They were often detached from the a nme. Yet other sections of that class for years, even decades, at ays there, [he potential for stfugglmg within those sections was alw be very biner, and when it TUrned in ro real ity the siruggle t.:ould with an almost insurrectIonary [lnge. t 111 1 8 S 9 Frederick Fngels observed precisely thIS develupmcn te: when London's dockers struck for the first time. He wro

stricken Hitherto tbe East End had been in a state of po veny... hose SPlf l! \ stagnation, its hallmark being the apathy of men all hop" . . had been broken by hunger and who had abandoned ,

Who Can Ovr-rcomc?

.

'"

And now, this gigantic strike of the most demorabsed cleOll'HI' of the lot. the dock lahourers, nor the regular strong. expnl enced. relatively well-paid men in steady employment, but 1110.1 who have happened to land up in dockland, the Jonahs Ilh" have suffered shipwreck in all orner spheres, starvelmg.. h� trade, a welter of broken lives heading straight for uner rUin And this dull)' despairing mass of hwnaniry who, every 0101 II tng when the dock gates are opened, literally figbl pitdlnl battles to be first to reach the chap who signs them on. Ih.1I mass haphazardly thrown together and changing every dol}, h.1 sU(.-ct:ssfully combined fa form a band 40,000 strong, m:Unt.11II discipline and inspire fear in [he powerful dock companies . . Engels' point is very imporrant in the 2 1 Sf century. Internatlon,l ll \ Ihere have been three decades of defeat and demoralisation tnl workers right across the world. This bred a fatalism about the Pu\ sibility of fighting, which was reflected in a mass of studies Whllh depicted the suffering of the poor and the oppressed, shol\ 1I1� them alwa ys as victims, rarely as fighters. Thus there are maSses 1,1 materials sponsored by the lnternational Labour Organisation 011 "social exciusiun"-a theme which suits (he bureaucrats who run sllch bodies. Themes like the "casualisation" and "fcminisatlon of the workforce become stereotyped, academic ways of dismi.... ing possibilities of struggle even if some of (hose carr)'l11� through the studies try to escape from tbe paradigm in which tlu'\ are trapped. This [endency to see the urban poor and the perm.l nent workers as rwo separate groups hermctically scaled off frolll each other is particularly prevalent among NCO activists. The reality is more complex. Slum districts themselves are rareh homogenous in theIr social make up. Permanent workers live 111 them alongside casual workers, the poorest sectors of (he self-ern ployed, the unemployed and even some sections of the pt'1I� hourgwisie. Mike Davis tells how: The traditional stereotype of the Indian pavement-dweller i� .l destitute peasant, newly amvcd from the countryside, who sur vives by parasitic begging, bur as research in Mumbai h.l� revealed, almost all (97 percent) h'1Ve at least one breadwimll·r.

70 percent have been in the city at least six years . . . Indc('d. many

pavement-dwellers

are

simply

workers-ricksh.ll\

men, construction labourers, and market porters-who :lr�' 342

The RUllaw�)' S)�ll'Ul

. hlc compelled by tbeir jobs 10 live in the otherWise unaffl)rdl heart of the metropolis.

I co Z61ig and Claire Cerutl point out (hat recent research on " \tlweto in South Africa shows that Ill 78.3 percent of housebolds ..ho were employed. self-employed ,md there was a nux of adults , unemployed". They conclude that:

the South African township and slum might be viewed a!) a meeting point for trade unioOists, unjversity students, gradu­ ates, me unemployed and informal traders. Though the spectre of unemploymenr affects all layers of society, these groups are nOt permanently cut (I ff from each other and can be found in the same household supportmg e:lch other." •

!"he picture is simjlar for El Aho, the satellite city of the Bolivian capital, La Paz. It contains hundreds of thousands of mainly in­ digenous Ayama people who have Illoved to the city from the e­ ..:o untryside or dosed down tin mines, and whose effons to som

how make a living for themselves are ch.lr.1cteristic of the informal i '>tetor in such cities everywhere in the Third World. Yet EI Alto s 54 also ;'the principal industrial LOne of the La Paz region ",11 with percent of the region's mdustrial workforce and an increase of 80

percent in the numbers employed in mdustry In (he last ten years. lity' What is significant is "the combination between 'mforma and/or small businesses based un family labour on the one hand and the degree of incorporation of the labour force in wage labour

of in productive tasks on the other", so that neighbourhood forms organisation have a class (as well as an indigenous) content. Under these circumstances, struggles by workers have the capac­ e ity to act as a focus for all discontents of the great majoriry of thos living in the slums. So in South Afnca a senes of protests and riot� h: over the delivery of basic services created an atmosphere in whic the public sector gencrJI stf1kc in June 2007 was the largest strike since the end of apartheid, pulling many people into trade union action for the first lime. The potential cross-fertll­ s isa[ion of these srruggles- of community and workplace doe not live only in the mind of 'Ictlvists, but, as the sun'Cy su�­ gesrs, expresses the real household Ci:onomy of conremporary South Africa." WhQ Can OverCQOle?

,<3

In Boitvia, EI Alto was at the centre of the ncar upnSlllgs thar rJrn\ together miners, reachers, peasants and indigenous orgaOls. 1I1I1II fa ovenhrow twO governments in 1 8 months. In Egypt I.ltr III 2006 a srnke of 24,000 workers in the Misr Spinning faclOn III

MahaUa al-Ku bra:

ferem secmrs of the economy and industries, from �llahalb ,,, Kafr al-Dawwar to Shibin al-Kum, from spinning and weavlllr to cemelll to the railways and underground and public rranspl lll workers. The strike waY(' went from the public sector to the pr1 vate, to the civil service, from the old Industrial areas to the nl'\\ towns, in all provinces. It wem from the textile sector to I.'n�1 neertng, to chemicals, to building and construction, to tran!>pl III to services. The strikes had a wide impact also, reaching S('I.."[or' which do not have a culture of protest, such as teachers, douor,. and civil servants, and even to slum-dwellers such as those from Qala'at al-Kabsh and the villagers from AI-AtshY Such examples show that the working class in rhe Third Worl tl " nOI condemned ro the divisions and passlvny emphasised by SOII .11

exclusion and NCO accounts. The Incessant tearing apart at old patterns of economic and social by capitalism as it restructllrl', ilself on a world scale does nor SImply cause suffering. It also HI' ates the poten tia lity for resistance that can find sudden expreSSll1l1 when people least expect it. There is, 111 fact, a pattern of sucb struggles gUlIlg back to the fir'l Impact of capitalist indusrrialisation in such countries, recordl·� 1. III

the collection

of infinite labour supply usually StOP shon of a total war of all against all; conflict. instead. is usually transmuted lilt/) cthlllr.;. religious or raciaI Violence. The godfathers and landlords of the mformal sector (m\'islble in most of the literature) inteillgentl}

triggered a wave of workers' protests across Egypt, crossin� dll

for instance,

Those engaged In intormal-secror cumpetltlon under condillom

Peasants and Proletarians edited h\

Cohen, Gutkind and Brazier 30 years ago.'" Tbere arc mnumer ahlt­ examples from recent decades to bear our that picture. We mU� 1 expect many more as economic crisis interacts With citm;ue Ch.Ul�l· and cnses of food security throughout the rest of this century.

use coercion, e\'en chronic violence to regulate competition and protect their investments. . . rhe reaj� l · of such developments cannot be denied by anyone who has read accounts of the imerethnic and Sunni -Shia riots that peri­ uJical1y paralyse the Pakistan city of Karachi. of the hisrory of .macks on tne Chinese populations o f Mala)'sia and Indonesia, or nfthe wave of artacks on Zimbabwean refugees in the very South African cities described by Leo Zeilig and Claire Ceruti. ' The city of Mumbai provides a graphic example of how the mood can shift. A semI-spontaneous upsurge frOll! below by the workers in the city'!> textile 111 1115 in 1982 developed into one of the higgl.'st prolonged strike!> in world history, lasting a year, involving hundreds of thousands of workers and dominating the political lIfe of India's commercial and mduSlrial capltnl as it built networks of support gomg right hack into the vil lages from which many o f the workers bad originally cume." During rhe strike there was unity between the different religious and caste groups rhat make up me mass of Bombay's lower classes. But the stflke was defeated.

In [he aftermath ShIV Sena. a po l itICa l organisation bUIlt by rurn­ ing the local lo.larathl speakers against other groups and then Hindus against MusLims, ruse to a duminant position in wide areas of the city. This culminated Muslim population

111

III

murderous riots against the

1992-3.

Unity in struggle had created a sense of solidarity which men ex­ �ned a pull on rhe vast mass of the informal workers, self-employed, the unemployed pour and the impoveri:.hed secriuns of the pett)' bourgeoisie. The defe:n led 10 the sectional attitudes and communal conflicts of the pett}' bourgeoisie II1fluencing [he self-employed, the

Fragmentation, bitterness and revolt But It is also mp i ortant to recognise th.n people's bitterness agallN poverty and oppression can burst Out in other ways. The fragmen ration of people's life experiences in the world's slums a l l too ofrl' n leads to different groups turning on each other, as Mike Davis S;l)" '44

unemployed and wide layers of workers. This was a vivid example of how there are MO different direc­ tions in which the despair and binerncss that exist among Ihe "mwtitudes" in the great cities of the ThIrd World can go. One di­ rection involves workers struggling collectively and puJling millions of other m i poverished people behind them. The mher in\'olve� demagogues exploiting the sense of hopelessness. demoralisation Who Can

Ovrf<::omr!

,4<

and fragmentation to direct the binerness of one secrion 01 rh, impo\'erished mas.. again..t other secnons. Tha t is wh\ r h , ; wurkrng chlss cannot simply he seen as lust another gro rpill f with in '"the mult itud e" or wthe peopleH, and of no IOtn n.. ir III, porrance for the struggle aga1llst the system. Nor can W(lrhl'! struggles be seen by those who organise them as impon.'I"

slmpi)' because o f rheir economic comenr. Their struggle.. 1 1 Important preCisely because thcy have the capacit), to prond,- ,I .

dm�Ction for all the bitterness among the mass of people orh, ·, wise with out hope as they try to survive in the slums 01 du­ world's megaciries.

These mo\'emenrs have led man)' altlVI�t� ((I adopt what

;Ht"'

ometimes called �neo-populist� views."" These see the peasanl�

JS the agent of social change. or at least a component

III

the

Jgency of tbe "multitude". And sometimes the tuture of world lood production is also seen a� lying with them. sinle food pro­ duction per hectare is often greater on small peasant plots th311 on I.uger holdings.'" But missing from this rccc>gnition of the persistence 01 the peJ�­ .lIltry as a force. even if a declining one, is the way in which it hdS n changed profoundly by capitalism. although nor necessarily III

the way which-Marx and Engels expt.'cted. Ham7.a Alavi and

Teodor Shan in pointed our in the lare 1 980s that "rwo alrematlve The peasantry The development of the capitalist form of production h;h lilt the life-strings of small production in agriculture; sma ll prod III

tion is irretrieva bly going to rack and ruin. . . We foresec Ill(' inevitahle doom of rhe sma It peasant. . .
third of the world's population. The reality, across much of 1.;1111 1 America, as in nearly all of Africa and South and East Asia, is Ih,1I

hundred� of m il lions of mdiyidual small farmers are clingmg on Itl the land which they own or rent. They find themselves cauf-hl again and ag,111l In a vice, as rising prices for energy and fenili�l·t

Inputs squeeze them from one side and competition from caplla II�I farms with modern equipment presses them on the other. And till

disconrenr hred by thiS can still make the peasantry an ImpOnJ IH political fact in majo r countries in the Glob31 South. Even in Latrn Americ;t, where the peasantry shrank by h31f betwcen the 1 96()� and the 1 9 80�/' it has been pC3sant�based rebellions 3gainst capl talism that have caught the imaginarions of pcople around rhl

world, with the Zapatistas in southern Mexico, the MST land l!,"�, workers' movement in Brazil and a big sectlnn of rhe movemc l1I which swept Evo Morales to the presidency of Bolrvia 10 2006. 34.

lorms of agriculrural production" had developed wlthm capnal­ Ism--<>n the one hand "farming based on wage labour-, dnd on " the orher �3 form of organrsatlon at production based 011 the family farm which is incorporated into the capitalist mode of pro­ Juction" . In this second form, �The

peasant

economy

is

structurally integrated within the c;lpltalist mode of production" and "surplus value is extf(lcted from the peasant through the agency of commercial capital and credit IIlstirurions" and "con­ tributes

to

capItal

accumulation-but outside the

peasant

economy from which It is drawn".oJ The peasantry that has been drawn I11tO the circuits of capital­ ism in this way IS nor a homogenous group, but differentiated Internally on the basis of �i7.e of landholding, ownership of equip· ment and levels of debt. At one extreme are those who ha\e managed, by one means or another. to transform themselves IIltO peny agricultural capItalists. at the other the landless labourers. Between them Ilcs a bigger or Sl11aller layer of those who rely on family labour. perhaps employin� wage labour occasionally. per­ haps supplememmg their household incomes by agricultural labour for orhers. L ..bour outside agriculture can be l111punanr for the poor and middle peasants. Figures from 15 de\'eloplllg countries in the 1980s showed non-agrlCultural lllcome amounted 30 to -1-0 per­ cent of toral rural household Income; in Chill:! it i ncrca�ed from 1 0 percent in 1980 to 35 percent in 1995·' and "acquiring non­ agricultural jobs has become crucial til avoiding the fate o f peasant life and esr.:aping rural poverry";'" in Egypt 25 percent I)f rural household IIlcomc came from �wages oUlside the village­ in the 1980s." '4'

Not all peasant households are Imegrated into the wider el'On omy In the same way. For many there are only the mOst mc:m." forms of wage IJbour. Sut a minority may establish links \\IIi! those In prtvileged posirions-delivering support for politict.1I1 domg favours for big landowners or moneylenders, mantpula'lth� supposedly rradillonal family. clan or triba l ner\\lClrks. A di ffefl'll tiation ari.l.es between peasant households a<; "Huggles over 1.111.1 3re tied IIlto the conflicts in the wider economy. at

it

local. a n,1

[lonal or even a global level." Such differentiation means rhat what art' convemionall\ lit, scribed as "peasant movements� do not have a single autom.\{I, trajectory of opposition to capitalism and the ruling classes. '( ht leadership In peasant movements often comes from those \\ hn ha\'e been most successful in enlarging their holdings and at-\ II mulating enough capital to employ labour power rather th.1II sell It. They have sufficient freedom from dally rOil and '>ulll cient connections to wider society to take the initiative when I I comes to mobilisi ng others. Hanl7a Alavi noted long ago rh.1I peasant revoirs [end to be led by middle peasants, not pO(Jr peasants or landless lahourers.·- The penetration by caplt.lli 'lII of the countryside me.lIls that it can. in fact, be the pert)' agn cultural capnalists who head peasanr m(Wemenrs, putfln).! forward demands like lower prices for fertilisers that henchl themselves dLsproporllOn:Hely. That is not the only direction in which revolts from the colin tryside can go. The differentiation of the peasanrry often mcam that rhe middle and poor peasantS are under pressure from thO\�' who Will use politic.11 connections to drive them from the land­

i India. local party cadres in ChIiM. caste Hindu landowners n chiefs connected to state apparatuses in Africa, soya barons III Brazil. The result can be uprisings direcred against (he perry agr,lr ian capitalists and nor led by rhem. But such upriSings (hen haH" to

confront the forces of the state, which try to Isolate them in par

ticwar localilles, relying upon the very wa)' in which the peasalll household gets a livelihood�by labouring [0 produce

a

har\'e"

from its own plot of land�ro disperse the protests. So Ihl, Zapatista insurgency rocked rhe Mexican state, but that did nIH prevent the Sfate effectively sealing the movement off in tht' Lacandon jungle where it remains Isolated a decade and half lateT. The various Maoist movements of dalits (the former �untoul'h abies"), tribal peoples, the landless labourers and poor peasant� III

re· India are annoying to Indian capitalism, hut so long as they 3rt' trieted to remote countrl areas DO more annoying rhan a gnat bile I to a healthy adult. Yet the very penetration of the countrrside by capi talism makes more possible than ever before links between the poorer sections poor of the peasantry and rhe urban workers. For it means that the in (ltasant households have, through migration, family memhers bit­ the cities. JUSt as workers' struggles can provide a focus for the terness felt by all thc groups who live in the slums of the cities, so toil on tOO they can do so for [he hundreds of n1l1l10ns who still

an remote patches of 1.1nd. Bur whether that possibility becomes that actuality depends on workers fighting 10 win With dcmands e. reach out to the poorer layers in the toWI1.l. and coumryside altk •

Who can overcome? It is the very development of capitalism that shapes and reshapes the lives of those it expl oits, creating the objective circumstances ur that can turn a disparare mass of people who sell their labo This power IOta an increasingly self-conscious class �for itself". ruc­ class is the potenrial agenr for challengtng the chaotic and desr tive dynamic of capitalism because capitalism cannot do without it. The mistake of r..touffe and Ladau-and thousands of other so­

the dologists. philosophers and economi!>ts who wrne that that working class has lost its central place within the system�ls system they do not grasp the elementary poim made by Mar'\(. The own, is a system of alienated labour that has taken on a life of its and capital cannot survive without more labour to feed it. JUSt a.l. the vampire cannot survive withuut fresh supplies of blood. There have been phases io the history of the system when If has

n had the means to bind the mass of people tl) It, either by repressio or by keeping them relatively coment. Hitler on the one h,md and n Stalin on the other did seem to rule on the basis of mass repressio d during what the Belgian-Russian revolutionary Victor Serge calle . prime the "midmght III the century .... Ir was possible for a Brttish II minister. Harold Macmillan, to tell peoplc rhey ha d "never had

so good", and for most workers ro concur, even if grudgmglr. during the 1950s. I have tried to show that the dynamic of the system is gom!; to make it difficult for capitalism to cemenr ItS con­ trol permanently o ...er the mass of people by eirher meolllS. ".

Its very restlessness means that It cannOt ilJlOW those It e'pl,nl to rem:lin in any degree of contentment for any great len.,;th " t time. As rhe runaway system lurche.'> from boom to slump and trl. ro boo�t protits and \\.:rite off debts in a wild ammpr (0 IURh I•. , � .tgam I[ dashc� the very hopes of a secure life that it has eno,;OIH af,\t!d

1I1

the pas!. Ir insists the mass of the people have 10 '\tII�

longer lor le"s, to accept tbey must lose their jo,,"s because ban"\"! lost Ihelr heads, to resign themsel\ics to hardship in old age. to 1,:11 up their homes to the repo men. to go hungry on peasant plot· IU .1S to pay the moneylender and the fertiliser supplier.

'"

People Will react against this. Some were aln:ady doing "0 ,1' I wrote these words. The last Spurt of the mid·1990s onward ... It nan,c-fuelled boom saw spontaneous riuts against rising food ,111.1 energy prices in a score of countries. The firsl months of it.. Ill'\\ recession saw protests, riots and strikes ag;llllSt JtS effects. Ir coul.1 nor be otherwise. All such movemenrs can provide people wnh I hI conditions for learning for them!>dves about the putentililltlt'� lit class struggle against the system. And the inter:lcrioll of recu rrelll crises---econnmic, milirary, ecological-is repeatedly gOing I" create conditions that breed further discontent even if capltall\1Il does somehow finally emerge from the present CrISIS inract. It bears repeating again and agalll that the wealthiest societ� III

dements have produced ver) impurtanr social uphe.wals III Iht: decades since the demi�e of the long boom-from Iran In \ 979 tnd Poland III 1980-8 1 , through to Russia 111 1989-91 , to Indonesia in 1998, to Argentina ,md then Venezuela and Soll\"la III the years afrer 200 L. The escalauon of crisis In October 1008

led President Sarkozy of France to warn fellow rulers of the danger of "a European 1968". Whether his warning was right or wrong in (he sborr term, we will see massive social upbeaval re­

i the decades ahead. But what has so far been lacking reatedly n has been a third clement lenin focused on, rhe subjective one: a political current able 10 win people in their masses to the notion

of a reorgalllsation of society and prepared to take decisive action a t key moments in leading people to fight for n. The absence o f such a current IS Itself a product of obJective processes� �ome of which are described in thiS b(mk. The last great wa ve of insurgency against the system in the late 1960s and early 1 970s failed to break through'" Restructuring of the system through crises disorganised mnny of rhe forces Illvolved in that in­ surgency JUSt as defeat demoralised the left. The demoralisation was made more profound by the way the great majority of those on the left worldwide identified with the societies of the old Eastern bloc, societies which had,

III

fact, been absorbed into tbe

hUlllan history. the United �tates, operated over the last tt ; rn

system's dynamic of competitive :1cc umUlallon and which suf­

�tandards of those whn labour within It. That tOO was (he pa((t'rn

of the system.

decades before the curreD[ crisis broke by pushing down the livlll�: of J.lpan fwm the early 1990s on. They arc examples which th(h\ who rule over Wc�tern Europe have set out to emulate, and

,un

sw,;ccss (hey have will create similar pressures on those preSldll11 U\ier capital accumuhnion in the newly induslriail!olOg societic� fit East and Sourh East Asia. That docs not necessarily mean liIerl ml�ht nOI he spells better than

III

1Il

wbich some pans of the system might ,(,\,111

the recent past to manr who live within them. Su\.h

was the (."ase In the mid to late 1980s and the mid to late 1 9t1(k

fered more than mo�t from the CrISIS of the srare capitalist phase It was as if much of the left had to be born afresh when the latest phase uf insurgency began to take off wuh the Chiapas re­ bellion in Mexico and a wave of public sector strikes in France in 1995, the demonstrations agains( capitalist globalis3rron of 1999200 I and the movement against the Iraq war III 2002-3. But being

born afresh also meant having to learn afresh. Typically. activist\ talked about fighting globalisatinn or neoliberalism, nm capiral­ ism. But the runaway system has itself created the objective

and It may well happen again. But in the " runaway wurld" of l\lP

conditions for yet another shift.

il
system is forcing even those who run the system to talk about (·ap·

Lcnl1l laid out conditions that he saw as necessary for SOClt'l� to enter a ';pre-revolurionary crisis" . Two afe going to be lui filled again and again in this century. The ruling cla�s will not Ill' able continue with things in the old way. And the mass of peopll

As 1 write this. the shel'r .;cale of rhe crisi$ facing the world italism. and having to recognise that Marx held something to Sil)' about it long before Keynes. Many of the new generarion of ae­ ti\'ists have hegun to study his writings and man}' of the older generation suddenly find they h:we an audience to pa�s Wh.11 [hey

will not feel able to put up with things i n the old way. These tWfI

have learnt on to.

350

Who

The

Runaw"y '\)'INl

Can O��rcome?

1<,

Th:H in It"elf does not guarantee that the subjective dcmCrlI \\!II arise to make sure that the next great revolts again!.t the system .II'

nm conr:Hned br It. For that ro happen. those who stud} c.lpu.d 15m have to become an Integral part of a mo...emcm of tho..c \\ h,.

sufter from It. Whar we can say with certalnt)' is that without 'II. I,

Notes

a mo\'emem the world or the end of this cemurv IS going to Ix· III toterJ.ble tor the majorit}· of those who live in n. As the }(JIIrI) Marx PUt It, -Plulosophers have inrerpreted the world In nUI' \

wars. The point is to change it."

louoduct ioo

\ For a s ummar}"of d!e v.lOUU5

attemptS to measure happiness., s«

lam Ferguson, -Capitalism and Ha.ppmess . Intern,mmldl

\3 I'utlogethcr by Eng�ls from man USCnpts Marx lcft In an

ml:C)mplt'le SIlUC.

14 AISl) edltcJ hr Engels aflcr Marx's dcath.

-

2 J

Sociallm,2: 1 1 7 . 2008. Wa�h/llgtOlI Times,

15 Av.ubble tooay 3� !lit GmndTlS5l',

24 <Xto�r 2008.

Nlllf'boob for 1861·3. 1 6 Thl� I'; the hUls of thc SO"1::alled -1f.1m,'Orm;llloll problem-.

Bank of lntern:ttlonal �nlcmtm:li, AlIlIuiJl Rtport. June 2007.

4 QuotN ln Randall E Parker, lntroouctiun, f-.c()mm",s of tlJ�

Great D�ress'(Jn (Edward Elgar.

ThtOfl/!$ of SlIrplus Value, and his

17

6

7

17

�plembtr 2008. 18 Arun Kumar proYldes

�

'try useful

account of how thc cQn,enliona!

200n px. 5

Willem BUller. F..,(mdal Tjml'�.

QuotN Ln as abo\·c, p95.

ligures provldc a dl510rtcJ '·,CW of

£wnomlQ ofIne Great

)lanSllc.\-, III Alt..rnatlL'e £Cono"'l(:

D,-preUlon, p9.i.

SUTI'e)', lndl:t 200.5-2006 (Deihl.

A Marshall. The PrinCiples of

Daalllsh,20061.

hITervie.....ed In Randllll E I'arker.

IndLa, ,n -Flawcd Macro

EmnomICS. 8lh dillon (London.

ChapiU One: Manf', Con(:qns

1936), p368. 8 JQaIl Robinson. Furtha­ Cr.mt"hUltnns /0 EconomlQ ,

(Oxford. 1980), p2.

Sc-c, for ,nStaIKC,

GLIlian TCII,

�Cursc of the: Zombies Rises ill

Europe Armd an Fcnc Calm-,

FmonCl..l1 Time5, 3 ApnI 2009. 10 Karl Marx. Econo,mciJnd

PI"losophICal ManUSCripts of /8044,

http://www.maTJosu.orglarchlve/ mandworks/ 1844fmanuKrlpt51 labour.hnn II K Marx and F I:.ngcis, (".alleeted Works, Volume 34 (London, Lawrencc and Wishart, 19"), p398. 1 2 hnp:l/www.marxlslS.org/itchlVe! marx/work5l1848/communlst­ mamfcsto/ekO I.htm

352

1 2.

U�ual1)' called �honlculrur.ll �1I:lIes" hy autruopologJm.

Adam Sm ith, Tn.. We>llth of

Natluns, Book Onc, Chapter 4. a"allablc at hnp:l/www.ccollhb.orW

hbr
pUt conmicrable cmph
phy,":a! dISl,"C\1vcness 01

comm'NI!I("'i .....hich ,0<.1 thc �me rn'� In hl$ accoullI of [hc bU51ness " ..Ic. 'in. for examrl�, hl� PriUS ,md ProdltclIon (London, 1935\. � ..Illlo....e� . 01 Pi"ro 'ir.lffJ 1 1898I '18] I, an I [al lan c:.;onombt a[ (.lml>rIJi;C l;OI,"em[v ..ho Jld nOi )('(' hl� 0\", "'�lcm .1> dl'p3rt'"� Irom \IaT>;'�, Ih(IUlth ('1«>1'11' like Ian \tI'Nl'lan �'t U>l'd hl� ..mlOK� In Ihls !>Cno,<. f> nll� ....as . [hc �ondu\lon .nml'J 3[ , h\ . AnahrKal \h�l�rs� I,ki' G .-\ Cohtn an" 1:. .. .. OlIO Wnfthr. 5 «. , for IOManu:, ( A tohl'lI, MTh" Llhour Them)" 01 V�lul' anu Inc Con..:tpl of � . 'l:pIOIl:l[i()n �. 10 Ian 'i[f�man I , nd o[her�, Thl' \;,11,1' CtmtrOl'1'r5Y (Lond',n. Verso. I 'Jill I. rp10l·21J. 7 Adam Sml[h, The \Vraltb of NII/io/l5, Book One, Chapter �, al·"dahlr at hllp:lfwww.econlib.urw LI hrar�6mllhlSIl\WN.hrml 8 Mar"l(, C.lplt.1/. Vnlume One, p39. 9 Mar,\:. CaPIIIlI, Vfllume One, 1'39. 10 S(lm� [ransiallo", InlO English use Ihe archaK wnrd MahquolM for proportiooat�. addlO� conslderabh' ro Ihl' J,ffi.-u1n· of Mar,,', ...... 'rk for ne" readers. J I Karl /o.Ia�, �Lclt�r tn "'ugdmao � ( I I Julv 1868), I n "ad �Iarx and h�JencL. Ellgd�, Colltcud Works, \'olul1)(' 41 (Nl'w York. 1 '.187). 11 MMx, C..apltlli. Vol� Onl', p'j. 1 3 The USI' "I th� "'Ord ..mbodlr:d� somefl rnr� t:auscs (onfus.an. �or daTlh<;ation, sa Gughelmo C...an;hr:dl, FrantleTS of PolItIcal � .(ono'ny (London, V..r�, 1991), pp 1 00·'0 J . 14 � also I [ RubIO, EJSa)'i' 1m Marx's Throry of Volue ( Monneal, Bl.1ck 1<0"', 1990J, p7\. 15 11m I� nOI alw3�.� nnmedl3tdy Otl\'lOU5 frolll Manc's �xposl{[on 10 (;hapler One of CapItal. This l11\'olves hIm analyslIlg th� commodity In abstraction from orhl'r fl'3turt'S of Ihe (ap,cal1St system wh"h h� deals WIth lat�r. M

Compelltlon IS t;ken lor �ra1l l,,1 �"" e conWlo.iit) pwduclloll assumtS Ihe ..:ompt.'tlnve SJi.: nl Wrnmodllll:'o, hll� there IS Ii,} �crOWI1 at (h,� S(;1,11t 01 its furthr unpJlI. In thC' �aClll' \\a). Charlo 0111' don nOt dl'al with t:aplfal ahhuu�h Man bier IO"SI� [h,,, nnl) in a carlla";[ SCKIC'I} lhat Mhc:mg a L"fIOunoJl1) I� Ihe danlW3IJ1 and ddC'rmmmi: dLlr.....:u·"'u, of liS proJUlI� ' I C..aplfal. Volume' Three ,\11"''''". Progrn�. 19"14. r85"1). 1 m ,I tul rounded c"'posltlon fl( how ,0mpefltlOn bel .. �n (apI/lib �ubordllla[cs each of [he'm 10 th, law of value, �c C.<1ptfJI, \'nlum, Three, pIUS: lind Marx's POSIh umfl\l�1y pub li shed manUSCrlp[, KRCiUlts of [he 1),1(', I PrOOLlCflon Proccs5�. K Marl( oItl,] I Enllds. Collated W()rks, Volwil" 34, I"p355·4f16, dvailab)e .1I hnp www.mar... �t�.o.lV....rchjvc/m.1 r\: works!1 864/«ononllcJmdc)'. hIll! 1 6 Marx, ClPIfIlI, Volumc One, r' Marx, (""Pltlll, Volume One. p-1. I g Marx, Capltoll. Volun� Onl'. I'�4 1 9 h�ures far hlggo<sC 2.000 companl from -Th� Big 1'lCtureM, hup:!/.." \ t-orbC'S.com. 4 St-rlember 200K. 20 Ad.am Smllh, TI.t' U·t.llth
II As abov�.

21 h was onl' of the' POIOts WIth Wh,,1

he dis;
h'm

NUle

\ Marx, Capllll/. Volume On... 1"'09, h So the Chap[�N In (.Jl/Iltal lin

manufacture and malhlllen fall withm th" �"fl()n of the work tnmkd MThc "rOOl1clIon 01 Relau,'C' Surplu§ Value�. Clplt.ll. Volum� One, ppJ.J6·S04. '1 \tan:. Clpllll/, Volulll(' Otle'. p41 1. l'btte IS a mmor amhlgun� In \lan." worl as to whnher Ih� InTl'm;fjullOn of the' labou r "'lIhout Jny chan�m,lo: oltechlllClut amounu to "relatl\'e� or Mab!iOlu[c surplus value-. smce a p",!Sulte' on page' 410 !>«Dl5 to Imply Ih .. Jalltr. and th.u; is how soml' people read Marx. The ]><1101 has 110 WIde 5Ignlhoncc."prdcr the: rdatn'r surplus vall1�� opnon smcr 1\ IS IOvanably combmtd with the introduction of machincry which, as fo.larx POllns our repealed I)'. usually increases ra[her [hall dmlllllshes the burden un Ihc worker-and produces a dlfftrenl son of reS'staru;:e to thaI produced W

by e't1endmg !h� workmg day.

28 Marx, Capilal. Volwne' One. p410. 29 As above, p411. 10 Engcl5. Soa,II,sm, Swmll{ic iJnJ UlOpwn. m Mar;l", I:.ogeh and Lenm, The �..ssentJal l.4t (London, Unwm Books, 19601, p 130. There 1$ .sometlrIK'S confUSion among �brx:Jsts aboUI th.u;. SoIM conlend compclluan cannot be conslltulI\e of capital SIIICI' Marx's ml'thod In VolulM Of\(' of Capllal is 10 IIIT1VC' al Ihe gcnc:ral law5 of Ihl' SYStem by abstl"3ctmg from the ImpaC'f of compctluon over tht d,smbulloo of surplus "alu� bctwt'c:n tht d,fferl'nt unllS of the S}·slcm. Competillon Ih�n supposedly belongs to Ih� sphere of dlsmbuuon. nut that of production. KUI the compctl1lon IS berween prodllclU,!t units. I! arises from the faC'f rhal their in!�raC!lOIl with each other 15 not planned. ThiS then ImpoK'5 on each th.. genfral features of [he system Marx anal�$l'S m Volume On�. W,thout " Chapter One

there woulJ be no rca'iCm tor tht' mdl\'ldual Cdp".II� 10 abide' hy Ih.. law ol "alilt', ("o'tn II som� ut rh .. nl'�("'iMn tJlt([S ot compcllllon express rh('m�II'es 1/1 Ih.· 'l'hert' lit d'5tr1bulion. As .\br'< rU� I 1[, MThc mner la" lot �all1t'l cnforl�� 1\\.C'1 l nnl� through their ..:ompclluon, Inclr mutual pre-ssure upon one IInorher. � HI'ru;:e It l'i absurd lor \Orne' [hrom[s to claun thaI [h� l does nOl Inc.:lud" notIOn af c�plI.. Ihe n(llion of man� 'Oml"'tflng capllal5: the cor"'''pt of , apit ..1 I"rc.uppu_ ":(lmmo.I1[)' produ..:l1on. It 15 Similar to �\lb-smtI1111g mpul·aUlplll tables rela[jn� panlcular IIIdustrlC'S !o each other for [he compc,illoll berwC'C1i Clpllals and [hen clalmmg 10 ha"e a modt! nf cap"all<, <()Cldy, asd" [h� MH.lcardian�

lTlIIU of /o.I3r'l'5 IheOTies. 3 1 �Iarx. <Aplfal. VoluffiC' One. 11 MVaIOTlSJIIOI1� IS [ht French translation of Ihe German lerm used h)' Marx, Verll'l'rtltng. "Val0f!SOIIIOnft In I'rcn.:h mcan� an e"l(panSlfln In the valut' of Wffit'lhlOR I<'K a compan)' s�rel. Rut rhe K�neral English meanmg of [he word IS different, mamng simrl� �lUting the: priet or value fli a commodlt,.. etc, t'Specially b) a (I'n!rahstd orgaOlstd KhC'mC''' (.'ihortn Oxford Engluh iJlctlonary, Third Edlllon). ThIs usage leads 10 connmon wllh th� very dIfferent concep[ of Mreahuuonft [ie gelling the monl'tary �alu" of commod,nc:s), which IS how the term valOTlS3t1on 15 used I n Ihe �_nghsh Iranslallon of the Gnll1dns$ll by Marlin NIColaus. All lhis 15 confullOg (or newcome'1'S 10 Marx's wTlung..-n -a d C'ncour....ses an acad�micisl [enden"

10

den"", often ncarl)' unlnltlliglhle. eXPOSUlflnS {If Man's 3nalyses. JJ Marx, CalI/fIJI, Vvlume One'. p751 34 As abo'e, 1'71 b. 35 This IS somClhlng DJl'1d 11Jr\'cy

'I<

�hps 1010 10 hiS books Th� N�u.' l.n{Hn.:lII5rt1 (Oxford. 20(5) and A

�bvrr Hutory of NroltIHriJlt5m

IOxford.2oo"/). Chaplcr TYro; Marx and hili Crilin 1 L Walras. f:ltmtnU of Pur� EC()rwm,,;s twndvn. G('Qrge Alkn., 1 9.54 ( 1 889 )). pl42. 2 .'\\ llbovt'. p372. 1 A \Iarshall. n,� PntlClplN of I:.COllomUS. p109. .. M)mUVle'ol. Wllh Kenneth J Arrow�.

10 G R FC .. cl (td)}!).,n Robinson II

and Modern EaJno""c Theory

(London, Macmillan. 1989). ppI47·148.

5 6

Meaning MdeSlrdblbl)"�. Irvmg Fischer, Mis 'Utillt), th� \\l)§1 !:ounab[e Term for the Concepl n IS Used (0 Dl'l\me/M Amer,Wn Efonomic Rel�t·w. Volume II (I918), ppJJS.7. 7 F<"Ir a Krles of arllcle$ diSCUSSing Ihis prub!rm and Ihe f.lilur.. of dlffrrrm mac!lmaiisl rcooom'5TS 10 d�...1 wllh II. SCC' 1 farwell, M �lii!l"'lr and P Newman (rodsi. Cap,till Theurv (London. Paigral'r·, (990). Thc anlclc by L L PIlSml'tll and R kaHler., MCapllal Theory' l'aradOl[rsM. pp136·14-. pro>-ides a u:seful and rrbmd), ac(rloS.blc summary of Ihr argumenlS. S« also Joan Roblnson. I-_c-unom'c Ph.losoph}' (London, Walts, 1962), pliO. S Joan Rohlnwn. E;.c-onormc PJ"llIwpli),. p68. 9 A Marshall The PrwClples of FfOnOm/C$, p62. 10 MTwo setS of IOcornmrnsorablr rolleclionl of mlscel1allrou5 objects cannot 10 themse:lves pro\'ldr thc material for a quamllanv� 3nalY�lsM. J M Krynes. Gf'nera/ Throry of £mpIO)'nlcllt. /ntt're�t all/I MOIIC)' (London. Macmi1!an, 1 960), pJ9. I I J M Keynes. Gtntral Theory of Emp/o},"'Clt, IlItf'rest and Mrmt')'. pJ9.

JS6

I

12 A t�ou� II IS a vctSlon

J!I

"hi.h thc wage IS thr lOeasure of >a[u, rather th:l.lI Rlcudo's �erslC)n. whrrc Jl IS boour performed. ]J J M Kqllts, GI!'JeTa/ T"('Qr"1'

U

2J M.igo�[ Angel Garcia. Ml(ar[ Marx and thr Formauon ollht A>cragc Rail' of Pr06t�, InttmatlOnill Soculml', 2,5 11979); Anwar Shaikh. -Marx·s Theory of Valut

of Employment I"tlfrest lind Mont}'. 1'41,

14 ASilOOvc. f'p21J-214. I S Mau •• Capital Volume One. rll 16 A rise: III tbc pncc of basIC (:on�urnrr g
h:l.ppcns wlThom i1ru!!,gles be"H dlffercm capITal,sts and het"ttn

CapilaL pp4S-46. SwCC"zy. Th� Theory IIf Glplt.lljjt Deudapmmt. pp l15 and 128.

t

"

capnahsu and ",nrkers. 17 Tho; who[r argumtnl for II.'lan. \ rosJtJon IS pUI slmpl), and al lenl-:1I, in Andrew KhmJn. Rl!cli/lmm}! J\1ar:l:; CaIIlM/ (I e)UII!!IOn Book" 20071 ppI4�-175.

1!1 !:tror Inn Steedman. MJrx a{tt'T .\",1/.1 ILondon. New Ltfl Book,. t \l-�I for an Innuenllai dehate on Ihe issue see Ian SI�dlOan and olhn, The Va/lie CcmtrtJt·n"S)', See J!I TIl<

�:lmc ("ollecllon. Grofi Hodgs(Jn �Cnl1qur of Wrl�h" Labour anJ I'rotiu-. pp75-99. For the mamstffam account of Marl[. <;0:< I' A Samuckon, MUnder!ilandlOl! Ih, Marxian NOllon of El[ploll�lIon; \ Summary of the So·Callcd Tl":lnsformalion I)roblcm bcrwc.,.· M:HXlan Valurs and CompclIlI\�' .

l'ncrsM .]ollmal ofEconormc '-,tnatur". 9;2 [1971 I, ppJ99-� l,

I' Bell Fmc, Mlkh311ng Ih� 'New lmperiahsrn�. HW()n(;<1/ ltWtNlDlrsm, 14;4 (1006). piJS. 20 As 3bo\�. p l 54. 21 I-OT a furIcr and \·�r)" IIInucmlaI ac("ou nt of thIS cmiquc, wllh malhrmallca[ prCSCm3tlons !itt Paul Sweezy, Tht Theory of Caplta/ut D" , ·elrJ/!.nellt (I.olldon. Denn" Dobson. 1\146). ppJlS123; � also earthedl, Fronl/o'rs of I'ollflwi ECOlfomy, pp90·92: A Kl.man. Rtdmmurg Marx; ,

NUln

and Ihr 'Tl":lnsfonnauon I'robll'm·M• Ill lnsf' Schwartz I�l.

T� Subtlt Anatom)" of eoplt.llw" ISanla Monica. Goodyur. (977).

24 This is an argumrnt I accepted and !>pelt OUi 10 m}' £XpwmlnS the emu (Londoll. Bookmarks. (9114). pp 160-1 62. 15 The�' ha\l� formolated whal are . r�[M known 3� - W ipo mtCrpretJUOns of Man:. 26 �or varloos presrntJuons of Ihls argumenl. usmg mJlhcnulII,al examplrs. sec Carchedl. FrOlllll!rs A of Political Economy, ppl)2_96; Kilman. Redillmlllg Marx's C.aplfal, pp is 1- 152: Alan Fr MMan: without FqulhhClum

;c'man, •

MPRA Paper no.1207 (20071 a,·allahlc al hltpJ/mpril.ub.uDl­ moenchcn.dd1207/ 1fM PRA_PJptr 1l07.pdi

27 Th.s int�rprru"f>n of Marx on thIs poml I!> known as thr smglc S)SlrmIfIlrrprctal1onM. Some of tho!it who hold 10 II also a�CCf'l, M

hle me, Ihc tnnporal um:rpretatIOn. With thr combmallon of boI;h belllg (and rso known by lilt cumbrme wmewhlll offputtmg) phrase: MThe Temporal Slngir S)'Slem InlrrpCelaliorl or nSI. 28 Carehed., Frontl�rs of Poll l.C<:l1 fwnonr}', pp96,�n. 29 Man:. (;Q/llta/. Volume One. p44, JO nus IS essemmlly Iht account promkd b) Bob ROWlhorn In M

.ontl,,:t and Inf/al'0I1 Cap/tal,5m, ("

(London. Lawrence and Wisharl, 1980) pp231-249. Except th�t Rowthorn sers lnllmog as taking placr maml y \"Ia the StMe and th�rdor�. for him, outSldr of capitalism. Carchrod. stes traIning

as addUig 10 thc �a[ue (If labour pow�r. but docs nm rxplalfl h(J" thIS transf�rs .nlo Ihr tinal produa (C.uch�dl. Fr01lflerS of Polltlc.:!1 f-con(lm),. pp I 30-133). Alfredo Saad hlho and P Harvr) both suongly rr[«l the mlerprrtaliOn I haH put hrrc �auSC" Mil confbfo educallan and (nullng wlIh I hl' �1OC1ng of up of labour III mac-hintrr and othcr dl'mc:nls (If ("onStalll l'lpllal-� AJfrtdo Saad hlho. Tht "illue of MDr:c (I.undun. Roolledge. 20021. pS8.

tr'S For !-IaT\'cy. "Skillcd labour crca more \'alu� III cqual penods of mne

than doe" un�I"lIcd labour b«ause duclive. " IS ph)'slCall) lIlorc pro and Ihere .s no rral>On to suppose Ihat an)· ddtrnUn3lC relatulnship eXISfS berween thiS ;nC"ftastd physlc�1 prodU�lIl/e!II'S� and thr ph)'�jI;'31 produ� IIVilY of the extra IJoour neC'ded {() produce Ihr �lraJl�-I' HaT\'cy. -Thr Val ue Hed Labor Crcating Cap;t(11}' of Slu In M arXl an E,(onollllCS , Rn'l/!lV of . : RaJ.(.:!1 Pr>IItI(ill Iocol/Dln}'. 17 1-2 qUflIcd hy A Saad Fllho. in The -

y IS VQI,,� of Marx). SUI what Harvr

assuming IS lhal thrrc is SC'1� way of measunng thr comparall"r r phytlCal produclil/llitS of labou thaI might be prodUCIng qUllr dl(fen�1l1 produclS IC Ihal roo can b)· cquate tilt �aluc of commocilUrs ,0mparinK thr.. usc >'alurs, This n lu>rs him (and A Saad Filho) ope dr b}' 10 Ihc very oblr'Cllon ma Bohm-Sawuk. 'I G ulC("hcd" hon/lerJ of Polil/fiJl economy, pllJ. .

Ch�pter Thr«: The Dynam;cs of thc SySlcm I J � MIll . r'IIfClpies I)fPI)/mcill Ec.O/lOlll}' (London. 19 1 11. pJ39. re 2 See I W�lrIlS. Elenlent5 of P'l ·on�, ... F,conmnrcs, p3 81, For Jl of !itt Eri' Roll, A H,story

. Ec.ono.nif Thought [London Faber. 1962). pr6

3

Anwar Sha,kh. KAn Innodu...non 10 Ihc HISIO!" 01 CnSI$ Thf'On.·�. ln Bnu.:c SleHlbc,.,. and

Olhe rs

(cds).

(".;1/111.1"$'" In (r,s,s (�e.. York. l'Ill"" uf R ad ..,,] Pllhll�al l.\

�<.on\)m ",,>, 19�81. pll!. AlID

I

a\'JI Jl;ok ;]1 hnpJ/humcpage. ne ...,.; hool.edw'-AI,hJlkhJ..f1\li �

I heonn.pdl llKa l)ensl('roso. -Rul BusI� b'de

\toJ,.·]s 01 die Creat

IHpr�wlO; A Crill�al Surw)-, DI5oCunion I'apefll 2005001,

Unl\c\")lIoi l.athuhque de Lou>ain,

20m, pp3-4. �vallable �I hnpJ/wwv..lrcs.ud.ac.be/I)P/lRt'.s DP/2oo5·S_pdf; $("I' also Randall E p�rker, E(O'lmmcs of tlie Creal

1

/)eJirtS$l()n. p2?

M�n;, ("Apltal. Vol ume One,

�

As above, p I I 1.

ThiS. ror IIlsrance.

IS

8 9

dlspropomonahn' wcrc pft" -al, amoog reformiJ! sociah�n lO !h

hI'S! dK.lldL'!I of Ih[ 10th (tIlIUt

5« Paol S....eel�, Tht TI,t'P1') "I

CapllCrY "md,

summJ!}" of Ihc fir51 lour chapt.

of Volume Two 01 Marx's c:,.I{m (M05oCO"', PrO@Jcss. 1984). 13 'bne, (.apr/oJ/. VoIulilc Two. p I un 14 Marx, ("oJ/lllal. \,,)Iu",e Threl'. p4 1 5 As abo,·c. p"9.1. 16 Sec, for eXdmple. -In "r,lI\><, ..t Hvman M.lllsky", GuardMn. 22

III

early a<."('ounl of such � �h,'""

Charles Di,ktm's

Mart",

Brdl,2004).

Ch,,�;:II'U'II, wrtllen m 1 844-�. 18 Marx, Capr/Oll, Volume Thrt't:. p'�

pp239·2"O. The most prevalent r«enl vers.on h�s probubly h«n thaI expc.lUndc:d by Ihe radlCal Amcncan t'ConomlSl5

19 As abovc. p384. 20 A_� atxwt. pH9. 2 1 � A Ha) ek, PriUS u"d Prod,!"".n ( London, Gt-o,'ll!e Roulltdge. 1 9 H . ppI03-104.

III The C.nPWt/'SI Cyd� (uldeo,

Marx, Cap'lal, Volume Th!u.

Puul &tran and P�uJ SWttzy hook

III thcir

M'jJlopoIy Capll:J/ ILondon,

Pengu in, 19(11). 1bc.' o;ee capllaltsm's problem 3S Iy.ng.o a

yowlllll -surplus� whICh CUIS Ine bUYHlg power of Ihe masses and

producc� a steubr Ircod

10

�lagnal1oo. A somewhDI Similar poSlllon ,� upoundcd by Joseph Slellldl,

Matlmtv and Stagmll.MI m

AmerlC<2n (;apllalm" (New York,

Monthly Rcvlew. 1976). Set' my cnuque of these po!illlOn$ III C Harman, Explammg the CrlS'S, pp I "II· 1 54. See a Iso M F Binney,

'

21: See d\(' quol� frum Lawson 'n William Kcqtan, Mr Maudl",Jo! � Gambit (London. Hodacr &

1:3 I.b)n TroISk}" MRtpon on Ihc World LcooomlC CriSIS and the' New Tilsks oflh� Communm Inlernallon ..\, Tht

hrs' fll't: )'t'd r,

of tht Comm'tnm /nltTIWIIOIIJI,

Volume o� (Ncw York,

24 W Keegan, The Sputre of

Cal/1tllllsm (London, Rad!U�,

1992), p79. On th� $OCI3h�{ lefl lh.

MarXISI accou llI was relKted III lh.

(London. l.awrence and Wishart, 1976); Anwar !.halkh, � An

Sutcliffe,John Harmon. Paul

Crisis ThcoryM. pp229-23 I. 10 The resl of IhlS $('Cllon 15 a J58

18 As above. r14S

: , John Stuat! 11,1011, 19�, for UlSlan.:e 'nne,pla of p"lill<:dl l:,mllf)m)'. Kook 4. Chapler� " dnd-.'i, av",labl� al hn-p:lI�n·2.�I.m�"D1astct. w_«onlugcmlJlI.3/11lllUpno/

book4/hk4ch04 .W Ene Hobsb�Ill. I "duSlry and Emptrt (London. l)engum.

31

19711. p75.

Mar!('s reicc!:"1II of RICJrdn's c!(planatioll makf;$ nonscn�". of Robt:rt BreMer's ass.erlion Ihal Mar"'s theory rHIS on a �Malthu"an � assumpl.oo Ihal �producn\,lIY can be e"ptClcd fall�. Sec Robert Brellntr, �The

10

Econom'C$ of Globa l

Turbulence�. New Left Rel.'ttU'.

1:129 1 1 998). pI I .

32 Marx, Cap,t.J/, Volume Ooc. p612. 33 Marx a lSt) u'ICS anorhcr concepl. thc �val ue (Ompl'mlloO (If caplfJI� 10

descnbe Ihe taUO of m,'CSlmtllI

mea11!i and malttlal of producnon to Ibt C(HI of labour power (or. m h,s I"rnunology, Ihr ralll,) of

(onstaD! capnal lo \'anahlc

capllal. o� c1v). t.brx Ihell defin� the organic composmon of atpllal as Ihe value composllJOO Kill 50 f�r

organ'c composItion from Chanllelo in thevJlue (omposluon duc 10 al !eranons IT! the COSI of either means of prodllelloll or lahour power. See Frtd fI.-Iosclt)·. Thf'

SWt'elY and others. For; full

aC('oum of Ihe Vlew� of Ihese MMan:i'l� crlllC$ ,)f Marx s, set 01' '

upla"''''1( Ihe Crms. pp20-30. NOll

Fa/lmg Rale of Profit m tht PosIlI'ar us Eco/lomy (London Macmillan, ,

1991) , pp3·6. See alS<) lhe

Chapter lbrtt

d.s.:USSlon 011 hllpJIt1�aldu.eLn. \\ III edul-o:ofrrclilope/JTI:h "d02 1 11{}I1'I 2.hlml. B.- �"nua�t. Ren �IIlt dnd I lI\\rence HalTls U1 RtT('ddm/Z

Cup,t.lII Lollduo. Ma�ml1l3n 1 9�9. ppS8·60) Jlltue Ih..1 lhe- MI·.lIue composition of CJ PI{;lI I� lbe rJl n) of thc �urn:nl value lIf Ihe mc:an� and malenal of proOLKlion ..onmmcd to Ihc curre-1lI ,':due-01

ppH6-7. 17 As abovc, p2r.

�s il detcrmlllw hy the Icchniatl wmJlO'iIIJOn� . htd Mosel cy argucs thiS dl�unguiShc-s ,hangcs III the

Pathfinder. 1972).

1 9705 by Andrew Clyn. J:\ob

26 Marl(, upl"" , Vol ume Th�.

III

Stoughloo, 1989). p5S.

V",ler,;,,,,s""'/Jlmn Theorlf's Il11roduClion 10 the Hls!ory of

HacTl500. Ste,edman Hodgson. Glyn and other� Also CnllCS of the Sraffians such J.� Bob RO,,""lhotn_

which �w Ihmp sImply 10 It'ln

•• �n

ursum�m of Pavel V l\l:Jksakonky.

theorit.; of monopoly assoclaled wllh Kuran and �w«l\'; Ihe Sraffian. IIM-Ricardo.an (UCrCIlI of

II In\erprela non5 of 11" a nr\ an�h,

1 " Named afler UII Itahnn AIll�n�,ln fnudsler of Ihe early 1 9205.Thl·fI

Ihe

15 foe lII�tancc Ihose ",ho ac�epl Ihe

CJpll,z11S1 Cwle.

AUgU5I Z007.

pp l l O· 1 1 1 . 6

pHaphra"t of Ihe .lrgullIent in Pa"cl V \'Jl�Jkm�ky, Tht

bbour power coosuDleol�. The pollli I� lhal (he- current v;alue ot the h ri capllal lOI15Umcd 1'1 00'1 nccr.,.... Ihc s;lmc: as the v;luc 01 Ihe ongmJI 1II"nllllent-llldttd this IS a po'llI \\t· Will deJI wilh laler, and !he "31\.C 01 consum�d capnal will len.1 to hc kss than Ihc \'aille- of invC'Sted capllal, as Hlcreased produc!illIy

rcdu�e.. Ihe sociall )' llecCSSJry labour needcd 10 produ(c each IInit of capll31. 34 I lilttdman. M
Afler Sr4fa, p64;

lOmpare- abo pp12�·29. � 35 AndrC\\' Clrn. Capltall5l CriSIS anol Ihe Org�nl( Composl1ion-. Bu//e/m of rhe Cnnftrcn(e of 50<'1;111S1 EconomISts, 4 (1972): Andrew G)�n KProdU('tIVII).,

OrganiC Composmon and !he hllin!; Rale of Profit: A Reply�. Bulltlm of 11>.. Confere"u of

Soc",IIJ/ £,:onom,SIi, 6 1 1 973). 36 SUs;Jn I-hmmclwell. -The

Conrlllulng Saga of Ihe Falling Ratc of Profil: A Re-ply 10 Mano

Cogoy�, Hul/Clm of Ine Conftrcnu of SOCIOlltSI Econom,sts, 9 (19741. 37 Ro bert Brellocr. Tile Eeo"omlCs of Global TurbulntC(' {london, VcrS<).

20(6), fO()1nOle pp 14·15. \8 Gerard Dumerul and Dommlquf Levy, Tile

£conomta <)f Ihe Profit

R,'le I London Edward [Iga� 199 i). .

39 N Oki�hlo, �Tt'ChnIC31 Changcs and Ihe R3!e of Profit -. I
VI/werStly Eco'JOmie RI'I" t'U', 7

11961), ppSS·99. "0 For Marx's argument with a numerICal t"ample. 0;('(' wpIIJI. Volume- Ont, ppl 16-.1 L 7. 4 1 �or more on thii a�umen t, ....,th 3

Simple numerK:ll example of my own. 5('1' Expl.JlnmK the CTl5I5, pp29·JO.

41 For � gener:ll mathematical proof

of thl\ ;ugumem. �. for n i stance, 1\ Olmhll,). � A Formal Proof of ""'n;'� Two Thrormu-, Kobe L"lI'tTfll)' EronOMlc Rtl·It'U.·. 18 1 1 '1721,

pp 1-6. ..� Set, for cumple, the af!l.um.:m\ of HO
Cor,fertllre ofSocialist Emnonusts,

6. 1973). It h�s smcl' been amplified

b) Ih� temporal smgle·system �hool of Mun.Ist e..:ononllsrs. 4 � Robert Brenner, after reiecting Marx s theor) of the tendency for the raIl' of profit to fall on the ha�.. of Oklshlo's arxUOIl'nt, then pUIS forward an account of hl� own I'I'h,,:h rests prt'Cisd)' on the way Ln which capnah;it!. who hal'e illl'eslcd a lot III fixed capital In the past st'\" Ihelr pnces undercut and theu profits threatened by capnallsrs who have 1II1'tS'rcd more recentw wuh cheap<"r or Itdlnologlcally more adl anced fixed capital. Hnmg ac.:ept�>d Okishlo's J!O'Sillon on one page, Brenner PCOI'IOO hiS own rdUla"vn of Oklshio a few pages [ater_nd dot'S nor reall§e he ha� done 00. Sec Roben Bren n!;'r, '

'

EconomiCS of Global Turbultmu.

1'1'14·\5 and 28·31. 46 Sec Marx, Capital. Volume Three, pBI. 47 EXCl'pllonal ca�� will be when completely n�w hntS' of production emerge WITh low organIC composItiOnS of C3pit:.l1 bUI with a level of prodUC[Jon and IIIveslmcnt capable of absorbIng a 10{ of 360

a�cumulated surplus value, Kur th.-se C!tccpnOlls will soon hto gnpped by (he tendern:y for thelt v�tI1ccompo5ltIon� 10 rt�. 48 Marx, Capital. Vulume Three, 1'14 I 49 Marx's argumem IS contamed 11\ Volume Three of c.,pltale, bttWttTl 1';nIOUS school, of Marxists who see the Crt�IS a� ongmaung III the rate of prolit ,or Ihc dispropvnlvn between d,fJl'r< 5I'CIOrs of pro
Accumulallon and Ihe 8r�akd0411 of the c.,pllaJut System, (London. Pluto, 1992), p76. Stealso RICk

Kuhn, He",yk GrosS/11
lIS own value), and the other pornon would produce values at 3 lowe.- I1I{C of profit, owmg to die pre5!iure of unemployed Of but partly employed capll;!'l ... The faU in the rail' of profil would ttw.n be by an ahsolu le Il ;K:COIp'iln� decrta� in the mus of profit, �mce thor mass of emplo)-ed labour power could not be IOcrta�d and the: I1Ite of surplus valU<' raISed under the cond'l1ons we had assumed, $0 th.1I lhe mass of surplu� value could not be mcreastd cuher.�. 53 Henryk Grossman, Tbe Law of Accumulation and tbe Breakduu'n of the Capltalut S)'5tem, p 191. Ht'myk GmulIIlln, 54 See

Ritk.,.Kuhll, 1'1'1 38· 14 8.

55 HCI1I')'k Grossman, TiIc '�"lwol

Aeeunm/almn IJnd fbI' BreakdOIl'fI oftbe Capl/allSl Sy5lelll. p76. Also Rick Kuhn, Henryk Gms,slflan alld

the Ruowry of MllrXlsm, 1'85. 56 See, for Instance, Marl<, Capltol/, Volume ThrC'C. 1'241. 57 Marx, CDPIMI, Volume One. pJ60.

58 As above, pJ56. S9 As a bove, pJS6. 60 For a I'er}" good pteSl:ntaUOIi of thiS argumenl, see MJke Ku.lron. kMarx'sTheor) of Value". III Mile KIdron. Glpltilium arid Theory (London, Pluto, 19"4), pp74.75. 61 K Man: and F Engels, The GumJn Idrology, m Mal')( aod En�els, Colle
anJ Nalllre 1PaJgr:tve, 19IJ91. 63 Marx. CApital. Volume One, p i i7. 64 Mao:. Capl/al. Volume Thre,e 1'792. 65 As ab<JVc, 1'793. 66 Marx, CapItal. Volume One,

1'1'506.5011. 67 Marx, Cupltal, Volume Three, p793. 68 F Engels, The DwleclICs af Nature, in Marx and Engels, Collected Works, Volume 25, p461 . 69 As above, p462. 70 As ab<wc, p46 3, ChapttrsThrtt to Fou r

.,\ "lux, Coplt;}l. Volume One, I'll \ 72 ,'Iarx and Engels, CommunlJl Mamfesto, available at http:llwv...,,'.marXl5r�.org!a r �hIvel mar't/wolIulI1l481communl51mamfestolchO I .hlnt 7} There were a few ellcep uons III the 20th cenJUr}, IllO'if nO{ably JOU"ph Schumpr1ef 10 Ius Caplwlum,

SIx.alism and D�OCTary (I.cndon.

Allen &.: UnwlO, 1943), hut they l1('ari) always owed a dcbt 10 �Iarx for Iheir approach, evco while rrYllig to adlusl hIS findmg.'l 10 !usnl} capHah�m rathcr Ihan Ibmn It. 74 For Ihls reason, Mar:. docs 1l0t onl) deo;.l.;r be the law of value as functioning m an abstraCt m odcl of commocliry pwducnon ill Chapter One of Volume Oncof Cuplil/l . bUI also h II funCtions al a m!)fe concr�tt level through thc ITlterpla\' of capll.ll� !lI the chapter k))istrlbulIon Rdanons and ['roducoon Re1allon$� ITl Volume Three o( Callital (pp857.859). Chapll'!' Four: lJeyond Marx: Monopol), War and the Statt I Quored 10 D M Gordon. kUp an d i Dol'. n tbe Long Roller Coaster'". ll flruCo:' Sfemhcrg and Olhers \cds), 2

U!) Capitol/15m'" Cn51s, 1'23. S« MFlgure 2: N'er Rcturns on

Capml! Ul lhr UK. 1855 ·19I r. In A J Arnold and S McCanne)', �Nanon:d Income: Accoulillng and Sectoral R.ul'$ of Rtturn on UK RI�k·Beanng Capital, 1855-1914 �. 1\0\ember 2003, 31'ailabll' al htfp:llhuslncs�,S(h I)OI.e'l[c(er.at. ukJ i g!papersIQJOla.pdf accoulltn 1 Sec the accounn In Garelh �[edmln Jones, Outca5t Lando" (Ibrmondswonh, I'engum. 1991). 4 hedl'nck Engels, � I'rehec to the l:nglish EdltlOnM ( l S1I6) m Man, e,plta/. Volume Onc, i\1'ailabl c .1t hlrp:llwww.mafJ
Harman, f:'(pl.mll"K riot C"SI5, rH, '"

See, for German), G SfY, lJagl'5 In

6

Gtrm.Jr>:'! IH71·19·H ( Pnn"ewn .

1960). r74; A V [k;.al. R�a/ I,\;J,I1"<'s In ( ''''''1.111)' I Oxford. ClArendon. I 'l6Hl, pp 15·16 Jnd p3$.

-

'wto Ihe detailed a,(;OOnl ofthe Ul'IU.I

01 wOlkmg hour� m the 20th crmury In 8 J.,;. HunmculI, W ork W llltlmt

fnJIPhtladelrh,J.Temple, 19881.

II Fdw;ard IkrnSfeln. EI'fJ/Iif/O>lJT)' S�I.lllSm I IQndon, ILP, 19091. flpRO lind 83. 9 A$above. plI9. 10 R Hllferdmg, F",.mu c.:.uplt3l. p304. I I As aOO\'e, pJ04.

12 As above, pU5. 13 As "I)ewe. p366.

1 4 A� ahlln, p23S.

15 " I aOO\'e, pp289·290. 16 A. abo\·e. pH4. 17 A� aOO\·e, p194.

I II S« WilH:nn Smaldon�. Rlldolf Htlfcrdmg ( O'en, 10001, plOS. 1 9 r-"I SJlladurl, Karl Kauuky and tbe SOCM/1St R�L·ollll1on. 1880·1938 {london, Vtrw. 19791, 1 "'" 1 . 10 hom '" KaUlSl�. �Impcnalism �nd Ihe War�, /lIIrnr.Uloll.:ll SocUllI$l Rrt'l/'u· (November 191 4), lIvAilable on www.marXISI§.org 1 1 J A Iloh"un. IlIIptrtaliSIII: A �t"dJ INew York, 19()11. naila ble .11 hlrrJlwww.�Qnllb.orgllibrnry/

'" 1'1 U\oohlHobsmv'hhoinJmp.brml 12 �or de"uls set: Barf}' I:'.lC�ng.r�n. (."loboliJy,/ hn:mu (pnocemn. 20081, pJ4.

23 Norm an Angell, Tht GU.lt I//"slon IToromo. \1cCkllanJ &

Goodl:hll d . 1910), 1'269, mulablc OIl hnp:l/ia3506 1O.us.arch1\"t'.orgll l

IItmslgu-a,IIIu.�lOrIStuOOange110ft} grt� IIIIIISlon�tuO{)..ngeuoft.pdf 24 Nigel I bTr1�. All PCJI<;C W:.ltft, Intcm01tlfJlJ01/ SOCI,llinn 102 12(04). 25 Ellen M..rksms Wood, �Log1C5 of 1',)werM, Hl$loru.;J1 MaruMlism 14:<1 (2006), pH. 2(, A� abol·e, p22. 17 MIChael Ilardl. ��olly of our Mnsters of Ihe Um"err;e�, G..,mlum, 111 Dt'c�mbf,r 2002. �

362

IIoolmarh 10031. p I J 7,

28 l'\ I ll ukharm. impnl:JilSm (l,d

Wurld fro,.umy (London, "krl, 19-:'21. a"'lIlable .11 hUp:l/wwv. rnannsu.orgld rch",:/hukharml worksl l 9 17flmpcnaVmdex.hl/11 29 V I Lenin, /mptnollnm: Tbt 1fl�j.. Stwgt of (".ap",e1ftr known. BUI Bukharin .,ctual]\ wrolt Ius

book fi,..,l.

Highest Stagt of Cnpltallsm, Chapler 3. "FUlaoce CapIllll and

Ih� Finano::ial Ohgarchy-.

« N I llukhann, IlIIptnll/t5m and World F..conOlllY. p i 14. 045 N I 8ulUiann, IlIIpnUl/lSm ana tht A.ccumu�ttO,. of Caplt.Jl. p256.

046 As above. p267.

047 Rosa Luxemburg, Tbt Routledge, 1963) 048 Rosa toxtmburg, AccumulatlOH of

3 1 As abo,e, p6U.

11 As dhm't, p 1 11�.

CaPIUl/, An Anh-CrltJqUI', In Ro5.J

33 Asabo\e. p69.

34 A.( ahc..le, ChJplCr 7, �Impcna(, a� a SpecIal Siage of Capllahs!1l 1 S N I BukhJrm, Im/Jtrl.:JllSln ,mJ \\'I)rld Eamlllll)" Chapler 10, �'ReprodllctiHn of Ihe Ptoce<;'e' "I '

(;oncCntraflon and CcnlrJI"JIH'" of (".aplwl on 3 World .x.II�M

•

36 N I Buk harm, E<"ommncs uftl/('

Tr.:msfumklllOII Pumd I New ror�

8crgmJII, 1971), p36. 37 N I llukhann, Imll,.rl,lllS/tlllml

World Economy, pp 11'1·11'?'.

311 Nikol:11 Ilukh�rm. tmp.""';1lls",

,/•. 1

tbt AallmltlolllO'1 of C"'PII.J/. III

I.uxemburg and NI�oIJl

8ukharm. ImpeTmftsm and ,1>0: Accumlj�tlon ofC.aplIlJi (Allen

I..ne. 19721, fl267. 3� �, for in�tal"'e, Elkn Meik�m' Wood, � I1�'C!i of Power� , p2l. 40 F'gures froll1 1-1 Fels, [uropt: TI..,· World's Holnkrr: 1879·1':1 14, quuted on ;\1 Kidron, �lmpermlJ�1I1 The H l "hCSI Sug.. Kut One�. In /nternoltloll.JI'iIlCl,llmn 9 lfir�1 �ries. 1962I, pll1.

41 The arglllnent and Ihe figur�$ for thisare prOVided by f
I LenUl, ImperU//'JIII: The

AccumuL:JlI0n ofCapItat (London,

10 As abo\e, p204

Ro-,a

43 V

19741, p 1 95.

41 For one of fhe Ii!):f rec�I\Jllon' 01 lhis hnulMum of 100 lileral

ApplicMinns of Len m s Ihel)r�, '

!tt'e

Tony Cliff. "The N �Iurt uf !Ifalim_, RU��I� � ( J ':1'181. m T Cliff. Marx/,;f Theury aftt!1' Trotsky II on.:lon, NOI..-

LuxembuQl and N ikolai Bukharm, lmptrtar.sm a"d the Accumulallon

ofCap'f2I, pH a rm. lrnpertaitsm and tl,t 049 N I llukTi lI«ulII"I"//("1I1 nf upttal. pI 110.

50 As aoove. p224. 5 I Set the di5Cuss,on In Chapler Three

"A NOle on rhe Th�
DpltaliSI �tate�. C4(J.t
earlieL

caplfals. Marx recognisM llus when n i hl5 ongmal plan for Cop/tal Iht'

A«umlllatIO,. ami the Breakduwn

volume 10 deal

52 I lenryk Gro5sman, Tbt Law of

with Ihe Slale was

of/he Copl/ll/iJt System, p98. 53 Figores from Cohn Clarke, �Wa,l!es and ProfiIS", Oxford £Connml'

due 10 appear after the volutm'S dealing w'ilh th� Interplay of f e"'nt capll.als In the clCl:uiation dlf process. the dlSlflbunon of surplu§

504 Set; -Figure 2: Nel Rttums on Capital n i the UX, IS55-1914�,m A J Arnold and S McCarmty.

v�tue between dlffertnt o.pirals, tht'

Papers, 30 (197111. p40 I .

�Naponal Income Accounung and Sectoral Rau:s of Rerurn on UJ.,;. R1sk-Bc:anng Capllal,

ISH·1914�.

55 For a fuU cxposmon of Marx's VUK>U§ �·ItWS on the $Ule:, Set' j·bl Draper. Ki3rf Atal'%'s Tllcoryof RI!1IOfUllon: St.Jtt and Bureat"T,uy (N"",,· Yorl, Monthl) Re-',e'w. 197':11. 56 Graph a'a,labl", 31 hftp:l/www.�OIl lib.org/hbrary/l:nc l /Go�enlment Spcnding.hnnl 57 For a forceful cntlct�m of th" VII'\,>. s.ee Juslin Roscnbc-rg, Tht hnlllft of CtL'ii .'ioclety IVerw. 19941. 511 This wa' an Imponant POint made by (;o(,n l\arker In dlscu§§mg "3nous vnslon� "f th" M(lIpilJI den\'3uun � Iheorl es of Ihe �Iafe In his articles. �The Stn!� as CarIlJI�, Inttnr.:WOfWl5«III(,$In. I t 1 9711 I; Chapfer Four

fale of profit, ",nl and so

forth.

60 Ellen Melkslns Wood, � l.ogICS of flowerM. pLS. Even DaVid Harvey, who accepts fhut is all a:onormc

fauonale 10 ImpcnaLmn, WnlCS .11 one poml of �tcmtonal and

ahSl loslCIi of pow·tr�! 3.5

caplf

dlSflOCf from tach other. � DaVId

I!af\"l')', Tbt Ntw lmperw//.5m, p19.

61 Sce �Two lnslghts donolMakta lbeory �, ill Im,.rn;1tIO"01I SOCUlI,sm, 100 (firST sal�. 197�1. 62 My lim ned knu" ledge of Iheltt debates I� IIIdebl«l 10 a paper prt'5Cm�d al lhe NIJ\'emher 100., confercnce organised br HIstorICal M:lteTl.lllsm n i London. Sec Oll\'er NachlWC) and To ht3S ten Brink. " l.osl

m

Irall�luon-lh<:"Gl'Tm.111

World Markel [)ehare n i Ihe

197(kM• HlSt(lricwl ,\I.rUrw/IS/>I, J 6: I 120081. ppJ� �I. �or ....,me " t '.,

Iht kty IHllttS §tC' Wolfgal1ll MutilH & Chtlsttl Ntusuess, MTht 'Wtlfan: SIa.le il!usi<)l1' .md wmradlCuons berween Wagl' l,.1bour and C.apnal�; Elmtr Alv.1fl'r. �Some Probltms of Sl.llt Inrel'\'enfiOmsm-; Joa(h'm Hir$(h. -Tht \tone Appara.rus and Social Rtpnldocfion-, III John Hollo",.., ' 3nd Sol 1'1(:(1010 (tds). St.Jtt and CaIIlt.J/, A M.J�xlSt Dl'b.lfl' (London. Ed....ard Arnold. 19871. 63 This ISa summary of hl"t argulTlCm pro�Jdc
19th eentur) .I.� * � n":leo reglml"' ScI' rhl' reVIeW of hl'r book h) Pepi,n Sr.l.ndon. tnterlld/lflnal SocwllJnt, 120 (2008). 68 For a much fulkr de.elopment "t Ih.s argufO flC I. SCI" my arnck 'TI, State and Carltahsm TodayM. In'I'�n.J" On.J1 s.,clJitsm. 2,5 111991). I'p3-57. avallahle .11 http-Jlww"'.Isl.org.uk!'id;2 14 69 Volulllt' Two of Marx'l C.a/llfdl spt'lls OUI fhl' relation brtwel'll fh, Ihree forms oncc prodU'''H' capn;;rlism has fStabllshl'd liself 70 I\e,1 Srenner, *Betw�n fUlrl al,,1 Motion: Accumulauon. Tl'rrnnrl.ll Orglllluli l on �nd the HistOrK.l1 Gfp flgn hy of Spatial ScaI"M. UnlverSlfV of LhlCago. 1991!, al'ailable 3t hrtp:l/sociology.n�. n) u .cduldocs/l0f2221Brenner.l:t'J 1991!.pdf 71 For an aCCOunt of IhlS, sec W RUIgrok and R van Tulder. 1'111' LogiC of /l1tl'l7Wt/O/I(// Rt5tructurm8 (london, Taylor (ilhl Frano;lS. 1995), p164. 72 "or a useful dl§.CuS510n on the literature about th� n('(Work" J XOtl. Corpor,J1/ons. ClaS5�5 .l1l.1 GtpltalHm (London. 1985). -3 C05tJ.S Lap.l'·"Sa5. -Rl'latlon5 01 po....er . and Trust In C.()ntemporan Fin;anceM, Hlstortcal Materl;1/,sm. 14:1 !2006), p148 . -4 Costas Lap;avl[)a.S. MRelanons nf Power .. m l Tru)r III Comempur;II' Fmance�. 1'150. '7.� V I Lcmn. 1ml't'rlaltsm; Th, Hlghl'st Sta1(t of Copt/ollnn, p60 "6 CiauS Offl' COlltrud,CllO'" 0/ thl' 'IJi-"lfare Sla/ll (Hu,,;huuon, 1 �84). p49. 77 AntOniO GrJmS(l, SelectloliS frolll Prt5l!r/ N()ubooks (N�..... York . l nremJfJonal Puhliihe�. 1971), r 1 70. 78 What I1re someumeoo �·lIl1ed Mruhng blocs". 79 All qUOttS from Karl MllfX, Ihe hr" draft of Thll Cil'll �'artn Fr.J"ce. In ,\1,ux and ..nge!s. Col/crted \tm.b .

Volume 22, p41!3. a.·ailabll' al http://www.mar"'�ts.orgl.. rchlvc/ nurxlwork511 87 1 "i.-l·w i .. r· fr.uKcldrafts.'chO I.htm 80 II is ttus vIew wlueh enables Han'cy 10 see pnv:;lIIsauon as a form of �accumulafion b} d'5POS§l'HI0I1� of prooUC'li,e aCHvmes *ouuldl' of capltahsm". See Dand Han;e)·. Thl' Ntw fmptn.Jlmn. p141. 81 In eountnes Irkl' Ililly or Braljl thiS could hi' half of 10t�1 produC1ne In"estm<:nt; In the case of the Unlled. States :lrnucxpendJlure was equal 10 lOla) producn�e inVI'S\TIlI'nl for lon& pc:nodJ of nme. 82 Marx. C..,pttJl. Vulunll' Three. pp862. \6.�.

83 Karl Marx. MTransfurmauon of Money Into Capltal-, M,mllurtptJ of 1861·3. III M.mt and Engels, Collecud W orh. Volumts 30 and 33, a�adable al htlp:/I www.marxists.org!lIreh.vclmarxl .....orksll 8 6 l1economldch ISl.hml 84 R Ih lfcrdmg, Fma"cl' CapItal. 85 Th,S, for lI1stance. IS Ihe posItion Impheci by Fred t..-Iosdey In h,) study of the rate of profir 1Il thl' US wheo he excludes Ihe st.n� �Ior from hl� c.t!cuIaoons see h,s Tht fallmg Rotc ofprofit m IllI! Post \('ar Umll'd Stiltes I-oono",,.. 86 Marx. Capllal. Volume Two. 1'97. 87 Frwcnck Engels, SOCldll5m Sc�tlfic and Umpwn. In Marl:. Engels. LtnJll. Tbl' Essenll.:lt Ltft. pp71-72 &11 Karl KallISk)', The (;f,m �lrugglt !;l1so known as MTht [rtun ProgrammeM1, Charier Four hnp:l/www.marxlsls.orgfarch •• ·/d kamsl),/189Uerfurtleh04.hrm 89 Lron 'l rouky. Tht first I-Il,(, )'e.:m of Ihe Comm"n,st InttnlDIlOl1.JI, Volume One. 9{) Marl{. Call1lat. Volume Ono:, p7!i. 91 Tony c!tff. Thl' Nature o{St"IIIIISI RlISSID. Cliff waJ duwlIIg Out the Impll(:anon of Bukharm's account UI Imptrw!um Dlld tht World E.conomy. Chapten �Ollf 10 h,·e

I

2

3 4 5

6

7 8 9

Chapter h�e; Slate Spc:ndmg and the System X� MlIrx's comments on �mlfh In rh" rtgald 111 Karl \larx. Thl'ortr' of S"rplus \O/
10 """0.. Call1wl, Volume Three. p296. I I \\arx. Caplla/. Voluml' Two. pU12 .xe Tahle E I. 10 Anwar Shaikh lind E A Tonak. MtDSUflllg the "'I'atth of NallOrIS (Camhrtdge. 19'}4). pp298-.J03. I l �red Mosde)'. ThI' FJlfmg IWII' of Prlllit In tIlt Posl \\7.:r Unttl'd Statl's 1-.'0"0,,,).. 1'116. 14 !llm<>n MQhun. �DlstnhulI\'l' Stua� III tht US E.conum). 19642001 �. C.,,,,bndge j(),mw/ of E(o"o"'/c�, 30: � /20061, �Igllfr n. I. � \hdt;acl Kidron, -Waste: US 197tr. 111 C ..;tplwlmtl (Jlld Thror,.. ppF·.1'i1 16 Abu Ft�mal\. MTht Il\de!emlUlaq· of I'nce· Value Corrt'1am)n�: A Comment on I'apt'"rs by Snnoll Mohun and Anwar Sha,kh �, al·arlable :1.1 http://mpr.l.ub.ulll· m uenehen.de/2U4010 1/�IPRA papl'l_2040.pdl

)6\

17 Gugilimo ur(;htdl, Fronllrrs of POIItrCd/ Economy, ppU-84. 1 8 Michael Ki dron, 'WdSU'; US 1.9�0�. p56. 1 9 �bn" Thl!l)rle$ ofSllrpl.15 Va/lie, Volume OIlf', pl-:"O. .!O karl Mmt, CrunJ'lSU, pp750-75I . 2 1 The Cnmdmu was no[ published In Enfl.h�h unlll 1.97J. 22 Mld!.ael Kidron. Mlnrr'fllanonal Capmdum -, 'nfrrntlllOflJI Socwf tsm 20 16m SCne$, 1965 I, pi 0, availabk al bnp:llwww. manrisfs.or&'arclm·eJ kidmn!worhlI96.i1x>Ulnfercap_bun. Carchedl rtCogmses the dtff�m cff Mnon-b.uic-, U$lng the terminology of Ihe Ricardluns he IS cntlClSlng) on the dynamic of accumulallon wllhoUl exphddy drawing KJ(iron's cOliciUSlon about thc rate of profit. MNon-ba51C5 cannot� , he writes, Mbe the transmisslun belt through wluch value changes In rhe previous producllon procC'Ss are carned IntO ,he next olU'�-G Carchedl_ FronllCfJ ofPO/ilical £Collomy, p83. 23 M"had Kidron. (apI/aim" and Throry. p16. H Mlchad Kldrun. �Capltahsm: the l..au'st S,agc·, In Nigel Hams and Juhn Pal�r, 'It'orld CrlSU (london, HUI�h,"son, 197 1 ). repnnled in Capllall$m and Thror.,.. ppI6-17. For a longet e"I'(ISlIIon of thiS .. kcs up cnticl�ms In�lgh, whICh t frum Emcst Mandt::! , � my f-.xpllmllng Ihe

Cnm, pp39-40 and

159-160. 15 HcnT}k (.rOS5Jllan, The /..Qu' of AUlimulilllOIl, ppI .57-158. 26 T S Ashton. The Indll5trloJi RCI'O/lIIlon (Londun.

o.xford

UmllerSII\' Prt$�. 1948). pp 1 12I I J. The) did then /un' 10 enfoll'" on them Ihell own d'M:lpllOe of work, flm�d b}· lheciock. See [ J> Thnmpson, MTilne and Work­ Di"'phneM,

J!1 CIIstums ill

CUrllmon Iu,nuon, Pcnguln, 1;193),

JlP3"1'0-400.

366

27 I-ur a dClldopmcm of thiS arilUIlI\ I wnh hmoncal referen.:rs, KC Suzanne de Brunhoff, The St.lf(· Capllol and EconomiC Poltr.

(London. I'luw, 1978), pplO·III 28 See Londsc)' Gtrman, Sclt, C/oJu and �ltlllsm (Lon don, Bookmarks, 198 9), ppj3-36.

29 T H Marshall, 50cwl PollC)' ( London, HtJlchmson, 19611), pp-'l6-S9,

30 Ann Rogers, "Back

�Empluymclll. Edu";:HHJI1 and Human CaplfalR, 10 II. Huud and I'

Johnson, The CAmb"dge f.(Qnoml( HIstory of Motil!T7l Bntam, Volume Thrn ICambrldge. 2(04). 17 Assuming !he lahour !he,' tram is

s:oillg to cnd up
38 Sec RIChard Juhnson. MNOIes on thc xhoolmg of thc t'11�h5h

Workmg Class 1780-18SUM• m Roger Dale alld othus ledsl. .Ilchoo/lllg and Capllen ShapIll and Rarty R,.,me), �'ic len,e, Education

tu

the WorkhouscR• IlIlernOl/IO/JP1 SQ£WI'Sm 59 (1993), pi !. 31 Han.sard, Parliamentary Dchatts. 171h FebruaT}. 194J, Col 1 8 1 II. J2 QUOted on T H Marshall, SoClJI PoitC)', p17. 33 Notorluusly, the anack on publll sector employment

m5tallce. Mat} ()'Mahon)',

in Ro�rt &�IIII

and WaITer Ellis, Bflfam';s Ecollimll. Problem: Too Few Producers (N�"

pp5S-66, 39 For a tull accoum 01 develupmenTS III themajor n i dustrial COUlU1" es ol ,h� rimt', � ChriS MeGuflie \l'orla,,� ", Mellll (London, Merllll. 1985).

Chaptcr Six; Th� GrUI Slump 1

sc:n'l.'S IU

",duce 'he �alue III lerm, of 5(":1:1l1y ne.:c<;s.' r) 1.1 bout of e.l�h unl! of o\ltpul-and U1 doing '0 redu..:es the 8.1111} a,,;crulllS fII the­ IIH.llVldual Capltull51 from undertaking ,he tmlllln!!_ 16 The Mlrer ndcr� prohlem: 5Ce, inr l'\Otc

1919-39 (Lundon,

Allen L:me. 1973 1. P 11-:". Sec JIso Albu..ch[ RitsChl and Ulrich WOlfek. RWhat Old Cau)C ,he Gre.!t

fonn of constant capllal lhal �an

a"corage Iaoou I praducII ,if)' lind "I

Charles Krndlcbergcr, The World '" D�remon

connan' ClIpllal thiS IS a peculiar

sy5tcm a� � whol e. If IllCr"ascs

1 �3. For a very good contemporary eXPl,,"ion of IIa)ek's POSIILOO S« John \tra�he). The Nalure of ('oJ/IIMilsl C"SIS ILondon, VielOr

(joll�nc7,

.

14 Marx's term In Coplta/' Volume

walk away from ,he lirm and worl. dscwhcu. and m some lOtcrpll'1:at1Qns thiS Iuds 10 Ihe v�w of slnJled workers as In some way pos5CSB SO of lhelr own "human capilli" and a pan of their wages 15 vlCWed a) a Mreturn- on Ih,s capll"!. It sh uuld � added, ho.. -cver., that disputes (lver [h iS qUC'Sllon can be m danger of turnmg In,o pure s.:hobsuclsm, SllKe In any a51' the COSIS of tramms: add to the mllestment �'U"!' nf a lirm. AI Ihe �ame lime. lllsobr a) lr.lllIm& IS genelahsed acrU)� ,h..

Routledge. 1939) ppJ3. 47-49, dn d

and t:ontrol �, 111 the '!-arne �nlu",,,,

Yurk, St Martin's. 1 976). Onc, pJ49. 3.5 If they arc eounte d:u part of

Mayn.lrd Krylle;, Volu me 2 (London. Macmillan. 1'1'141. 1'141 6 Quoted m W Smdldone. Rudolf Hdferdlllg, pIO_i. 7 See, for mq-an(e. Randall E. PJrker. f.(()nomICS uf Ihe Gre;Jt DepreSSIon. p14. 8 Stt the summar>' 01 the AU�lTIdn �Jew bv Randdll [ Parker. &(111(",11,:$ of lite Grt'"ek, PIIU Theory of (' .JlplliJl ILondun. Routledge and J."ccgall P�ul, 19.04' I. p401I. and Pmfil. Illuresr ami I,wurmem {I.Ulldlln.

Ixpres510n?R. III�t1n.lIe fur EmpirICal Rcsc�rch

In

�.conum"" ,

UIllHfSity of Zutlch Workll1� Paper SO .!OOO. pU_ See ,he estimates for GNP In t\IljtU5 Madd.son. MIII�tOncal StdllSIICS for fhc \'(odd Ecullomy: 1-2003 AD�. a"allablc at; httJ':l/www.ggd.:.nctI •

1

maddlsorVH'510nca'-�t..t'5'ocoJ honzonl ..l-file_03·2007,xl5

3 For ::l mIlCh more dClOl1.lcd accuum of th.to sp rt:'ad nf the criSIS, wnh wurces, see my £.xplJllIlng IIie Ct/SIS, pp5.i-61. 4 Xc figu res gwen m I-nt7_ Stc rnherg, The umung Crills (lundon. ViclOr (jollancz. 1947). pH: I.t:'WIS Core), The Dec/Ille ofAmfri(an ('..JPllillIslII ( London, Bodley Head, 1935), 1'27. '\\::IIJable at http://www.marxms.orgiarchlVe/ eurcy/19j4/dedm d� hU �_hI1l11 5

Quoted In R �klud�ky, )olm

Chaplcrs Fivc 10 �,x

19J5), pp.;6-112.

F'llures gl�co by Core) ill 1111' Dl'C/llle ofAmerlCd" c;apltOlh sm. R.ll'ottf Br�nn�r and Mark Llick. MThe Rlt,Ui:atlOn Approach: lhcorv �lId H�\lory�, Nmt Left Rf'l11'11'. I : 11:18 (1991), argut thai wages rose sharply In the ycal"$ before the Cra�h, hu, fh� graph !he) prOVIde from S Lehc rgOIl • \.1. . anpou'nIn Uono.",c Grou·th (New York, McGrnw-HIU. 19M) OIlly su� a n§c of about the!iamt Ind;u C .orey·s ligUR:S_ 1 0 \hchacl A I\o:rnstcl n. Tile C"'oJI DepreJSlon ICambndllc, 191P!, p 18";', He adds dur for the populallon as II whole II rO'iC" I , perCenl. lind for lOp I percent of the non farm population the ligure was 6,1 per.:ent. I I Roben J (.<}rdon, MThe 1910, and Ihe 1990s m Mutual Rdll'l.-{lun �. Paper Presemed to EconomIC 11,.10T)' Conterencf', Duke Uni�cBIlY, 26-27 March, 2004. 12 AI"ln l lan sen, FilII Recol'e1)' or St
9

-

'

13 Simon KUV1cts. OIplwl m the AmemWI EconQlllv (OLIP.

19611 1'92.

14 Jos�ph Gillman. Tb� F,,/lm8 Rott

of Profit london, D�nnl� nobson, 19561. p17. 1 5 J�ph Slemdl. M/ltu",v and 5t;18n.II,,,,, ,n tl,� Am�ncan Econonry

llondon. Blac:k'MIl. I 'H 1), pISS and followmg.

16 AI'm Hilll$C1l. FilII R.I!(U�'rry or Sugn.mon, p296. 17 As above, pp296 and 298. IS

Set the caJcula"on� m I...:wis Cony.

Tilt Dedmt ofA,mPTlt:an Capitol/ISm, Chapru 5.

20 Barry hcheng.r«'11 and Kns Mlfch cme r, �The Greal a�

II

Deprenion

Credll Boom Gon� \l('rong".

Bank of Intema"l)nal 5etrlemem�, Worklll� Papt'rs No 1 37, September 2003. Avadahle at http://www.bls.

orglpuhVwork 137.pdf?llofr:unes" 1 2 J Cort�, "he Dec/llle of Amer,ca" Capltalm" p172. Compare IIlw Gillman, p p I29-130. 22 Bar!") Elchrngreen and Krrs Mllchrncr. �The Great Deprrssion as a Credll Boom Gone: Wrong". 23 See for m�tance, the a((OUni given oy .,. A Preobrazhensky m Tbe Dec/me of CApltd"Sm I M Ie Sha rp. .

19S51, plr. 24

S«, tor Inslance, RI)�rt J Gordon_

MThe: 1920s and the �I ulual Rt/le\:IIonM

1990s 10

•

2S Kindtlhcrgtr, The U'orld m

Dep,aSlQn J919·J9. p i P.

26 Marll, Capltoll, VolWllt Three, 1'473. 2- Al vm H3nsen, Econam,( Srablll�tlon In (I" Unwlallced

World (FJlrfield, NJ, A "I Ke:Jlt). 19":"1 1 1 932H, pSI. 28 Charlts KindlebC'rger, Till' \'{Inrld m Dtprusl(ln 1919-39, p 1 17. 29 Mlhnn fnedman and Anna

SchW3rt1� Tbe Crr"l ('.ml/Tactlon

/919-33 (pnnecrnn Un"erslIy I'res5, 1965), p2 1 .

Srulhe)"$ 1935 aeeoulli of thtse conlrad.efOry 3rgumentS �Iil1 makes pow�rful rradmg today. Stt Stralhc)', The N,mlu of /ht

30 John

("ApIlOl/m Crl$ls. pp39-1 1 9. I'or 168

.

Uru"e:rsl'Y MJCTQfiilns., Ann Arbor. MlChlj1:3n); Gt-rard Dumtml and

,

DonuD/qoe: Levy. The E�onomltJ of

tbe GUilt DeptnSlOtf IEd.... ilrd

EIg.ar, 20(2) and Tht Econw>I/•.

OfTbe Gnat Dtprtnllln. 31 J M Ke:yl'lc:s. Gf!YIual Tb�r)' 01

19931, p154;

'17

48 Ch.rb KlDdlehergtt, The World In

SI\'es figures for thc 1920s only. 41 For pWhlab,I'l)' before- 1914, S« Tony AmQld and Sean McCarme-y, "National Income Accounung and Sector�1 Rarn Qf Ret .. m on UK RIsk-Bearmg CapItal, 185.�-1914 , Ess.ex Um\'cr!;lty \'('orklng papt'r,

Mont),. pl64. n As abo,'e. p59. 3'1 .AJ abo\"t, pp 13.1-1 36 and 214 35 As above, p219.

Dtp'tu.on /929-39.1'.2":"2. 49 Figures SI.-en

No,'em�r 2003, 3Vallable ;11

K,,)·n..s's account of Ihl:' �marKlllal ('ffi(l�I1" of capllal� and ItS u:ndtnq 10 �dJmilllsh", set pp 135-] 36,214, and esptclall�, 31 4-324. For a

37 As 3bo�'e. p221. For

htlp:/Jww�.t'sStll.ac.uklAFM/Rt'Sea rchl workms-papf-n/WP03-IO.pdf

For profita blhty �fore and after the First Wor ld War, �e Ernest Henry Phelps Brown and Margarel

comparison of Ke)·ncs·s po
wllh Man's, sec Lcfleri� TS(lulh,lr· Marx and Keync., on J'rofitabd" '. C�pl(al Acc:umul.ltion and EconomIC Crisis�, avalla bIt al hnp:/liu.gsnu. 3c.k r/upfileslha�'11',I �

H BTOwnl', A Centlll")' Qf I'ay

(London, Macmillan. 1965), pp412 and 4 ] 4; abl(l; t 137 and 1311. 42 Thto Bald..rSlon, �Thc Begmmng of the DepreSSIon III Germany 1927-30·, Ecrmoml� History

%5002-lOO5�..5 0lcflcris%20

ReView, 36:3 (19S5), p406.

Tsoulfidls.pdf 3 8 11a)·..k's rC'CQgnmon of lhe ph)'�1�.11

43 Calculations from JOloCph Gillman,

as well as Iht valut char:lcl..r 01 prooucnon dIStingui sh" hiS

Tbe F,,/ling Rott of Profit, p�lI; Shant Mag.., hThe: Law of Ihe: Falling Rale Qf I'TOnl-. p208; and

wflllnp from dH:_ of mOSI ol th,

rnt of thc m.arglllal isr nC'OClasslul dool. I-Ie admn:s Ihe Imponan�.. .1 l\!arll m de,·tlopmjl: such Idta,. !:.<'t'

Grrard Dumtnil and Domiruque

It-vy. Tbe Emll(}nfU$ of the Profit

.

F A H..,.ek. p,�tS alld p...k1..ctmn. p 10l.Tlllli provides him wllh certall1 II1SlghlS mlsslIIK 111 Ke\"�,


Raft'. p248 16tf,ore 1'1.21.

44 Thesr are 10 br found m Marx, Capital. Volwne 3. pan V. 4.5 This is mltrprr'lIng Grossman'5 accoont as shQwmtf, how capllahsm is dn'·rn

1\

has no tscape. Src RIck Kuhn , � EconomiC

that cn:;e� art" me:vlublc. 39 F A Hayek Prrcts
Social Re:vQlu"on�. Schonl of Social Science, Australian N/ll1on�1 Ulllversily. February

C.ri�IS and

,

Cupltiliut CrISIS, pIOS.

Gillman, Tilt rallmg RaIl:' of I'r"lil;

exneme Crises, nO'! 10 a

breakdown from whu;h

.....ho can'l ;l.C\:tpl rht impilc;l.mm

'10 See Ihe calculations In Joseph

10

2004. pI7. 46

E A Prc:obrazhensky, Th� Duli"e of Cap/t"'/$m, pp3,) and 29. Pfeobrazhe-nsk�· was, howe\'er,

Shane 1\-bge, MThe uw of tht Falling RlIfe of Profil: It� Pbc.. III

vague 3S 10 how thJ5 impt'ded

che Ma"fJ�n Theorelical Sy)tt'm

recove!")' from Ch3pttr Sill

the ctlSls. l.lkt' man�

In

Fnl7 Sreml'lt'rg.

(".ap/tallSl" and SOCIalism Qn Tnd/

Ilon don, Viclor Gollanz 1�511. p3Bj

Arthur Schwrllur. BIg

BI<Slness In lb� Third Rtlcb

,.

36 .AJ above, p 3 16.

MIChael Blealley, Thp RISe and 1',,1/ of "t)7IeSUI>I fconOlIllCS Ilondon: Macmillan. 1985) p4�.

LrWI� Corey, The

D«lrnt af A men�o" Capltolum

I;.mpIQ}"mmt. intf'TPSI and

tbe

of Ihe raIl' of profil to fall.

the Profit Rat� (Edward Hgar,

33 As abov�_ ppI61-162.

1 9 A s abm�, p I 70.

MarXist C'CQn()ml�l\ (If Ihc h'\1 decadrs of the lOth cemu.... he did not PJ)' much Jtte:ntlon 10 thf pass.agrs (n Man on Ihe lendtn(,·

and Its Relnanct for the US Economy� jPhD thesl§ Columbia Uruve:rslly 1 963. releas.ed thwugh

imen'lews Wlfh p3�t and prestm malllSlream ecO:JomlSlS p unmjl, fQrward dlffereJII IlIItrpretilfion scc: the twO �olu""," b.· Randall E Parker Refit
(Bloomlnglon US, Indiana .

Uni.enllY Press, 19641, p336. �O Aflhur Schweltzrr, RIg 8uSlness 11/ the Thrrd Reich. p33.5. .� 1 Ste Ch3plcr Four. 5l

(. Harman, up/almng the

("TlSrs.p71. 53

Fmz �u.'rnberg, C.aprtuhsm and

Socialism on Trt.�I, pp494--495.

;4 A 0 H Kapbn. The LlqllldatlOlI of U'ar ProductlOIl (Ncw York. McC.r�",-HJII, 19441. 1'91. H As �bo\e, p3. 56 John Kenne lh G3lbrallh. Amen.:;;:", Copltails", (Tr.Jns.aClion. 1993). p65. The View th
....

'rh Ih� war 1!l

accepted br m051 of (� marnSUl'arn ....·onoml5l$ Intrrviewed In P;ul..er's two volumes. 57 Tht VltW of 1'..uI

S....c:uy and Paul fl,�rlln rn th.. US, of the edllon�1

team Qf Ntu Itft Rt'I'II'U' III Brualll, Ihe len wlllg of Eutopt'an wci� l democracy, and "f the grl'at malor,,), af academic Ma,-n , Sll>. .58 Trotsky had devdoprd thi S nUllor!

In the 1 9)0" alk:! il �onllnlled 10 he acceptw by �uppo�dJy �orthodoxM TrorskYlsls until tht"

col1aploC of t he USSR

1!1

199 1-.ll1d

In a few CBIoCS rvrn aner",,'ard�. .59 M ReIman, The Birth of �ta/lmsm

(I,Qudon. Ta urus, 19871, pp.F- 311,

prQ\'ldes an account of thr crt'ls based on IIIltrn;!1

drx:umrnts.

60 As above. pll'1. ."

" I <;talm ,'",blen'! ofl..em",sm. quotN In [.... 1OK. J)cuto;..;he�. \t"l", U.ondOfl. .

Oxford. I !:I611. p3!8, fI! "'talLn. quuted LIl F H <":arr and R 'IX' Danes. fOHnd.monsola Plilnnf'd Ec"m.m�. \'olum..- Ont (london. MJlmlilao. 1'169), pJF. 61 1 ,", l'rto"rJ1.h..-nsk�-, Thr Drdme IIf (..,p,IJilsnr. p 166. M I,"-WI� 0m:�. Thr Drdme uf AnrrTK'Jn Capltallsnr, p4114. HIs eon�epl of dedme did not rule OUI shorr p!'fllxb of growlh. bm with wsho"er upswmg�� and longer -depresSions� . 6_� John �Ir;l,-ht'y, The '\Jt",e uf Ctlp,lillw emu, pp375·376. btl I-, A I'rt'Ubrazhen$ky. The Derlmf' ofCApltJ/l$nr. pI5!J. 67 I..wn Trorsky, Thr DrJtli A!:olt), of GJpltJ/ ,sm and IIie T
1

2

3

4

5

6 ., 8

9

Chapler Sev..-n: The Long Boom I uSC' the t..-rm -WesternW as short for �W(,slern SI}Ic�. n i ';ODlT3;,11O the -Easlcrn bl,..:� c()umneS. AI!>crt II<;hl"w. -Rt,JCw nf Handhl-H)k of Dc�dnpmcnt b.:onomIQ·. JO"rn.J1 of r:CO'lOlm( LllerJturI'. VolWlle XXLX {I991). p1730. !>Ionetary IIl('3sures were mdudeJ m the (on,-enltona! "'nn�t:ln to..1 kll. allhough "''')'I,e� Iud been �tr"��1 3",,'UI thtlf cllicaq. J \1 "'t�'n�. G,.",rrlll Tbrory of r.mpiU"lnl'nr. 'n/e,en alld MOllt'\·. pp 135-136,! 14. Z 19 and 376. As aDo,·e. p376. As al)()\e. p378. Robert Skldelsl..).Joh-n M.ry"a.d K",'IIes, V"lum� 2, 1'"0. �nerJlh' called �Qrthod()" "'eynt�l�nlsm� or "Ih" PQst-war SVllIheSlS J Robinson. F,jrlb", COIll"bllllon5 to ECOIlOnu(S.

10 J Stl".I�hey, C"nll'mpu'i11j' CMflltJ/w.. I london, Gollan7, 370

I!:1S6), p2J�, 1 1 As aDove. p2J9. I ! lbt most rcct1ll IS Dan AtklO<;ClII 1,1 L'lrlj' Elliot. The Gods tiM Ellli, (Bodle,' Head. 2008). 1 3 See. lor IMt3nle. Wlll l lulwn. The Slaft! We're In UlIna,han (:apr, 1'1'15). 14 Graham rumer. The (,cd" (TIm (Pluto, Zoo8). TUOltr looks to .l IlllXtUre of the IdeaS of KC'}'ncs ;111.1 the p""w.n InDnelansl lning f,,1 I_� C�rJTd Dumeml amJ Dom,m\fut ��y. Clpl/al Resurgent: I(fH,I. ' Ihe /\'ro"',eral l(el�" IIIl(m {Han." , Unl\'''�lIy I'rrl�. 2(1)41. pI8t>. 1 6 O..vld, HUT'-tV. A BTlef H'storY ,., Nrobberallsm, piO. I':' R e o Ma nhews. -\'\'h�' ha, nrn�" had Full Emrloymcl1I Sin�t th(­ War?�, [conom" JOllftjJI. St-plemhtr 1 9M. pH6. I l1 l\1c)\hnad Do,". TI'Slm/l A11..mctilflsm (I.ondon. traJlC�� PUlIe:r. 198 I), p76, ke also Rol"rl Bre:nner. Thl' Eeollomles of GIl''',11 TII,bulclIU, p94, 1 9 Tnn N<)Ie:rman�. �S.)(:lal l)cm"l.f.,. and �."Iemal Cnn"ramu�, m " H. Cox (td). SpJUS uf (;/ob.J/lsutl'1'1 /<.iull dford Prns. 19971. p206_ !O Michael Blune\,. Tbt RISl'llnd FJII ofKeYII/-'sl,1II EconnmlCs jM.acmIUan. 1985). p I 0 1 . 2 1 P Agh"ru. Tbec,ry of Capl/Jlw I(t'Kuwt,u'lll.ondon. r-.;ew Leoti Souls. 1979!. p16�, 11 Roben Brenfltr and �brk (jhek. "Thl' Regulauon Approach: ThCOIj· and HIStOIj,M, /\'ew Ltll Rel'I"'I' 1:188 (199 I I. For ffi) 0\\ II. nrh"r. cnllc,sm of thl' Rl'gulallnn 'ich.K)I, <;tOt' r ..JI111.lImng 111f: ('mIl. pp 143-146. B X-e li<:rMd Dumtml nnd I)onmuqlh u--')., TI� uononllL'S of Ihe Profil Rillf', Figure 14.2,1'248. For �aritlu' IIlWrpfL'Ial10nS of the rate of profit 11\ these dccade\. ste <;hanc Mage. MTht l.:Iw ofthr 1-31111111 l"nucn,} " I the: Rail' of I'rofit�; JoSt'ph <.ill/mao. Tbl' F.Jllmg Rate of Profit; Wilham

NordhaUli. Brookmgs f'afltN on Ecolwmi£ AcllVlty 5: 1 ( 19741; VICtor I'erlo, -lbt Ntw l'rop;lgdnda of Ikchnmg Profit Shard and lnad/!'lu;ltt 1",·tSuntlll�. Rt'I-� of Rtu/"J/ PoI ,tICiJ/ EconomICS, 8:3 (\9':'6); �bmn FddsteU\ and uwrt'nct SumlOC'f'S. MI!l lhe RaIl' of Profit Falling?·. B�mgs Papers I: 1977, 1'216: Robc-" Brenner. TI't Economu:s ofCloixll Turbulmce;

Frtd M05C'icy, Tht F,lllmg Rail' of Profit In d,e Post War U",red S,ateS £aJllomy, Anwar-Gh;ukh and E A Tonak. M�.uunng tht Wealth- of Nal101I5. Df i fcrrnt 'Mlys of mc:asunng art" ustd, and tht figutes differ �ro..-v. hat from each othe,. wllh som" showing a 1(0)l-term da:lin" anJ some a dip In the mid 1950s. BUI none: of them show a f311 to Ihe level of thl' first three dec-ade� of the 20th CCtltury. or 10 tht 1e:,'eI of tilt laiC 1 970s. 24 Shane Mage. �The 'Law of the Fallmg Ratt of Profit'w, p228, 25 MlCluei Kidron. -A Permanc-nl

Arms Economyw, lIl1tmallonQl Sacullu",. 28 (fir'll �nrs, 1967), nallable at hnp:lfwww.mal1llsts.org! arch,vdi<,dronfworks/19"7/!(x/ prrmarms.hun 26 For a longer dlscuSilon OIl lhc analy� of Baran. SwttZY and SttmJl,!Il'C th" Apprndu:, MOthCI Thrunes of th" <":nsl)". tn my Expwmmg tl,c Oms.

27 r..llchad Rle:anty. The R� turd fJII ofKeynes",n Econmmcs. p I 04. 18 Mage argues thai II rose: 45 perctnt 1946-60. Sec �The Law of the 1'alhng Tendency of Iht Rate of profil�. p229; Gillman argiles ,h�!

the lano of the mKk nf fixed capllal to labour e:mployed morc Ih3n

doubled between 1880 !lod 1900. hut grew by anI)' 8 percent betwten 1 947 and 1952; \)umenil and I Cl) shuw the capHal·output Tlmo for the US nearly doubhng betwccn 1!J4) ,lnd 1970. but quaJruphn)( fur Wesl German). France and BruJIIl

Chapler ",",'m

combined IDumeflll and l.tv)-. CapIIll1 Resurgent. FI!lure 5.1. p40). They Illso �ho..... ( p IHI output pel unll 01 capital ,"�esled Itb<: -prodUCIIVll}lIf �arllalMI .ls !allin!/. by aOOm a thIrd In Itwo laSt twO dec-ades of the 19th c"n1ll11 for th" US. bUI remauung more Or les� fixtd from 1950 10 197Q-i----1h � rano t"nds to mo\'t� In the mve:r2 dl�on 10 Inc orgamc composUIOIl_ 29 See MIchael Kidron, Wl'stem Cop,tait. sm Sinu tht War {London, Wtldenfdd and NIColson, 19681. For earher verslOlls of a �ptrmanrm war economy � theory, set' th" anlck hy T N Vaoce (also known as WJlter Oakes) on Hal Draper (edl The PrTIfIlInl'nt Arms Economy (Berke:ky. 1970). 30 John Kenn�th GalbraIth. Thc Nelll /"dustrwi SIIlI� (Princelon, 2007), pl84. 31 As aDove, pp33-34. 32 As aDo\'c, pl. 33 F Alvalerand others, hOn the An�lysis of Imperialism m the Metropt 10 th" df'\'elopcd COUOInC5 In 19-1 of o"n SI4 bllhon dollan--MKhad Kidron. Capl/alum (llld J'hrory. p l 06. 19 See Anw,.r Slta.l..h, hWhu I'a,... lor the ''X'dfare' In Ihr Wdfarc <;!Jle?�. 1 1 RI'$l'.Irc:h. ,-olumc 70. numlx:, So,.,,: 2, 2(H'H. hnp:l!h(.rf1<'page.!lcw....h,><11. eduf�A<;lulkhfwd fMt'_ Slale.pdt 40 For Briull1. f>CC, for ,mlnee. il \"".11 Trtllds ( 1'\170), wh"h ,h,'w�d Ih.1 1 Ihe vaSI bulk of U\�rea"l!'!:

17I

educaunnal cxptnd,[Urt was Con�entlated I n the§(' areu, whI le pmnary cduc,luon eXptndlTurn hardly grew at all.

Connor, Tht flSu/ Cnsis II/tht �t.:m: {Tranucnon

4 1 Jamcs O

'

I'ubhshto, 20011, pIJS. 42 F'Rur" Irom Alex NO"e, An f.((J.mmi( Hulo,}' oftht USSR

lLondon, AUen Lalll', 19""'0), pJ87.

41 Stt Iht figure�

In

\' Uo·Pm". and

Ii Ii �hat1lhn. ConsumptIOn PilI/ems

In &iSf('m anJ \\7estcm Europe

(Oxford, P"'rga",on, 1 9:9). p62. 44 hRures from Ale>( No,·e. An

uonomu: /Iulvry ottht USSR.

p387. Angus "hddlM)U'S mort reeem

l'aiculatlons sugg"'�1 the

output of the USSR grew ab out Ihr�·fold bttWttn 1945 and 1965, ,

lighTly

faSTer Ihan the 19 5T3tes he

Includes tn Wt'5tem f.uropc- and more than SO (lC"rccnt faslcr Than thr US. hrtp:llwww.ggdc.netl rnJddisun/HlstorleaCSta[[nicsl horil.oma1·IiIt_OJ·2oo7.xls 45 PUn-dol, 24 April 1970.

46 Thl� was a k...) tnslght Qf Tony Cljff

Tht N3tU.t (ltSt3l1mst Russw [ 1948), repnnleo.l In ,\furxisl Thtflry A./lt. Trotsh. pp80·92. 4- D W Conlkln, �Samcn m m

Tt.;hnolOttIC"1I ChJngr In Ihe USSR�. $"'"It! ::Jludlrs i 19691, I'l'i9.

4H J�f (,oldman and t...arel Korba. fconomlC Grim·th In Quhoslomit.J.1 {Wh,te Plams, N', Inr...rn;lIionaI Ans and xienu-s

Press. 19(.91. '19 Branko Horvat,

MBusln�� eyell.·s ill

Yugusl,)\·J,1� fas",m f.uropeuol •

j·.conomrcs, V olulTk X, 3-4 /1971 I. SU

Karmond l lutehmg$. MPeClodLc Fluctuation

1!1

SovIet Industrial

Growth Rate�", SOI'let Stud,es, lO:3

i 1 969), pp331·3S1. The

unevenness from ) ...�r fO year IS

shown d�arly ill

,\.bdlSI)ll·S ligmcs

for GDP, sec hup:llwww.ggde.net/

III

add ISQn/HiSf<1riCOlI_!i1ausIJes!

hO(lzonlal·fil",-03·2007.xls

� 1 F �mrnllerg. Capltalum and 372

SOCl.:l/,sm on TII.:lI, 1'531:1. 51 For delOuls. see C Harm3n, U.I> Stn
Frank kneHr dalmed 10 be a Marxisr--Theorles of

-6 SIll Warrtn. Mlmpc-naitsm and

Capll,i1JSI Industrlahzallon". Ntu' Ltfl Rtl'Il!U', 1,81 ( t 9�3).

pp42-49.

Undtrdn'tlopmmt. p49. 63 P Baran, Tht POlrtIU/ E.conomy of Groutth iHarmondsworth,

-8 As above.

1!1

Pengum, 19731. p399. 64 P Bar..n, Tht Palt/lui f .conomy of

79 As abo�e. 80 Leon Trotsky. Tht 1hlrd

81 � London, Bookm3rks.

1988).

H Neul York T,mrs, S July 1950, quoled

T N Vance. MThe

PC"llJl3n..nt ,",'ar Economy�, Nt!W /"'"m3t'Dn.:lI, Janu3ry. Feh.-uarr 195 I.

5" ,\.\ KIdron. " lmpenalism: The

Hlghcst Stage but 00..-' m C4plt3lum Dnd ThroTY, p 1 3 1 .

�s J Stopford and S !mange. Rmll

Stalts. RW.JI hems iCamhndsC', 19(1), p16.

56 For a �uecmCI accounl of the cok played by Israel as an Tool fOI

Pengum, 1971), pp15·16.

66 IksplTe Baran's P!"1:paredntS$ IO CTlOClSl!' tena m ta,,""" f of �I,] hn '� rule, he quoted �tillm favoutllb1r hurudf and ac.:eptcd S!almlSl claims

against the country's CllIneSC"

mmontv to stage a �coup�

tornmined 10 the path of ��laTe

that

AgalnSI me Official HI�rory�, Rol<,· & (.ws 49 i20081. rpJJ·B.

R PreblS1,·h. "Power Rebllun\ and I\-larkel For,es-. in I..: � ]..lm Jnd

o F Ruc(,u, Debt and Del'ej,)jlm"1!/

In u l llll !tmrrlc.r (lndi�n:l. NOIrc Dame. 191151,pp9.1 1 . 60 I Roxborough, Tht'orl('l of Underdt'L'tlo,ml�nt. pp27.32.

61 i\ Gunder Frank, �The Dc\'d(lpm�11! of Underdevelopment", M(mthl"

ReI'lell). 'itptemi>er 1966. 61 As Ro."
,

67 NIgel Harm. kTke ASIan Boorn

1

Soclallml 3 ( 1978·9), p3. 68 Len"" /mpenalum. Chapter 4,

the InHalion of 1970,

see

anal)'';(' ��u["\'ey:

Soda/ism. 46 (firsr SO:fJes. 1971 J.

2

Grl.1rd",n, 16 September 1983.

3

Joan Rohinso!1. Fllr/hN

Om/rrb/mons to EconomICS, 1'36.

4

Quoted

Itt

the G'lOrdJ.:lII. 15

�plem�r 1994. 5

Frede(IC �, �The Re§('arch

As.\eS�rnenr Exercise. Ihe State and the Dornmance of Malll§lrtam h;t)n,lnllCf

'"

Brlllsh UI1L\·ersl[[es�,

Cambrldgt joum3/ uf f.conom'o,

Intemill/Omll !tfter Lenin iNcw

Volume J I: 1 (2007).

York, PIoneer. 1957), p18. 6

WIllIam K.-egan. Mrs Thatcher's

Inltm.Jl/onal Afttc Lmm, p209.

ECOHOml( &�rlment ( Ibrrnondswonh, PtngUln,

Argen"",..n gro.... th rat� In \.\ A �TCl�, -Argent",a: H \elrttetllQ

19841, 1'116. \\ dlt3m t.:ttpn. Air Maud/mg's

7 1 See Ihe mmpanson of !taltan and

Dc!hlrrollnta-

.

-

(;olmble (I undon. Hodd ..r and

m Dtbalt. "

!iloughton, 1989). p 144.

{I9781. p20.

"Argentina , Ott., F'I/,,,t Anno VI. I (Rom(', nd,. p3. -

73 Figufel, Givm 11\ ('.elS3 I\lasia Rncha, Ml\eo-Depemk"C)" In Br.t1.11 H. ""tw

/4 R('I.�r:u'. l: 16 /l002). 74 frmtOmut. 29 March 19H6. 75

10

The EcOllomy ", 10 Intemallon.11

69 I.eon Tcutsk)', rhe Th"d

�2

Roben

Brenner, The EconomICS of Gi(lb.1/ Lon!emporuy attempt

�The Expon of Caplt.1I I-.

70 leon Trolliky. The ThIrd

For delails see, for nsranct, i

"Irbu/enu, ppl19 and 146. !-Of a

Economies-, fnll'm.,tiorld/

(HarmQnd,wunh. Pengum, 19R-' and

ere wmpl..tel}" falSI!'. See, fllr

rle I' Baran, Tise Pols//cal "..couomy of Growth. p44 L .

'i8 World Bank. \'('ur/d Dn·eiopmenl

Rl'f'Orl, 1991. ppB·)'o! 59 For summancs of Ihese argumenrs. §('(' I Koxhor(lugh. Thtflrli's of Undt.dn'c/opmtNt (Lono.lon. Ma�mll1an, 1979). Chaprer J: :-':I�<' Hams. Tht End (If,he ThIrd \'C'nrIJ

...

exam

caPltahsl" devdopmem of tndu�trtt

under Thclr own comml--Kua t...I J Soong. .. RaCIal ConflIct In '\'\,113'".1

The End of Ihe Golden Age

Pt'.rform'Wcc and IIVInS standard�

Bookmarks, 19861. avatlablc at

Malay nationalists u-.ed ethnIC (1£11,

Oaprtr Eighl:

about I� USSR's agricultural

Tht Hijacit. Statr (London,

57 See Ih.. fascmallng account of ho"

/ntenl3tlQna/ A.fttr I min, 1'209.

Growth. p416. 65 A Gunder Frank. uprla/lsm und Undtcdtl.elopmmt In LAtin AmenCd IHarmondsworth.

Impenaitsm see John Kose, Isr,I/�I.

hllp:lfwww.marxlsls.del nnddleasl/roscJ

-7 As aoo'·....

8

As abo\'c, ppIOJ and 127.

9

A ubo\·e. p 1 7J.

10
j)'SYnt on Kt)"nej (r-;...w York, I'r.u·ger. 1992). p13 I. Skuuo;en (edl,

Ndulu, FaclIIg /ht Challe,/ges of Afncan Gr()wtb, ;r.v31lahle at

I I H H Happe, lI\ M �koU!;en led). Dlsunt 011 Kt)",ts, p20�. Il J R Schumpet...r, (Apl/aisml, .'iorUllmll and Democra,)'. 1'103.

hnp:l/....eb.worldbank.org/WI15r1 �J

1 1 St:humpt'leT had Tried 10 expl3111

PrtSS r�ltas.c: sllm",artSlll� a report

for Ihe Worlo.l Batik hy !knno

EXTERNAUCOUNTRlh.Y AFRiCAEXT/O..eontent'\' IDK: 2 1 I21869-menuPI..::2511658-pat-;...

....hy ti'lpansion look piau." 31

dlff�r�nl �peeds m

31

dIfferenT pOIl1!\

The hIStory of eaplullSm b,'

PK:1865106-pIPK:1865118-rh...

rtfcrcnc... to

!iuePK:2..'i 8644,OO.hlml

upon the dtffet1ng lempo� oj

Chaplcrs St"en to ught

�lonlt wa\"Cs�. bJsed

m

mno\'auon. Bur smce mnOV311011

dcpemli OR rh� wldu dynamics of rh� s�srcrn, J1 IS hardl) an �"pl ana\J(1n of Ihe lau�r. For a long dl:l.:U�S!im on Iht"SC' mane..s � Itarman. fxf/IJlmng I� CriSIS, ppIJ2·1 j6. 14 Ton NOlermans, �Soclal Ikmocracv and External CC}fIsrralnlSM, In KCVIn R Cox, Spaus of GI0b.3I'lDtlfln. I S Companies will onen do their �I to understat.: the,r prohts to govemmmts, f� tax ��sons, and 10 wQf"ken, In ortk-r 10 lunify low wages; rh�y also often ov�rstate their prolils fO shareholders, lfi order 10 Ilotxl lhelr stock �xchangl' ratings and thclr capacity to borrow. 16 Th(lma� ,\otichl, -Why is Ihe Rate of Prufil Mil l Falhng?M, Jrrome Levy F.conom";� [nstlnne, Workmg Paper 7, Seplember 1988. 17 An war Shaikh and E Ahmel Ton3k, Me{wmng th� Weallh ofNa/Iflns. 18 Ufuk Tutan and AI Campbdl, "The ['OSI 1960 Rate of PrOlit in

<Jcorm3nyM, Workmg Papcr 0510 I, [unLr UnJve�!ty of Economics, Tu rkcy 19 Ed....III R Wolf, -Wh3t'S Behind Ihe Rise In Prolitah,lu), In the US film198(b and 1 990-M, Cnnrbr/dge JvurnJI of �onomlC$ 17 (2003 1. pp479·499 10 Plrul Aleml and Duncan K Foler. "The Clr('tlll of Capital US .

Manufacturing and Non·financlal CorpoUle BLJsIII�s S«lor�, 1947·

[993M, Sotptemher 1997. avallahl� al hltpJII'l(Im.:p.lgt newschool t"dul -fole)'d!I;Lrcap.pdf 11 Gir�rd Dum�nrl and DOfllliliqu� Levy, �The Real and Fmannal Compon cJIIs of Profit;!bilL!)'-, 10m, pi I, ava,bhle ;1t hrtp:Jfwww. luurdan,�ndrll�v)'1 dle2l}()4g.pJf 22 Kobt-rl Hrenm:r, The �'O"(),,,,(c� of GlobJI T",b"lence, p7. 23 Fred �lo$('Je)', -Tht R.lle of Profil and the FUlIJre of CapllaJism-, RI'/'I('II' oJ R,J,ilcoJf PolIllCal .

.

uOftomlCS (May [9971. IIn Il� hi, al hl1p:J/www.mthol>'oke.�JuI -lrnoscle)'IRRPE.hrml l4 Gcr.ud Dumtnll and Dommlqu,· Uv). MThc Real and FIILallelal Componems of ProlilabllllY15 Andr.:w Glyn and Boh Sutlhff.:. BrItISh eaf/ltoJllsm, It'orkl!'rJ JII,I tb� Profits SqUI!'Ui!' (Harmondswonh, l)mgum, 19-2 26 Bob Rowthotlle, -late CapllahsmM, New ufl R�I" tt/.

1:98 ( 1976). p67. 27 I'..�I f\hndel, Loll.' CdPIMIIS", t London, New left Ilooks, 1975). p 1 79. 28 Martin Wolf, Flxmg Global Finallce ( Yalt, lOO9) pxii, 29 For a summary of th� eVidence. \,1.'\ Chris Harman, E.xpla",mg the emlS, ppl lj.124. JO Victor l)l'Tlo, -The New Propagand� of i)eelullng flrofit Shares and Inadequal�

lnvCliunelllM, ppSJ·64, For a damnmg reC�nI refulalion of Ih� view Ihat Incrused wages \O,ere Ihl

cause vf !';riling prohl ral�S M'(' Robe:n Br.:nner. l'he #:;conomll:s "I Globaf TI" b../ePlct, p i 39. 31 M N Baily. "ProducllviI)' and Ihe Scrvu:.:s of Capil�l and Labour-. BrfHll/",gs PIJP"S on EconOlPII(c ACtlL'Ity, 1 98 1: I 32 Bank of f.ngl;md Q_rterl)' B..lletm, 1978, pS17. 33 FIII,,,,ewl T... ,�s, 3 Mal't"h 1 97" 34 Thomas MIChl. -Wh)' Is Ih� Rale UI prolit Slill Falhng:M 3.S Edwin Wolff, MWhar's Behmd Ih� K,� In f'rvlitab,llI)' III Ihe US In Ih<'

19110s;lnd [9'0s?� 36 Fi)!ur�s for non·rC'Sldenlial bU'lne" capllal l!.Lven In H I'amck lind H Rosow�ki (cds). Asia� !\eu' GI,mI IWashmg!on, Brookmg

["-'lIlullon. [976), p i ll, 37 As aOO\"\", pp 1 \·12 and S S. 3!1 A� aN"':, p!l, 39 DaVid HalbenlJnt, Tht Hest all.! tht Bngh/tst (London, 1970), p"l! 40 US DcpJnmcllI of Commerce

Am�ncan 1.'Sllmall:� §howcJ J(l"1> ....,h rar�s 111 the U...\K a, helnll oowec:1\ 1\00 rh,rd� and three quaner.; of Ih.·

figur.:s are g",'en 11\ loseph

�I':lndl. �Sragn.mon Theor)' and 1'011<:), , Cnmbruige Journal of Econo"./Cs. �

Volume 3 1 �br�h 1973). 41 For a longer d1.scuss.on on th,s, s« Harman, Explam",g the CriSIS.

ppI37.[40.

42 Roben Brenner pomu rerc:al�dl)

III

The £Conomli:� of GlobJI Tu,buf",u to Ih�

way In which German and Japanl'Si!' mdusuy W;l� ahl� 10 be: profilabk al Ihc cxpense uf US indusll')·�allho\lKh, as w� ha'� �n carher, he-dQc:'l nm retalr thIS to Man,s account of falhng proht rat.:,. 43 M N Bailv. -Produc!!v,t)" and IhC' .5<'t\'ICC5"lf Lapnal and La bour�. 44 The argum�nt 15 Rall�'�lhou�h he does nOI, of course, prC''ient it in ,\ hni)l lcrms as refernng III Ihe way <;uncret... labour mSloe Ih� US has to be C'v;lluated ill lerm� 01 abSlldct labour on a worl d sclLl�. 45 For exceptions, 5tC Ton ) Chlf, Russ",: 0 M,lrxlst Anal\'Su

ILonJnn, lnt�rnal1vnal S<1<:1",hslI1, 1 '64 ); and Chm Harman, -PrOSP«I\ for the Se...enn.:�: Tn.. Staltnlsi �tal"'" �. fnlemutlOnJl Soc",llsm 42 (linl series, 19-01. 46 E Grrmam IEmC'S1 Mandell Qllalr/I'ml' fPltrmatmrw/"

(1 9561. t·J Im

)

See Ihe Rl1Jort on Draft GUldC'lmrs

for feonotlllr and Soew/

/)t'I-,elOf/nrnll. gIVen by Ihe Iheo SQvitl pn me mmmer. N KY/hknv. 10 271h Longrl"Ss at Ihe C�U, 49 Abel Aganbegyan, Prm,d,/, 5 April 1988. 50 J Knapp. Uo)'ds B{mk Rem"II', (ktuber 1968, p9. QUUltO In Chris Hannan -Prospects for the Sr.·.:nnC'S: Ihe >;lall11lSt StalC'SM, Th..!>!! figuce!i w.:re b�sc:d all oficial f Eastern bloc wllr�� al {he I1lI1e: .

Chapt.:r Elgh!

1Il,'oh'cd m produ�lIlg. n H liehenslem. MAlloome In dfi�lcnq" \'. ·X.lndt1cienq·�, AmNlta/i ECOllomlc Re,�ew. June IYI'.O. i4 Robe:n!, WhllesclJ, �Whv Doc:s the USSR Appear tll n... Allocativdy [fli..!enr�, ,scn'lel St"J'e5. 42:2

11 990). p259.

.1" ') V \el) unUl, SolslallltlSchelu<J),o

IIlduJrr"'• .1" Janua!} 1988, rran5 ialN III Cunen l DI.I{i!'St ofthe 501'''' P,ell. H FehrUll!}' 1988. """ ,llso ,\ boch.:"k... Mllow to D"·,,I.: the PoeM. Moscow ".�'$ H, 1989. See also Ihe figum frum l":arodllOC' t..hmua,sl\o SSR. 111 ,\hk� I·blnes.

·t ranslanon).

17 09751.

March 1 9116,

.

14

47 EmC'S1 \\andel, -Thc �n..rali<;('d RC'Ce§s,on uf the int.:rnatlonal CapilahM b,;unlJm��, fnpr�t"fI" 16"

48

Sovlel C'Slunaln, hUI v>'I!h Ih� �JI",' downward mnd. I-or OIh..r t">tlmatcs and a diSCUloSion on rho: different figLJl'C'S. � B il:OSlln\h anJ M Belklnth), MOffi.::lal So�� (�"h' r->anonal l>rodua ACCQunlln,C, III CIA DIIKlolOlte (If Inretbg.:nc�. Measunllg Sm'ld G.' P. Problem5 · lind So/lIt,om Wuhlngton 1990. 5 1 ""'JIIlY SSSR, 28/69. S2 "ol/henIlS)n's shon 51()1} fonr ,,,.. G()()Ii of IIJ� CdIISt' pro\'ldes a ltraph" ....Il"c of lhe frustration anJ !-!!Icmess thl) caLJ�d to thosc

RUUla: C.Lm and POU'f'T /91 7·1{l()()

S6

(London, Iklo\..m:uks, 2001), �Iar)(, CAlmal, Volu� On.:,

pp648·6S2.

'i7 �An Opcn Leltt'r II> Ih... Part},M.

...L puhhsh('d m English as Ja, Kuro n and Karol Modul..",�L,. A ReJlQ/utlotJa'1' SocW/lst M,m,fl!S.l() Il.ono\lII. JllIernalional Soci311�1\, ndl, pJ4. ;8 B�lar� SlnlJlUplng, Forward 10 T"� Polish CCU"f)n"r CrISIS

(lundon, ROIJII�J"e, 1994). S9 B,Imnj; S"nalUpang, Thr /'"lIsh f(O/lQml( CTlsis. p3. 60 As I wrote," 1977. bnngln�

logelh�r Ih� 3nal}�s of Ton' ( hft and ]..:uron and \1(Jdtdc,,�kl. MTht m

Pohsh ensls IS an f'lCrreSSlon nf

Mn!i.�(h usnt5 \l'orkmg Paper 2006-4, l'ebru3ry 2006, av:ulJ bl,

somelhlng much greau'r. Thl' �T� in ·hl�h Ihe �!a!1' ..:nuld pro!«t ...

http://www_UII'I3ss.edu/«ooonll.< pubIIQII01l5l2006·().I.pdf

n�tlonal upu.llism from th� d,rC'Ct Imp�C1 of ""orld cnSIS IS draWUlg!O an �O\l D'5CuS-Slon on 'Slatc

dlSW�Slon of lhe world S)Slem of

dat:1�. World Bank, I July 21111 75 Cosus ....OSSI!i, �Mlrad� Wllh"ul

stIlI' (arnahsm ... Each lUuonal

End -. Maddl!iOn's figurrs suJ/.lo(�'

SI;lle c;(r'tJh�m I) more and lOOn:'

wu lUSt o,'er -iO pt'rcem of the l'

sucl.:.td 1010 a lhaQrK, UI�Qrgam�J,

SllI' m 1992.

"'Qrld ,yMl'm whcrc Ihe only ordcr IS Ihal which IS provldcd by lhe

Schrcyer,

world markct It!>l'lI--ChriS

� Poland: ensis of SUII' Capnalism-, /rller>wt.(mJ/

TheAggrc-gatl' And Se<:loral l

Harman,

SrK,a/Um, 94 (fir�l �nes, 19,71. 6 1 C:hn� Harman, Class StTl'gg/es In

£ajtem I-uwpe, p331.

62 �I'PO({ of mccllOg of U�SR Coun":ll PnJlJda,

19 Septl'Jlllxr 1988. All rl'pons

EconomIcs Ikparlment Workm" Papen No 248, OECDf2000. 77 Figures gn'tn by Roben Brcnnn, Th� Econo,,,,C$ of Global

Turbult'IIu, p8.

78 Figures gl�en b) Arthur Alexand.·I.

Ja/Jim In the wntO:XI ,.f ASia (jQhn. HQpkHU Unl�erslty. 1 9911).

from the Sovlel press are from the

mOnitori ng ser�ice unless indi..ated

otherwlM'.

elc1.

79 Cosws Kos.SJ5. -Miracle Wuhoul

64 50\'11'1 TV report of 17 Januarv of a wuned of Mmlsters mct'lmg. BBC

80 Anhur Alexander, JUPJII In Iht'

CrmtexI of ASI
8 1 ProoueUl ify m manufa�tur,"g,

be the ITlOlit eflklent

MOnltonll, Reports, Februal) 1989. 65 MOf(ou' Neu's, 15 Octotw:r 1989. 66 ];W5tJ.l. 21 October \988.

SCCtor of lhe econ,.my, was "anously I'Stlmaled at 75 percem t"

6' PrJi'd
80 pcrc�nt of the US figure.

68 I Admm, -A NQle on the CUTrenl

1.1:\'1'1, PailI'm and Trends 01

82 Rod SleVC'ns. -The High Yen Cn'I' m Japan -, CaPltJI/Jlld Clan, l4

UnemploYlllC'nl m Ihc USSR\

(t988J. p77. 8J A� abo\e, pp76-77.

SOI'lel Studies, 41: 3 (1989). 69 Trud, Il Januar), 1989. -0 T"JS, 15 Oc!ohcr 1 989. 71

ludgt'd [Q

84 Kartl van VCol ferrn, "Japan III the

Maddison , figure'> 5hQW Japanfie' '

Gl\.I' m'enakmg IhOlI of the USSR In 19117, sec hllp:lfwww.ggoc.neli

Age of Un,enalllty-, Ntw Left

Rn'lcu' 1:200 (2003). 85 Costas Lapa\'J1sas, -TranSItion ami ensls III the Jarant'il' � Inan.lal

Inaddlson/H'510ncal_SlaIISllcsl

S)§ltm: All Analyulal OH�r\'Ie... .

honzontal-filc_OJ-2007.xts

(.IIpu,,1 a- CIJss, 62 ( 1 997).

72 Figures g,tven h� COS!,!S Kmsi�

� Mirade Without �.nd�. InttrnQluJ",,1 S(JCIQll5'n 54

m

( 1 'J92), pI 19.

73 h"u re$ from Angus Maddl!iOn,

gll·tn m Tahshl Nakatani and PCler Skott, "Japanese' Growth and Slagrullion: A Ke)"rleslan J76

86 K�rel

Win

Wolferen, "Japan In Ih�

AJilc of Uncen�lOry�. 8i

flgures j!JHn by Gavan

McCormack, � Brcaking Japan\ Iron Tnangle-. Ntw Lt'f/ ReFlcw. 2: 1.1 (2002).

!Ill RegrtRabl)', )Q01" left wlOg commcnt;Hors wLlh a QUite Iusllficd

Paper.l7, Kell� In�U!ute.

19tU�, pIOS.

103 hgurts gl'-en In A A Hoffman, GJpltai AuuHlula/wlI m lAIIII

AmmcQ ( 1 9921. 10-1 Repon b) the TechlOl group nf

prc:KonlpapcrslJapan»d(

COmpaOll'S, June 200I�e

90 As above. 9 1 Paul Krugman, -Japan's Trap�,

www.lechlnlgroup.com

May 1998, availahlt a!

http://....cb
The Holy GroJ;1 of

t\tacroewnnmll:s (Wdcy, 2008).

. 93 Ga"ao McCnrmack. . Breaking the

10;: hmlllrwi TImes, 13 July 1990. 106 UNClAD Hom/book of

StD/lsllrs, 2002. 107 J !lwpford and S Stnltlge, Ru',,1 51ules, RlI'iJl Firms, pS. lOS FIgl ln given in Romilly Greenhill and Ann P�rtlfor, i-lIPC:

Iron Triangle�,

fwm Juhllee: R�arch 31 [h� N",,' F.-eonl)ml4 Foundannn (Ap£l1 2002), t2000nk.o� w ;1.vJllable �t ww.lllbile

Preseol!, -Thc 199& m Japan: A Lost [�adc-.

95

for India, see, for ,"stance, Vilek Ch.Jbber_ '-oded 1/1 place (Tuhka Books and f'rmeelon Unllenlty

f'ress, 20(4), p2S2: for ChlOa. !he offiClal6gure!i show a halvmg of (he growth ralC fur 1976·8

109 "Trade \\' ....

Ihe mld-1960s--scc Justm Yifu I 10.

m

96 Sec- graph m World Bank, \'Vor/d Dl'velopmelll Report 1991.

-fmanei;!1 Openness: The I-.xperlence of Argen lln.1, BraZil ana MI''Cll'O'\ CEPit I ReL'II'W 70 (2000). p6 1.

1 1 1 As abot'e, p60. 1 1 2 IMf World erollomlc

eXltrnaVpubslhlf.mddft9961111 pdf/demasl.pdf I JJ World Bank fi,,,res, sec hllp:llln ...·C'h90.....or1dbank.orgl

ECAfec •. nsf/GC'ncraVI 1-68S-1 C 99JE5A548U56CDBOO'i8AQ48?

m Latm Amencan H,slOry", 10 K S

OpenDOClimen!

Kim and D F Ruecio, Debt alld

Development In Lal/II AmtrJCQ, p49.

Ad!ustmenl�, World Deve/opmrnt, 19: 10 (1991), pU20. 99 A de janvry, �Soc:ial Dls3n,(:ulallon III Lalm Amencan liistory�, p67.

Outlunk

1996. Stt htlp:1fwww.lmf.org/

97 A deJanvT), �Social Dis.1ffiCubuon

98 0 f' Ruccio, "When Failure becQmes Success: Class and Ihe Deba!e over Sta bilisation and

".ustrad�.org

Pralt'S,

10

RO$S Camillit and Yipmg Huang. Gmu'//' Wl/lnUl/ Mrradl'S (Oxford, 2001). p61.

Chma-,

Makl'S US Suong".

1 1 0 M C Pellido and 0 Magalhae�

compared wltb Ihe early 1950s and

Fang Cal and Zhou LI. -I're­ Reform [conQmlC Dcvdopmt1l!

How the

Poor are Fm,m&m8 Ihr Rich, 3 repc'1n

94 Fumio Harashl and Edward C

End�. p118.

Pr(ll'dJ, 6 february 1999.

Deht CriSIS of 1981K, WorklOg

�Re\'ISl1lOg Ihl' Great Debt CnSIS ot

ava.lable at: hrtp:l/www. mmncapoll�fed.orWresurchi

!aprrap.hunl 92 RIChard Koo,

Del,t'lnpml'1It /II lAlm Amtrl<J, p I 1 0 1 A flshlo..... KRe�l$llIng the (,reat

102 IMf. quult'd 10 A Fishlo\\,

l.(KI DKad��. SeptemMf 2001,

OECD Area: Recenl Trend� AI

Drbt
1984. pl06.

89 Fwnio HayashI and Edward C l'rl'SCOl:t, "The 19901 m japan: A

EconomIC Growth In lh

100 .... 5 .... Im and D I- RU((lo.

Unl\-er�l!} of Notrc J)�me. Ma\'

Left Rn'/etU, 2: 1 (20001.

-6 Siefallo Scarpella, Andrea BassouunI, DIrk Pilal and POlul

Crises and dl'SIrucnvrnrss of the

6;

rnmeJ OUI dJffercnt1� . Stt. for u:ample, R Tawn Murph)', s f;,;onomlc Cnsls�. Nt'U, •japan'

'4 World Devtiopmenl indicamr<,

npllall5m- ntC'ds !O gJ"C way to

of Mnmlers by 0 Valavoy,

disraste for the Japanoc: ruhng class also Imply Ihal illr had I1ftn more �Wtltern� 10 ItS .approach to compc:"uveness, Ihmgs would ha�t

]'erspc
Chapter Nine: The Yea" of Iklusion 1

Ben Bernanke, Spca::h to Ihe Ea$lcrn EconomIC Asrocianon, W.lshUlg!On DC. February 20, 2004, available

31

ht11":1/www.ft'dcralrcseryc.govl ROARDDOCSISPEECHES!20().11 J77

1(")()401101JrtaulI.htm

1

HtS/()ry l Hdmm ndsworth.

l'hdlP Thnrnlon, ind�pe'lJI'''t,

I "'er 1999. 1 I're�,� In th(' US gm'emment pul-II<.JTI'," \lmuhlI whor ReIlew Onhn(', 01 an arnd(' b) •

.

'X \1 ..h,'d CO" �nJ RI<:hard Aim 10 tht' 1999 Annual Repon of the IcJer,,1 Rc....n(' Bank 01 D:llb" "I'allabl(' 011 hnp:ll",v,w.bkgovl IIpulVmlrI1(01)/06fprn:u.hlm .. lb,s I( hased 00 mI' per""ndl rc.:oll«uon (If J('b;umg WIth Des. �1 at L\" anJ .\1mf"rd;n Cardiff UoiHrSHY ;)l lhe lime. 5 ['na/lc/iJi Times, 1 1 SePIC"lllhcr 1001.

Wt-, fOf n i �ldnc(', �US RecessIon

6

P�ngu"" 200·4). 1 4 Gareth Dale, Bult't'1'>I State Copllollwn alld GfrJI",/tSolti(}./ (I'eter Lang, 1(04), p12'" IS H. Honoh..n �nd D � lan�e"',..J. quoc('d on t:harl.... (,oodh..rt .10.1 nuL So.:hoenrnJler. MBurden �hafln8 on a &inL,n): Ctl\,� 111 Eumf't" , .';ulaNc: ;II http:// ....ww.nksh:Jnk .<;Omlpallc:loIJ�N 2659212006,larukelJ_sv.pdf 1 6 c:.n: thr 01:('0 TCpOrt on th lJIlC"Sllom. M(,60vc:mm('lll PolK."1l'S ToW'ard� "'n,1t1o:uJ .\IJ(kC1�ft, Pan> 1996, a'-dliable 31 hup:JI", ww.olt,_ -

·

0l'C<.!.urWola�1996doc.n\fHJcct'>JS 1 bSJkf6a: 1H6�5dOO,BOOb4/;t kd,

Ma}' Il:lI"e Ended &fol"(' h lkg.1n�, fl'l,IIIt1o.l{ T IIII('S, I \1:1fch 1002.

.., WorlJ Hank, \'(lurid Dl'I'c/upml'lII (lId,ell/urs. � For furlher d,ocunlon "" thil;, .1ee the m)' resl"IQn5(, � MI�readings and MIKon�eplloJU� It) Jlln Kn i caid, 8The World Economy-A Cnllca] Comm...nlft,

III

intenratl()nal

r;anng) and Im'eSlm('nI Ac("ounl

ft .

\X'orld [wnOIlll(" Outlook. Internallunal .\lon('l.In Fund,

:W05.Ch a pl('r T"'0 (Fig. 1 . 1 )

�vJifJhl(' JI h lrp/l :w w w.•mf.org/ ('xlemallpulWftJwwll005IOlipdft ehaplerl.pdf II) Da,'Id Kon, MContradlCllom of Econ01ll1C Growlh In Ih� :S-Mhbt'ral I·.ra �. Rellleu: of Rad,cIII Pofl/icill

(1008 I.

I I Fl"('d Moscl�y, � Is Tiu- US Economy Hc:aded For A Hard landlJlg?�,

a�allable �I hnp:Jl.....ww.mthol)·oke. ed u/_f11l0\.l!Il')'III work 111g 11 Kerry A '\\a$trOl,lnr" j('d), The 1006 Bankruptcy Yearbook and AI"WllilC, Chapter I I , "I'al lablt'

from www.hankruptcydata.com/ Ch 1 1 Hisrory.htm IJ JO\.l!ph Sliglil7., The Roanng Nmetles: Wh), Wl" re Paying tht: Prtce for tl'e Grudlesr Duade In '"

ru

"JA1n..JYQHI09E60677. Ju..

1 "'7 h('d Magdoff. MThe ")(plo�ilm oj

I II

l)('bt and SpecuiJtlon� . Mmltblv R"I'ICU', 58:6 (20()6 ), p;. SI�f::mo xarpella, Andrca

Muonollilc (,rowlh In th,

O�t:D Area: Recc:n t Trends at the Aggrt'g3 t(' and Se.:lor�I Le"cl M, OECD �A;OnOml<:S t)rp;lrtmcm Working Papen 248 (lOOO), p16. 19 Fl8ur('S 5upphN b) Rob rrl Brenn.., OIl the HlslOrlcal Matl'r1alisl1l

('.ooft-renee, I OfIdoo l(X);.

20 lable from Slebno �rpella, Andn:"3 IkIssanull, I)Irk Pdal and

Paul Sc;hl"("'eE, MLconol1ll' CrrOWTh

1nvc:snncnt-. Economclrlta, 42:1

(1 974). pp39.3--424. The) �uggrot "a slgnrficam change In Iht' a\'('raJ!e expcaed age of new non-fum Imt!.lment

_

III

..: Kecclll Trends OIl th(' OEeD Are the Aggrtple and Xcloral l.('VcI� 21 As abo,·c. p,m. 12 ror mamsuum economic dtSCllssioos on the Increa5t'd r.n� 01 depreciatIon due 10 comp ulensauon , sec: Stace), -re�hll and Karl Wh�lan. MExpbllllng th� lnv�Mmem Boom of the 1990s�, JOl/mal of MOll(ry, Cr�dll arrd /lonklng, J5 1200.3); for an earllt'r discussion on the dlOrrel1lng of dIe bfetlln!' of fixed capital and thus oj mcreasong depreciation utes, see Martm !, Feldstl'm and MIchad ROlh so;:h lld. MToWllrds 3n F.conoml�

1919 10 1 5.3 I'eaM; m 1963.-

2J Tm,,[ lahollr compc-ns.mon.

mdudmg ('m plorers' �ial Sl'I;Unl} and pc-nslon conlnlmuon\ and unplllN labollr Income for '\tlf­ emplo�ed pC'r",n�. "or hgures. 5tc: hrtp:l/(l<:dl'.p4.511e.111ernel.comJ p uh[ icationsldOlfil('s/'

8 1 10071 3 I G15.xls .There would

seem 10 be- problem wllh lL\ong

Ih.:-st fi�urcs to compa r� lah. ur· .

shares [r"'l country '" ".untry, a�

0ppoM'd to "'·�r um�, �m<::e other dat.l indicate ,1 mu�h hlgh('r 5hare r)f (aplt�[ �cc umulallon 10 jap3n [han in rh(' US and Weslern EUfOp<.'". 24 Chuck Collins. Chns HarIman and EconOllllC I)ispanl)' at the un!urr's Tum�, lJnUN for

�

Fa)r

Econom y, I i [)..cembe-r, 1999_

25 � Ihe gmph III G Dum('nil and D I.evy, CApITal Resurgent. p46.

26 Intem,lUonal Lal1our Organl'atmn figures, a"lll]able from www.llo. orpjpubideoghshlhuT('aulinflprl l 1999129.hrm The figures gll'cn by ,arioll5 sourles v�ry toosldc:rn bl), depc-ndlllg 00 how count pan· tim(' working and whether ther rnke mto accounl unpaid ol'enlmt 1l1C"3!;urt:m('nu. Oth« nguru. b.aSfil o n I"('ports from firms, show a bigger rise than do the [1.0 figures. 27 BBC report, 5 Scpt�mbtr 1005. 28 AnwarShalkh. "Who Pays for Ih� 'Welfar(" m lhe Welfare SUld" 29 Tab](' from Duane Swank and Cathie Jo Manlll, �Employer� and Ihe WtJf3rt State" , Cum/,aro/we Political StudIes, 34:11 (200 I). pp917·918. 30 Figures from US Department of

tbty

I.abor, Or�nt1.auon for EconomIC

Cooper-nion and Dc�tlormenl There are dlscrepanCl" wnh th(' .

Chapter Nine

pJ lft'm

�f ....cen (ountnl'�

.1 1 ProdtK1J�I1� pc-r wnrll'r n i Fran�(' a� only �o l""r\..n\ ot Ihar 111 Ih�

....

..from 1 9.8 \'C:�rs 111

Holl)' Sklar, MDi\id�d I),,'Jdc:

Ba5�a l1lm,l) lrk Plilu and P�ul

5.:llrerer.

�oml/sm ' [ [ 9 (lOOIH. ':) :.olar(;v Terron('s and Rol.>cno c'lTdal"('lh. �Global Ba[ances, A

#-:cono'll)', 40:1

B�bo8d<:9�k11S63al0050fa l'I/�

[[ (1 fiRu res tor mJi\'ldudl <;Oltntrlc:'S. bUf th(' S-.Imt' {j\'erall

Throry 01 Replacement

ur;,

,",UI rrudu'1l'1n' pc-r hour

wnrkcd IS S percent hl!:hcr-fi!!ur.� for thl' )"('ar 2000 trom EU, Amn.. dala b.1$C.ItIV('I\ Ul 0111 leT 8Ian�hard. MEurfl�an COm .... '!h o.-c:r Ihc: Col1l1l1g D�:atkft, Si'rfcmber 1001. hnp:!/...",·w,ml1.cdultilt'Sl 1 ��9 11 Dl'tait\ fwm Sidan RomOil. in � (orrma nv: Th(' RI'>t' of Ih(' letl� . inrrnl.Jtlomil #1.1/15''1. I 08 /200 'iI. J3 St�ph�n Bro"dbt'rry. MThe P('rforlll�nce {If l\bnuf�cturin!;�, 111 Roo('flck Flouo and Pau l Johnson. The Cmlfmdge F(lmomir HI5/0,}' of Modern HrolOlIll ( t:ambndg(', 1004), pS9; Office of Nanon,,1 \(all�lI(;S, MOII/hiy DIgest of

Sr,JflSflCJ, Jul), 1007. Ta"fe 7. 1.

14 For grcatCf dt"fall. �e Chn.\ Il3rll13n, MWhere is Cap'lah�m GOll1g: Pan 1wo-, IntemOltlonOlI �(k"11,5",, 60 (1993 I. pp98 j0 I. 1'i (:h('n /,han, Nllor of Thr Ch",a AI",I)'�t,June 1997. J6 Chlllg Kwan m. 8'Madc: to Chma': Labor as 11 Polilical Forcc: ?-. Unil('rslly of Mnnlana, 20(}:1, ·

a'JII�hle on hnp:Jlwww.umt.('dul

:.olansfielJlpdfsflOO4Lec:Papc-r.pdi 17 "or Ihe full $IOry Stt lilt' ISSUCS o f Ihe Chin;' Do.ltfy (8I:11 1Ogl for the second wrek of Augusl 1005. 38 C GUIdi and W Chunlilo, 'iurl't·v of Ch,nese: Peasanls, qUOIN 10 Yang l,an, MDark S,d(' of th(' Cbll1(,5( .\I{l()n-, Nnu uft ReV/I'll', 1:31 (ZOOS). 3�allabl(' at hnp:Jfwww. l Rlt:606.�htmI 11ewIdlr(''·I(,W.n('[/N 39

SOil/II Cllma Po�t, quoted III M Hart Land�herg and I) Hllrken,

�Chjna aud Ih(' I)ynaml("$ of

Tran.\nallnnal Accumu[ation �.

paper given lit con ference on �Tht Korcan b;onomy: Manut PerspC("I'I\"(,s�. G)'eong�ang Nallonal UIllI'('rS!f�, J,nlu, 'iouth '"

Knrr�, 20 1\a) 2005, p24. 40 hgurc gll'cn b)' Manm Wolf, In F,xing C;/ob.l/ I-mwllu I Yalc, 20081, plbS. 41 SIt\cn Bamm and Ray Brooks. M \1:'h,lI'� Dnl"lng 101esTmCnt I.Il Chln.l�M, I'IF Wnrking I'�per 265 120061, a'"allab].:.ll hlrpjlu;kas.� Jlr\;.nrs'P{UIlf} lmtwpalO6.265.html 42 As "OO\'c. 4\ Jahangu �l ;md I...! CUt, Mfl(pLunUlg UlIIIOl'S lnw Consumption: Thc Neglccrcd Role ul Household I�Olncw, )\I F Workm8 I'aper lSI (2()()7), al'albble ;tJ http://wwv..unf.vrWcxtcrn.l1l puWft/v.pl2007f wp07lSI .pdf 44 A� abovc. ,,� !-rum Jahallglr A�ll and SICVCIl J)unawa), �Chllla's Rehalaneing ACI�, FI/lQ'Icf' and Drr'e/Qpmem (1MF), 44:3 (2007) J\o'allabic al

hllp:lfwww.lllli.orglcxteroallpub51 ft/faoddl2007/09/;uil.htJn 46 figure qUoted 111 �1 Han Landsberg and P Burken, �Chl!la and fhe Dynaniles of Transnalional AccumulallonM, p5. 47 QUOTed by J K)'nge, hnJllcI:I1 TlmeJ, 23 kplembrr 2003. 48 FmwIICW/ TImes, " Ft'bruary 2003. 49 QLltlrl'd UI fmdncl.l/ 1Imes, 1 8 NO"cmber 2003. 50 Jonathan Andcl"Kln, MSOI"lOg Chm:J's RebalanclllS l'uult'M. fillJnCC" and Dtr'elv!m'ent, 1 1.\11'1. 44:3 (2007), :;Ivadablt' at htTp://www.lmf.org/exrcrnal/puW ftifanddl2007109/..nd('�n.hnn . S I Ray Brookh �I..abour M-arkct I'erformanrn M, 10 Esl< ar Prasad (cd), Clnna's GroU>/h and Integrullon In 'he World EconOtn}· (IMF,20041.

52 The �!>t'Condal)' $«tor� mdudes

conSlTUCllon, watt'r. dcctrlclty gencranon, t!e, as well as manu[acTUnn/l. B Stevt'n &trn�l! and Ray Brooks, "What's Drlvm8 In�estmt'nr In Chlna?M p5. 54 Phillip Anthony O'Hara, �A ChlOcS(' '".

!toeml Structurt' of Accumulanon t."

C:apilal�1 Long·Wd,e UpswUlF;?"',

Rn'IeUi 0(Rad,�/ Pollllc.J1 UonomlCS, 38 (2006" pp397-404 'th aU cak:ulanons of prnhl BUI as .... rnro!:!o, thcrr can be doLlbts as t<J II!.:

:uxuracy of the�tan.s0C5 ht' }w;e� h, uk:ulatloru on parurularl� Slll,r Ius hgUf\':S mdlCil{� a dedulC' m Ih.· m!t' of e"'pl<Juanon, I
JO

j('SLis feit pe,

Edith.. LaI'Ula and I:'..mma XI3Ot.)l11

Fan.

D,,'erglllg 1'3t1trns of Profitabihty, In''t'!;tm�n{ and Growth In ChlllJl and India durill).: 19110-2003"', World Delle/O/IIIIC"I. l6:5 ( 2008) , 1'748. 56 Zhang Yu and Zh..o �'enK, MThe Rale of S urplus Valur, The Composllloo of Caplrol, and Ihr RaIl' of Profil In Ih� Chinese �lanufactunng Industry: 1978· 200r paper prcstmcd .11 Ihc Second Annual Conftrmce of Ih., Imernallvn,,1 ForLim on lhe Compar:J{lVe PollIKal h�onom) lit Gloh�hzauon, 1·3 Seplember 2{)n". Renmm UDlI'erslty of Ch,"�, Beijing Chiru. 57 Quml'd m J Krnge. FrnancJ;J/ TImes, 23 s,..plcmi:lf:r 2003. � al", Stt'VCfl Bamra, '"Banking Sector lX-velopmems III F..swllt Prasad (ed), Ch,,�'1 Grou,th ,md I ntegration J/I tilt \1f,'orM Ec<mUI'l\'. 58 S rel·t'n B.trnet{ and Ray Brooks. �What"s DrivlOg [nvestmt01 In Chllla?,pI7. 59 ScbaSllan I- Bruck. �Ch,"a Risks UlLllu)n Overkill Aller Bear PrLlilt'nce� , ASI
•

,

�.

NOTn

MOuna's Trade wnh {he United States and tht' World-, CR::. repon to ConweM., January 2007. avalbbJe .11 hllp:l/dlgllakomo mons.iIr.c mdl.edul cgtfl·,...�"O ... f.cgt? O!en arucIe: 1 017 &,;onle-,a=ke�_workplace 62 Chma's sharc of global OLilpur w..s t�lImated at 10.9 percent, the US.. aT 21.4 pcrCt'nt. � Sellm Hd,dag and Subll" LaU. Global (,rowlh Esumatt's Trimmed Airrr PPP

Call (.emI'l' (,IOII<,th�, tiN! 201n" hnp:llv.' wv, '.u nIdllCllid,•.oeWl1ll3ltcV l.abour%20shOrlase%20thrt'� I%2U 10%201ndlao '\.2OcOlIl"'o2Cl.;entTC''' p 20growth.pdl Ch:Jptct Ten:

1

M

Revl>.lonsM. IAiF S"n'�' Maga�lIIt,

8 J:l.nuary 200S.

63 St-t Fm,Jr/cwl .Exprt'5s. 3(}-April

2 U!'C"TAD Im'estmellt Rnef. Number I 12007). )

UNCTAD World lnl'C'stnll'lll R/'fJort

200S and Intt'mauona( Moneta!)' Fund. W'orld Economic O"t/ooil.,

2004. a.... ,I.lblt' al

www.finanClalcxprns.com 64 PCfla Topalova, Mlnd,a: Is the R1SIIlg Tide LJijlllg All Boats?M, IMF Worlnng Paper. WPfOSI54. March 2008. available at


www.lmf.orrJext�nal/pllbsJftlwpl

2008/wp08H.pdf 6S A Bant''lCl: and T l'lkcrrr, �'lop Indl3n Incomt's, 1 922-200(r, World Bank EconOllllC R('l�"'W, 19: 1 . pp 1· 20, qLlOfed III Petta Topalova. -India: Is Ihe !Using Tide lthing All BoatS?M 66 Abh'J,t Sen .. nd HlmanshLl, MpOVCrty and In«juah!) III Inul.l: (,emng Closer 10 Ihe Troth �, Ide.ll, 5 lkcember 2003. av,lIlJble al hlt p:l / w w .....n .n .....orludns.orgl !ht'nltSlinequalirylma)"20CHflclJS

_

POlcnv . -WC.htm. Therr has been.! vul' long diSCUUlon on how 10 mterprct The: offiCIal figurl'S III vanvus arlicks In the: t.'(I1wmlc alld PolltlC
S

6

�

S

�

H

Sector In India , Approac� fur Social keuntyM. 71 "labour Short'.lgc Threat to Indian

Chaplca Nine to Tt'n

Glob:J1 CaPJlal n i tht' New Age wro Ann.wl Repllrts 1 998 and 2008.

10

Octohrr 200S, Dauba.'>e: CountTl...,. \-Iuhmanvnal finns (rg nT, I'onl, Coca Cola1 had c!l[li1t'd 10 the prt:­ wu penod. But IhC")' weTC' nor p,cnuaUy based L1pon lOtC"j!rated Internauonal rt'scarch and pmducTlon. So {he Btillsh suhs,dmry of a US car firm would KC"neralir del'elop and market i� own models lndepcndently of whJf happened 10 Delrolt. lnsobr n {here was lnlcmanonal orgamsanon of ptodu.:llon, II was b)' firrru based In the me1topnillan counU"l('S comrolhng the output of food�tufsf and r:1W male"al. 111 the Third World, as for inSClllCe Unl leI'er vr R,o Timo Zl� dId. fill,1IICI.lI T Imes, Survey: World BanklOs, 22 May 1986. A C.lderon and R Guild.., MThe Spanish Ball" StraTt'S)' m Lalill Amem..�. C".PAL Rn"tw 70 (20001, pp7lH9, A!. abo�e, p79. UNCTAD pre,s rel('llse, avatldble at gfTrm1'1.1.IesI hIIp:llwl"w. ullt'lud.or webt1yer,upMocid,,2426&ullhem 10:.2079&13n8" 1 See, fvr a primt' nample huw 'u�h nonsense euulu ixcvmc a iashlonab(r c01llmodllY Im;;l beiore {he lasl world rt'ceSSlon, Ch..rll'S LeadbetTer's much h"ped book of {he lale I 990s, LllImg t)tI Thm Air (Harmondsl
J une tlltHt, I I HNSllless Week, 14 \.lay 1990.

Mcrg('r!i and AcqUlslI.on�",

12 \

htrp:ll m "a.Iu(k .wrrmuulh.edUi

Danmouth Cullrgr. a�:lIlahlr

�orre�l('r. TlJe Econollllc Horror

,II

II ondoo. Pohry. 19991. ppI8·19.

I'3S<'Yf:l.�ulry/�)'d,fink('l�teIf1/JnII;

1 3 !'>;aoml ldem, !\o Logo t london.

ICr.w. IkIrdcr.pdi 23 Tim l\()('I;hLm. -U, Mulllnam>IlJI

t"tarmngo, 20001, pll,i. 14 John Ilulltma�, -(.lob3. 1 Car"(;Il and Ihe l'Jllunal ')t
Ikllle/rid anJ John Hollowa" Global ,

(;"puJ/. ,'·JIIn,t.11 SIJI;>
Pu/ma ofMont)' (51 ....!.uno's Pl'l'S.'i. 1995). pllS. Hollow.ll) does al ,JOe

POU\ltc\;0glltSt llul prcdu..1ne �JPllal ls lt";s ,noJ·"lt than mtlfl<:'\'

caplIaJ. "ul lhtn g� 1m to 'gIlOf"(' tht efft'Ct uf Ihl� d,stHlClII.In on th(' rclJtll.ms bc-twttn capJl;)1$ and SlatC$. 1 S �pt'ech to COIl,R.res5. {> March 1991

16 N Ha rTIS, Till' End ()f /lJe TIJ"J \t'orld (I-brmondsworrh. Pensuln, 19S"), pl02.

J � ScOlt l:I�h and John Urry. The f,nd

Corporallons and the Mohlhl\

Vicw�. Rel'lnt' 0/ R...iJU/lI P,,/m,

ECftno,m·. )H:1 (!006), pr�, 1-1 As ahme. pP6.

H ,h abu"e. p3?4

26 RK.:4rdo IkllofiOft", -After ForJI'!' \lhat? Glplnlllsm at Ihe End ul lh

l

OI1lUI)': Bt\"ood d\(' M)' h�� P It> 1"'" Tim t;.occhlin. "US M ullinatlun� 1 .

Corporallun, and Ihe .... h,hil,Tl HI , ['mdUL"''' C�pllal.'" 'KertH;., 1

View". p374. 18 W Ru'�rok lind R \·an Tul
Tho

1.01-:'( of /lItrr'WtIOIWI Rest"'i1lmll�

(london. ROllllcd!:�, 1995).

Europe Do W(' Net'd Now? WhiCh

JO Mary Amltl and .!Ihang·JIO Wei .

Can W(' Gtt?M m RL�cardo Bellon,,!\,

(t'd), G/obJl MUlln'. up.tul

PJilerns of l.aoour (Chdt('n/um

-

CC!1lury AI;"'''' New l.,eft /{rrW'II· 2 1 4 ( 1 99S), p I 1 7. -.!>c",ice Offshonnto:. Prodlicuvill

and Employmem: EVldcncl" from

Ih(' Umted StoUt'S�, 1.\1r Wnrking

Rt·j/ruc/,.mlg. und /n� CJ.,mKmK

Paper \'('P/05I2JII. 1'20. JI Tim "oet:hllll. �US Mulnn;ol1()nal

.

l-.uward HlPr, 1':199). p50. 1 ';1 1) Bryan, �tilobal Accumuhllon

C.fIrptl(atlt'"' and Ihe Mobil ity 01

ProouCll"(' Cap'lal. A �kl"pucal

and Ac(ounlLng for Nallon:JI

Economte Idl"llmy", R�,'''''IV of

VItW-. p3711.

Rod"·J/ Po/lI/ml EClJnomy J3

32 Manm NI"t.! Souly and Rohcn Z uwrcncf'. �Wh:1lI llappenw 10 the

(20011, ppj7.n. 20 Abn M Rugman and ALlin V('rbtk('.

Great US Job ....Ia,hm"� The Role

�Rl"gtonal Muillnanonals and Tnad

ofTra.u and Ofkhormg�. paper

Slrat�y", 2002. hup://www.aW.h.grl

prrpar�d fOr lhe 8roolong5 Panel

deosIEIBA2002.fik.sIPAPER5IC 1 64.

on b;onomll� Act,,,,!),, 9-10

pdf. For an Imponanl ;mal)'S.. � of -cort firms" whICh ha'e must

lhe

n i fluence In Ilill10nal C'COOQmlc:5. §« O(luglu van dt'Tl lkrgh('. Alan Muller and Rob "an Tukk[, E,asmus (S)core/x.Jard of GotI' Q)IlfPlJnlf�� (Ronerdam., EraSIOus,lOO I).

2 1 Gordon l'lall, "Cross·Border Mergcrs Show RIsing Trend As Globa! F .<:Ollumy . Expand$�. Glob,,1

FmJIICe. Ikcembtor 2004. 22 Sydney hnkelstcm Cross Bord('r .

382

k

Sc:plembcr. 2004. pl. 33 Al::m M Rugman, The RegUln�1

M ••llmut.onOl/J (Cambridge, 200�),

34 Alan 10.1 R ugman and Alain

Verbeke, " R eS't)llal Multmlll10nab an d Triad Stnt<'gy�. 35 r.hchllda Grdl. "Thl" ImpaCi of

Forelgn·Controlled Entcrprlses m thl

EU � Euroslat 1007, hnp:llcpp.cur<1 .

Slat.c<:.curopa.eulcaclM1l1'Y_OFF PUB/K5·SF..o7-067/ £N�S-SI-,07, 067·EN.PDI-

A I-aC�1 of Regtonal.sm tlr Globahsa1llln ? In C.m,brldg�

the US m200f. amounted to Sl'N t>i lhon. Ihe l;,) mlhtJ.n hud!:('t I"

-

Journul of /:-crmomrt:J. 211 120(4). pp253-27I. 37 As abo\'I".

38 "'gun.,;, from U'\ClAD. World lnr'estmmt Report l{J1J�.

S440 hilitoll. U /rJ" �tuJ\' Gf('UP 11.'·11"'/' 2006. J\·allahle al http://www.U!>lp.orp '�Iraq �lLIdy....sronpJcptlrtl rcportfII06ill1!kx.html

AnJ1C'x.

Tabl(' IH.

39 Stt -P(,IlI,lgon T3k� ImI131"� In War "'gamsi ChIp Imporr�-

C hap ler [ICH:n, I-inanriallsauoll

,

29 M 1>1Jlln, M the Twcnll�lh

�wruch

"

rroducu"e CaplI.. l, A Scerll�al

of O,gJtrljed eapu"hsm (London. ['oltty Press, J 9117).

I I!! !lu�nn(' de Brunhoff.

[hohr �t1d "pc'UIJllllnM• p�. ,�, phYSICal lOl·e'tnlem by non-tarm. non ·lillan," al �orporJtt "u'll1t', III

36 Georgim E ChOndr�a\ and Tht"Odor.. Pd;o�ldlS, MTr3de Flows,

hnJncwl Tiltlel. 2� Ja.oUiU11 1911-. 40 hn.;mcw/ 1imes. 12 SCjHC'mber 1 'Nt). 41 A",.:1(' rt'pnm«l m llIlenwtfOff,,1 Herald TrIbune. 1 "1 lHt.:tml't."r 19':16.

42 Roben Brenner, The /-cmlamla of

r,i! ull'nCt'. 1'1'206.207. 43 For an ulcllem account of the G/ob,,/ Tu

Arg{'nllman et;onomy 111 tbl� period. s« ClauJIO KJI" "1-:1 Giru de 13 Eeonomia Argentina'·. I'arl aladable al hrrp:llwww,

One.

aporr('a./Jrg/ .mprimd,1308U.html

44 DICk Bryan. "The Inttrnallunaltullon of CaritaI�, CtzmbndK� /VIlTlla/ ofEconomlCj.

and tht 8l1bblC1 lhat Blit'St (ildt'<:>1l ll.achm�n, 1'",,;m�t.11 Time•. 2';1 Jalluary 2007.

1

! Chns (i.le_, Fm,lIIet"l l "'U'S. 1

� FcbW,lrv 200S. /'o
�"ln,)�tomtor, 7 �ptcmber 200!!. aVdllahie at hllp:/fwww.rf,cmonltor. t;oml"lngltoli billIi

4

rll/,lI/cllIl Timr$, 29 January 2009.

S

Chns Giles, FII/.m(i.t1

6

19 January 2009. Andrew tilrll. C.apltalism

1'imes,

IIPlltl1shed (OUII,l007). p51.

- '1 he
Ruf>ert Brcnn('f's (alculaIJom. Othl"r e�tlmltt'S. for mstan(e bv '\lJmn Wtllf m the FmJnt:tJ/

1 9 t t9951, pp42 1 -440. 45 \lark E M.myrn, 501./11 KO'�J-U..!I.

£CQnOltIlC Rl'fatlOnJ: o.HJptr;Jlirm,

Fntlwn. and FutN'� PrtJ5/1Uij, CR.!I

,mes 121!! Januar, 20091, arn�e T J I ;I figurl" of 40 percent for thl"

h [lp :/ tv. .... ... .. ·,fa.s.oTgIltl.Jn/l;'T'S/lI.l.lO3:

mld·2000s.

Report for C.onsress. Jill)' 2004.

66.pdf whteh (')IltlHlS a f�SCllliltlOg

1l�1 of the elastin betv.«n

8

the US and

!Ioulh Kor('an ,R.<»-nn1llt'l1S l as each

�k5 m ad"aJlC(' th,c, �unomte rnlcteSlS

of the finns o�raung from

liSnanollill

leITll0nc5.

46 ThiS. cs§cllnall},.

IS

William Roblll!><m

th� argumenl of

III

Tilt Tneor.,.

of Global up,/a!I$I/I. Uohn Hupkirn;, 2004). 47 M.lfx, C.llpll
48 H Kissins�r, DIplomacy (New York. !lImon & Schml('r. 1 9 94 ). pp80!1 and 816,

49 \Verkl)' Srandard, 7 Scptembc-r 1 ';197. 50 I'roject for Ih(' New Amerlclln

Cl"n\llry, StlJ/fmltnt of PrlllClplt. 7

Junc 1 997. 5 I Fred Magdoff, �Thc ExplOSion of

Chapl('rs T('n to Elc"en

9

r>.1"h;ld Mah·hul Urn, contrlhu\lon 3t oonf('rence 011 Millsk)' and Ihe cns.s. 1..n'Y

fllS/ltute R�po't. 18:3 {ZOO81. p6. Sc"aSIIJn ihrnt'S and Garr)' Young. �The Rise til US

Hnusch old Ixbl: Asscssmg ItS

(;au�1"S an d .!luna ma",hlV�. BUllk of/- PlglJlld Working Papr, 206 (100J J, Chan Four. p I 3, avallJ ble hup:l/www.d(.mogra phI3.cOm/ db·usdl"bt r�\lI)·history.pdf Mr

10 \'i:'orld Sank. Global Del'eiullmrll/ flno'let (2005 1.

1 1 Robin Blackburn, Hal/killS 0" DI;'I1//', Or flll'filmg In L.fr (Verso. 1002); Agl' Shod ; HIJW Fo1'/I11/-:

UJ (Vl"tSO. 2(07).

F;PlI1P1(1;' Is

1 2 Andrew Glyn, Caprrulrsm '"

Unltilshtd, p69. 13 Mar tin Wolf, f"'''1It:UlI T,mt�. 15 J�nu;u� 2008. 1 4 FlgurH as gIH'''' In Roben Brenner, Tht f.cu"'mllcs of Clootl/

lj"b" lt"a, pZ81.. I .� Ponv ....n . an hahan lID1rugram who plied such a schtme In Iht US aner World War One. but Chults Dld.em dcs.:nbed su.;h a s.:helJl(' long htfore In Ab�tln CJIHu/t'ml. As I ..�� wnnng tnl� Bernard Madoff In the U� admlned to ama.�mg $40 billion In such a schemt and ::nr Alltn STanford was ,1ccused of a Similar liCam. 16 Chris Harman, MWhtrt IS Capitalism Gomg? M, '"'e"'t1/,(,,,'/1 SOCla/os", �8 ] 19 9;). 1 7 MI�hel AglitlU, M A Comm�nt and S(1O't Trick) QueSlions-. Economy t1nd SooNy 39 (2000), p156. Th� dlKu�slon betwetn Aglictra and Bon', was Indicau.e of a �l[u.:Ili(>n where the RegulaTion Schoul's elion 10 e).pi;l.In the long'Term trJlecwry o( cap'talism �omC$

adrift. �vr a (ommtn ! on II, S('"t John t.r�hl and Paul Teasue, '"Tht' Regul.
Economy ,mJ

Sa.:ltty 3 9 ]20(0), pp 169·170. 18 For a

(ull cxplananon st.: D",k

Br)an and M ,�hael Raffertr,

C..tipllal,sm umh Dtrw.UII't5 (l'algr.1\t. 2006). p!".

1 9 I"homas �blowskl. -}kthmkmg tht Relation of InduSlTlal and hnan,'al Capllal�, papt't g.,·en 10 HutorlcJI MJltrw/.sm nmfnence, December 2006. 20 -lmmtlldvwn �, r.collomlSt, I 7 ApnI200S. Z I hntlllcwl Ti",('$, 6 Seplember 2001. 22 Auoove. 23 As aoove. 24 Fillall,,,.1 Tlmt�, 15 September 2007. 25 Sp«ch opening tht London HQ In Canary Wharf In Z004 Z6 �Flow of Funds A,counu of [he United S[ales, Sc<:ond Quarter 200r, Fweral ReKcve slau$tkai release, p l06. table R102, '84

hTtp://www.federa!rescn'e.�O\I RfLEASESlzll200709171

2i Marco Terrones, and Robcnn "Global BalJn�e-., � Card arell •• SaVUlg5 and In��[mcnt Accou nt World £C(Jllumic Outloot. Imcrn�l1on�l \lon�l,lry �und (ZOOS), p92. 1.8 "CorporalC$ arc Dn"mlt the Gloh S3\"lIIg GIUI , JP MOrg.ln Seum" 24 June Z005. '

�

2!" Duruln Papadlilliinou, Anwar

Sh:ukh. ClaudIO Dos S.tnlU$ and

Gennaro uua. �How hag.lt hlh US Economy?". Stt;1ttglC AI'IJIWI'

Fehnmy 200$, The Levy

E,onOfmes lnsmute of &rd Collcl!l' 30 �pc«h atlhe HUlori,,,1 M.ltt'f.alismconfercncc, Loml"n, No\"embcr Z007. 3 I Fmtlncwl T,mes, 22 Janu:.ry ZOll�. 3Z Marrin WI/If, hll;m(itll l mIl'S, 2 J AugusI2007.

33 Mamn Wolf. F"'''II""I T,mes.12 Januarv Z008. 34 ,\Iarx. CtJPIMI, Volume Three, p4 i� 35 Adair Tumcr. -The Finan�lal en", and the FUlun" of hnan�I�1 Regulation", The �conomlsl's Inaugural CItV Lecrnrt. 21 JanuaT\ 200�, a'·J.I�ble at hlrp:J1 www

.fsa.p;o,·.uk/pap;esiL.braryl

CommllllM.'..Itlon/Spttche5/ . 200�1OU I_auh"nl

36 ,\Lan," \"t'.)lf, "A W�k Of I .veng I'enluuslyft. hrwnCIDI T,mes, 22 N"v�mber 2008.

37 Mamn Wolf, fmDIIClOl1 T,mes, 23 November Z008.

38 hrumcUlI Tlm�s, 3 Fchrual")' ZOO.". 3� Quoted In F",""CUlI Tlm�J, 7 January Z009. 40 F,nancUlI Times edllonal. 16 Sept�mber 2008. 41 Quoted on Fi11lmcial Timel wehs.ll·. 29 January 2008. 42 John Gap�r, �Davos and tht Spuil of MUlual t.hsunderstanulnl(, FlIlIlncUl/ Tlmel, .10 January Z009. 43 I htard hlOl speak lit en London Univers,ty's SOAS III lalt en January 2008.

Notes

44 l.alT) Elliot and Dan AtklOson, Th" Gods thol fal/I'd (Bodle) Heau, 2008) 45 I shared a plattorm al a ([lnlte m�ung.1t the Naoonal limon of Srudenls ,onference III 2000 wllh Qnt of liS leading 6gurn wM ("Tlu.:JSI'd me fm lalklng of ftanu· capitdlirnl- Ofl the ground� [lui nellher of us had "an .llernall,e 10 capllJ.lism-. 46 Gerard IlumCru.l aDd lJonllluque Uvv. �cos!s and Benchn of Nf'Oltberal,�m: A Class,Anal�su�, 10 Gerald A E�"telll, Fmi1n�Iil"JoItion and Ih" World f..collomy (b:lward Elgar, 2005), pi""'. 4- lam� Crony, "Tht Neolibera l Parado,,: Tlf e lmpact of Dl'struc'l\"� Product Market CcJmpeulion and 'Modem' hnancial Mllrk"l� on Nl>nfinan�.al Corporanun Ptrforman�e 111 I h.. Neohberal Era �, 111 Gerald A Epslcm, Fmollcwl'$
Economy p86.

48 Fraru;OIs Chem:lIS, 1.tI

Mmldl.l{,UlllOlI dll Ul/llttll (S)·ros,

1 997), p289. 49 As abo,·t'. p74. The p,usa�n from ChGna.s arc lranlilated bv me. 50 As abo,e. p2!,,7. ,1 As aOO"e, pJ04. U Peru GowJ.n, Till' c.;lob,,1 C.!mblr (Vtrw. I�9). pplJ·14. 53 Win lIunon, Tl,t St"te W,'" 1n Uonalhan Capt, 19951: W,II...nl l'.n-gan. Tht Sprc're of c../IIl"IIS/"

(RadlU\. 19921. S4 Stt. for t"amrle, Engelnen

Swellimmer. -FinalKl.lh<;allon and

t\,;o Slowdown of A.'CUmu1allon-.

Glmlmdgc)v..rlldl Of ECUIIU""", 21U. rp71�·7"'4: Thomas Sablow�ln,

MRelhmking tfte Relation

of lndustTial and hnancial Capllal-;

Till van Tro:e.:k. RC.uII5lderlllg Ihe In�'esml/''1f·Pmfil Ne."..s In Fimm(f'

I..eJ £corwm,es:
Approach. hnp:l/idea5.rep«.0rgJ plimklwpaper/O I ·Z007.htmh

Andrtw GI) n. CaJJIf"llsm Chapttr I',k,('n

U'III'!l5ht'd, pp55.65.

�i Jam('� Crott), MThe N�llibet�1 i'aradox: rhe Impact of D"�lTu�IIH' l'm.Juct Market COIllf'CllI1nn" Jnu

"Modern hn..n....al fo.tarke($ on NonlinatlC.al (;orpoullon PeiforfTUlKe 11\ Ihe l\eoltbcral ErJ", m Gerald A �.psttm.

Fllunclill.JoIIIon and the World

fc()nomy, p91. �6 Ht pUI Ihe argumenl al �

("onftren("e on h
Flnan....allS�uon at London Unl\en.lIy'j; SOAS In Ma" 20011 and 011 the Marx.)m t,'CIlI ill London In July 2008. w.- the p,ll'<'r a,.uk/ w a,a.lal-Ie al hllp:J/ww.r.oas. l'(;onO!llloieVenl.>lenSI5/4193�.pdf 57 Tht ont reftrenle b)' M3T" I() M)tLOndary e"pll1;tJllon- ,� when ht wntes that �the workeng dass IS

SWlltdled� by Ihe moneylender and .llso by the �rt1311 dealer who sell, the means of subsistence of the wurio:er--Mar).. Cap,ttl/, Volume nm�e. p5�6.

58 ��m Ashman made IhlS pOInt I '5 low=fully at LapaV'�S prl'sental1on of hiS parer J.[ Ihe 'jOM hnant.alisanon ,onf�r�n,e. He had. !;;hr pomtoo 0111. ("onfuscd the different le,els of abm-actIOn wnh ..h"h !>.Iarll had anal)� ("apnahsm. lt should be added IhJt. ,arnal rn II� IOft•.:.a1 ,ontlusion. 1\'� argulJl('nl ..ould .. i ! Lapa\1l undermlnt Ihe ,corral ,tr�S en \brxlSl pol.lleal ,",onom) on (xplott:ltlon al tht polIItuf rrotJu..,.on. slII,e liK-r(' art all sons of lon.UtllC'r paymt:tlls Ibat wuld be dcs'snated �s �d"<"Lt cxplOllnnun -{a" pa,.mt'ntS. r"nr­ for domeSl1l accommodallon. the demcnts en ,horp.nlt bdl, thai IIU tu r..t,\lleN' and whoj('!ialers' prolin, Ihe payments made III pnvately owned puhliL Lluhlle•. ;-9 Setm.llan Barnes and (,Jrr) 'rl1unll,. "The K.se Ifi US HOlh�hold Deh" AncsslIIl! 'I. Cau'l('s and Sust;t1nahlll1y�, 8illlk II( J..lIg/"tI.I ft

,8\

chI' Relallon ofIndu\tnal Dnd

U'orkmg Pap« 206, 2003. -

l Ime......." on Tod.J}· Progralllfl.lt

HOC Radio Four, 23 jJlluarv 2()(l<;

ppll-H. (,1

NatlOlUhse�. hnoncru/ T lmel,"

Fmancu,l Capllal-.

60 Dick Brpn and Michael Raffert}', CapII,,"sm U'ltil Dt'rm.lI/l·I'5,

Wolf . MTo Nanun.ahse or Not 10

"n!:d�n SlOckhamlller.

hnp:l/new).hbc.co.uk' ttXb�·""u.lr0

M Flna.... l allJ>,lll<.lIl and 11K- Slowdown

01 Acrumulaoon�, pp719--41.

jeffrey Sachs, J;l.DlI.aC}·27 Z009; S..mucl Brittan. 30 January 2009.

,

Proouct \larkel Comrc:llfIon .lnd

hnp:llhus§Ooel.free.frisurlin!t,pdl 73 11"s was the posItion of Engdbert

(1 999). anllable al

Siockhammer.

1·..rform3n�e In the l\ooliocraf

Accumufanoo�; relln-aled III

haM, In Gerald A Lf">ttln,

Fm,mnahs"llon a"J lilt! \t'orLJ

Snmuills-. anllable 31 hrtp:llkrugman.blogs.n)·uolf'S....oml 2009102I01Iprotecnonism-aod­ sumulu§-wonk�bI S2 Nicolas Vcron of the 1ku!',C Ihmk

-Sollll: $ryhzed Facl5 on Ihe

(.
£collom)" p1l2.

Finance-Domlnaltd Aecumulalll'll

February 2009.

fell/lOmlCS of Global Tllrb"It'''(f!.

CJIiJnge. 11:2 (2008), ppI S4-202;

6] Figure fi:1\en m RobO'n Brenner, TlJt'

Reg.me-. III CompttJlJQII

e'

p21 'i. The figure for Bm,lIn was

Dum�ml d ..flled Ihe rele'ance 01

mu�h brger.

profilabiht) in corwerulion al Ih,' SOA!I confer..n�c: on

64 Rub.m MlfwJrd, -The Scr\l�e

Fumnciah5<1l1on

&onomy\ In Root"r1(k Floud and Pauljohnson,

Tht G:/mbrlJgt

Maurinllsm conie!(,lIce

UTlt,,,,,. Volum.. Three, 1'249. I)'; C.enrd Durnenil and Dommlque <'II,

M 1'11.. '1efllihcral

Couruerrevolum.m". 10 AlfrOOo ledsl. NrofllH!r.lf,sm, II Crlll(;al Rt.IJtr ,PlulO. 2005f. p 13.

III

No"ember 200S. -4 G�rard 1)l.Im�n;1 and Donunique Uvv, Cap,fal Rtsurgtfll. 1'20 1 . is Ben Fin.,. MDrharmg Ihl,O N('w

resred nn Tl;"l'lrch ,hal clalmC"d ro

T/'t' £conO/lI/u of

( ;lull.J1 "(l(rill//ena. p IS6.

had

cn,..,.. of Inr 19"Ck .and

PJrellle.lu, MThe I ;lIe 1'J9t...· l''\

hlammg Ihrlll on 100 !treat a monI"

[lltTemc-. in Gerald 1\ Ep§t�lIl. ' hll,mCI.1f1sullfIli .J"J Ihe \To,/J

'l.Ippl). Th.. cm.s 01 SC'pteml>cr·

�,«J",)m)'. p1 14.

tollowe� to h3T� halk If' hl\

(999), p60. They JI50 po.nt OUI Ih,lI lhi� I� dear lram Marx'�

tre;lImClll of rhe 1�'1I(' m Volume

Two of G.l/Jllal, althr!U[:h al POlllt§

111

Volume rhret' h.. a!iCnbed these

fun�nons ro different group, Hf C.lpilaIJ51s. -0 ThOll\JS SJbJowski. �R�thlnkmg 386

SS John Gappc[, �Davos and th.. SpiTil of Muw�1 MJsunderstal\dU\�M

.,.... Georv;e Soros. Ffllan,l.J/ Till/a, 2'1

januat') 2009. � also MJrtll1 Wull.

711

�111,111("11 TImes. 1; Jal1l.lJry 20U'I. H.1n1.: of[nsland Swhlliry Repon.

Octobtr 2l1lJlI. ljuolt'd in lhe Gu, l rdwlI. 2S Octohtor 100S. The

•

&6 Pel�r Temm. �Thc: (jrc;1.I DepresslQn�, III 5 L Engennall & flo �. Gallman. Tilt (' �mbndge EcQnomlc Hlsfory

of the UmleJ

Stafa. V olume Thr�. Thr '....·.clltlClh Crowry {Cunbrtdgc, 20011. p305.

S-:' As abu,·... p306.

Chapler T" eh'e: I

The New L,mIIS of Capllal (;harlcs Dickens. lIard Ti",u

IHarmondsworth. PengUIn, 1969).

2 F Engd). The CondlllOn of ,'''' Workrng C/..tS$ 1II " ."gland. 111 Marx and Engels, Collected \f'or.i:J,

OclobO'r ZOOS It'd mille 01 hiS ongllL1l.1 r�arch.

MOlley "lid hll.1l1ct 1.\lacmtUan,

fmmlclUl Times, 30 january 2009.

19H(Jo..

BuoMc: Fmanclalls.anon on Ihe

� Econnll\l/;$

UpStages Dlplonmm: Ora maK•

u.'iCd Ihe CTI") of Ihe urI.

upstde down whcn II came 10 Ih.,

Ihe shih IS well m..de II, RHben \\

flf

114 Gideon Rachman.

c ..

193(k He lorncd hl$ �Oollll""'n'

68 Tht �J� I\.r Ih.) II1r"'l'reIJIIOn 01

t.apJYIU,IS, Po/w(al f' ,nmumv

January 2009.

sho" Ih,U !\If') 10""' .1 money 5urrl,

b" \\an.
6';1 \bkJto hoh and C"qJ<

L.a�n, �W�y Lrnd..rs Add IQ Innosp«"on�, Fman(;wl Times, 10

MtH..nallsm. 14:4 (10061. p14S.

-(, hiedman'� IIIIIUI a��delillC famr

Vnlume 4. p343. 3

-

4S I 1'97); Sec also jonathan Neak. l p24. �IOp (;/t)bal W.:mnllg, Sommat')o of COnduslon�. n i

GlWrdUln, 30 Q.:lIlbcr 2006.

Jonathan Neal.., Stop (;Iubul

>,t'.mmng. p 1 79. 8 John Vidal. CU.Jrd,all, 20 9

!iet: Gcorse Mnnblol. GUdrJiall,1 I)tcemlx-r 2008.

to Quoted by john Vidal.

GU,lrdlolII,

10 r)">,emlx-r 2006.

I 1 George

Monb'ol, GuardIan.

S May 2007. 12 Cli>'c H�ll11lton. Mijl.l,lding on ":YOIO-, 1 3 hgul'CS from Jonathan Neale. Sfop (;1(,b.J1 Warming. p71. 14 GeorgI' Monb"Jt, MEnvlTonmelllal Fetdba,k: A Reply 10 Clive

Ibmtlton n, ( 19'7). 1 S t;lern quoled by jnhn Bel1.o1my I'osler, Bre:1I Cl.oIrk and RIChard Yorl m MF..toIOSY: The I\1oDlenl (If Trulh-. MOlIlMy Ret'lew, 60:3 (2008), p5. 16 FIona llarve). � �.co-G!Oups �ear an OPIMmuni1y Lost", F",•.,,(IU/

Timcs, 14 March 1009. I"" GUardlUII, I I Mar�h 2009. III Oburt·t'r, 1 S FebruJC}' 2009. 19 ,\Iarl<. CAPltul, Volume One,

(;hapl�r 10, MThe Work.lOg DJ\'-.

for Modern Amhmpogelllc Glonal

WorklOK Day-, "..,tibbie al

Juhn W Farley. ··me S<:len"li� elSe: Warm;ng�, MomMy Nfl/iew, Jul)'· Augusl ZooS. jonalhan Neale, Sf>lP Ginboll \Varmmg. C/)Imge fhe World (London, Bookmarks,

200S), pI": �J>l'neer Wearl,

(fillannal Tlma, 29 JJllliar, 20U\lI.

Wa rming -. hrrp:l/www.alp.org!

7\1 "i« �harb accomp.;ln\'U1f1, �1:Inln

6

George: Monb,ot, -En"lronmenlal Fetdba,k: A Reply 10 CIi"e Hamllron -, New Leff Re�.,t,.·, 2:

�or brief histories of Ihe -.;ienc", see

JanuJI'}' 1009 �um;'ll" I.f 1< l"o�

ongmaullg In the U� \\'JS $2.2 t!1iJ,on

5

Dccemlxr ZOO6.

S3 Ser Cilloan T�1t and PCler Thai

ImpcTlaI15m�. HlSIl)ncul

SaJd Fdho ,1nd Oc:l>or�h JI.hll�mn

(,t. Roher! Brenner.

May 200S ;'InJ

in hIS prescnmuon al Ihe HlSturI• •11

Modl'm £collon!/( History of

l

III

IZ008), p52.

SI I'..ul Krugman, MProlcctioOI�m and

111

MFm:u\CI4lIls.lIlI>l and !hI' S,lowdown of

'\onfinan..;lal Corpor.llloD

ro Gro"lh, and Ih� tmprum'e Inr Socialism M, Mon/My Ret'leli' 60,3

M�neru.u, 24 No.'Cmbc:r 200S.

-2 MIChel Huswn. �s.urfing 1M LUI> Wne"• HISlonc;a1 A I. lferl
..

SO 5ct-. for example Ihe: 3mdn 10 the F",ancw/ Ttma by Wolfgang

day/new'>id_7S46OOOf �846519 .'111

62 J;tme\ Crott}'. MThe l\e.,hheml Paradox, The Imp'''1 of De<;uUqHe '\Iodern' FifklJlcaa.1 Markels on

March 2009.

4 jamts )lan5en �nd orhers. br�l't AllIlosph('rJc L02-. quntnl III Mmql l l , �C]jma(e (hanse. Lunu,

"11m�line: The 1)i5«l\'er)" uf Global rusrorylcllmarrillmci.ne.hlm ChapletS E I ..ven 10 Twthc

Pan S. MThe �Tru�e: for Ihe hllp:J/www.nlarxlsl�.nr!Varchl\.o:J

1113

rxiwolksJ 1867·1' Ilch 1O.hlm/!'> I

10 A) above. 1I All fiKurCi fromjonalhan r\e.llc.

SlOp Globol/ WQrmmg. pp211-29 and 1.57. 2l DaVid Adam. M(;hm3re Change CausJl1K H"ds TO I ay Eggs E.uh·M, '87

IS Aug,m 2008. 2) I'or a 5Umm�ry of Ihe v;mous talculauons ahoul peak oil, s« Energv Wal�h Group. KCrude 0,1 Supply O.."look�, (klob<=r 2007. EWG·5crin "'0 312007. 14 1.\ ahu'e, � H As abon. pl8 26 John Belbmv Fomt, KPeak Oil and Energy Imprm!ism-, Monthly Rel'IeU', 60,_1 (20081. 27 Report of tht Nallo.,,,1 En"KY PoliCY Group. May 200 I. 1'181, Qv.,I�hleal htTp:// WW".wh IlehouSt.gov/energ}' Na.,on;JI-Energy·Polc i y. rodf 28 juhn Bdlamy FO�ler, KI'eak 011 aod Energy Imperiall�m·. 29 The eXlem IQ whICh lhe: priec fI� was � result of the approach of peak oil l� open 10 debale some a5{:nh.e the nse 10 Ih,s. olhas 10 �peculalioo thaI big 011 producing narion� were kreplJlg oil io Ihe ground so as to r;Jl� ns prke. For all argumrnl mal II was due 10 war, poliricallll!irabihry, currenq rates and spa:ubnon. Sft hmad H�III·Zadeh, Kls T'her-c: an 0,1 Short;Jger�. avai!ahk OIl hup:ll wwv,'.SIaleofnaIuce.orgIisTher-c: AnOII Shoruge.hlm! 30 Stt. for example, Robert Balle), "Time Ifl I'ul the Brakes on Bloflld�- Gua,d,,,n. 4 july 2008; Jonalhan Neall', Stop Glohal W"ffl/IIIK, ppI 01-1O.1. 1 1 S«.forms.ance. Jav..... BI��. -TlK Fnd of Abund.mer; Food Panic Brings C2l1s for a 5c:cond 'Green Revolullon'-. hnancliJl TImes, I June 2008; for an apoc.al)"IxlC "lew of what IS happening. Sft Dale Allrn I'(elffe� KE.ilting ross,l luds-. From the W,lden/cu, 2004, available OIl .... w w .fromme wlldeme$.com/fttd ww31100J03_tan"8 -od.hUlll 32 Their argumenlS on Ihl'i poim were rthant on th� findings of rhe ploneerl1lK orJl,.lOic chenll�1 I.lebl�, whuse writings bolh Mar" �nd �.nllds s!\Idled. See John Btllam}' FOSler, Mllr.Y·s f'co/ogy l'\Iomhly Gu.:l,d,"II.

.

'"

ReVIew Press. 2000), pp147, 1711, 33 Shelley Feldman. Dev NaThan, R:l.l eSwJn Rama and Hong hng, Klnlem�uonal AssessmenT of Agnrulrural Knowledge, Sclefl(e and Technology for Development Elm and 50mh ASIa lind PaCIfic: Surrunary for D«-Islon Makers-, IAASTD (2008). available at hnp:ll... w w.�g.:Jssessmem.or&fJ.k" F5AI'_�D"L220408JlOal.pdf 34 World Bank. �World 1}t"\dopm�1U Rtporr 2008: AgrlCulrufe fOf Dc:"dopmt1lt" (2007), 1'7. availabl� al hllp:l/go.worldbank. nrg/ZJIAOSUFtO _H Thc Icrm 15 mal of lhe IlJrnet I'nrdma�, for "mance. �Thc Pobllcal Econnm) of �ood", Neill Ltft RtI'/tlll, 2: 197 ( 1 99J I. 1'1'29-r 36 JaVier Bias, KThe �_nd of Abund:uxe: �ood Pllnie Brings Call, for a S('wnd 'Gr«n RevolutIon'. � 37 World Bank. 2007, -World Ikvdopmtm Repon 2OOS: Agriculture: for I)e,·elopment". 1'''. available at hllp:l/go.worldbank. org/ZjIAOSUI'UO 38 jal'ler Bias. �Thc End of Abundana-: Food Panic Bnngs Call, f\J1' a �ond 'Glttn Revoluflnn' � 19 For a longcr anal�sisnf Ihe HISIS and lIS poSSible imph�aflons, s« Carlo Morelli. KBehmd the World Food CnSls-. lntn'/l,lflOIlllI S
2 lktalls of Ihe repon firsl arpeared III me ObstTller, 22 Fehruary 2004. The full tepon IS availablf on hnp:l/www.SfoptS5o.com/campatgn /Pentagon.doc

1

2

,

4

Chapler Founern: WboCao O.ereome? John H C.oIdlho'lX', Da.id Lockwood. Frank B«:hhofer and Jl.'nmfer rlan, The Affluent \('o,k" in fht Class St,uCtl"#! (Cambridge, 1971).p6. C Wrighl M.ills. I I'T! Gault'S of World W,1r Th,u (New York. Sunon and 'iehustec, 1955). Htrbtn Mncuse. One D,mcnsVln"f M"n (London. Roulltdge & Kegan Paul. 1964). hnp:l/www.man:lsls,Org/refere:neel archlvdmarcust/wurk$lone· dimenSlonal-maniindtx.ht.m Emeslo uclau and Chantal Moufk. Hegemony and SOCUl/1SI Strategy: Towdrds a RadICal

5

6

8

,

DemocrdtlC roitt/cs {Lolldon, Vmo, 1985),1'82. M Hardl and A Negri. Emplrt {Harvard., 2001 I. pH. D Fihne� F..litlmallng the World OIl Work·. Background Report for World Hank, World Devt/opmenl Report 1995 (Wa�hongton DC, 19951, availahle at hup://www. monarch....otldbank.org 5«. for example, my cakuJal10n for 1M size of the new middle dan 10 Bmam, m C Harman. �11le Workmg Cl.3ss After the RecesSlon-, InternatIOnal Soc.al/sm J3 t J 986). UNDP World Development Repo" 2009, Tahle 2 J . Slmilar figurl'$ to rhost of Ihe UNDP 3rC prOVIded In Ihe CIA Ytar Books. The figures pro�ide a 51milar ge-ngrJphlC" disrnbullon of indu�tnal work m Filmer., wim over JOO million mdustrlal worktrs In the old IOdu5lna.l I'ConOmJes and a similar lotal 10 me BRICcoumnt's. "lmroducnoo-, 10 R BaIJul �nd rnhers., 'f7n. Crltic.Jf SN.dy of Work: . •

Chapters ''',n«n 10 Fourtun

LafxJr, Tl'chnology "lid (;I..b,t{

Production (Pluladelphla. 2001 I. r" 10 US Ffderal Reserve figurts, avaIlable al hl1p:lI_-",'.ftderal reservc.go\"/re!easnlG17/Re\ISlnnv 2006121 11tabk I a�rtv.hrm II US Depalilllfnl of Labour prondes UN figurn for 2006 aVlltlablt OIl hnp:lI_.dol.g.o,·/aspimaflal' l $lchan boakl2008--OII Itpot chan3�7.hrm. ACCQrdmg 10 World Sank figures the Unlfrd Sl:ales accounted for 23.8 JKIcr'm of the world's manufacturing ompUi 10 2004. and ovtr TWO decades the: US shllre had bar-c:I�' dlpJKd. 'The annual al·tralle SJ]lCC 1982 WolS 24.6 pt'rccnl. wh.k Chma's shaft for 2004 was 9 petCCIlI and �)urh Kore:a's 4 JKrctm. Quored m Inll'n1llllQ'Il1/ Hl'rald Tnblllle, 6 $c:prtmbu 2005. 12 The CIA Ycar Book proVides a figure nearly TWICe mal fnr the old mdllsmal counrrtt'S alont. 00 doum becauSl' of:l. wider defillinon of wh:l.l constuutes the Indu�tnal$tC1:0(; 1 J Fisutes &i"en by C H Femslrin. �Structural Chaoge n i Iht �tloJKd Countnes UI mt 20th Century·, Oxford Ret'/tW ()f EconomIC Pobey, 1�:4(lml.!abk A I . 14 R E Rowthom, �Whtre are the Advane«! uOTlOmln Gomg?�, In G M Hodgson and others, Qlp/talum '" Evo/..lwn (Cheltenham. 2001I, p 117. I S As above, p127, 16 As above, 1'127, '7 Guardi:1I1. 5 June 2002. IS Of6ceforNa"onalSlatisllC.,u�'mg III 8r.lllm2000,Table 3.1 4,a"aliable 31 Imp:l/www.stali$ucs.gO\'.uk 19 AlI lhe figures arc from �Emplo}'ed rer50ns by Occupallon. Sex and Age-. avmllable :l.l frp:l/ftp.bls.gm{ pllbl5pecl�l.reqllC!iullfla319.1\(1 1U Manuel ("'.aMells, "The Nelwnrk Soeiery: hom Knowledge In 1'011C),-, III Manuel Castdls and Gusm,·o C..:I r.lo:so (t(!sl. The Network Soc/el)' (('..enter for Tran�tlannc Rdallon�. 2006), p9. '"

"

1 1 KIll Dunn, (,lobJl R�$tNlctl."ng

IltUl rhe I'(III"!' oflAbour (Palg.rav.. �IJ�lmnan, 20041, p I IS.

.. asy 22 K
rano b� IlISt 55 pt'rttTIt 10 60 pcn::cntof ...·hal ll othcr ....l� would

hav.. �nh. Then: 1.5 J tnple error

here. II usumes [hal rh� 13bou'1/I In

the fortnc:r USSR. China .lind Indl ,

Umon Organi�mg". The ILR

....(/'C: IlOl

<.oll«lIon. (.!OO I', a\adahle a1

....orld syslcm untli lne:

hlrp:l/d,S'I..kommons.llr.eomdl.

edulegv",..wconu·nl.cgi?amdC"; 100 1 &conl(.\:r:....porrs

23 Ra)"lnond·PII':"," Bodin, Wide, ,anglllJr Fo""u W Work Qnd bnployment .n l:.Jlrope, lnt.. mauonal l.abour Of lice rtpon aOOI). 24 Asahove.

25 Roher' 'raylo!; -Smmn's World o( Work: Myths and Real/Ut"S�, ESRC

Future of Work ProgrJITlJIle Scm"'ar 'ieri.-s. 1002, ava Ilablt :11 hnp:llwww.

�rc,ac.uklESRClnf�n{reflm3g� fow_pubhc311on_3_'�1lI6-6057.pdt

26 These figur..s an: flOm th( Offict for N:uional SlarlSlics' S()(;lal

T,en!b

2001, pSS. Kevin Doogan, New OlplIllllSftd The T,arufOTmalU)n o{ "'ork (POIIT),. 100tH pro",des ;l �Imllar 27

changed Ihe hglob.lil capllaVlabour

pICIUrt 10 th� figu'�.

-Ibcsc at\' "t/)' rough cakui.mom,

j!.I\'cn the J'roblem� of counnng rhe numher of workCf"i m lilt oftm

mol'S!\"( §«Iors of nauonal

e..:rmomlt"S. Bul t"llmtr's figun"S,

t� of UNDI' and Ih05l' of [Ilt CIA

all su�es[ a [Quern 51mJlar [0 Ihls.

2H All figlU".... are lor 2005, (rom

UNOP. /1mn.Jn D('I'I'I"pm�l

Rrpo,t 2()()9. T.1bl� t

29 A f.lllu� 10 � [hJ.J, Itads f;i)mc JO

�3SII)' �)(:lAAef3[e the growth of tIM:

·orklng da�. ,hal h..1S resul[ed from

...

glob�hs:",on and urbams,,"on. So 1II a Inuch quoled P.1pc!; Rl<.hard

Freeman has wmll':ll o( an �dfa:tJ\e

douhhng of ,he glolxli labour [orc.. (Iha[ IS workers produCIng for

tnlemallonal mark(IS) a\'cr Ih( paST

d«:ade and a half, through Iht entry of thmcs.e, Indian, Russian and

OIher worktT'$ mlo (he glnbal

economyft. Thl� hJS �upposcdlv

dOing SO as pan of the early

1990-.

and th.:!1 the.r whole: workforct1 an.

now worktT'$ (mplo�'ed b) ("apl1al, There IS, howrver, a big dJffe�flc(,

bl':n":en m( workforce I n lIS lotalil'

and Ihow: who are ....age workers. 111 100 1 Ih( non.agncul[uraJ ",orHnr�(" of Ibe developing and lransmon

J:'ConolIUt"S "as I, I 35 million (figUl"tl from Sum",.,')' n{rood Im'/

AgncultJlra/ SI.Jtl�IICS, hlOd and Agnculrure OrgamS3non

of the

Umted Nanom, Rome 2003, 1'121. But by no means a!l lht non-agnculrurJI workforct' are

workers. Self-employmcOi as �

proportion of Ih( nOI1.agn�ultural workforce IS 32 pen:en[ in ASia. 44 percent to latin America and 4S

percent III AfrlCll (Women (Jnd M<,'1

In the Infom/'."11 f.:';onomy. 11.0,

20011. And only a propon!on of those who S«'k work a� wage

workers mccecd III getting emplor"J In the fOrTJ1;;Jt §«lor n i modem Industry, Mon ;'ITe 10 very low

produrnnty;om.. oftto worklOg fur fi""§ Wllh onl� a cour1t of ",orktr�_ .10 Inltm.n ional l..abour Oflict, A.frICol/1 Employment R,lX'" 1990

(AddnAlxlba, l991).pJ. 3 1 Inlemallonal Labour Offile,

Women flnd Men 11/ lile Inforn.,11

Emnomy, 2002. 31 5n: Chapter Nin( for de{ail�: !oet

JJso Ra� Brooks. "LJtx,ur

Markel Performance and Prospet:rs�, 10 !:swar Pra,au

(ed)

Chllm's Growth alld IlIttW,IIIOII /1/ Iii" World Economy ( l MF. 2004), p5S. Table 8.5.

3.1 A mlstak( made, for InSlanee, hy MIke Davis 1 0 I'I<1nel o{Slm.u

(Versa, 2006). 34 Figurt'i from PRELAC NC!4·sltlur

Notc.

(San[Jago, Ch!J(), Apri l 1992. diagram 3.

35 Paolo Singer, Welal Exc/USIOII m Hraz/I (Imemaflonal Labour Office.

1997/. Chapt(r 2. Tahle 7. ..m l i lable .11 h np:l/w w w.•lo.ocg 36 Figures In J Unll!. -Gender .Ind

Infonnahty In Lahour Markt:!) on South rul:l-, "':onOllIlC Qlld

PoiJtic

JO Junt

r Ray Brooh. �Labour MarKel P(rionnance and I'rosp«uft, EsWaT Praud (edI. Chlfws CrDU'lh alld 11l1l'gr,1/lQn into the "'orid ECl'momy; for fUrlhcr an
the CbmeSl' urban ... 'orkforo;e, sec "13nill 1-Ia""".andsDerg lind Paul Burkell. -China, C'.ap,tJIISI Accumubnan, and Labor-,

39 M�rx, Capll.J/, Volwne Ont, p628.

40 A s aboH·. pM).

E"'TI/Mment Rl'purt 1990. r)4 4- Ratar Malum
KcgJm(: A Studv oj Ind!,11l ManulaClullnj>! Sector". 2006.

availahle OIl htrp:l/mpra.l1b.um.

muene�lI.dd48511

48 As aho,·e.

49 r i-nge1s, " Lener to BcmJ.[em. 22 AUjoluSI 1889ft. m K Marx and F I-nllcls. Col/uttd Works. Vulume 48 (London. 200 I!. 'i0 MIke Oa>-Is. Pwnet rtfSlllms, 1'.16.

� l lco Zeihll and CIJJTeCerufJ. hS!um', KC5l51ance and The Afri�an ,�l)craIIW' 117 (100S), nailabl( al

hItp;lIww.....1$I.orll.uk/] nde" .ph p4?

Id:398&'.,�ut" I I '

U �Informn de Desarrnllo Humano In la Rrgl<1n del Alu]'Il'Ino, La PU) qll
Office, 199', ChaPltf 2, p14. 42 5ef., for mst.lrKt, Ih( figurb given to J lJnm. "Gendtr Jnd InJol"l1l
(Romb;J.� I, 30 Juru: 11M) ! . Tabl� I"'. 10 and 22. pp2J-�·ll"6. There

arc, of �ourst", )IIUo1Il0nS 10 ,,11I�h a

suddtn d(mand for IJoourun onl, h<" mer from the m'ormal sector, leadlOj>! 10 wage ralC'S ICIIII"''''f1I)

aoon' thOI(' .n the lortnat se<:lOr. Th( :;ame ph(nollltnnn .)(:curs, fnr lmtan.:e, wllb �lump" labour m [ht budding mdustr) In Hrn,lIll.

43 For an � .. C· O lll 1[ Iw tmpJo)l'f\ of I'.h} th(y cmplo) pc'rmanrOi

v."rkc:rs, SoCI' It :'In:fkerk, �Thm�

'tars of Industrial Lahllur m �\1rh GU)atJI: Trend, "nd :'llt'lIfi.:ance�, Eam/!ltllf ,md Polllrci/l Wtckl,· (Bomb\"). JO

Ch�p[er Foun......n

Orgao"aIlOIl. A.{"'.)II

Orumft• PNUO SII1"Ia, 2003,

4 1 J' �lIlgcr, -Wlal hduslon to Brazil�, InTernallnna( l. a bour

8'11;11, Chapter 2. t�blc 10.

46 Inrcrnalillnal Lahol1r

\'(I111klng Clns,·. Intl'ffl.mon,rl

},foll/hly Rn·rell'• .i9:1 (1007). 3i! UNDP. Vo,/d \ DetJe/opmell/ Rel'o" 10M. Tahir I I .

June 2001. 1'2402. 44 Pallio !:>1ngcr, SOC/oJl £."cc/ldllJn

4� As aro>l'. p P

III

10

Rohcn" S
Cml<.J del RomantlClSmo Ann· (.1pilalisil-, in

!:i<><'/J/m"" u

Holrb,me. In (20041, .\1\ Ir.lnslalion. n As JI'OH.

q uo Zelhg and CIa.rl' urUII,

-SJUlm. Rt"Slsanle l and thc ..\tTl�an \1:mlong Ctassft, H i'wrn � ramrhlel on the slrik( b\· rwo Ej:�r"Jn 3
Iransl �Icd h� .\nnc Ale\"andu In /mtmJI/(Jn<1ISrxt.JI'i," l I S (lU"!1 .

56 Rn"," <.:ohton, P�trr {;mbl1u and Ph�lhs Rrnier, Pl'<1SU/'llS .md

I'mlctolrl.ms (\1unlhh Rc,"cw I'r��s, J 9�91.

;- H ,-an Wcr...:h , Tflt B"'"/>J\'

Tt.wt!t Smh 1981·1 �IH (Olll',

1992), 1"1'45-46; Mcrna Mcnnn

IU , d Nt'tr� AdnrkM. 0111' 1I""dr,.d Ye,'Ts Olle 111t'lIir,d \'ni{l'$

(KokaIOl. Seagull. 2004L �8 � hlRds,

Tiot I'c,Js.wr Qurs/I"" In

f-rol/lct lind (;l'mr.ltI\' 1 1 1\'141. III "'­ "In", �nd � Engd\ C"II.·.r,·.1

\f'nrl/l, Volume 2�, 1'p4�6

Jnd 4'1"_

WI

�9 Adatll David Morton

,

�(.Iobal

CaplialislII Jnd Ihc Peasantry In

11(')(1(0 �, Rtl 'Il'U' ot PriU
!jm(/,u, .14: .1-4 !2oo7), pp441 -4;3.

60 For nll,,'�m of -nro-p"pulism­ \.l�. for 1n�I"n�c, Ttreo.;e J B)res, -t"tO-(:IaS.h:al ....w-- I)opuhsm H )'un On: IXI;! Vu and Dela P,1'»C'. Towardl a t.lIlique.� Journal of A�rim.1II Ch.Jngt, 4: 1-2 (10041_

b I .!.«. 10f mSI;tJ1ce. Kmh Gnffin.

Alilur R.ahman J,;han aod Am) kkowlt7� -I'uH'n) ;md the

D,.mouuon uf Land, � /l)ltrnJi of AgrJrliJII Chdngt.

2;3 {july 20021.

62 H�m�a Ala\"1 and Trodor Shamn.

lillroducllon 10 K>l.rl Kaulsk\", T/If� ARran,1II QIIl'S/lOn, Volumc 1

(Z10.an. 1988), ppx."",:i-l{]{X.Ii. 63 Dan ) u W�ng, -Steppmgon Two

Boal�: Urhan Smll(:gles of Chme�e

l'ea•.1 ms 8nd . rhcir Children�, in InremllllOIlIl/ RC�'/CJIJ ofSoccwl

Hmor)' 45 (2000). p170.

64 As above. p 170.

65 S Rodwan and

I Lec.

Agr.mlln Ch:lrIgt III EID'Pt

Glossary

(Bcckenham. 1956).

66 For dn a�-';()unl IOf Taen! re�all:h un

� quo"ons

.

<;('(

1',lUlme �

!'etea. -lnequalilY and Xw;lal

Afr....-. /oumal of AgT
111

\20(4)6- Hamza AI:i�I. -Peasants and

Rnolutl"n-. SIXIJlm Rl'glSll'r 1965. 1'1'24 1-2n. av,lIlable: al

htlp:/(sue.aI . �trtgl)Icr...","" .!ilXlallstr()Uster;(om/fil�R_ 196.5_AI,wi. pdf 68 Although evcn thcn a degree of COn'lt'nl from qUlle wiJe bIen (11' the population wa� nhtaon�d a� J result uf t(;unnmi( gT()wth. (.9 I'nr an accounl of the: IIlsurgenn and an e:-.;planallon for ITS failurc. SCI' Chm Harman. Tilt Fire LAst Time (London, Bookmarks, 19911l.

A},suact labour What all pan,,:ular JCIS o[ labour ha,-e: In common under ap,t;;Ilism: IS measured in tC[ll1.5 of Ihe: proportiOn each comrilurrs of Ihe: 10lal sociall) n«:eSMry labour time expended III the «:ooom)" as a whol... Ab�olule surplus ,a1ue The lIl"re�SC' In surplus �Iue that uecurs whtn workinghoul"'O art IIlcre:ue:d without a paralle:l mcre:ase 11\ P3)'. Austrian School Ve:rsion of bourgcoi\ I'<:On0111K5 whICh ten ds to r.ee economie: crlSCS 35 ine�itahle, bUI necc:ssary [or connnutd economIc growlh _ &sl known figures FTiedrich von I-bye:k and Jostph Schumpeter Autarchy A[lempl lO cut an fi:On(111)' off from trJde: links with the rest of [he: work!. •

8:lr.Jn, Paul Marxl5l ,h<'OTlSI who argued thai de�dopment was only possible III Global South through a bre3l w'IO capIl31ism_

Collaborator of Paul Sweny_

Bauer, Quo Austrian Marxist of finl

Ih.rd of 20th centUf)' v.ho followed � pollC)' of tr�ing 10 re:form capJlalism. Bernsle:in, Ed,urd -ReviStol1JSI� Crtlll of re�0l ulion3 ry r.brxlsm 10.IIhlll German SOCia list mO\"CIlICIII at beginnmg of 20th Ctnlury. Bohm-Bawe:rk One of foundcrs uf marg.llla[m economics. wrote beSt known crit'que of Marx's work! Bills Documen� I�Utd by banks anJ other caplla liu firm! that act as IOU� as they gran! each mher credl\. Bonkiewia, Ladislaus ,-on Polish

Glossary

«:OnOml5l III btgmnin g of 20th ce:llIury who carried Ihrou Kh a seriOUS eumlnnion of Marx's work hUI rejected some of lIS crucial findmltS_ Breflon Woods \'�nue of the conference Ihar KI up the POSI World War Two financial �ysttm base:d on gold a nd dollars. Name given TO Ihal system ul1111 11s collapK in J971. Bries Initials 5tandmg for Brazd, Russia, India, ChlOa and South Afrio. Bukharin. Nicolai Bolshtv,k leader and tt"ononllS[ rheori�t; e:xtnlte:d by �)fahn 1938. Capnals Tenn one:n uKd 10 de:scribe

t'ConomlCally CQlllpetmg unus of upllaliSI $)'$Ie:m (whether mdlvldual owne:C$, 6rms or stales). Cmlralisalion of capilal Tendrnq for c.. plla[ 10 pass Into ewe:r f and fewer hands, through mkc:ove:T$, mergen. elC, so flul whole: capitalist 5fstcm 15 undtr dlfect control of fewer competing caplla!s_ Chtago School Followers of Millon �'Tledman and mone[;lnsm. Circu[allng capilal see h"ed capital. Cliff, Tony PaleSliman bom Manust resl dtnt In Bmain Ihrou"," 5C.'Cond h alf of 20(h century; devc:lope-d IhetJr)- of Slate: capitalism and. in ;1 rudlmcntary form. of the permanrnl arms econumy. Commercial capilal invCSfmenl alme:d al makIng a profit from Ihc buring lind wlho� or goods 3S distinct from theIr producllon. Somctl1l1n '"

called mer.:hant'5 caplw i.

Commodity !i.omethl ng bought and s<)ld on th� mark�r. (ommodules are commonly -alled L Hgoods� In English. ConcCl l lration of capital Grm.th n i

SILP

of the individual .:ompering capl\1l1� thatmak� up !he t:aplt�li�! �ystem.

Concrete labour Rdn� to the specific

Dead labour T�nn lIscd by Marx to describe commodiucs lIIade III th�

past but usC'cm. Dellcit financing The mfthod by whid, a gO'·emmenl ply� for th� t'�,es� "t e�penditure over receIpts from t3>1"Jt>on by oorrowmg. ])epartment One :,.,etlon of {""conoml

charauen$ocs Qf any act Qf

whICh IS IIIvolvcd III rurnmg out

boour-what dlstmgulshN, for

equIpment and maa'rials for f"nhn

example, the bbour of a carpentcr

productIOn (callC'
from that of a b". drn·er.

econom'StS

Constant capiral Marx'� term for a caplwllS!"s ulVNonem 111 plant, machinel)', r�w material �nd

components [in other vwrds. lhe means Qf production), dcnoted by c. Corey. Lewis Also known as LoUIS Fram3, an early member of the

w

al goods ").

..apn

llcpanm{""nt T,,"0 5«."lion of t'\:(III<)m)

Departmenl Three St-ction of ffonOrm which mrns oul goods .....hlCh w,lI

be COn,umed by wurkers e'thcr-;"

Khmshchn', Bn:zhne'·. Andropov.

Gorbache'l-ran the Slare. Credit crunch When bUYing and

Ifnding wi�e, up In the banking �Y'lem and the w,der economy. Cuhural Revolut;Qn PQ!Jucal turmQil In Chma 10 thc latc 1960s and eJrly 1970•. Davos Swiss ski resort where W(1fld EconomiC l'nrum of leadi ng ;ndu�malist�, financiers

.

gO"ernmen! ministers and econQmlSts rakes plnce each y�ac.

Deflation A fall III prices. normally as§ocl3tcd wJlh ImpaCt of econonuc crISIS. Derivati�'cs Financial cnn�ra�"t.s

dl"'lignfd m allu\\ mvenUTl> ru lTlsure themselve§ as.lll1st fmure changes in priccs. DerivarivC'S

rradlllF, dt\'c!opcd as a mcans of

speculating all intercsi or exchange

ntes, and then 111m a form of

financial gamhling on (:hang�s in

m3rkfi'l 1ll gener•• !. 394

.

other words the section that turns out

"

luxurr goods� for

coruumpuon br the ruhng class. armaments and so on_ Somctimrs referred

Chernmko and finally

ital), Luxembourg. Ma113. the

economist n i US III fin;t t1urd uf

NClherlands. Portugal. Slovak i a,

20th centul)·.

Slu\en la and Spam.

E"chanl!e v;Hue -limn used b�

Sm'th. KIt:ardo and ,\tux for worth of CQmmooit,l'!i in terms of

Olher commodmes. Sa Value and Usc-value. which capiral� ha\"1!0 to undertake {()

commodities (fQT mSlance. spending

�tmg goods. adn:nising,

on mar

prOfC1:tmg plant and lIlachlileryl.

10 3S

Depanment la.

Dependency theor) TheQry ver}" w,despread in 1 950s an d 1960s

which held thar dependence of

Fi31 mom.'y Form of moner that has no

mn;n,;c value apart from a guarallt.:e from a go\"ernm�m. eg loken� such as notes and coins made of cheap mctal. Stands

111

Contrasts wllh Circulating (aplfal,

whu:h i§ IIIvested 10 thmgs that a re used up

11\

each cycle of productJon

and have to he repJaad for the next one• •e raw materials, components and labour puwer_ Fordism Tenn SIlmcnmcs used to describe capllahsm from 1920 to .m

d_1970s. ImphN supposed

coopelallon betWC1:n firm. 10 mass tr.> keep

up

..,

age rales.

Fonnal s�ctor Jobs in which workers have Icg31 em ployment Tighs. t Friedman, Mi l ton Conservative fret mark�1 economl�t5 whQ bcheved siale could stop crises by (oncet

of or exchangeable for materl,ll

conrrol of money supply. Inspired

with value 111 il.$ own right, such as

gold or �11\"er.

HmonetanStH ro1icies of Margarel Thatcher 111 �arly 1980s_

fictitious cap ital Thmgs like �harcs

and f("�1 C$t.lIe In ,·e.nn ents th�1 are

advanced tconomiC"'i prevcnred

not pan Qf th� proce§s of

r

conomic dfvelopnll.'nt.

Depreciation of capital Reduction in

the rri�t' of pl�nl. machinn�' and '0 Q" during their period of operanon. This ca n be duc to wear and lear, or to the "de\'a]ualJon 01 capl la l (see below). -

Devalu31ion of capital Rcductlon 111 the

production but which proVide tht owners with an IlKQlIle out Qf surplus .alue. FI)I. Foreign Direu lnvestmenl

In\"csnnent hy � firm U\ one country .....hich gives it more than 10 per celli Qf QWllershlp Qf a

firm in

anothcr country. In''cstment that

value (Jf plam, equipmem and '" "n

dOl'S nOI S've that level of

as te<:hnical advance alluws a greatn a muunt to be prodU\;ed wnh

nwnershlp or comrol is called

a )\l\'Cn quannry Qf labour lime.

plmJoio l lII,estrnent. Finan� Cilpital Capll.al lll th� financial as QpPQscd tu prvuuni"e and sales

Euromoncy (Eurodollars) Vasl pool of

se<:ton; of the ceonQmr. Often used

finalKl', d"!\OlIIinaloo in dnlhr� i">ut

!O m i ply that financicrs are Ihe real

....

hl.:h grew up in l31e 196()' and 1970s, beyond the conrro! of nanonal governm ents.

Eur01.one Currencr union of 16

.1I1d C<julpmerrt whllh lru.{ for SI:\"CC3! cycles Qf production.

contrast to mOlletary medium made

Third World economics on

held outSide the U�.

Fixed (apital upltal II1ve�led III planT

producllon industries ... .. ith Ulllon5

not he I.lsed as means and IIlJteriah

later wrOlC an imporram Man:isl

generaI 5eCretaTle!i"-�taI1ll,

Fischer, Irving Leadlllg ncoclasslcal

m3tenall�' c�pand Ihc l>urpUI of

(somellllles call«l �wagr goods� I.

Fiscal measures 1:1>1" and spc:ndlllit

France. Germany, GrcC"Ce, lrcland.

which

be con�umed by worker­

other scetors.

undcnakell by govcrnment...

�tay ;n h"sine\s, bUI which docs not

will

III

Aunna, Belgium. Cyprus, Finland,

(oncemed w"h turnmg OUI gllOds

of p roducTion and whllh will not

CPSU R"ling pal"ly with," USSR. Its

lendcr. It eurrent!y conSISts of

Expenses of production Spendmg

Amencan Communist Pan)" who an a l� sls of Ihe slump ufthe 19305.

adoptcd the euro as Ihelr Mlle legal

European UlIlon Stdles ....ruch . h3"C

po""er

III

the economy as a ",hQle.

t h . of th� 11inanciali§alion Gro....

financial section of thc cconom)" Jnd ,ts intluence. Often the term Implies rh.s is demmemal lO eapnal Glonary

Galbraith. John Kenneth Amcnc,1n econOlmst of the post-war dc:cade,

CTIUCai of unrcsrrawed £ree markets. GO!' Grns� Domestic Product, measure uf the market "alue of all liml

gQOds and Sl:rviccs m ade IHllim the borders of a nan!)n owr a year.

GNP Gross National Produ ct,

J �

GDP

but also mdudes the net meom.. fr()m 0\C1>Cas IIlvesanent.

Gold standard Srslelll under which Slates oed the valu.. of th�1r

Il

ational

currenllo 10 'l"anlll,e, of sold and paid Qff debts to each mher w;lh 1(. Slates broke '\'lth It dunng W..rld

War One and from t he early J �J(). [[) the end of World War T wo. Operated

111

modified form under

pr.I�t- l �45 Hrl'tlon Woods Slsrtm that collapsed m 19-:'1. Golden Age TefTII �llm�l1m{"; U'it'J fur long boom !II the decades foliowlllg

Ihc �ond World War, Grtat Depression Term u�d for period of cme� In Ihe 1870s lind 1 880s, and again for slump of thc 1 930s. Crotsman. Hcnry\.! PoSh-Ausman Il Marxm .IC11VISI and «onomlSt of first half of twcntleth ccntury. Hansen, Alvm One of leadmg mamstream us «onomlSts of middle Ihlrd of 20th century, convencd 10 Kc)ntSlantsm by CrISIS of 1 9305. Ha)"e\.!. Friedrich von Conservauve «onornlSI who (lppo'\td :mempls of Slatc 10 mlt1gnte Imp3Ct of c:o;;onomlC crl§tS. ci a Imlng thl� could only nu\.!c thmgs worse. Admlrcd by Margaret Thalcru-r. Hilferding, Rudolf Publuhcd pioneering wurle on Impact of financc and munopoly on capilalisrn. bUl later kned as financc mmlster ill WeImar Repuhli<: 3nd oppose
Infonnal seClOr Jobs whcrc workers do not h,nc fonnal cmployJru'1U tights . !LO Intcmaltonal l.abour OrgaIll5:11lon. a Unlfc:d NatIons agcncy dcaling wlIh labour iSloUH. IMF Internatlon,,1 Monel3ry Fllnd. Intcrnatlonal body domInated by old mdu�tr1al �nunrries jparucularly The US) "hlch. alon!! wnh fhe World H.;1Il1e, le...d� moOt)" 10 counTrIes m economic dlflicuities III ft'lurn for Ihem acceptlll8 IIghl 3%

conrroh over their poitClt"S. Jevons. William Brltlsn tconOflllSI 01 18605·705, a founder of neoclassIcal economlC$. Kaul'>ky, Karl MOSf promlnenr MarXist at be&IIlning of 20th cemury. latcr opposed ft'volutlonary approach. Keyncsiaru�m &onomlL dOctnnc "ased upon IdeaS of the Rnnsh economISt of Ihe ImeT-War yUr
\liagl" UJhouf and up/tal, TI·I'

Cntlq"c ofPoIlt'Cll1 Economy and

chapler one of Copual, Volume 0111'.

Lc\'enge BorroWing to magmfy Ihl' hu�ing powl'r of small cash pa�mcnls for sharI"!. property anJ Olhn assclS. uquldil) Having (.;Ish In hand (or asscn Ihat (an be easily turned mUl cuh) to meet claims Ihal fall d� or. GlosSI!)·

thc tilst of I bank, mttI w"hdrawl[ requests. Luxemburg, Ron Pohsh-German Marx"" leader of revolunOllny OPPOSItiOn 10 German)" (0 hlSt World W:ar. murdered by counter­ rcvolunonanH n i January 191!1. in

Macro«onomic Ref('rring 10 economy as wholc, as opposed 10 "mlcro«onomlc� reiaoon!l bttw�n IndiVidual ekmcnu wllhm It. "MacrotConOtnlCS� is branch of m,IInstrcam econom,,;s concerned With frylllg 10 gUide nauonal tConomle�. Marginalism Another name for ltOC t l nsl Cl..l tConotmo:. i Matlihall, Brlllsh «onomi,t of lale I !lth and early lOth centunes and a lec)' 6gurc In neocla�I�..1 c:o;;onumlcs. Merc3ntile or merchant capital In�ntment alm('d at malemg I profil WIthOUt cngagmg in pmdU�"1:10n, for mstanle m thc buymg and sel lin,: of Kooth. Mercosur A reglonal lradl' aKrt't'mcnt betv.·t't'n IiQme Soulhern Aml'flCan states (Argentma. Brazil. P;l.rlguay ilnd Uruguay). Microccooonllc ste macron:ononliC. MMilil:ll'Y Kq·oC1tIOlSm� Term ustd for economic Impaci of n�mg military e�po!ndlrurl' paId for out uf governmenl deht during Ronald Reagan pre"dcncy m 1980s U!;. MlIIsky. H)man I\.on..(lnhodox malllSfr�m ('conomlSI of mid-lOth celltul) who rccOKnistJ mel nahtlil) of speculan�e bo...ms and bU�b forcapitaltsm. Mm Powerful JapatlCSt' mtOlSlry 01 trade and mdu)lry. MOoetilrum Doctnne whICh holds crises C3111101 be soIled hy g(wemmenn lIlcrcaslIlg thelT s�ndmg 10 morc than theIr tax mcome. Irn:rtasing the supply of money, Ih.. holds., WIll stmpl} lead to lugber p�C5. Under lhe namc Ihe quanltry Iht<)ry fif mone�, thiS

AIR M

Glossal)·

",a� Ihe orthodoxy III hourgc'lm economll� beforc Ihl' rost 01 Keyn�Sjalll.s1ll III Ihc 19J05. and becaml' fa�hlon.1bJe ag�m In Ihe IIlId-I!l70s. -Monelary mC'aSurtS � AlIl'mpl to rcgulale economy. prc,cllllng mflauoo and countcnng rf'CI'S�lom by government COntraClion ur cxpans.on of amount of money Ihat " tlTCulatmg. Moncy captlal Money hcld With the Ultl'nnOIl of ,"creaSing liS value, clther liS pan of the proccss of producllve Invemnenl, or through lcndlllS 10 olhc[s. Moral depreciation of capllill I IJS� of value "f plant ilnd aplfaJs �5 It becomn obsolesccnr m the f..Jce of rapid le<:hnologlcaJ ad\·ance. NAJRU Non-Acceleratmg Inflation R.ue of Unemployment, $tt' /'.alural RatC of Uncmplo�·mem. Natur.al Rale of Unemployment Lt_'" ....hl
unlcss subJt"Ct to uumal forccs liT Imerf�rem:e b)' state, monopc.>lics or trade umon aan)fl, NICs Newl� Indusmah,mg Countm ,�f 1960 10 198(k. likt SiMh Korea. lirH.I. Ta,wan. �omrnklalUmu Tho� holdmg h'gh up pn .,legrd JWXlIlons m state 3nd mdUMr)' m nld uSlero Bloo: counmcs before 1989-91. Non·productl\� con�umpljon The uSt" oj goods In wa\1> wh,,j, sene Mither 10 produc'(' nc:w pbm, machmery. raw m:uenals and � un [*mean. of I'roducllon�1 nor Tn prov,de fur th.. cQnsumptlQn nerds 01 work�n. The u�e of goods fur Ihe CQnSllmplion uf the ruhn� dass. for advcrHslng and muk..t'"g, Qr for nrms. aU faJl ,ntO th.� caTegory. Non'productive expcndilUr� F�renditur,·s underl1lken by capllalist, or the U.lle over and above wh3l 1� neccssary for the producuon of eummodiues (indudM spcndmg on consumpnon of the rulll1lt dass, un ItS personal .;rnams. on the .Mexpenscs 1)( production" and so onl. OECD Ori\amsatlnn of EconomIC Cooperallon and D�velopmenl. O�alll�lIon of Ihe O!'>tJl>ll�hed mdu�Ulali_o;ed cuun\r1e� 1'1IIh 3D Important rCSC'arch arm_ 0.1 shock C;udden lIlc:reA5(' m pnce "f 0.1. t"opt:<:.all) as a result 01 the Arab·l�r;Jd war of Onohcr 1911. Okoshlo'� theorem Theory wruch claims 10 d,spro ....• Man \ tendency ofthc n.tcof p rohl lu fool[. OI'FC Organi Z.lIlOn of Ihe Petmlcum hl'urtmg Counrnes. a CHId �urrentl)' madf ul'o/ tv.'eke CO\lnTTle�: Alg!:T!:l, Angola, Ecuador, Iran. Iraq. Kuwail, /.ih)'3, Nigeria. Qatar. Saud! Arab'a, the Urllled Arah Emiratcs. and Venemela. OrJanic composillon of capiml RallO of Ihr 'alue of m ; · eSlmenl III plant, mat'hm�ry, r;,.w llUu:rtals and so on ("mean, of produCtion�) to rhe

,·alue of expenditure: on cmplolln,lt productIve 1.lbuur. U�mg MArx-m tcrmmol0ItY, Ih.s I� the rallQ of conStant capn.11 to vanahle- capll.!l. Of' dv. Se-c :olw T c dlnl�a I COm[1'O<;lIlon of carnal. OTSAnistd �or Term usc-d rn Ind.a for formal Io«t"1. ie w·here w(,rk.." have Icgal working np.lm.

can he expresiitd another W,l), as the QUO of the UOlC.' tht w·orker spend.. producmg SurplU5 '
Pareto, Vilfrcdo italian nrtXlassicJI t"ConomiM .11 rurn of the 20th centurv. whosuprorted \h,w,lrn.· nsc to power. Plaza Accord 198,� Agrccmmt by Japan and German} 10 allow 1m­ ,aluc of Ihelr CUfTI,'n'les 10 ru.c � .1' make il casler for thr US 10 export, l'un:u scheme A lraudulenl 'Khe1l1t whlth p:l)'S profiTS to old mvt\tor> OUI of m(mey collectcd from n<,,,

Realisarion Term used bv Marx 10 deS(;ribe thll.' �u��e)sful sale of produced i;;ommodlUe� so as 10 achie"e a profil, -Rcgulauon� IheonsiS h..n(h s..:hool of econoillisn mflucn�ed h) MarXIsm who perrod,§.(." 20th �en!Ur� G'illlilism II1tO Furd,sl And pusl·J.urdl�1 phases. Relalive surplus value increAse III surplus " alue obtamf'd "hen IlInc It t.tkes fur workers lU produce Ihr equJ\·alcnt of thelT own wage 's reduced, 50 CaU511lg a greater portion of the-ir worklll/i\ trme 10 go IQlhr eaplIalisl. Renller Old fash,oned term dcscrlbmg someune who ltV" off unC':.rnc-d IIlcome such l. and who able to lIC' drawn II1to Indu�ITY with the pertodl� CXP:'OSI0n of I'rudu.:uon. Ricardo. Duid Polllleal econum'�t nl fi�1 dttades 01 19th cemur)", de>eloped labour Iheory of ,-:olu.. ami an ,mpl>rI;Jnt IIlllucnee on Marx's ,dea). Robmson. Joan I{JJ,�al ""') IICSlan economIst of mlddlr thIrd 01 10th century. bruke w,th ne'H:la��llAI school bUI re)ecl.cd \lJn: '� Iheor� of �alue.

ml·estors.

Proobrnzhensky, E.vgen)' RUSSian Bolshc,·ik acnv.)t and cconomlSr. �"e-CUfed hy StJlln In 19,17. I'n,·ate Equity Funds Inve'>tmem vehldt where rich indlndual� C"I11� tOlliClher to huy shares m comp.,nl!." on order 10 make a p rofil. Productive CJ(J'C'ndilurcs Spcndmlt 1'1h ich is nt"C�sary If commoditle� arr to be: producoed and �urphJ.5 ,'alue ClC'aled (spendmg un the mean. and m.lIrn3ls of producllon on the onc: hand. Ind on workrr.· waite'S on Ihe orher). Producti,·e labuur Lobour whl�h controburcs 10 the crt'3tron 01 �urplus \"alue. I'rofits, mass ofTolJl l'fohl' of a parllcular c-apllaiisi. M���urN III pound�. dullan and other �urrrnc�_ Pro6t, nu� of K�tro of surplus "alu� 10 c.tplill 1Il"e�rrd. MeasurC'd as a perccm;l�e. DrnntC'J a� 51(c+v). I'rofit �hare Propomon of tOlal "Ulput of a firm or COUntry Ihat goe\ III protit�, a, opposed 10 wa,ltrs. Rale of C111" the wages of workers who prodllClI.' commodifies �hould he coumed). It GIOUIH)

doe spends (111

producmg good�

equlvakm 10 h,� Of her Ii. 111& $landMd. Also called raIl' of surplus .'alull.'. th.it IS. the ral10 "f �urplu., value 10 "all3blc capll.!i. and

deplCted as sA.

•

Samuelson. I'�ul Malor popularlset of the mallls(ream �ymhesis of neoclassICal and "'eyne�ian ideas through hiS econoul1c le,(lhoo-,k 111 poM·war decades. and ad�,!>C:r w the- Kertnedy government tn Ihe US. Glossary

Say's law Sur�d I.,W th,lI hl1IJ� there cannQI be J ny gener., I o�erprodu�lIon of gocKh J"x,IU'>t ulh urnI' wmrone �elb somelhlll}: �<Jml'Ont else bUI's II, �humpeter,Joseph Ausman economist of fi"t half of 20th eenlUTY. �urp"rted capllahsm bill rejected ,dea that 11 dC\e)oped <moolhl)·. comed phr
Smith, Adam MOSl lmporram polrnc.ll economiSt n{ I�tter pan of 181h cenlUl)'. 1)'�lClned prt'S("ntallon§ 01 h,s Ideas now wnSlllUle apologics lor e�pllallsm. bUI a nilleal USC' 01 many 01 h,s concepls was unpoflJIlI 10 Mar�. !K.Iciall).neces5.1ty labour time Llbour 1I1l1� ntcded 10 produce a ceria In good, U�ln� average tc-chmquCli prnallrng Ihrou!;hoUI economy ;lnd working at average ,ntenslty of effort. Delermlnes th<' amoum of ahslra;;:t lahour-and therefore ,aJue embodied III a commodity. Social wage Term used 10 describe welfare. health and other benefits supphcd through the- �!ate whICh impro'·e wQrkns ' I"'ing 'Iandarili. �"tnC) Abllny of firms or ondll'.duals til pa, off :,ll[ debu provldong tht-� h;we- trme 10 IUrn Ihelr own as§.(."1'> onlO u,h_ Sraff;,. I'itro (aml....dge c:conOffilS( who relulN baS'l cnntenllons of onhodtlX bourg<'ol) ....ononucs. tbl' �nco.:lJss"al� m;Jrgn,..II�1 �ool. 111< followers (end to base thcm\.l!I.('� on Ricardo rather (han Mar'( ;Jlld rtjeu the Marxm Iheon ol lhe- (;oUong rate of profiT. and usualll' Set' lr1'" a' ari�l11� when wattes CUt 11110 prohb. TlIr) Me oiten kilown as �nco·KililrJi:l.m �, although Sraffa regarded himself a.. m thc MarxlSl lradmon. Sirache)·. John l:iesl known purvc"or of M�rx'Sl onlerpr..taIlOns of slump 01 1 9JOs m Ihltaon. Labour ParI) minister In fhe btr 1940, and KeynCSlan apolOjo(lsl lor Tll!!hr WI1l� ,..

Labour Ideas III 1951k. Surplus \alue Marx's lerm fc.r exct'S� �Jlue ptoduted by tile e�plollJ.uon

(If worker�. II forms Ille b;.s", fo, Ille p rofit nf Ihe IIldindual upllalm plu� wh:lt he pan OUI to OIl1crs

III

Ihc lorm of "'nt. Intcrnt

pa\'menh aod laxation (plus wllal

he spends on "Iloo-pmduo.:m'e

and ,hal lh�refore Marxisl

deve:loped thtOr}' of �pc:nnanell1

ecoflomi13 musl be abandoncd.

war ('C.momyw

Tnad Tht ,hrer malar partS of the

mduslr1ah'll'd cap lla;isl world. I�

North Amenca. �uropc and Japan

Tru.5lS Associanons of ond uslr lal

conccr," which collaboratc 10 cane up m arkets and f(ucc up seiling pnees.

m 194()s 3nd I ';I�!h.

VoIcke.', ['aul H�d of US Feder�1 Rewr.'c In the late l'rOs and 191105.

Voleka' shock or Coup Sudden Im::rease ill US internt riltes ill 19'79,

\\lIrid Bank �e Ill1rm.IIHm,11 \Iunct.lry Fund_

\\'TO World Trade OrgJnt\Jllnn. ,"Iernanonal a)tenn Ihat dill\)

10 promotc rIC'(' trade ,1nd ncohbe:ral agenda.

Walr�. loon FrelKh a:onom1Sl of laucr pan of 19th (('ntUfY ; ;! fc.under of f1C'u..;laS)I(;11 r .... momK'_

Tumo.-t>" lime of capi lal Tum laken

aCfi\'IIIt'SM). Dcoo\('d b� s. SWee1), Paul AOlcncan C'Con(lmi�1 who wrolc a palh breaklllg

from begmnmg (If rloducllon procC'SSIO final sale of goods_

attoun! of de\'elopmcol of \Iar'l(I�1 Ideas

III

UNCfAD Unlled l\al1(ln�

19405 �The

TlirlJry IIf ('A/llt.JilSl DeL·e/opme"t)

wllh Raran, an account of mid 20lh cenlur!' l.:apltJ.l!slll in and,

1960s � /Ifonopoh' <:.a,,,,,,/).

Tariffs Taxes 011 Imports. designed

[0

ral�.. thtIT price "nd so m3kc II

casler fur

1(1\;,1) producers to

dummalt market",

Ta) IOriSOl Tcchl11qllc of ,o
el..r� .KI 01 labour. �prr,ltl til rough IIldu"r)

III

rhe carl!, 20lh celllUry.

Te(hllieal eompo�ll1on of C'3pilal Phl's(!,;JI r.mo (If planl. mal-hiner.. ra..... malenals and ..., (In I-mea!!'! ,!lid 1ll,1IUIJI. ot procl'k:110n-) to tOlal bOOur cmploved, \\ � rhb r.llln

I' nleasured

111

\"alue lerm,

ralher Ihan physl(al lerms. II �om"" Ihe -urpmc compo<;II10n of capllalM Terms of trad� The ,d,1ll\e rflces of.a counrr(s CXpC-IrIS fO Impnns. An unrroH'menl the Tenns IIf trade Il,eaos a C'OumT\'

has to pay leoJ� for

lhe prudu�I' II importS.

To)l.en; lerm u� fOT US! and .'M>ITth

EaSI A�lan IIldu�r .. all'lI1g economics.

Tramformauon prohlem Problem \\111':0 allscs when tht ;UltmrT iJ;

mad" In mOI-c from Mar,,\ "tCoulli IIf �arlla!i.m in Tcrms of valne '" the pTlCe\,11

a�t\1�II)

whIch goods 3rt

h(>ug hl alld sold.

Manr

t'(:onom!�{s h,1,-" claimed It 15 I mpass lhie {(> wi,e Ih.. rroh!cm. 400

•

de,clopme:OI agency and Importam

WUTce

of economIc naIlSI"':J.

Under-consumptionism Theory whKh

blames C1rllahst CrISIS 001 011 fhe law of Ihe: failing rate of pronl. bllt on Ihe 10

a

•

lleged 1naj" hry of capllahsm

pro\-ide a matktt

produa:d wlfhm II. lehions of the

ftlr a II goods

The fiN

theory wtrt PUI

furward hy cady 191h cemury ('Conom"", 'lieh as Sismondl

.

bUill

has b«n
Marxms !from R� Luxemhul'JI. IU Baran and �WC'l"vl and h) Ke�neslans.

U'II' ,alue: Imfll('dlalt uselu! quahtle, fli a ((mlmudll),. \'alorisation ler m u'\('d m some

IrJnslanuns of Mdn's capnal tor the sdf--expanslun of upi lal ha§ca un me French nansbll!)n of tht .

(;enn.Ul word \'trU"e:rtU>lK,

\-alue Am(lum of ahslra�1 bbour cOnlalned in a �ommodll):

detcnnlll� Il� ..,,�hJoge ",1luc and.

after some rC(_h�tnhL1t1on of surplu�

�rween eapllal"" , 11\

prl�e,

�omum to vJrlRblr l.:aplIal,

d,ftcr,

1

alu('

\'alu� C'ODlpoSltlOn of (::lpllal KallO ot

frum "rgallic compos!I1un l;Iy lakmll mtll a�(oum chdn)tcs due If> mher factuU a� ".·11 as ch,Hl,l1.e In {cdtnieaI romp<J'omon.

Variable C1lp ital C.�plla! l1l\'e�red In

�mp l(')'mg wag� labuur. l)enorcd

h, ". Vance. T N American

C'Conu

m "t ""lin 401

Index

1834 Poor I�w 13'1 1968, role of 1T1Igranf wbrkefl In J7J; 19M:I-75 w�H' ot mduslrJ.11 SfTUggJes 331 Abalkm, on W1Vlet srnkes 20'1

Ab5011lle �url'lu<; �alue 3�, 73

labou r 16 Abstraction lIT thrtc volumes of Ab�lraci

Capiral S7 AccumulaT10n and compcmion 35·6.

58, 85, 99. 116; and exploitation 37: and alSls 58. 60. 62. 1 0 1 . 204. 21:; and rail' of profit _17·J9, 69· "'2. "'7-78: for th", !>:IkC' uf ,Kcumulanon 36. 84: nnerendln� 52: and cldSS 107, 1 13-1 15:and logiC of Slate 1 12-\\"; .md ll�SR 158: and CriSIS 11\ USSR 204: in Chma in early 2()(){h 24 ;;-6; an.,! consumpnon lit ChllT:!. lit ",;Hlr l000s.., 1"6lgr.lph 24-1: a nd cn� of t'..aSI",m bloc '"'"'I: and corruption ;!lTd n:pn:.'i�lon 111: structures of

and m",rl!.Y uS!: J 16 sa Il/JO Capital accumulation

AdvC'nlSlng. as

u

unproo cti.",

121; C'l
AtTIca. loss of mdrkels to Chm.l 121:

growing ChllT� inll uencc in 2"'. rI\'alry betwccn French and US mtcrcsls 270; fall 11\ real wages 340-1

MAfrican �()'.:ia hsm , dlS3ppomUllC1II M

wilh 2 1 8

MAft",r JapJnM 2 1 1

Aganbegy;n . on stagnation In So\1(1 �onom>" 203

"02

Indc_\

Agmda 1010 Progn.m""", In (;"'nnan'240 Aghetla "e Huyt'.

"gf!hU�IIl<'l>' and dgnculrur.r.1 It'ChnolOjtlcaJ advdnc(' 3 2 1 Agn.:ult ur"J a�umulalloll. �truC!ur"
�4t1: with TctJdor Shallifi. on ways

peasantn' are IOICllJated mto ..arllahsm J47 Alfa 121 AJ�('ria 1 8 S Alicnatetl lah our, �y�lt'1ll of J2t1

I_t 14,111, 8] AI�3ter, Hm('r, un (,erman $tJle and ".:unum, lit lung bQom 170 Americ an Free Tude M('a 211 Amnt'Sia of mainstream eo;OIl{)ml<­ AhenJlI""

comll1e11l.lIOI1l 2S1

AndroPIJv, Yuri, eXl1<'rience uf f..asl Luw�;\n

U'I.CS

and role in apT'UmtllTg (,orbachey 20AnKdl, Norman. on capll�llsm's Jme for peace 92 AngJ.,..Saxon carllah�m� 219, 2':14 An)!ola IS.S Ar3h..l�r3eh �'Jr of 1 967 184: uf O<-I(>�r 1973 184. 1 9 1 Argentma 1811,351; mdustrlal devel opment lx-fore Flr�1 World. w

1 87; mdusmal gn.wlh In 1950s and 196�; lompared wllh hdly 1 8tl; e(:onom,e and polJllal ensn 01 19"!h 218; criSiS of 2001-2 224 Arms cxpend,[ure. U!> dunng long boom 198; �arlanons hetwn:n Slate� dUTlng long boom 198; In

199(h and earl)' :moOs 234; Ciuna

2009 JZ7; Runla 2009 327; US

2009 32"'; US 2009 )r;and

d)'namlc of �)"stem 131; effeq on org�mc "omPOSluon of eap,!;d 23�

Arrow. Ktnntth. on hmlrs of mathemalKal modd of markel 43 ASian erisl� oi 1997-8 9, H2; paruc

among eommtmators 230; rolt of IMJ- In htlpmg ""nl and GM

acqulrt Kortan !inns 266 ASIan T')l.Cr5, gnlwlh

,H

£;tSI as ',alm's

U�SR 2 1 8 see also ASJ311 crosj�

A tk 1I150n, Dan 1 63 srr II/SO

Ell";II,

UHy

Augu�1 2007 tredu crul1"h 8

AUSlrlan schooI 19�; Jnd slump 145; and reSIfIK,unng Ihrough cri�,

1.32 ser a/so Ibyek. Fncdrich �on;

xhumpe,er. Joscph

AUfOnOm) ofsllue 1 1 0 - 1 1 2 lXIil OUl�. m 1980s and 1990s 133;

ehr,.,ler 19':"9211; 2008·9 1:91, 100 Sak...r. Jan\('S l"4 Kaldol. Koclltr and M-JII, quo'td )32

I\.Jlkan W,u', tlf 1990s, role of dlffermr

ImperiaioSl lfllt«"Sts on 270

8.lnk�. r"k In UPII�IiSI produrnon 634. 8':"; fallurt'i m US 1931 149; na"onalisallon� In Japan.

""'..ndma�Ia, In 1990s 134; SpanIsh and Fren�h in Lliln Amtn", 14(1; crash of Seplember-October 2008

277-8 .NO; eSflOl:llCS of lo'iSCS 10 2008 \00

B,mk IIf Internau()n�l l,elllemtols 7; On faIlure of croll()ml� forecaSls 9

llanklTlgcapII0l16J

lIaokmg crIses, htofort' 200.1. COSIS 10 go�ernmenh of baJJ outS 234; su

a/so Cr..d,t crunch

Bankin� mergcrs. Intcrnanonal155

B.mk rupl<:lts �nd �rl'\C"� 67. "6 «)4

Bilnkruptcy

Ytilr Book, '1 umed un

ulCrustd frtqutncy of

ohht 19605 and 1970s 253:

�xporl-oritnled devtioprntnt 219

baokruplCIC5 233

Brenner. Ned, on role of stattS in

dc�ndtncy IMOT)'. quOttd 186-7;

Brenner. Roben 7 1 . 105; on Volker

Baran, Pau l 165. 190. 2 1 8 ; \'er510n 01 mlsllllerrrelS lenIn on tconomlC

de�dopment 187

&Iller. 0110 n, damlCd refutation 01 R
accumulatton 108

and bulure of Ktyntslam5m 296. on Japanese and German

economICS 170·1; cnuqut of

Impcnah$m could end firSI Grtal

profi[.. 195. 196,135

Ikrnanke. Ikn. on Jack of an c

xpJananon for Creal DepresSIon

9.145; on de(:lme 1M economIC ,"olanl"y 129 Bt>m�t...lO. Ed ward. r"\'I�I00!51 argumtms of 89

Brenon Woods 198 Brezhnc�. Leomd. on com-ptnnve pressures on SoVltl e(:onom), 203

BRICS 2J 1. 327; as 3 d,sparatt collection of '"try difftrtnf

cconomlcs .,SJ; after ASlao CrlMS 282; and wro !Tade negOl1atlon�

BTllam.ltavesguldstJndard 193]. 149; dUring IQng boom 170. 1911;

Bhopal disaster 308

InflatlQn early 19805 193;

BJOfuel� and food shorl3ges 321

99: lack of cxplanal1nn of why

DepressIon 101; rele",nce 10

undcrslllodJllg Cold War 182

BUlldtsbank 1:40

Bureau,rllc),. clUJ goal of 206

BUSIness cydt 56

su

also Cn� B,umt!! Cycles If! Y"8osl,W/O 178 Rusmen Wedr, on M$taltl�s torporallon� 257

274, 327

\krnsum, MKhaei. quoted 146

Rcvan, Aneunn 1 35

rdutatlon of Rosa Luxemburg 100· 10 I: Ihrory of Imptnahsm 95-96.

69, 360; figures for ralc of

!kllo!iort. RIccardo. on Fortl8Jl Dmtu In�ntllltOl 2 61 ; 00 M prlV.:ll1std Bermuda 221

of fltodasslcal economICS 44;

comp;lrtd With l.tn1O·� theory 98-

Marx's throry f:.illrng ratt of profil

Keyne!ilanlsm� 288

8ukhann. NicolaI 77, 89.165; c:nflqu...

�Fordlsm- nOI1OO 6�; relects

!kar Sreams bank, I3k!"n o"cr by Morgan Chase 1n

early 2()()(h 2711·9 !Sudgel dtfiClts 200, 2 16; "'Ih end ot long boom 1 9 1 Butler. Willcm 1 6

unemplOYlllenl ill ]950s 172;

reslruCTIlring 10 198th; 210-11;

Cadbury-Sthwtppts r:1II003iJsa1tOn of global opet3[1ons259 Call Centre employment, 10 India 252

Callaghan, James, IUms agams1 K..-ynnlan IT1Clhods 1 93

Camhndge <:rlllque of nwclaSSlcal

88; nanonalis .. lllon of raolwars II � nl.,,,:kburn. Robm. on JX"nslon fund..

mduslllal output \984 193; manufaclUnng Output 1970s-2000s 141; propumon of manual workers

Blau:. Ton�'. and cIomalt change 310

finolnclal mdusuy 295

Capliais i l agriculturt. and penan1

BlSlnarck. Ono von. proVIdes pensIon

1:80

Bicanc), Michael 165. on

Keyneslanlsm and long boom 1 64

Blind Sf-aft. (;hule5t film about mlnC�

14j

BoelOgfMcDonnell Douglas mtrger. role of SUIC 10 facillioltlng 2/1,

Butr War. and pan� o'·...r fiUlts.� of workIng dass 134

BohOl·Bawtrk 4 1 , 50, 5 1. 67; trmquc of \1arx on ,'alut and prlCt' 48

Boom. of 1920s and lOn[rad,cllons .

w!lhm 1 44. 146; 'hon-I,,"cd of mId

to 1;lIc 1980s 1 9�; of 1980s 28�; of 199
Sf'e

II/SO Lunll boom

Boler 296; qUOIed (wllh Agl.etlaI on a��t bubbles and US hoom of 1,905183

Braunmuhl, Claud.a '"un 104-5; nn Ihe

334; shart of new m�tstmenf on

Br1llan. Samud, from Ktyoe5lanism 10 monttarlsm and b4ck agam 194;

on fUIllTC of capItalism 1)"lOg on \:.aSI Asia 241; 00 fall109 caPIGlI-olitput rallO 10 19605 and 19705 197

Bronftnbrntntr, Kalt. on thrtal� 10

movt producnon used 10 demoralos.e ....orktrs . 336

Brown. Gordon 130; nn

Mconmbullon� nf Lehman Bmth""

farmers 32 1 . 348; and SOIJ nUtrll"T1t�

.320: and Green RtvolullOn 321

('�pll..1 accllmulal1Qn, Mcslltnllally

nal1on,1l� 260; and chmalc cha!lgc 308·3 14; global. kaltldoscoplC palltffl In 2 lsi Cl'1llluy 264; !lew cenuts of capnal accumularion

186

CtiPlt;J/ iMau:). dlffer...nt kvels of

amiralilOO 10 Ihrtt vQlumcs 14. 87;

firsl chaplcr 21; Volumt Two on

praCtices for cnsls 298-9

Inlerf...I�1I0n btlween comumpllon

Bryan, Dick. nanunal di menSIon 10 glob�1 accumul'lllon 266; 00

e,,"changt rale and dmrlbullon of surplus 1'31uc 266; qUOlcd on nauooal duncnslon 10 finance 2.59; (with fo.'llchael Rafferry] crm'1uc uf sharc holder valut theoroes. 295 Bubhle ecQnomy, J:lpanest of 19110s,

10

Hubbies of 19705, 19805, 19905 and

periud 1'65·80 219; Mmll1ldeM

ul1nbndJ1.� Econonuc Pohey Re�iew 19'

287; blames irrt'sponslbl... financIal

slal� and ....odd markel 104

Brazt! 1:18. 221; gro,",,1:h III I 970s 188:

economICS 10.44

214,215

lndtx

and atcumulallon 99 Caplfal exports. and imperi:lh�m 98; and econornlc development. lenon's

Il'HI during lung 183; Jee also 1'0rel,R.n D,r«1

¥iew 187: II,N boom

In\'eSlm�n1

ell Pita! p.rowth . grca t�r lfl Japan and Genn:lll)· limn Jt\ US dunng loog boom 198

Capllill lOtCnSI\'e forrn� of proouCilon

40.S

He

OrSJnJ� ..:omposJtion of capLtal Carl !� I, as iL rtl:Hlon nOI i US! a th Ing 32; �OJUtanl ,lll: \'atl�blt 38; :\C'lf upan�um vi 3�; dIfferent forms 61-2, 107 (;apllahsm, l'r«ondLtlI.Jns fur 40; 3.'1 .J m!�h�lnfl, SYSlem 85; global J�n;lIn .. of 8�; h«omcs g10hal

systern 30 (apltallst5., 3S embod(.Q1ent of the �II eXp;1nsion of I'�IU( 113; alliances

belween 109; as Mh"nile brorhrors"

,..

Capnalisl �Ia!e. onglOs 105-107 Capnal-output falLO, 8ntam 18751901 102; m 19705 197; for US in POSt war decades 371 Capnals and St;J.I('S 102-110, 125

(;apuals m 2151 cemu,)', dlfferronr accumul:lIIon STrategies 263-4 Carchedi, (,ughdrno 1 1 1 ; on tr.lnsformation of va lues 11110 prices 50; on skilled and unsk.illcd Labour and value 51-3; Oil prod uctive and unproou(ti\t labour 1 2 7 Drnegic, Andrewquoled on Great Dcpre$.�lon 1111 Cancls 89

Casltlk I.bnuel, on �urpoSol'd M ,lrucmrll !nstabLllTY� of lahour markcrs 3 1'1 Ca�ualtsallon 142; casual emrloyment. nOI new 10 capLlalism 341

(;hene), O....k 3 1 9 Lhemobyl 308

Ch�naIS. Fr.lIlI;OI� 193. 2%

Chlago !,chao] of a:,mOIlILSfS 192; sa oJbo Monera".m (hildren. Chro01� malnutr",on III India 252 (;hlle 211: growth 1977-80 119 (;h llla, a. stnll
Lao I 1 'I, Wurld War 1 8.;: undt'l r-. 1 1 8: «,onorni( gruwth 188;

pt'asams 188: pnOlJILve

�"uOluI31I0n 243; s[a!� car'tallsm 243; Cullural frovolution 243; Stagnallon In 1 970� Iltl; nrow O

lodel of acrumulallon aftror J97Ch 143-5; economIC growth 1 97820011 241; foreign trade grmnh 1979-2007 2�2; over�a5 capIta list ...

IntereSIS 2.. 4 ; growth

Ul

1980!. 244_

f�1I 1!l manufauunng cnlpl oyment

from late 1990s 248: Lnformal empIO)'m�nl 339; rur�1 workfon:� Z43, 245; Dpp�rent faU in �asalll incomes 2�5; po-eft} m tarly 2000s 245: exctss of snmg o,er ,m t:Sffiltn t 246, 282: ,mpons 1((lm

Jap�n and East ASIa 217, 247: shalT of con�UJ11PlJon lIT ourpur (graph) 246; bd of m\'l.·�lmenl roarl) 20005 245; real tsl:ue bubble 249; unempJoYIDf'nt 7: and glob:.1 mflanon of 2007-8 24-; growmg n i fluence in Ainca and utln AmenC3 250. 274: share of global UUlput of manufacrurmg goods 242-3; Olulnn3ltonals and �xporrs 247; propon,on of glohal buymg power 250: HItt'rdepeHden,� with US 246-7, 250; and US debt 250, 281: chaliengc!O US hrgem on y 271 Chortareas and P�13gldls, on regional.

nOI global, econumlc I!ltegr�lIon 26J ChnSlian Democrats, Ideology 164 Chryslcr, hankruplC}' 290 CircuJ[� uf capmll 62

Colomahsm, IxofoTt' FII'!it World War, 94-5 Olmbmed and uneven devdopm�m m Commercial labour 113; non produclJve for Marx 125 Commoruun, Marx's analySIS of 2 1 Commodit}, capLlal 6� mohlilty of 107 Commumst countnn. and comperll,,'e

accumulation 178: durmg long boom. 175-9: cconOlnJC

HuctualJons m 177·8

•

(AmmunlSl Manifesto (Marx and

Engels) on revoluuonJsmg of forces of productlOn 36; and global dynamiCs ur�pllahsm 84 CompelJIIOn, and �xploltatlon 37; and accumulation 85: nllhmry, �nd accumulation 117; and organic compoSlUon of caplt1l1 70·71 ; blmd among CaSI Asian Tigers 142

Competitive accumulanon 1 16. 176, 325; aod cTlsis uf USSR 210; and

between states 326-7: and

carbon �n�!K}, use 3 1 4 ComputensalLon m 19905 235

Clark, Kenneth, on M1rrtlevancc" of

nal1on�litr of COJ11p.lnlts 257 Class Marx'5 definmon of 112- I 1 1; 10 1t�Jf and for IlSelf 332, 349; char:acter uf the Slatl" b ureaucracy 112

Computcrs, depll'CiatLon of 236

Con(l'11tr.luon of caplr.tl, under mod�m capitalism 28-29, 78·80, 303: and sl ump of 19305 1 H; dunng long boom 169: and workmss of law of "allle 79·80

Class compromlSC theoroe!. uf long

Concrntration geogr�phlC31 of capLIJLs '64

bourn 163, 172 Cleaunces 39

ConcTele labour 26

C],male change 3011-314; and crul

C.ongo-ZaLTt' 185; (1\'11 war, and c�pll:.lisl mleresTS 170 Confl,rns Pany lndL�, atcepn hberJlisanon of economy 210 Collstn'alivro Pany, economic pohcles

320; wt.lJ..n� �f imernatiunal agrtt'mmts 3 16; :md fooJ st(1lTllY 312; dt'St:lblllsmg effect on system

317: food S«:Urlt). pt:ak 1.111 And economIc Cflses 327

CQC.l-(;O!;I. oUllets m Germany dunng 0.throll, G utk md and Bra:tler 344

Cold War 271: as strugglt' T(I diVide and redivide world 1 80: �conomiL'

of 1 8 0 · 1 8 1 Collt<'ti,·� worker I H CollectivIs.:ItJon

10

m 1950s and 19605 162 Conll''''{I
S«:ond World War 269

Continental llIinois bail our 233 Curey, LeWIS 1511: on IInproductive expendLture and boom of 19205 146-7. 367

U!)SR, companson

wllh enc:losures US Index

Counttr-cycJi(al ml"asurcs 164 Crash of 2007-9 277-304, 325 Creative d�lTuC1,on 67,195,23.1 Index

Crwl! money 27. 66

Credit 27. 87, 6 1.67: upansllm 01 h�

banks 64; dUring busmns L)'�le 6):

In US In 19205 147; and truSI 1119

Credmmnalr

149

Cripps, FranCIS, on mabillt, to

18,35

relan ons

Credit ltun�h 01 2007·8 8, 16, 277, 190; Mar" on (CedI! crunche-. /';h

undentand how econom) works '"

Crises 8, 55: ml'Vltal'ol1it}" 01 S8-60: �nd capllal accumulallon 2 1 7; and Ihe tAllLOg nle of profit 75; role of cred.t m 64: b�nkruplcln during 61, 76; and rnUllct\lnng of capitals 81; role I!"I l!llposmg law of valuro on entt'rptlSc 81: reco,'ery from 61, 303; and mam�LTeam t'i.'OnOmK thror)' 55-56, 67; lI11derconsumptlunlSL Il'orones of 511:

of 1937 In US 1 54; ah�nce of d urmg early prn;1-war drocades 611; after long hoom 195-201,315;

n i

Ea�ltm Europe 179: Poland 1970s 206; and 1!l1cm"nnoali�arllm IIf �YMem 301: and US hegemuny J17 Cwny, JaffiC$ 185,294; un financial mrereS!S and roconomlC

detCtlOraflOn 293; on financro and real m�tslmenl 295 CUln\-all"n and clun.a!ro chang.. 3 I '" Cycle of rrodUCtlon 62 Dains 3411 DaVIS, �hke, quared 341-3, 34+-5

Davas, World Econonuc Forums. mood ai, 2007-9 277 Da",ts plan H7, 149 de 8runl'ooff. Susanne, on n auonal dimen�lon 10 fin3n�e 259 Dead labour 1J, 311, 41, 71. 114 Debreu, Gerard 43 Deb! roconomy 280-291, 326 Deh1 263, 278. 291, 300, 326, 141,]71, 377, ]78, 38J: Third

World 22], 179: llf1d US boom uf 1990s 279: U!t huuschold 1952 and 20062711: for mCOflle grou�, 294; US banks III lOO!!, 301; 1929 and 2008300 D«olonisatlon 1 82-3 M[)ecourlmg� 2 9 1

�DeinJuslTlalls.afl(m· 332

185; n�uooalls.1no:l I H9; «oooml�

8Dcle�er3g1l\gft 290

growth 1 H9; Nasser's htlrs embr���

�lu�l<m. )t"31'i of ll?�3 1 , 253.281-92

DeprnJency Iheont� 1 86·11. weaknnJi of 1117; COll\'enlOll� of many

supponcf5

w

fue markets 219

[XprCCl3lJOn 37; and ute of profit 75, anJ org.ullc composiuon of C2['lLaI "'

market 220; strikes of 2006 344

El Alto. workforce 343; upmmgs 344

�ub$e<Jut.'nt u:paoslon 284 D"31. M.e�n3d, quored 163-4.230

[)c\eIOpmenlahs[ Idrology 186�188 1)lckens.. Gad". quOted 307

Dlffcrem configuulIolU of global carll3ls 262·3 Dimenmms of comP<'un()Tl 200 [)uOlOlshmg !"t:rurns 69

"l>lr«1 FlI'plOltallon �. a critique of COllCt"pt 294 DIsciplinary labour 118 Dlspropotrionally. and developmenr of "Di�ullhty" 26

upon of I;aplUlI su upllil1 e!CponS

Elliot. Larry 163: ul1tor grt�tcr

Expons. role Ul German alld Japanese

employmem Intemlflon.311y 3.1 �·fI regulanoo 292 mV"(ffiem 22]·2; IU a/50 Global South. Tlurd World

EmplTt (Hardt and Negn) 93 Empires. European before First World W3f97

!-.mploymcnr. Industnal

.

111

industrial countri" 333; I;ause of d«llIIe i n US Illanufacturmg earl) 2000s 262

Enclosures 3 9 End of E",pm! Uohn SIr.Jchey)

FlIlan�nl mdUSlry, m\'",m�nt as share of lOla] m.esrmmt, US anu Brltam

a:ononu" I""I

195 Finanoal lnnnuuo!U 63; and the expansIon of cred" M

Family wage \J2

Famme. lnsh 40 Farmers, sm311, oumht"r

hnanci.aJ l!Utrumcnu 286 In

21s1 century

!-cder:al R�n'e 8, 149ue also

Energ) sc<:unry 3 1 9

]2: seemmg pe.rmanem «onoullc

FetishIsm of commodities 33. 6 S; alld �cuerbach, Ludwll;, on a!tfnlll'lon and religion 1 3 Fia! money 27 Fil;fltIOUS aI;Culllulation 299 Fictiuous capital 65; and

196·7; on nrollber3hsm and finance

state

capital 293

and dock $trlkt of 1889 341·2:

66 Filmer. Ocon. srudy of ....orld

lOS: on casual employment

DumcmJ. Gerard 71. 299

for� dlS.lppe,uance of peasanrr)

Dunn. Bill, qUOfed 335·6

346: on B,smarck's n;Ulon�hs3noll 1 15: on pollullon In Bradford 307

EADS, �"mprtl[lllll w'lh ik>emg 239

fnron. bankruptcy 233

E3�tern !-uroP<'. and (,cnTIan

Epstein 294

IIlvt'Stmenr 241 bSI

233 Eastern bloc 1945·89 118; 5ubordm.ued 10 m,lilary·mdu�Ulal gOll.. of USSK 1110·1; dunng kmg hoom 175_';1;10 1990s11S holnglul d�tructl\'eneSs of capu1lltsm. rt'C�Olsed by Marx and

baclemg for 274 I'uromone)', and e"'panSlon of finance 3ner 1 9605 281 I'uropan eOlpnalism. pressur" on 239·40

Econonllc cyde. and long boom 1""8; under St.ltC ,aplI.ahsm 178 Economic growth. madequacy of n(lrmal mC3suremt:nt� 1 7 honomll; onhodoll')' durlnK long .

boom 162 F..dIll;3T1on 334: bbour

US; growth of

Sfll!e spending 00 174 EffCl;!IVe demand 164

EgyP!, ulldtr Na�scr, nO[ nt'{Kolony

ImellSlficaTion of boom·s]ump cycle

and dlsmbullon of surplus valut bctweell capnabs! dasses 166

thronc§, 292-298

98; alld mtercsts of productive

I;apl[aI193-4. 297. 298; dUring years o{ dump ami long boom 279 Finance in rn:o\'ery of 1!lS:0s 283; bbmcd {or dctenoraflon of system 293-5

Exchaoge valuc 23, 25; III Adam Smith

279-80 Finan(".al bubbles. and demand lor

�m3ncial capiroI, national d,men)lon

IlId('\{

tolS9 Financ.lal corporanollS. US. growth

Index

In lOS. on problem With word

8Fle!Clble prociuc1ton8 261 Food. and UPlt3it5l1l 320-322; cru""b. threat of 322; pfl�" tI§('l; of 2007·8 310; 5CCuril)' 311; producuoll and populanon srowth In 20th I:Cntur)'

320-21 Ford 284; KI�cr Rouge plant ] S2;

f;lCIOrt" In

C.erlllJny dutlng Second

I)agcnh;lm Asscmhl) piant 25� Ford. Henry J.S MFordl�m ft. th('Qf'V of 164:

concenftll.lcd

Critique 01

10

d..�cloped

coun{flCS 263; share<; of diffetent

output 1 9110·2005 278

valuanon of 278

Keynesl3ntsm

deSflna!lOIlS ll1l; slocks.

Japan late I 980s. reason {or 214

3ccumubnon 128-9 lee a/sQ WaSte.

b:pLw"ng the CriSIS (Harman) 14. 16 !-:xplulmnon 28·35: and aCI;umulafion

h)<..ll measu� 149, 162 sua/so

rorelgn Dlr«t lnvrstm�llf.

111

Financial assct�, global, and gluhal

leak�

c;luscd b)' finaTiciaiisallon 299

16'

21

Expendllurc� that uo n m contnbutt III

M:lrll'lsm 48; on fog of markers

\1'orld War 269: closure of

Cap.rD/ (Ihlfcrdmgl 90-91

output of r�al «onom) 287;

Fine, (kn. on academlci53tiun of

SHct't <':n�h 144; mOllct3rist explanatlOIl for slump 145

Fmallcc and MfinanClalil<1[1{m �

67; impact 011 workers bud�eu

Exd3ngc rales. and rol� of �tJ!C 265;

31!!S. JR6

Muuliryft 43; opnmlsm ah�r Wall

Finance, spcrularoon and the 1;t1)IS, 6.S-

European Union. comhilled

Fm3nt:lall$alion thC'Qry 292-8, 299.

fischer.

workforce 331·2

fm,lnCl'!

European Communit), 2 1 9 m3nufuctunng Ilmput 313

Engels 83-84

<0.

EthIopian illUSIon of Somalia. US

economy 289

hrst World War 89

Fln3tK:C I;apua] 90·92; Hllferdmg on 89-91; lenin nn 98; Bukhann on

Equaroual Cwnca 185

Germ.an. seU of( 01 enrerpmn

temporary mOmt to world

food OUfj,UI J21

depression 88: on rIse of cap-itaIm

Dumentl and l.ivy 296; on profiT ratcs.

hll;lOciahs:mOIl 17i-291,3$

Fertiilsers In USSR I n: and global

alle,nanon 28

184

Ftnanoal labour 123 FmaOClal protectioOiSm JO 1-1 Fmarn;lal s)'stem. orlgm I.f 6J

Ftll(Jl1cw/ 7-1rntJ. praise for l�ung Lehman Brothcrs go bu�t 291

Volcker. Paul: Gr�nspan. Alan; Bcrnankc, Ben

old

279

growing debt 2 1 9

122

Empire Sum 8ulldll1g 147

Finan"aJ !;tISIS. of ] 907 92; Inuu�u frequcrn:y of 280: of 2007-8 I I

imern3110llal now� III . :l l flo....s. Fman.:a III 1980s. 199Qs and early 2000s

Export b3 mer 204 &pon onellfed dt"vflopmcn! 219; alld

Engels, Fredenck 35; HI Mnuchester

crises 60

of profit 72-73

Elecm;mla industry. p.mern of

Mbnerglng markcuM• Ihare of glol:>�1

Derl\3tl\'6 m3rkns. ongms and

37; ratt" of 38; and Impact on rate

m

statr 26]: flows 1982-2006. growth of wxk 1950-2007 2��; not

mamly (HI new prodo(fi�� c3paCify 261; low propomon of fOul US

Invesrmenr in recent dK.3.des 260

Fonn31 emplormem ])�

Former US�R. growrh

1M

faU m mdusmal produ.:flon 1929· 33 143; economiC 1"('C00'ery of mid

19905 225

forrester. V,viane quored 258

Foster- John Bcll.lrn) 81; on pot'ak oil lIS

and lare 1930s 155; SC'llureof wC'Slern Poland 156: Slilte plannm� dunng rwo world wan I 15; Wesl Gcnnany dunng long boom 1 64,

Fragment;:luon :Imong slum dwellers

144 •�.

h.Jn.::e. fall m mdustn;:ll production m �Iump 143; ec;onomic outpur 1940s

10 I !POs 161; dunng long boom 170; curs m publIC eXpot'ndnure 240; Impemilsm ill Afn.ca .. fter decolomsauon 185; tonAlCting interests wlfh US in Africa and Middle �St 274

Fnnken)tein'� m.mstcr 85 �reC" labour. pa"I;l1 negation of 175

"Freelng� of labour 40 Free-Illan. Alan. on unproduco\"C" labour 127 Freeman, Richard, figures on global workforce. critique of 390 Fmdm3n, Mdton .100; popularirr of

Ide3S after cnSIS of m.d 19705 192;

denounced :u Ke}'nes'an 194

Fukurarna, FranCIS. and �end to hlStor}'� 258

170;avnomlCQUtpur 1947-70 16 1 ; mcreasc: m 1hare of global oUtpUI 198; uoemploymenr 1957. 1960 172; EaSt German)', erlSlS of 195J 179; uml\..anon, economic effccr� 239, ..nd Cr0311an Indtpendence

270; Social Democrat-Green government 140; f..ll ln real W:lge< 240; world blggC'St txponer 239 Ghana 1 8 5 Giddens, Anthony 325 Gdlman. Jose:ph 146 Glob.,1 character of capital's desrruCf[veness III 21�t century 3 16 Glob,l!

crisis. national ;;oIUII\lns to m

19305 and todar 302·3 Global South 18, 9 1 ; In long boom 182·201; Slale capl1aIlSm and economic gro\\.'th 190; economIC growth, unevenness 189; and end of long boom 2 1 7·225; impact of collapse of Kryneslan and Stal1l11st economic modds 2 1 7·8; trrms of

G8 Rostod: 2007 309

Galhrallh. John Kenneth 202; on plann rng dunng long boom 168-9 <.iarcla. Miguel An/<:el 49

GaleraJ Eltttnc. relrance of fin;:lncc: o f r profits 284-5 General Motors, and financial profits 284; in criSIS In 2009 290

G�vw/ TheQrf of Employment. Intere$t Dnd Money IKeynes) 149 Ge.Jrge Bush SC'1l10r. on Ntw World Order 258 Georgian afTack on OsSC'ua, 20011,

319; rolc of US 274

mwunationals 222; drbl 123. inability of ponr counlfles to afTr;/;ct Investmenl 222 su alSll Third World. Emerglllg markets

�Globahsanon- 1St!, 260,261, 164, 266, 267, 277. 281, 298, 30 I. 325. 35 I. 378, 381; rr;1huC"$ and ffi)'ths. 157·261 Glyn, Andn'w 71; (With Sutcliffe) on wages ;IS (;luse nf dechnmg profits 197: on finallC131 CflSt'S 280 GM trops, no wilmon to global food problrnr 321

German caplIailsm. economic growth and protits in 19905 and earl)'

2000s 240 German IdeoloK)' (Man[ and quotcd 8 1

u-:ade 218; negonallOns wlih

engels)

German unifica!lon, econonuc dfects 2J9

C><'rmany, mdustrlal output III 19205 1 44; bt!gIMmg ofcrisl! in 1928 1 48 ;

"Golden Agr of capl1ahsm- 1 6 1 171. ,

1 82,191. 195, 214, 232, 290, 296, .104; sec also Lnng Iloom Goldman and Korba, quoted 177 Gorbathev, '\'hkhatl, 109; on stagnanon 111 $ovlet econumy 202·1 Govemmrnt tontrois on monelar)' !lows across borden. abandoned

285 Index

Go\cmmtnt eXpot'ndllure, and ,\ass snuggle 175 Gowan. Petce, on cla�hes bl'1\\.ecn finance and producliVC" l'apllal 193 Gramse • • "nlOmo, on state .n "centaur- I I I

Great Drpl"C'SSion of 18':'0s and 18t!O�

88; and IIIlpot'flall�m 9-

Greal Depression of the 1930s ,: see

also 51wnp of I 'J(b Great teap Forward 188

�v.<'.1kellll1g ot the dn\'e ru w.r·

1.0;8 HarH�), DaVid I ll: un �da�� ,ompronl1sc- dunn,ll lon)! [,.,om

163 liarashl. �umlo liS llayek. Fnedrl�h �on, 149. 300; explanation for �Iump 01 1930\

145, lSI; �ruun"broul proces��

and dtclmmg profit m;1rgms 1 5 1 ; guarded praise: for Man( on HISC'!i

Grea::r 218

67; on madeq uatleS of Bohm·

Green ru·oluilon. and incrra5l:d foud

Iklwerk's theory of capital 67

OUfput 321; benefiu beconllng ex hausted 32\-2 Grl'C'nhouSC' gases 308 Greensp.an. Alan. and new paradigm

229

'"

Greenwash, nm suffiClenr expbnat,on for slow act ion over dlmate change

310 GrO§srnan, Henryk. 204; and theory uf breakdown based on rate of p rofit

77·78; cflucism of Rvsa I.u:ocemburg, Sauer and Hukharul 101; theorr connecting Impt'nahSlIl and nte <)f profil 101-1; destruction of \alues through war

131; mterpretatlon of .... !;:Irx 'J theory 151 (;nmdnsSC' (Marxl 129 (,uallo 81

Gulf states 1 8 3 Gundrr FnnL, Andu- 190; drmn be:mg a Maf"iSl 186; .enlon o(

depc.'ndencv thw!)' 187 Habl'r·Bosch procC"$S III

Hamtlton, Clil'C, debate wllh Georgc �1<)nb'or J l l

Harrulton, Lee 274 lIandloorn weavers. hlebhoods dcstro)'ed b)' ad�an,(' of capnali)m

40 H.mse:n, Alvin 144. 146 Hanson, J:l.mes J09 Hardt, Michael 3.1 1, .133; on capltahsm not needlllg I1llpenailsm 93 seeuiJO N�r;, Toni I larris, Nigel. 1 10; on capuallSlIl and peacc 92; mlSlnterprcution of BolshevlL poSItion 187; Indl'x

Hulth Ilnd educalLOli worker� 10 US JJ4

Health prOVISIon 334; and variable capita l 1 J5 Hedge (unds, m;rsslve gruwth 284 HeKel, toef'rge Wilhelm Fflednch 1 3 Hltr.mh) of slares. tannot be: stable 270·71 l lilferdillg. Rudolf. 165, 279, 2.911; critique of neuclanlcal economics 44; anaJySi5 of early 20th Cl""nrnry capitalism 89·91; and tendency of rare <)f profil 10 fall 77; am hlgumes III rmDnce Cap/1Il1 90; on finance capuill ;;Ind war 90: on dIVISIon oi funcl10ns wlthm capltahst d3SS 1 14; mInister under Wl'lIJl3r

Repuhhc 91 see QIso Orgarused

capitalism

J-1 , mmelweu, Susan 71 Ilmdu rale of growth 18� J lobsbawm, ET1l. on fallmg profir [ales m 19rh (enrn!) 6 9

Il obwn . J A 191; finance capltal 3nd imptriahsm 92; hIS ;1ltem3t1U to lmpo!Tlahsm 184

Hodgson, Gooff 48 HolloWJ), John, on lfISlam mublht) of c;:Ipltal151:1 I lui) Grull of n;cmomlcs 9. 145 Ilollg Kong 142 I-lung Kong and

!,hpngh:1.I Bankmg

(orpol',mon 255 Hoover. Herben 144 l-iorvat. �ra n k,). quotl""d 171:1 I lowe, GwHre)', 11lIdgrt of 1979 193 ]luman caplin I 128 Hungary, revolution of 1956 207 Huswn Michel 2j9

411

Hu!!on. Will 16.1; ;lnd short-ferm.sm

Industnal countnes KonomlC growth

294; un supenClr>!y of Japane�

m 198(kand 1990; again§t IM�

model 2 1 1

furreJoSU 214 Industrial capllal, relative ,mmob,IIt)

Internaflonal capLlOlhSf class. theory of IMf 230. 2J I; aUSlr-my pac\c:agt'S and HIliIS 242;

quO{fii III fa�our

of gro....!h ,,(Th.rd World dr-hI,

1980 220: IMH',l;orld !bilk debl

relid programmu no

ImnllgranOIl conu-ols, reasons for 1-3 Impwahsm, ;lnd end of firsl Great JXpresSlon 97; and �port of c;lpnal 98; and nile of profit 101; classical theory of 93-99: common Crlt'l.�ms of 96: defence of 96·97; weOlknesSCll in lenin's thwry 97·98: Rosa l o,
ImpeT/alm" Q"d World J:w"omy (Sukhaon) 95; and economIc de�'cloplllem, Lenm'5 poSItion 187; without formal r-mplres 184-5

Impefl,,/.sm. the h.ghest nage of Cdp,talrs", (l.cnlll) 9.� Imports, of lle\'elopeJ tountriu frC)m Impon"subslllU1l0mSI modd of de\"clopmeOl, 218;

s"

also

1101

colon)' 185; reGIIomK growth 1950-81 189; per QPlla growth III 19605 189: «"OIlOIllIC sugnallOn

In

19705 218: t'CQnomy

In

1990s

and early 20005 2S1-2; rate of accumulation Since rdonn� 251: employmrnl in Industrial S«tor 252; mformal emplormrnt 339; fall .n real wages

m

innauolI, an mtd 1970s 191; anna"Gn

barnn 204; hidden mflauon 179,

""

organlSfi!

sector In 1 990s 340; par III ofKilnlscd and ullorgamst:d sectors

innmallon. te-chnica., and IonS boom 165 Instab,lity, global 325

Intellcctual property nghts, and role of Slalr 265 capitals i 12 Interest raIl'S. raised by Voleker 296; Cut by Voleker 297; real m 1 9905 and eJrly 2()(}(}<; 297; and IIllCre�l� of finance 287-8; �1ashed to deal Inter-Impenahsm nvalrles, and Cold

Internanonal trade, growth 1 950·200"

255

f1C�

bowl 144, 340

Lebanon, 2006 274; aod US ImpC'nahsm 274, 184 i dustry 261 Italian k'\if"'ear n

ltoh and Lapa\,ltsas. finarn:e 3nd produclI\'t capnalislS nOI twO

Japan, during lon!t boum 170-1 ; Illduslnal output 19405 10 1 97(b fi nt 1 946-61 1 7 1; 1 6 1 ; fi'<edlnvestfe mcrease In \harr of global OUlput durms IGOg boom 198; growth through 19HUs 2 1 1 ; CtlSlS of 1990s

ro:<:o"ery rn mid 20005 ba�d on exports of tQmpmrnt to Chma; car firms in the US 256, 261, 28 1; grO"lh of working class 19H-98

IntemaUOnahS3l1on of S)'Slem and CUS15 of 2008·9 301 international mergen;, acqulsillon and alliances n i 19805 and 19905 256 m

JJJ J.ly
Tnad 26.1 Industrial counlne�' mve51ment from 1960s to rarly 2000 Iiablel 2S2

Invrstment, III US III 1920s 146: �obal 1960·20005 232; unevcn and

pilLcmcr" dweJler' and workmg

1980s, 1990s and early 2(){)(x 282;

class 342·3; agncultural outpUI

pruducnve M luw levtl ln industrial

to

Iron

9 , 1 1 1-217. 325; uplanal10ns for cns.s of 212; rale of profit 211; i",'estm"llI 216; cn�ls compa red wnh USSR cmls 01 late 19805 217;

'Wdr 180,1 8 1 1 82

spasmodiC growth of producuLe III

Iru Important

31

separate group� 298

Interdependence bclwttn statts and

340; IIIcquality today 251;

189; mUlh

relected by MaD'

colomalJ5JtI I H4; allack Oil

A!D('rica, India, Chllla 339

Imrsunr-nl flows. c()ncentrated

Iron law of wages,

Inacl, luI. eumple 01 old ,,),It

informal employment, m LafL"

Intemat'OnIJl Socwl,sm 16

nev­

F,anna Fad. not neo­

colony 18S

19905, lS4

M,mmanelll oil crunch � 3 1 8

Incom�• • n Life 192(b US 146

Ind.a F; under Nehru.

Ireland, under

Indunnal firms !Urn 10 financt ill

Interrullional Energ) Agency, and

Deptnden.:y Ihe()ne�

Iraq War of 2003 319; rallonalt for

Iraq 18\

lIatlonal borders 156

.

Dr-,·t!opmentallJl Idl'Olog)",

Iraq Study Group 274

France and Gc:rnuny to bade 274

Induswal concenuanon across

with nedn crunch 277

d�,'eloplng cC)untries 163

1979 351 Iran-Iraq War, role of US In 269

273; COSt of 10 US 274; refuul of

indusUiai complcxes 109, 259

268

Asian

of 241

Iran 183; O:<:1)nomy under Shah 1 85; In

countries III 2000s 210; mflows

MJUSI in ume� production methods 161 Kahn, Richard 162 Karabakh 208 Karachi, Sunni-St.'J and intcr-elhmc clashes .,45 Kautsky, Karl 81, 292; rt)ccl� reVlS10llJ51 argLlment H9; finJnce

world 5yuern than China today

mto US and milnary power 27J;

10

lapllJ.I, IIldu�ltial capilal and WIlT

2"

SlOp climate change MnOI posslt.leM

91-92; ultra-Imperialism 92, 185;

Indonesia 1 85, 242; cnm of 1997-8 214, 351; ami·Chlllesc' riOiS in 345 412

313; rniSlance 10 low energ)'

on colOnialism and control of agranan ram of world 95; on

n'"eSllllenH i 3 12 1,"",

Index

capllalist natlonah�allon Ke�gan. W.lham, 149;

I I�

CfltKlseS

Mult

68; and short-tcnnlsm 294; 011 5upcnomy of Japanese modd 2 1

I

Keynes, Jvhn Maynard 10: anll underconsumptJOnlSl \heorlfi of crisiS 59; caUSC'S of slump 145; cn�.' of 19305 150; caUILOUS 162; on rennel'S 294; hklllg for \'frs,on 01 labour theory of ,'alue 44·5; .. Allimal SplClfl� 150; declimng

margJnal efficlr'ncy of capltlll 162: soc.ahsmion of In\,estment 162

KeynnlJn mea5ucn, s«n as reason for i IGng long boom 161; rarely used n boom 163-4; failure of m lair 1970, 200-201 , 297; III Japan in 1990� 21 5, 216; limited effect of 217; as nalLonal $Olulions 301

KeynNlanls llI I I ; asexplan:tllon for

lonp; boom, 163·5: problems With

195; marginahs.cd aher 1970s 193: CrISis of 191-3: re"I\'al dUTIng cns!'

of 2007-9 300; lefl wing illUSions In 303; and nwhbcrahsm today 303; bastard 162; radical 1 1

Kidron, �hke, on a world of Slale caplfahsllls 1M; on Marx and producnL'e and unproductive

labour 127: on waste lind orgaruc COmPOSllLOIl of capital 130: on

�hr"'s modrl and rate ofprolif 130·131; on .mpaCI of arms

spcndmg 165; non undercQnsumpt.on.sl thror)' of effect of arms sprnding

III

long

boom 1 65·6; on Rrmsh cap'lal uporrs III long boom 18.1; on subsIdy 10 advanced conn\TI� from Th,rd World through

mum

gra"oll

173 KiSSUlgtr, Henry, on challenges to U(, hegemony 272 Klein, Naom. on "f oolloo.1' faClone�M l58 Kocchhu,

Tim, 011 US foreign

In\,l'Suncnt 260: on propon.on of oUfwurcing

III

US 262

Koo, RIC hard 216 Korean WOlr 198; fC3S1)IIS for I!!O, US spokesman on I S I t..osygin, Ale)Cey 203 4JJ

Kotz. David. c..kul�lIoD§ of profit nits

for mid lOOOs 131

"rugman. P�ul, 011 J�panCK CriSIS of 19� liS, on dif/icllh,ts of

lIalIonal statcs dnh l n g �-nh glob.. niSi> 301 "uron

.

J.:u;ek ami MOlhelt...sk., "ami,

un .,Lunom", cnloC'� on Sl,vltl tyf'C'

e.;onoml�)

46; and pl.lIlmn� wnhll1 enlerpnsc 80; OlXratt$ on II1dlndual c4lruals

through nme 53; wJlh ImPCrlaliSI

compcllilon bclV>·tfU 1I<1le capl1all�t [tUSlS 99; and 51311' controlled t<:onoml� I I S-I 19; a ...d gl3nt

corpora\lun� In long f:,(M,lm. 169·-I); on a world s<:alt 201; .mder �l3te

"Ul11�1�, Simon 146

caPllalism 201; In U�R 204; and wrlfalt and tduCJIIOIlJ.1

".....ng'-ilng stccl complex H2

fxpcndl!ures 137

205-6

":"010 conference 309 ubour, soclalJ� lI«eMar) 4 1 Laoour cost!, �Iahsan"n of 1 74 Lahour [lOwer 32, 36, 47; ,-alue of 85: moral clemcnl 31; labour uscd m

reproducing 52: supply and man;\gefllcm of 132; n:productlon of 132-137; in the 10llg boom 1725; COSt of rtproduCIion passed on to work IIIg class famIly 1 74; (wer­ IIIten�1V� e�plOllaIIU" of 3 1 5 Labour prodUCllvlry, III U�, Stagnallon In 1970s 202 l.abour throry of value 44-5, 47.

Imposed on capitalist! by cOnlptllli,·., accumulauon 45-6; see Ills" uw uf �alue Labour lime. soxlal l., J>e<;C'SS
Labour. dequah/ic:,allon of, 52-53 Lahour. skilled, un�kill..d and lalm'

HI

l.olmJless laboure rs 347

Laravltsas. Coslas, 011 role of �tnu31

banks In 6nanclal 5yStems 109; on

�hJngts In banklllg S) stem J.nd Mdirect el\ decade of 1 9110) 220: fall In real lndusrrial wage& In 191105 340: expom of

food and mw l11,lIefl315 10 Ch n i a 250; French and SpanISh hanks 240, 25�: pea�ant struggles 346 $i'i' IllsG ind,�idu31 ((Jun\nes Law of �alue 26, 45; Opc'fJft'S throu�h pres�ure of capllals on tach uther '"

of cnkS 67

Leaks of surplus �alue fwm Clf
Left mtcrnanonally. attllude 10 US�R 157 Lthman Brothers, coJiapse 277 Lt>llIn, Vladimir 77, 89,109, 165, 190, theor) of im!'C'riahsm 93-95; critique of Kaul � ky on colonialism

95; quoted parrot fa�hion on

ImlXrialism 184; 011 cunn ectlon stale and capi tal 106; on scml­

�

colofUe5 185; conditiOns for It pre· [cvolu(lonary crlsls� 350 Set also Imptria],sm Li�ral �o'·emmtm I Bmam l. and SOCial reforms 88

crl�

Thrtoe (If Copltal 298; on

consumpuon of caplraliSI class 126;

accumulation for the sakr 01

Anr, Crrl.quf" rerl)" 10 Ono Bauer

accumulation 204.: on anarch," of

101

marktl and �pot.sm of [;teton 80; on cOlpl1al accumul;",on and

Macmill,lI,I Harold J49 Mage. Shant,quOltd 164-j MahaJLa al-Kubra 344 M;tksakovsk y Pnel V. on Manr's ,

theory of (;TISIS 59-61 MalaYSIa 221, 242:

IUfT) 10 SI;;1.te

capllalism 185: an ll Chme.q rlOlS -

345

Mandrl, Erntst 197; on al»ence uf CrIses In

SoViet economy 202

Llfenme of 6ll� capnal, and nit of rru/it 236

Manual OCCUPJn4)n� in o;ervice sector Mdllufactunng, cenlralit)" in modern socict}' 333 Mao Zedung. death 243;

$tt

also

,\Olarcuse, H�rben 33] ""13rgmal efficlenc)" of mvestmtm. and '\iarglIIal output 4 1 ; tomr;tdiction m

mtasurIng II for nn;K"laSSlnl tht'\>ry

Margmahsl school of economICS 9, 23.

Brown 303

I og"- of capl l�I and greenhouse g.lSC'S Jlj

I"QgK of $tatcs" cou"terpo��d to IOJllc of cap/ral 107 rniswktn ellplanations 16.;, 1 6� Long Term C....pi lal Ma!lagtm�nI, lifehoat operation 234 1.osses dut 10 ttlo:coms buhbl., 286

I.ucas, Roben . on f:ululC' 10 understand cause of slump of 19305 9

u nf'rodU�lil'e labour m Capital ,.f up,tah�m 84; skilled and

unskIlled lahour 50; rdutanon of Marx's, Iheory of \"alue. crll1cisms of 41

Integnue arm� spending 11110

accumulallon 118; seekmg

[IITIl'

as a probl�m

menlS III a labo ur

theory of valut 44

1I1,"estmerll

11\

I 980s, 19!Kh �nd

20001 281

Manhew5, R C O 163,164 Ma�wdl Empire 2J3

McCormack. Gavan. on Keynrsl1In mcasurts mJaran In 19905216

Marx and Engds. Tt)t1:1

Mal,huslamsm 320.: on c:lpllalosm's

Mengrr 4 1

des.ructivt effect on hum3n

I\ltrchJnt�' capnal 107 l\I�rg"rs, Internallonal as proportlun of 1Ot.11 260; and I umplIIg national

producti�e forces 8 1

Marx. Karl, Ideas 21 -40, 55; on

W:lS',

and or�nic COmPOSlliOn of caplIJI 129-30; financ.al prolil$ as p"per

stale barrie" 267

Mrxlco 2 1 8. 22]; Cri\I' of earl� ]990s 22'

claim on etal prodUtllon 289; on

Michl. Thomas 195. 197

rolt of finance 281; on role of

Middle dasses, aSPJr�m In poorn

credlls�s.em and fraud 64:

Index

disnncl10n berwtoen produn,,"e and

Mass of surplus value, :Jnd

II11er3(110n wl lh nature 307: on

Long boom 161 -192; common

cXf'C'ndnmes 129: refints

analyses 165

41, 16Z;set aiw nC()l;la!.sical

to be IKtJored 42;

I I I; on sudden ,)uthrt>ak of crl�IS

.nlt'T"'A':H slump 152·2; [adurts 10

neocl3ssiClI dll"or)- wru-n It cOlnn

u�lllgstooe, Ken, pr;IISC for GorJon

1 9th century Fl3IlCt

look IIIw.llds 15; expl3nolli0n of

Marginal ,"alue of c�plldl 44

real world 10:

111

\larxist econorruc thtOry, lendency to

MMa'l:inal uulllY" 23, 43

til

on labour ,lnd nanITal world 8182, on orgamsauon of prodUCllon

Say's law 57

M .. ushalL Alfrni 4 1 ; on fallu rt of

labour 33

-,

122·12, on va mplrt-hkt char�cter

China

M.arkellsallon 240

I wmg UI RnlaUl 2000 334 lInnJl laboul 84; and Obl«"uJ1ed

rlstS 10 prott<:! Yalue of monry 286-

]411; on the 5Iale and unproducm"t

334

�hool

I .sbon Declaratlun 2002 139

diVISion of functIons w1thlll capltaliSI dass 1 1 4 : on mlerest r;lIe

ma,hll1e

I!lubahs�TI� 261

"

267 su also B;ul OUIS

growth of MsurplusM porulal1on 340; on capllalists as hl)Sule brnlhen 268; on Crises of 1846 and ISH in Bmalll 152; on dolmJgt 10 agrw;ultur� b> CapitalISm 82; on

Wllhll1 tnltrrnse 79; on state

rat� of profit 150

Les�eligiblht) )35

d,�uss,on on /inanet I n Vulume

of Impt"nalism 99-101; luxury

Mann, MKhael. on hml!S of

lIfeboal operations and ('(:ono.",c

I.abour. co.lerete 26

lad.lO and \1
Ine "tahlln�

LibC'rafion mOHmtntS 182

Labour. absiraci 26

50.51

Lawson, Nigel, recogni>o!s

Luxemhlll"8, Rosa 77. 89.132; theory

Indell

c

ounlries 221 '"

Migrallon, 5[;111' encouraged durmg I'lng boom 1 "72-3 181; reduces COS! of reproducUig bbour power 1"73 \1llituy comr<'UllolI, In Rukh;)rln's

Mouffe and L�dau 3�9

MST I,lndlcss ",'ork(,fI' mo�ement III Brazil 346 MulnnalJonals, weight in global economy 157; Mpmden�e on hOl11e

compellll()!l 200

base for moKh proiiublht)" 260,

264; dependel'l('e OIl St;IICS for troadt'

U� In 2()()(k 273, and

nq;l.>li�fI"ns 265; .nd role 01 statcs In aldlllg aceumul3110n 265; US.

prodtKtl,'�unproductlvc

affihate Sdics mainly local 261 sU'

164; Ie�el durUlg boom 165·6;hy

dlsnnl;llon 127·8 Mlhlary h�rdw.re, connnu;)1 role of 26'

ulso Translluioll.1.hty md..x

Multinational (';Iplt.l)., ronnlct1ng �genda 268 MullJpolant)' 274

MilnAr)' M'lIe lOlpltahsm 156

Mumhal, texnle strike of 1982-3 j4�:

,1,,1 111, Juhn Stuan, 6"; dCOl('5 possibillry

Muillpll('r ..ffect 162

Ann-MlIslrnl Clols of 1992-3 345 MuruaJ Assurc
Mmford, PUlficir: 230 Milling dlsasu"r

NalJonal Bureau uf ECQnOnllC

GuangdQng, ChUla,

1112005245 Mmsky, mQment 64, shifn 283 Mm 171

'-Iauonahsauon by former colonie!>

MuhulU il l S

185

Modzelewski, l.:arol 204

NATO 1 80; I'I<panSlon 11111.> Eastern

Mohun, Smion 126

Eurnpe 272

MOllblOt, George, on Stern Repon 3 1 3 Monnan�m, and Jlump 145; lak("l o'er from Kl'yneslalUSm 192·3, 297; and mfla(lon In BtilalO I 98th 193; failure of In early 1980s 19J, 201 �Moncl�t) ffi('asUICS� 149, 161;

KeVlK'S'S scepllcism o�eT 370 Monc" capllal 61,107; mobility of 10';'; grn""th of pools of 183 Mone) ,uppk growth 19<

10

Brllam 1980:.

\'luI'll'Y, Marx's a('count of 2:-: as unl\'crsal tqulvali!nt 17

Monopohes 90-91; gro"th of 1 S; and CflSes, according

Nall"nul Energy Pohcy. rcpon of 200 I '"

"hnsky, Hyman 64

IQ

Hdferdmg 9 1

Monopoly profits 9U

Monopoly �tllKe of capllalism, III Lenin's theot)" 93-5

N,uure, and capitalism J07

"'UI Gcnn311Y, St�u: plallmng 1 1 6 ; new mvcstment 155 NC'Cds of capllals and the n�s of capllallsm 3 1 4

Nqv� Toni 91, lJ I , JB; see ui$o IlardI, MIChael

Ndlru 18.S Nl'hru�lali �soc,allsm� lSI

'-:wclassicotl economists 14, 'i I: 3nd va lue 16, 4 1 ; arguments. agJIIlSt Marx oi l ; thfflry of marktt dtOlnll1! 42

NeoclaSSICal !>(h,)()1 of ecollOmlC), 10, 14, 22, 23,26, 47,53, 144, 369; crmque of Alarx, 4 1-46;

COntrad,ctions III, 42, 44; failure 10 explain

CflSU 9, 56: Kt)'nes and,

_"'urales, Evo j46 M(lrtgnge bubble of c;ltl} 200(k 286

44-45, 162; Ihe<>ry ,)f lIalue 013; Sl.'e

,\Ioseley, Fred 126, 195·6, 197,

cconOnlln

c�kulalions of profit rale� for mid 2000� 232 416

137·238 l(tl1Iph) 237 New classiCa.l5<.:hool 194

(llso Marglllah�1 schoul of N('oJ.beT3l ldwlogy III Llobal South III

New era of 19205 144; and �new paradigm" of 199(k 236

New unpenahsm, slmllulUcs and

dlfferellC� ....Ith old Impcn�losm

capitalism 1"9; III USSR [-7:o,tr

Ollcrprodu(,1I0n 6 1 , 1 7g: of telecoms handwidth

III

19905 286; enMmK"

accordIng lO R� Luxemburg 100 Olcrk,lS IIll"Cstment, dunng Cold W;)r 181

2'0-72. 253 New Paradigm 229

PanIC of NOI'ember 2008 290 Pareto, Vilfre..!o 42, 43 Peak 001 3 18-20; Imphcallon over

NGQs342

decadcs 3 19; does not couOler

:X,xon, RIChard, curs US arms

climate change 320

spcndmg. ends B�tton Woods 1911 capllahsl COmpetlllun 169; lind slump of 19305 155

North�o Rock, wast of Clry dl nner NOiermans, Ton 164: quoled

00

I)earl HJrhour 156 Peaumry 346-9; persistcllI:e of In Asia and Africa 346; diffcrenllanon w"hlll ]4",348; doing non­ agfl�ultura! labour 3J2; ChilieSI': 243 Pe{l$lllru and Proiet,m{lns J44

Ktyncslamsm n01 explaimng long

PenSions, Germany under Bismarck

boom 195

88; dUM8 long boom 174 Pem,lgon, [epon on global IIlsccu nt)'

Nove, Alex, quotcd on $cWlct growlh 175 Nuclrar ....upons 269 O'Connor, James, 011 rolt nf welfare bcrttfilS for capital 174

O'H;)ta. Pb.llJp J 248

Obama. Bar�ck. electlQn camral�n and clmtatr change J I 3; first budgn: 327

resuillng from chmale change 328 Permanent arms economy, as explanallon for long boom 165168; cOntradlClIOns n i 198-9 I'lgou, Arthur Cccil l45 Piau Accord of 1985 214, 266

Poland, enscs nf 1 97Ck and 1980s 206-", 1980-81, 3') I : $I�ficanc� for ....hQle !-utem bloc 206-­ ..

Offt:, O;o.Uli 1 1 0

PolamauQn of dassc5 87

Off-shormg, real role 336

�1'ohllQll apuaJSrll� l lIS

Oil 183; crisis of 19"3-4 184, 1 9 1; pnce and SoIlI('1 ('Conom) 107

I'ollullon. In 191h century ]07

Oklsh io IhcQrem 7 1 , 7J, Ihe"rtl1�al rcfulanon of 701-5; I:'mpmCJI

Ponusal 2 1 11

refut3l1on of 197 OM So} networks 109 Olympia & York 2J3 Ophehmlty 43 Orgamc composition of CJpll"l, In Marx, 38; and tt('hmcal advance 70; .11 end of 1 91h celln.ry 102:

dUling long boom 168; III 19905 234; n i China In carl)lOOOs 248 Orgalll�ed capitalism. Hllfrrding's thtOr)' of 9 1

Index

Ol-er'accumulatlon, under St;lIe

1II1("11mCOIIII Chllla mld,2000. 20111

New Deal 1 5 4

287; nanonaliscd 2n

Research 1 9 1

IU �J!f

of 262

Non-proou'i'l\'e rXpc.'lIdltures, In

Nasstr, Ahdul 185 ueul$O �_gyPt Nallon 5Utes and glol>al Cflse! JOI

II I

Neo-pupuhsm 347

and global compe[tl'l�encss 265

of general cnsis of o�erproduct'on 56

�Out'i()un:lIlg� overSC3S, hmll'

New York Tlmel on mlhldry contUctS

Mlhulry Keynesianisrn Undl:'f Reag.m 272; In 2000� 273 Milnary'lnduslrlal complexes 168

Neoli beral � polICICS 240

Nn SOCial wdge n i 1970s and 1980!.

1heorv 96; .nd econom,c Mdllary expendlrurr, 3nd long boom

k

Intkx

Ponu schemes 64, 283 Poseo 242 POSt IIldu5lTlai SOCIfi)', th('QIII"S of 33 I, 132

I'o\'trt)·, In ChlOa III early 200lh 24�: III

India

III

1990$ and earl) 2000, 252; III USSR in late 1 9805 208

Prill1tia 011 unemployment III USSR 208 Prehi�h, H.�oul l �6

Precariuu� l0b!i. rcal lel'cls III \'('r:st�rn !-UTOpe, 336·7 I'reobrawensk)', E\'geny [.59; on �)ump of 19JOs 153; ImpaCT of world 411

cnSl5 on USSR 1 5 8 I're!\(;olt, �.dward C, nn bllure 10 und�r�tand CiIIU§(" of 51ump of 1931h 9; on Japane-sc nl�15 of 1990s 21.S Pr"e ilgnals aod dimale change 3 1 1 Price :llld values 46; den�uons from values 8"" i"nmlti\e ac(umulanon 39-40, 132, 258·9; aod slavery 40: In USSR 176: Chm.. 245 Pnmlllvt commulllsm 21 PrWalt equlI} funds 2"'9 Pnl'anse
Producm"e caplfaliSIS and nedlt 61-64 ProduCf,\"e forces, can bt-c;ome deslrucrille 81 Productl�e 1300ur, and dyo�m" of sym"'m ll� whole 125 PToductlvlly of labour. and rate of profil 73; Europt stoll!' catchmg up wlfh U) In 1990s 239 Profi, margms. China mid 2000s 248 Profi, rale. Ihoory of le-mknC) [0 fall, Marx on ccnuahry of meary 69; and cns.s 75·78: counrervailmg tendrnC;le$ 72: wme Ma.,osts cnucal of theory 69; Marx,sl thoory dler Marx n; and S[ale capitalism 201 Profil rates, equahsauon of 87; [aUmg III mid 19th cemury 88; r�o\"ery n i Bmam m 189!X 88; before and aher ht$1 Wurld War l S I , frum 19705 TO t'3r1y 2000s 232; fall m. lind ;l[[raCnl'ellt's� of financial U\1"es[rnent 181: d:llm! thai Ihey reco�cred sufficiently m 1990s 299 and ulVeStl1lem, mJapan 171 Profirahility, in China, and low 418

lOIermrional �",lue of Yuan 289, and lOvenmem Inlow energy production 3 1 1·11 l'Tol�t for a New Amen....n C..emurl and US hegemony 272 Prolt'lan",msanon of public scc;tor employcd 138 pfO{ecl1on�m 145.302; Hilferdlllg'li aa:ount of rlSC' of 90 Proxy w",rs, l)plO;",1 of prtKnt pt;nod '"

PublIC expendnurt'S lind clasii sfTUggk 138 Pubhc works 116 MPump prmllng� .lnd slump of 1930s 155 Purcha.mg Power Panry 250

Quanntal1ve ellslIlg 30 1 RaIU. RamahllgJ. lndl:i·s MYoung Enlreprt'neur of the Year" 287 RaIl' of profil, and productiI"i[y of laDour 73 and lmpenalism 102: ami ,m"o:<\rmem 76; effect of arn!1 e"oCpendll\.lre on 1 3 1 ; and IUrnu�er lime ofcapn.11 235; under nale capltahsm 1 1 7·119; III long boom and aner 164, 195·7; and end of long boom 200; and Japanese etiStS of 1990s 216; and restrw:lUrmg Ihrough c;nSIS 232: m China 111 1990s and early 2000s. nllm;l!� 248: and waKes and crISIS 76 Ral10nal exptClatlons Ihoory 194 Raw IlL1lenal b",rner 204 Raw material, and empire before World W"1f One 97: chuptl1lng dunng long boom 165 RBS NabiSCO takeover of late 19110� 279

Reagan. Ronald. econollllc poltcy 194 Real busmcss cycle thoones 56 Real wage1, n� al end of 19th cemul"} 88; Sl'I'! also Wages, United States. Gennany, long Boom Realist school of 1OIernallonai rda[ions 103 ReceSSions. growth. durmg long boom 165; of mid I 970s. explanallons for, 1 91·2: of 19805 and 19905 224; "f 2001-2, 287; pallIc among Index

commenLators 230: I.)s� of manufacmnng lohs 332: of 20011·'1 spread [0 Chll1a and Imlla 291: uf 2008·9 and "utbad<5 In �o:en lO�esl1T1ents 3134 Rcc�'clll1g of 011 funds. and KtoWlh 01 fioance 281 Reform. economIC. 10 Commumsl countriC"l 1"'"6 Reg10l13.1 char.llCler of m3", mulnnahonah 262·3 Regulanon School 164 Relfic;anc.:m 28 Rda!l\'e surplus ,,,Iue l4 Renner! 92. 98, 114; �power� 294; MeUlhanasia of� 162 Reproduction of labour power and produu,e labour 135·7 Reserve 3nny of labour 137·11 Restructurmg of '011"'11011. 111 slump. war and long boom 164; 111 1980s. 199& and early 2000s 124, 2J4·.�; limited economic tffrclS of 235: and workmg c;bs� 3,15; a(:ross national lxlf(ler�. and growth of financ;e 281 Revislomst controversy 119 Ricardo. DaVid 12,24.25. 43,46: de,'dopllK"nt of Idcas of Adam Smuh 22; thoor)" of ,alue JO: gap 111 hIS theory of ulue 47: theory of fallmg r,lIe of proMt 69: followe!)' of 13 RIO I'.arth Summit 1991 309 Robmson. Joan. on support for economic orthodo:,<1' h) Ihose wuh power 1 1 : on perlilS[cnce of ococlasSIC"lII th«in� ,hal h
Ru,"a 12-; l�ar"l. mdu�trI,,1 de\'elopmem 111-; slump ot 199(10.. o5<:ale o f 2 1 O ; 1I1 1':189-91 H I loU also U)�R Sablowo5ll, l Thomas. on d"h�ull\ nl

'it'J'Jr.llmg finanual and mJu�1rIal capll"hsts 1911 '\a,h�, Jerfre-y. and �hod: [hnlp' 1 1 0 Samut'lson, raul, 10:-"" book 10: C;t1l1que of Marx on ,'"lue "nd rTl�e 48; qllO(ed on t'od of buslI1css C}.:Jes 191 Sao Paliio. BrauL size of formal and mfonnal worl.:for,� .140, FU)rIOH/ur c;alls " �a l>enoll III the maklOg� 1 8 11 SlIrko!y. NlCol�s. warns of danger of "a European 1968" 351 )aud, ArabIa 183 Savings & Loans. bail OuI 2JJ Say, Jean.Baptis[e 55 Sa(� bw n �'hHlt'drr, on �1O[emal modermS3I1Oo � 240 xhumptter, Joseph 10; and CrC3U'"e deslru("[ion J 94·5; and long wa�es m

'\clentlfic Amerw.;an ""armng on peak \>11 3 1 11 �ond Cold War and arms spendlJl� 134 �It tmplom}t:"fl[. m AfrICa "nd IndIa JJ9 Self-eAl"anSlon of cap",,1 7S <;Clrumn. qUOIM on acc;umuboon ami con.�l.Imp"on III USSR l04 '\eml-C(llnnies 1 8� Sen. Abh'lJl. anakSlS of Indl.! po'"em' figurC"l252 Serge. VICIor 349 Servic;cs and industr), false d"un�1",n H1

'\enl.r... hrtakdown f>f C.ltt:g(lry B4; ceO! ra1 10 capllal,st pruducllon tada) 334: productln lind unprodUCllVe 111 Shaikh lind Tonak 126. l'r Shaikh. Anwar, nn main�1Team ec;nnomics and nl�cs S6: on \';\!ues "nd pn(e
capllal 1�4 Shanghai 243 Share of nJuona.] tncam.e gomg to labour In 19� 1980s and early 20005 236-7 Shareholder vallle. theom'S of 294; crluclsed 295 Shiv Sena 345 Simpson, Derek, pral$(" for Gordon Brown 303 Slmul!all
growth under PHk Chung Het

Ifltadependc:nee I 10; difficultlts of

dlClatOrshlp 188; percaplra gro....th

break belv;n:n them 1 12, 113. 1 14:

In

1960$ 1 89; Mcconormc mlradeM, IMf 00 242 Sm-�' cns!! of 1989-91 207-11 Sov�t-type economiCS, dmamlc of 202 Spain 1 18 Speculauon, China

III

III

late 1 9205 US 147;

III

mId 20Cl0s 249: In bubbl....

of 19905 Ind 1000s 21�, 249, 278, Sraffians 2J

Skldtlsky, Roben, on Keyne� 162

Statt apparatu�. Iou oj cohtsion

de3th 176 face of d,fferl.'nt mttresu of

Slump

dlffen:Uf capll�ls 268

n i

Stale bureaucracy. as ascnts of capital

prufit and r.lte of e�plnila[iOn ISI;

accumulation 114; dus ch3ractcr

and concentrallon and

of III

celllT'dhsalion or Carl13l 153; how capualml1 got OUI of II 303 Slump, hegmlllng in USSR In lale 1989

209; m former E.Ulern Bloc In 1 990s 214-5 Smith, Adam 1 2. 4 1, 46, 5 5; on value

and labour 30; on ongms of profits In labour 19: amb lgulI;l"'\ In tht'ory

H. 30. 4�; th«lTV of falling rate 01 profit 69: producrive

of value

and unproducme labour 1 2 1

Smoot-I Ia",ley Act 145; n()l 10 blame fur world slump of 1930s )02 "SOCIal eunltact�, mrth of durmg long boom 164. 171

State capial, t in Cap/lui Volume Two 115 StateC3pllllhsm, 104. 1 .S9;e.:onomic dynamiC 1 18; (;.c,rmany and Japan In

1930$ IS5,duling long b<)()tn 1 70;

militansed 171;JapaJlCst dlTt"(:'ed 10 global markcl comptllnon 1 7 \ :

Stalimsmand Kcynesianlsm as us

IdrologlCal correbtl'1 302; and hmits

labour power 17) "Socialist W("letles" of old �..lI�tcm bloc as state capllahst I H I

Siale caplla.lisl UllStS.

III

Bukharm's

tlKory 95-96

S13te directed. monopoly CaPl13liSm

Statts. economK managelTWnl durms

anacb on Zunb:l.bw� refugn:s 345 South Kore3 211, 241; t"(:ooomlC 420

defeatcd 2311; mmers Brnam,

defeated 139; Egypt. 1006 344; South Africa 1007 343: !levlet miners of 1989 109: Mumbai l!'Xtile smke 1982·3 345

�trong, 8enj.1mm 14S

5ubpnme mortgages 2116 Sub-Saharan Afric�. growth, in 19611

189: debt burden 279; much of It

10

ad...anc� coumril'1 from

Th,rd World through m,gution 173 !mb�utenee farmers 21

S UIlll.lK1"li Lirry. and nC'o\ paradlglll Surplll5 vall}(' 29, 31-35: rd;!.u,'e 34;

supplying labour po....er In long

Relat1\'c Surplus V31u,,"

boom 172; cxpcndullre, US. ISOO·

1980 1 03; relenuts as arising from

surplus value 1 1 3-1 1 4; comparable

early 10005 216; theone� ,hnt !itc

2001S-9 300 South Afnca, strikes of 2007 34),

Srrikes, 31: tT,lffi" "'ntroller\ US

su also Absolute Surplus Value,

Soil fCTIilir) 82; falllllS 321 Soros, GeorgI.', on \i!:alt: (Jf cr'�I� of

Impen3hsm� 164

First World War 154: rolo: m

Soclallr nccess.'H)' labour orne 25 'i.olidarno!iiC 206

Keynes ngJ.r. 163; and �end of

229

rrolit, m!I.'�[ and rem 1 12; sh:l. re m nanonal OUlput, J:l.pan on

SoclaU)' nectssary labour 46

Strachey, John 64. ISS, best known WTlfer on .\Iarxisl economics m Bnta]Jl n i 193& 163: dtcldes

Sunsidy

Ind'a 15I

of ntxt generulJon of

and real inH'Srmtnt. qUOted 195 MSlOp .. g O � 164

3<0

capltahsu 115-1 19

to

as rxlrtn:l.l to capitalist economiC

S}'Slrm 103-104, I l l ; Imle

attention to In Capl/al SS; role III

;ntegr:mng ma�$ of pwple tnto

�Wtt7}', I'JIlI 48: Ofl tunsfonnal1on of vailles uno prices 48 SHia IS5

Slales and caplt:lls. stn.lcturaI

TaIwan 218. 242

Taleh. Nass,m N,�hnlas, cheered 1101 1).1\'05 for altack on banker� 292 Tarlor. F W 34 Taylomm 3'i; and a�5embly Ime 35 Ta:hNer 220

composition of capllat 70-71 Index

Telecoms rnl'estmem boom of lale 1 9905 285

Temlll, Peter, on Smoot-Hawley Aa

)02 Temporary conuacts. Brol.1ln lJ� Ten, Gllhan. on Zombie banks. Il. '" Thailand 221, 242; per caplU gto""h Tht AUllmlilation o( Capllul (I,uxemhurg) 99

Tht Com"'8 Slruggle (or Power I�,racht-YI 163 Tlot DwleCflcs o( Nalure iFngel�) 82 The Glob.t/ Gamble (Gowan) 293 Tbe M,lm(l'sto o( Ihe Commllnut

1nurnilt/mwl to Ihe Workers of h I .. U'urIJ (Trntsky) 1 16

The mean. of pmducrion, nwnershlp of2'l Tilt Niltllrt of Cap/talul CrjSl5 (Slrachey ) 163

The new workmg c1ass.es of th� "ThIrd W'ori,r 3.16-33 9 The I',lilt.cal ECOIUlmy o( Grou,tb (Kar�nI 186

The Theory Imd I'rOlcllce o(Soculm"

(Slrachey) 163 Third \'('orld IS; t'ConomK JVowth during IOllg boom 161.

muitlnal10nJls HO-l2t, 25� su

aim (;Io"'al South

lbrte \hle Island JOB "ThrombosiS," cmlS- IS) Tiananmen !>quare prult's.... of l'II'l 244 "liger (uhs" 242

�Tige....- H2; .!.fter Asian

'flS;S 281

'bppintt pOinh JOR. 127

Ton) (;hff. on mllifar}' ,oml'<"""u" 1 17; on H-bomb 3nd long boom 172

TC'Chlll.:a! adl 3nce, and the organIC

srStcm 1 1 0- 1 1 1

71; and orgam' comp>Q$1I10n 7J

in 1960s 189

a:ooomy 201, 206;arniSlale

Social exclUSion. Id�loglCal charactt'r

Solialiution

to profir.abllJly 312

margmal to gloh.:!1 capll�1 1l4,

and war 156; mdustrialisatlon, In

Social wage U-

Marx on f.l.l1mg raIl' of profit ';'1 Stemdl,Josef 1-46 Stem upon 309; suggesllons uulored

to accumulation wllhm a nallonal

Soci31 Democracy, Id�lugy 1 64 oftcnn 341

Stttdman. bn 4S: alleged rc:!ut3110n of

•

Slave labour In USSR under Stalin 1511 different explan.:tuOfIS 149; rate of

the era of -globahsauon n 264·70

Sto.;khammcr, I:ngelbe", and finane ..

Stalin, on -catchmg up· ",,"h West 1 58:

1930$ 144·168,325;

Mux 102; In lemn'� thl'Ory 93-5; III

Stem, Tl)(!d Jil

281, 283.285.321

through lime 74 Smgapore 2 1 IS, 21 1 , 142

of

rc:latlODsblp left unr60IH:d br

Techlllcal �omposllllln of .:�pllaI 69.

Index

Tory Pan}. splrrs en 19'X)s and dlfferem multmauonal agendas of dlffermt ,.apllal, 26R TOta1if:lTlal1l�m, fheollt"

fad to foresee

CII)!;'S In hstrrn hl,)(' 17'l To)'n��. Poll)'. spreads mrth of two tblrds of populatIon totmg middle class 334: pral§(, for Gordon Brown

10] Trad.. Jnd bud�rI ddi:,ts uf US In 2000s r3 1 r,u.l.. .:ydc .�6 sr.. ,l/$" RU51n"�$ ndC'l 'J radt' ncgouiluuns 127

Tran�tornuu"n "f values 1Il10 pn.:t'S 4� TrarufMmalion problem 46,50, -4: umqut\ 01 Man:'i wlUUfln 4� 5"

,lIs" OklShlo Theorem TrJo)oalLonaluy Inde� 260

MTnad� of �orth Amenca. the EU and Japan !62 Trostle, Ronald, un IOnm'.IILOn and inability flf �mall f3rrmn to pa) ropJrIt"> Hl

Trot�kr. l..eon 1 59; on c:Jp ,u hsm hVing

h)' b<.N)nlS and slump' 611: on .(anti canon 1 1 6: On equahsanon of

e'onOlllL� d"Lc1()pment 187; on I:ollvu[siLt' and uneven

development LlI1du tapitalism 190

Trusls 86,119

Turn.-r, Adair, quoted 289-90 Turner. Graham 163

TurnuL'er ume 01 carmal, "nd rale of profil 235

Uncud 17, 1 86; on mulrmaunnal

cn"p()rallons JO early 2000s 25-:

hr\ n I Ju 260

tfiln�nallona

tInderconsumpfJOmsl lh.eQrK"l 58

l'nderprodu(fl
"

UnIon Mmlne de HJUI K;uanga, nalinnOlloSt'd 1 K5

� U!llp()lar world� 274

United �I�I", unpero31ilim wlthoU! formal colonits 1 81: \eizure- of l)hJJippine� and I'ueno RICO 97;

�conoUL" l·rlS"'� 11:110-1920 55; gruwth 191410 1919

144: .hare of world output, 1910 143; Im'eSlmem l/J 19205 146:

rrc:��lon 422

III

,

outpUI 194�-197() 16 1 ; recesSIOn 101 1949 16.�; 100h..ur I'rodut,;11\'t� in

1970s 101; mnhods to ktel'

1 917, 1 47: fall in

dynamu: of the 'y'lem 129; anJ

boom of 1920.. 146,7 Unproductive lah.)ut, ami wasl" produ'-1wn 127; Kalc o f m llrhan"JlIon

III

U�

�elm)lll O"e{ EUrope and Japan durmg f:."ld \'(u, 168-9; go�emment spendmg. dunnlt IUlIj: ooom l64: post war heJ(t'mon,' UWT Western lurope 180; share (If world OUlpUt In lung boom 170: o\'crs.ta� Im estment during Culd

War 1 8 1 ; unempIO}'lIIem in 1950) 171; gn>lV1h of fort lSSl trade 10

Vanat.1t (aplla I 3 8, 70 Vtntzuda 221, .1 5 1 ; and US 011 3 1 9 V,ewam 184, )8S; Fr�n,h wllhdra".11

116

20th "nd Iisl

CenlUrLa J3-: and !tJ'Owlh of wage

labour. JJ6 US capluhsm's mlerest and clLnure change .11-'

Usc \ .. Iue 2.1; in Adam Smllh 11 U� ,alue ;tnd e 'lchangc "alue IDS, 1"'6; �nd (Cns.s 59: IIndtr milnarv �umpetLllon 1 17

USSR, (Ch",acter of b;onomy afl('r 1919 158; n:onomLC m«halll�m, eSIOlbhshed III 1918-9, 1 ';7-9;

accumulatiun and �OnWmPIl\'O

I- -', 1f14 ; bur"amcr.le)' �u bS!IImes i t...:l f for ,apltJhSI cbss 157; sla\e lallour 1 76: and lnw 01 vaille 1-'6, 204; n::onomic growth 1950·19-0.

182 Vietnam War U":

nd"(N IIIl!e;

...

171,1911 Village IOdustTIC1> 143 \llro ll1

\'okker "coup" 196 Vokkef_ Paul, ralstS uuercu ra!1':'. 1 'F9 196

\'On Bonl..le" ",2, on tran\lunnanvn of ,,,Iu� rnt.., ron�n 48·9 \'('ad�. Kvh..rr, calls lor grealer Tt1:ulal!Un 192 Wajl,e comrol� I"'S W,lge l�houf III USSR 158 \\Jg,'d cmrlnymeO(, fall in

....

vnal

Afrl(an 'ountrle� 119 \\'ag..." :lnd deve!upmtnT vf CrI)CS 60; III

175; SC1:n as modd lor Third

ri.�� in U�

e�r...ndlrurc: in GNP dedlne5 durmg

World de\'dopm�LlI 18";

of low profiu

10nJ( boom 1 98;

Impenalism In

workef� III 1970§ 197; Japan m

1970, 101, share of arms

l;'I;()nunliC

policy,

�a'lem

I'.uropc 1 11 1 ;

1980s 194: (;,,11 10 median wage

ComfM:'li ll"n w>th WesT_ SrC7.hlle\

19"1J·98 136; !,rodIlCII,-e

on 10 1: �au<;o of

work force m poSt-WAr dC!("de� 126;

Uhfa-lm�mlo$m 92, ISS

mdunrial

output 1929-33; daclme 111 capital stock 19 19-45 164-�; Fedeflll R�rvt BJnk In ] 930-31, 14S: fede-ral e...�ndlture m New [k0l1 ,IIIJ m l00S 300; mll uJI') e-xprndllul1:, tltfo re World War T"o 165, gOL'crnment capllal I"tpendlllll1: I�41 1.5"; �13te slwl'\' uf 'ovestmcnt 1941 1_P; e<:onomK­

WJSIC

177:

emplormc:nt in trade and finance 116: r,lIC'S of pmlit� and

,.:oods appear by 1960s 175; as world second c..:onOllLII, power 111; prOOU<.lIL'h- and competlflOn \L-"h tiS IIW;

onvc:slmtnl_ 1948-2005135,

ag.n�ullura.1 prohl"m< 1-6; ndlcal

growth m corporallons sales after

fluclu.J.nun,

emplO) 'w workfol\:t 1940-70 In;

Plaza Accurd 166: al1'empl 10 �Jln

from RU'�lan u.ccupatioll ilf Afghanistan 168-9: compuler

wnsumer

III

jo;rvwlh 1-8, 104;

frum <;t;llm 10 liort-.lo,;he,- 1 15; gruwth rJte� 10m: Icrll1 d�,"linl' 10J; !tI'0WI� depc:ndcou: on

I 980!. ! I J;

1920s 145; nOI causc III

1970s 197; of US

real fall III GermOln)

>II

carly l000s 1)7 \'(';111 Strtel Crash 14, \'(.llra' 42; 19nures p rublem of nme 41;

KonUmlC CrlSnl 56 War and surplus ,-alue 156 War on lerror and arms spc'ndmg 2J4: laduTC$ n i 317 \'('Hrell, Bill, (hooTl ImP<'nali,,", '"

adv"n..lOg e..;Oln<>ml.. UcHlurmenT I 89-9(J

foreign lude 20-'; 'l.lgnJ(II>O uf

\'('J�, WJ!(W by U!I in {.l()b.ll SoUlh

cause� and ....al". of 1 11 1 , 21)'7,11;

comp,u"d I..,.h JaJ'ane� �ns15 01 1990 l i e'; why mMktl relorms wert nOI ,1Ilswtr 110·11; utlLuon

World 268 Wa�hUlg{On Coos.cnsw; 2.!1 Waslc ...xpend"ure 2)4; III tlS, I 'FII J1�; Jl\d a..�umulal!om, 12'1-.111; a

J.11; arms sprndlOS 20H; 134;

rC\'o!t5 of nJuonal 1I111l0TIIle� 108;

\'(a'le J'f(lduLtHm 126

habn�e ot trade 198; IT,lde �nd

collapsc of 1,4

"",-pur,mOllS o'enak" Japanese m 1 9'K1l; 165; IlIIport of IOPUIS In

19� and t".Irl> 1O()4h 161; Con!tl'css, fear that Japan would ovenaJ.e liS 21 1 , mvestment 221; nwnher of wotktn m 1998 comp m :d

wnh 19"11 Olnd !'HO

budj\el ddiclh 10 1000� 173; hlow� 10 hegenlOn)', 274; overseas hegemon)' �nd CTISIS of 2007·9 J27; nJtiom;Jhsc-s Freddv �I.i(; and hnny MAe 2n: sourCt5 of 011 .1 1 9 ; world's blggcst lIlJnufa(!unn�

1980s_ 102,J; HISIS of Idte 19St),_

of bte 1989 and carl) 1 9 9 1 !08;

VJ1(m�'I!II," P Value added

III

schools 135

Vahlt 15_ 31. 33; sllhsmnce 01 16: and prlC�s 46-50; d llTn i g nlscs 60·6 1 , \iau: on productivit), and 27; and [echlllc.ll ad\'and' 2"'

WUntry 331·3

Unproducti�'c: expend!tures, ;lOd Ihe IlIde"

VarnpLrt'-lik� "h.lra�'ter of �3plfah�m S4 Index

271_ 17j; hut. W.l�cJ In Third

."O(radKlI1r\' rul.. 131; � \'('�IKhIless (\;onom\ 25"

"

3.11; 1Il\!h III

WeltJre e.;..pclldilure. I'roJu,IIIt Jnd unproJUI;liL e I ��; ;1, rrUpllrllClIl lIt (".])1' in different collntTle� I 'F� 'I� Ilahl...I 238

\'('elf�r.. prOVISII.m_ eOldy developmcm 11\ SWam 114; dl.'Hlnpmem III '!Uth c('muT)' I 35; dU rLn� Ion!, h.,."m '"

to WeSlcrn Europe and

164; C0515

US 174, ,:uII 13:-

Wclf.ltc State lind �d5 of rapllal 135

'«cn 11.11>:'0, quofed on 1fl§I.1buily of Chiot'Sl'a;I)n<>my

�bl!p� HI; quottd on

financLlII CrLsn 280; quoted on

-ddc\'crag.tng� 290; on role of US

hnu!>Chold OOIr()WtOl; m kecpwfl, gluh:.l.:.:onOln)· gome 188

Wolff. Ed....l0

19(-6. 195.

Womcn. m.1rnrd. eOI<)

19�

,"10

t'mplo)"ed

workforcr durmg long boom 17J Wood. Ellen 1 12;on Imperialism a) caused by poll(":5. not capllahst economi.;s

Workmg dJ.)". Iq;al Ilmll) nn ll, shortentng

HI

20th (Cnlur)" 3.1;

knglhcOing of 31 Work1D{!. hours, d«llIle In firsl pari uf

249

'«011, Martm I \I�; onTh;!, ';ns,s nf 1997 iI$ a

Se<;{urs J38·344

9J; S19tr not mSlrumem

of .1ppropr'J.!lon under caplralism

20th ctnlury 89

wor1..lOS )"car, diftefcllI (ounmes, 2004 239; UmlN Stale�. 19-3 1998236

\\orkplalC and (OmnlUml)' 34]

World accumll13110fl, 1 �70·2O(H 232 World Bank. endo�mel\l of �{at� phoolng

Ul

World growlh

19SOs lIod 19bOs 1 tl6 1961·2ooJ 23 I

World Trade OrgaDIS3uOn.

neg.. m atlons, sutes and corporate 1n[��Sts 266

World Tr3de Organl�al1l>n 1 7

\XOrld(;OOl. bankrupt.:}' B}

10' WIXllworth, m UK goes bust 291

WrJ�t Mtlls, C 33 1

Work

X.cfficlem:y

mr:t)ur�mcnt ..nd

pa)Jl1i'Ol

169, In West and in

•

lI!>!>R

20.

Khcmes 137

Workers. Ilum!xr In world 3 ecordmK 10 Deon swdy JJ I; as prnpomon of woricforcc in US 334

WorkHlS

•

dJ.'�. 11\ dasslcal '\[anHSm

12 9.3u; [hr, >n<:\ Ilf d.:.:linc JJO·JI;

'rhslO, Ikms. and dl�so lul1(ln of USSR 210 ZapallSlil5 346. 34S

tt!ob.ll SIZC JJ I: gl"I>al lh'lTll>ullon JJ-; une\'ennt)) ","hm 3 ,0;

Zei(,s, uo and Ctruu. CIJII"t". on

tebUoil ol lhe lorm.11 and

.fumble banh I I

mfonnal

South AfrICan townshIp 34J

Index