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A Critique of "Underconsumption Theories"
How Should Crisis Be Explained, And Has Modern Capitalism Reslly Overcome
Crisis?
(From 'Prometheus' No.29 1998)
Written by Hayashi Hiroyoshi
Translated by Roy West
Contents
-
Crisis is a Reality
-
Marx’s Criticism of the Theory of Underconsumption
-
Workers Under Other Capital
(Workers as the Sellers and Purchasers of Commodities)
-
The Contradiction Between Production and Consumption Under Capitalism
(But not as the Underconsumption Theorists Understand It)
-
“The Cause of Crisis”
-“Limited Consumption” and the Development of Unrestricted Productive
Power
-
Crisis and the Fate of the Capitalist Mode of Production
-
The Stalinists’ Concept of Crisis
-Mendelson’s Theory and History of Crisis
-
Modern Capitalism and Crisis
1. Crisis is a Reality
The consecutive bankruptcies this past year of banks and security firms
-- certainly no small matter -- shocked the bourgeoisie and conservative
politicians, sending them into a state of near panic while reminding them
that crisis is not a thing of the past. The immediate decision to again
use “public funds” which had been so heavily criticized at the time of
the scandal involving housing loan companies (jusen) -- but this time the
sum was ten times larger -- says a great deal about the bourgeoisie’s
bewilderment and sense of crisis. Since the end of the war they had continuously
repeated that “crisis is a thing of the past which will no longer occur
since the management of capitalism has become feasible with the development
of Keynesianism.”
Crisis, however, is indeed very real -- this reveals that as long as capitalism
remains capitalism the bourgeoisie will never be able to escape their fears.
They have suddenly abandoned such slogans as easing restrictions, administrative
reform and financial restructuring -- these were adopted by the Hashimoto
administration with great fanfare and were the “officially authorized”
policy of the bourgeoisie -- to fall back to Keynesian expansionist policies
and enlarged programs to stimulate business. This happened at the time
when a critical standpoint towards Keynesianism had begun to be established
following the bubble period, and the effectiveness of “small government”,
financial restructuring, de-regularization and free competition (market
economy) was beginning to be proclaimed. What a careless and irresponsible
bunch they are!
It is not easy to say what will be the result of their change in standpoint,
that is the expansionist policies to stimulate business, but it is certain
that a bubble, financial collapse or a slip into inflation are all possible.
The bourgeoisie believe that a bubble is of more use that a recession.
It was said after the war that crises were finished, and now there are
cries that there is no escape from crises. But what is a crisis in the
first place? Is it something that is unavoidable under capitalist means
of production? Or can it be overcome through reforming capitalism to make
it a little more humane?
Since the beginning of the 19th century when the cyclical and regular occurrence
of crises became visible, many theories have appeared to explain crises
and their cause. Of these explanations one which has been particularly
emphasized is the so-called “underconsumption theory.” This, in other
words, is a theory that explains the cause of crisis in terms of “insufficient
consumption” under capitalism. This theory can be broadly divided into
two currents. On the one hand there is the “humanistic” theoretical current
represented by Sismondi, the Narodniks (and later Rosa Luxemburg). On the
other hand there is the reactionary, bourgeois (parasitic class) view connected
with Malthus and Keynes. (The JCP’s position lies somewhere in between
these two currents, their view is “humanistic,” on the one hand, and
Keynesian on the other, and is therefore totally inconsistent. In the end
they return to the reactionary bourgeois standpoint, and this is probably
inevitable. Already no essential difference can be found between their
position and the Keynesian standpoint.
Simply put, the standpoint of the theory of underconsumption states that
since capitalism is a society based on the exploitation of workers, the
workers’ consumption is also exploited and inevitably becomes “too small.”
If workers produce but don’t consume how can surplus value be “realized”
(be sold)? Under capitalism the value of a commodity appears as constant
capital + variable capital + surplus value (C + V + M). The question is
how is the part M realized (Luxemburg’s awareness of the problem is a
little different since she asks: “Where does the money come from for capitalists
to realize the M part?” and “Isn’t it impossible for capitalists to
find this under ‘pure’ capitalism?” Of course this is nothing but a
different kind of underconsumption theory.)
The theory of underconsumption, represented by Sismondi, was introduced
to explain (criticize) the magnification of capitalist contradictions.
Thus Sismondi and the Narodniks scholars had a certain positive significance
in that they exposed one essential side of capitalism. However, even in
their case, this theory is nonsense and is unable to grasp the essential
content of capitalism. The theory of underconsumption was a reaction to
and criticism of Say, Mill and Ricardo’s theory of equilibrium. In other
words, this was a reaction against the view that capitalism is a mode of
production basically without contradictions in which no essential limitations
exist that internally negate the market economy, and since production is
consumption, sales are purchases, supply is demand (and the reverse as
well), general overproduction or a general crisis can not occur.
Marx, of course, was opposed to the theory of equilibrium, but he also
opposed the theory of underconsumption. He showed that it was based on
a completely narrow and superficial understanding of the capitalist mode
of production, and firmly exposed its reactionary nature. Essentially Marx
explained crisis in the following way:
“Crises are never more than momentary, violent solutions for the existing
contradictions, violent eruptions that re-establish the disturbed balance
for the time being.” (Capital Vol. 3, chapter 15)
“The world trade crisis must be regarded as the real concentration and
forcible adjustment of all the contradictions of bourgeois economy.” (MECW Vol. 32 p. 140)
For Marx, crisis was the explosion and concentrated expression of capitalist
contradictions. Marx insisted that capitalist contradictions must break
out in the phenomenon of a crisis or panic because this is precisely the
true character of capitalism, here lies its cause. Moreover, Marx points
out that crisis is not merely the expression, or explosion of capitalist
contradictions, but at the same time a violent solution, a process of forceful
readjustment and the dissolution of disequilibrium.
Along with the development of capitalism, the conflict or contradiction
between value and use value, production and consumption, the production
and realization of value, supply and demand, etc, also necessarily develops
and deepens. Simply put, at a certain stage in the development and movement
of capitalism, a situation of overproduction inevitably arises where the
produced commodity is not sold, cannot find a market, and the market is
too limited for the produced commodity.
2. Marx’s Criticism of the Theory of Underconsumption
We have seen that one example of an incorrect theory of crisis is the theory
of “underconsumption,” but what sort of theory is this exactly?
This theory explains crisis, i.e. the fundamental contradiction of capitalism,
from capital’s exploitation of labor. Hence, it appears at first glance
as a very convincing explanation.
Since this theory has a simple appearance it is extremely accessible and
has the character of being easily connected with opportunism. Already during
the period of the Second International, the Social Democrat Tarnoff offered
the proposal that crisis could be overcome through achieving “high wages.”
Even today this is the fixed idea and common view of the JCP and trade
union opportunists.
The viewpoint of the advocates of the theory of underconsumption is simplistic.
Unlike the equilibrium theorists who deny general overproduction from the
simple perspective that production is consumption (demand) and sales are
purchases (or purchases are sales), advocates of the underconsumption theory
argue that under capitalist production sales and purchases are not in agreement
because the workers are unable to buy all of what they have produced, and
thus overproduction is unavoidable. Therefore, their solution is to expand
the consumption of the workers and raise their standard of living. It is
probably a necessity that they adopted the particular slogan: “Overcome
depression through raising wages.” They argue that as wages are increased
crisis can be easily overcome. However, if this were indeed so, the question
arises why the bourgeoisie would be unwilling to employ such a simple and
effective method. This question is either treated as an insolvable mystery
or is brushed aside with the arbitrary and nonsensical explanation that
“the bourgeoisie are stupid.”
This theory at first seems quite reasonable. For example, a worker sells
his labor power to the capitalist for 8,000 yen a day. In four hours of
labor the worker produces products necessary to reproduce his own labor
power. In other words, necessary labor is four hours (the currency expression
of products objectified by one hour of labor is 2,000 yen). However, the
capitalist purchased the right to use one day of labor power, and has no
reason to halt labor after four hours. If he did this all of his profits
would disappear and he would probably cease being a capitalist. Thus not
four, but eight hours of labor are demanded and in this way the exploitation
of labor is realized. Even though the worker performs eight hours of labor
in one day, he only receives payment for four hours. The capitalist appropriates,
without compensation, one half of the value the worker created. Since the
worker only receives one half of the total value created (16,000 yen),
the worker’s consumption is “too low” compared to production. The worker
is definitely unable to purchase 16,000-yen worth of goods with his 8,000-yen
wage.
However, it should be clear at a glance that is completely nonsensical
for the underconsumption theorists’ to say that under capitalism surplus
value should not be realized, and that this portion (surplus) in fact represents
an excess since production exceeds consumption.
The problem is easily solved. (Let’s look at the case of simple reproduction.)
The surplus value -- i.e. the part exploited from the worker -- is consumed
by either the capitalist alone or by others. This part is definitely not
something that “cannot be sold” or find a market. Just consider the case
of the individual capitalist. For example, it does not arise that the capitalist
who invests 1 million yen and gets 1.2 million yen worth of commodities
“cannot sell” them. Needless to say, the capitalist who invests 1 million
yen and through the exploitation of workers becomes a capitalist with 1.2
million yen worth of commodities, can through the mutual exchange of his
commodities ? which of course includes the surplus value -- realize the
value of his own commodities. This presents no theoretical -- or practical
-- difficulty. At issue for the theory of the “realization” (i.e. its
“conditions of equilibrium”) is, as Marx clarified for the mode of reproduction,
only that the V + M (variable capital and surplus value) of Department
I. (production of means of production) can be exchanged with the C (constant
capital) of Department II. (production of means of consumption).
This is also essentially the same thing for expanded reproduction. The
difference between expanded reproduction and simple reproduction is that
in expanded reproduction, i.e. accumulation, materially the conditions
for accumulation already exist. If these conditions have been satisfied
in the production of the previous year, theoretically it is possible for
conditions of complete “equilibrium” to continue to be satisfied, and
it cannot be demonstrated that the realization of expanded production is
“impossible.”
For this reason Marx and Engels (as well as Lenin) necessarily criticized
the theory of underconsumption.
“It is a pure tautology to say that crises are provoked by a lack of effective
demand or effective consumption. The capitalist system does not recognize
any forms of consumer other than those who can pay, if we exclude the consumption
of paupers and swindlers. The fact that commodities are unsaleable means
no more than that no effective buyers have been found for them, i.e. no
consumers (no matter whether the commodities are ultimately sold to meet
the needs of productive or individual consumption). If the attempt is made
to give this tautology the semblance of greater profundity, by the statement
that the working class receives too small a portion of its own product,
and that the evil would be remedied if it received a bigger share, i.e.
if its wages rose, we need only note that crises are always prepared by
a period in which wages generally rise, and the working class actually
does receive a greater share in the part of the annual product destined
for consumption. From the standpoint of these advocates of sound and ‘simple’
(!) common sense, such periods should rather avert the crisis. It thus
appears that capitalist production involves certain conditions independent
of people’s good or bad intentions, which permit the relative prosperity
of the working class only temporarily, and moreover always as a harbinger
of crisis.” (Capital Vol. 2, ch. 20)
In Anti-Duhring Engels states that although ‘underconsumption’ is as old as mankind,
overproduction is a phenomenon that only exists along with capitalism.
In his Theories of Surplus Value Marx also writes:
“This was indeed also the case [underconsumption of the masses--Hayashi],
and to an even higher degree, in the ancient mode of production which depended
on slavery. But the ancients never thought of transforming the surplus
produce into capital. Or at least to a very limited extent. (The fact that
the hoarding of treasure in the narrow sense was widespread among them
shows how much surplus produce lay completely idle.) They used a large
part of the surplus produce for unproductive expenditure on art, religious
works and travaux publics. Still less was their production directed to the release and development
of the material productive forces -- division of labour, machinery, the
application of the powers of nature and science to private production.
In fact, by and large, they never went beyond handicraft labour. The wealth
which they produced for private consumption was therefore relatively small
and only appears great because it was amassed in the hands of a few persons,
who, incidentally, did not know what to do with it. Although, therefore,
there was no overproduction among the ancients, there was overconsumption
by the rich, which in the final periods of Rome and Greece turned into
mad extravagance. The few trading peoples among them lived partly at the
expense of all these essentiellement poor nations. It is the unconditional development of the productive forces
and therefore mass production on the basis of a mass of producers who are
confined within the bounds of the necessaries on the one hand and, on the
other, the barrier set up by the capitalists’ profit which [forms] the
basis of modern overproduction.” (MECW Vol. 32 pp. 157-8)
In ancient society, even though there was surplus consumption, there was
no surplus production. If the cause of surplus production were underconsumption,
as the underconsumption theorists claim, then there should have been more
violent crises in ancient society than in modern capitalist society. However,
it is common knowledge that there was no crisis phenomenon in ancient society.
For this reason it is clear that the theory of underconsumption is nonsense
-- this is also what Marx and Engels said. Of course, this is only a negative
criticism, but for the moment it is sufficient to realize the meaninglessness
of the JCP’s theory of underconsumption.
Furthermore, Marx writes of an anonymous author opposed to Malthus’ “principle
concerning the nature of demand and the necessity of consumption,” whose
work “contains the essential secret of glut” even though he completely
misunderstood Malthus’ thought. This anonymous author wrote:
“The very meaning of an increased demand by them” (the labourers) “is
a disposition to take less themselves, and leave a larger share for their
employers; and if it is said that this, by diminishing consumption, increases
glut, I can only answer, that glut is synonymous with high profits.” (MECW Vol. 32)
This writer is saying that a decrease in consumption is the magnification
of exploitation (i.e. high profit ratio), thus oversupply is synonymous
with high profits. With these words he gleefully imagines he has struck
at Malthus’ logical contradictions. If one follows Malthus’ argument,
high profits can signify overproduction, i.e. crisis, but since high profits
mean prosperity for capital, what Malthus is saying is a little strange.
This author is ironically saying that Malthus claims that workers are exploited
and consumption is reduced and that this is the source of surplus profit.
However, as exploitation increases, profits expand, and in a capitalist
society prosperity is the magnification of exploitation (i.e. it comes
from the level of the profit margin). Therefore, a market surplus has the
same meaning as high profits. It is said that the rise in workers’ wages
will solve the contradiction through increased consumption, but increased
wages means that profits will be eroded and this will cause a dilemma for
the solution of the crisis. On the other hand, even if the markets for
capital are expanded through increased consumption, this would reduce surplus
value and thus weaken and scale back the motive for the activity of capital
and accelerate the crisis. Therefore, this method is contradictory and
nonsensical. This is how this author ironically comments. Within
these critical words, Marx then sees the fundamental contradiction of capitalistic
production. The approach of the JCP is the exact opposite, that is, they
are forever stuck in the superficial standpoint of the theory of underconsumption.
In a different place Marx said precisely the same thing when he criticized
Ricardo’s “denial of the plethora capital”.
“Secondly [he overlooks] that the output level is by no means arbitrarily
chosen, but the more capitalist production develops, the more it is forced
to produce on a scale which has nothing to do with the immediate demand
but demands on a constant expansion of the world market. He has recourse
to Say’s absurd assumption that the capitalist produces not for the sake
of profit, for exchange value, but directly for consumption, for use value
-- for his own consumption. He overlooks the fact that the commodity has
to be converted into money. The demand of the workers does not suffice,
since profit arises precisely from the fact that the demand of the workers
is smaller than the value of their product, and that it [profit] is all
the greater the smaller, relatively, is this demand. The demand of the
capitalists among themselves is equally insufficient. Overproduction does
not call forth a lasting fall in profit, but it is lastingly periodic.
It is followed by periods of underproduction etc. Overproduction arises
precisely from the fact that the mass of the people can never consume more
than the average quantity of necessaries, that their consumption therefore
does not grow correspondingly with the productivity of labour.” (MECW Vol. 32, pp. 101-2)
Marx explained that the profit of the capitalist (today one could say company)
stems from the workers’ demand [the demand based on the money (wage) the
worker earns from selling labor power to the capitalist] being less than
the value of the products the workers create. As this demand (i.e. wage)
becomes smaller relatively, profits grow correspondingly larger. For the
capitalist the workers’ demand is certainly considered important, but
to expand this demand would require paying more and more to the workers
thereby reducing profits. However, for capital the reduction of profit
has an absolute limit, namely the collapse of capital itself. Capital only
produces to obtain the maximum profit possible, rather than consumption
being the goal of production. If profits cease then capital ceases production
regardless of consumption. No matter how much demand there is for a given
product (i.e. in this sense, consumption), or how much a product meets
the needs of the people, if the product cannot be sold at a profit there
is no demand as far as capital is concerned. On the one hand, for capital
the exploitation of the workers means the reduction of demand, and capital
needs to increase this demand. On the other hand, however, capital cannot
expand the workers’ demand and “sufficiently” secure this demand. If
this were done, profits would decrease and this would be fatal to capital.
On the one hand, demand must be increased, but on the other hand, this
is not possible. Here the limits and contradictions of capital are clearly
revealed.
For capital, increasing profits is the source of prosperity and the cardinal
premise. The expansion of profit is the same thing as capitalistic prosperity,
and all other conditions being the same, the increase in profits is only
possible through strengthening the exploitation of the workers, that is
by decreasing the wage which is the basis of the worker’s consumption.
The prosperity of capital only becomes a more certain and secure thing
through limiting the consumption of the workers within all possible limits,
that is, only through the “insufficient consumption” of the workers.
Certainly the overproduction of the market -- i.e. “insufficient consumption,”
especially the “insufficient consumption” of the workers -- is synonymous
with high profits. However, just like Robert Owen and Sismondi, the JCP
is completely unable to understand this fact.
3. Workers Under Other Capital
(Workers as the Sellers and Purchasers of Commodities)
One reason that the theory of underconsumption can appear to be correct
is that for capital (a given capitalist or company), the expansion of the
consumption of those workers under other capital is a preferable situation
since it expands the market. The spread of the JCP’s silly fantasy is
based on this hypothesis.
For capital, the worker as a seller of a commodity and as a purchaser of
a commodity are two completely different phenomenon. The worker as a seller
of a commodity receives money (wage) with which to buy commodities. This
sort of worker is important to capital as the seller of commodities since
it means demand. On the other hand, in the case of the worker as the seller
of labor power, the capitalist wants to control and restrict the price
of the commodity (wage) as much as possible because lower wages mean higher
profits, and higher wages mean lower profits. The JCP is completely unable
to understand this contradiction, or the confrontational nature of the
wage system.
Marx wrote that capitalists (especially those producing consumption goods)
see the workers under other capitalists as purchasers or consumers of their
own products, and thus as being outside the capital/wage labor relation.
The expansion of consumption (i.e. increased wages) appears to be beneficial.
However, essentially this is a fantasy and the capitalist becomes aware
of this during a crisis. The JCP’s idea that a crisis can be overcome
through increased consumption (increasing the workers’ wages) is based
on an absolute fantasy. Increasing wages would certainly directly increase
demand for the consumption goods capitalists. However, for the individual
capitalists or capital in general, increasing wages would lower the rate
of exploitation and profits, and since this would in fact intensify the
crisis, this is a cure (solution) that would kill the patient.
Capitalists take seriously and make a fuss over the consumption of millions
of workers because they see an enormous demand. Capitalists who produce
consumption goods are directly, and capitalists who produce production
goods indirectly, interested in the expansion of this demand since they
see this as an expansion of the market for their own products (in a sense
they are correct). Ultimately, however, it is a fantasy to think that the
expansion of workers’ consumption (increased wages) is in the interest
of capital. This is because at his own point of production the capitalist
is engaged in a directly confrontational relation with the worker. In this
relation (i.e. capital/wage relation), the capitalist cannot casually think
that higher wages which increase consumption are in his interest. The reality
of capitalist society directly appears here in the opposition between capital
and wage labor. This confrontational relationship penetrates each side
of the equation. The essence of capitalist society is the opposition between
capital and wage labor, not their common interest. Clearly the capitalist’s
hope for workers consumption is nothing but a temporary illusion, and he
will soon wake up, and indeed must wake up, from this sweet daydream. Only
foolish reformists, liberals, syndicalists and the JCP pick up the fantasy
of the capitalists and (mis)use it for their own opportunism and class
collaborationism.
Certainly in capitalist society the working class is an enormous power
and a consumer class. Unlike slaves, the workers are formally (legally)
an “economic” class (i.e. exchangers) equal to the bourgeoisie. Once
outside of the employee relationship, the workers appear as “citizens”
independent of the capitalist class, or as the purchasers of capital’s
commodities (capital’s beloved customer). Moreover, in capitalist society
the working class as consumers are flattered with all sorts of words, and
flooded with advertisements to tempt them to increase their consumption.
It is plain to see that workers who appear on the market with money earned
from the sale of their labor power represent a huge source of demand, and
that this consumption has important meaning for capitalistic prosperity.
The weakening of working class consumption is considered one of the decisive
causes of capitalistic depression. However, this is simply incorrect.
This is merely a concept that comes from a capitalist looking at the relationship
between another capitalist and his workers. If seen from the real oppositional
class relationship that exists between capitalists and workers, this is
nothing but a utopian concept or fantasy. Marx discussed how this fantasy
did not grasp the essential or internal relationship between capital and
labor in the following way:
“Actually, the relation of one capitalist to the workers of another capitalist is none of our concern here. It only shows every capitalist’s
illusion, but alters nothing in the relation of capital in general to labour.
Every capitalist knows this about his worker, that he does not relate to
him as producer to consumer, and [he therefore] wishes to restrict his
consumption, i.e. his ability to exchange, his wage, as much as possible.
Of course he would like the workers of other capitalists to be the greatest consumers possible of his own commodity. But this is just how the illusion arises -- true for the individual
capitalist as distinct from all the others -- that apart from his workers the whole remaining working class confronts him as consumer and participant in exchange, as money-spender, and not as worker.” (Grundrisse, Penguin Classics p.420)
Marx next discusses the relation between the limits of consumption and
crisis:
“It is forgotten, that, as Malthus says, ‘the very existence of a profit
upon any commodity pre-supposes a demand exterior to that of the labourer
who has produced it’, and hence the demand of the labourer himself can
never be an adequate demand. Since one production sets the other into motion
and hence creates consumers for itself is an ‘adequate demand.’ On one
side, this demand which production itself posits drives it forward, and
must drive it forward beyond the proportion in which it would have to produce
with regard to the workers; on the other side, if the demand exterior to
the demand of the labourer himself disappears or shrinks up, then the collapse
occurs. Capital itself then regards demand by the worker -- i.e. the payment
of the wages on which this demand rests -- not as a gain but as a loss.
I.e. the immanent relation between capital and labour asserts itself. Here
again it is the competition among capitals, their indifference to and independence
of one another, which brings it about that the individual capital relates
to the workers of the entire remaining capital not as to workers: hence
is driven beyond the right proportion. What precisely distinguishes capital
from the master-servant relation is that the worker confronts him as consumer
and possessor of exchange values, and that in the form of the possessor
of money, in the form of money he becomes a simple centre of circulation
-- one of its infinitely many centres, in which his specificity as worker
is extinguished.” (Ibid. pp. 420-1)
Outside of production relations, in the sphere of circulation and the market,
the relationship between capitalists and workers appears to be a relationship
between mutually equal “citizens” with independent rights, and a mutual
relationship between a sellers of commodities and purchasers. The essential
‘internal’ relationship between capitalists and workers (a master-servant
relationship) is thus abstracted from and forgotten. The worker as “one
centre of circulation” also has an important “social role” (the JCP
has actually earnestly used such an expression) to play in this society
of capital. That is, through increased consumption the worker can make
an important contribution towards overcoming the difficulties of a crisis.
For the individual capitalist, other capitalists’ workers are not workers
but merely possessors of money, purchasers, or “citizens” who represent
demand. Moreover, since every bourgeois regards the worker not as a worker
whose consumption is narrowly limited by class relations, but merely as
a possessor of money, as a consumer, and based on this premise because
production is strengthened, production easily exceeds demand and must do
so. If the bourgeoisie were able to evaluate the worker “rationally”
or from the overall social relationships, they would not view the worker
simply as a consumer, and they would know that within the confrontational
class relationships their consumption is necessarily limited. However,
this rational understanding is impossible for them because they are limited
by their narrow-minded class-based perspective.
If a crisis arrives, however, the brutal reality of class society immediately
shakes the bourgeoisie free from all illusions. They come to think of ideas,
such as the view that raising workers wages or expanding consumption through
higher wages is of decisive importance for profits, as optimistic foolishness
or complete drivel. In other words, Marx’s so-called “immanent relations”
penetrate their consciousness.
The individual bourgeois sees the workers of other capitalists as simply
purchasers or customers for his own commodities. Therefore, he reasons
that a rise in their income would mean increased demand for his commodities,
and so he hopes for an increase in their wages and thinks that this will
increase consumption and demand. However, once a depression worsens, and
begins to have a direct effect on this capitalist, his fantasy that an
increase in wages will expand demand is blown to shreds. Furthermore, in
place of this fantasy the immanent truth of capitalism, its essential relations,
are deeply felt, i.e. the truth of the opposition between the interests
of capital and labor, how a rise in wages means a decrease in profit, how
if this rise progresses without limit it would mean the collapse and end
of capitalism. The view that a rise in wages means an expansion of consumption
and demand provides no comfort because if there is no profit, it becomes
impossible for capital to exist as capital. The essence of capital is production
for profit, certainly not production for the sake of the consumption of
the mass of workers and producers. In other words, capitalism is capitalism,
not socialism.
Marx’s view is important since this fantasy is not only common within
the bourgeoisie, but has in fact been widely circulated not only among
leftwing parties, but also within the leadership of the labor unions. They
insist that the increased consumption of the workers would expand the market
and is thus one important -- if not the only -- means of overcoming a crisis.
By emphasizing the expansion of consumption would also benefit capital
through the expansion of the market, they pursue collaboration with capital
and advocate the common interests of capital and the workers. While berating
the bourgeoisie for not being wise enough to pursue a policy of common
interest between all people (classes), they completely ignore the confrontational
class relationship between the bourgeoisie and the working class. In fact,
there is nothing more convenient for collaborationists than the fantasy
that crisis can be overcome through increased consumption. This is the
idea that the only thing obstructing this fabulous “win-win” policy for
everyone, which would overcome the crisis for the bourgeoisie and ensure
wage increases for the workers, is the foolishness and stupidity of the
bourgeoisie.
The Socialist Party, JCP and labor unionists should seriously ponder why
the bourgeoisie would not happily carry out this sort of policy if it is
indeed in their own interests. In fact, the reason is not the stupidity
of the bourgeoisie or their superficial understanding. The nonsensical
argument advanced that chance, misunderstanding or stupidity would prevent
a policy that would be rooted in the interests of all classes and control
their fate is a far cry from scientific thinking (even though the expression
“scientific socialism” is often uttered by the JCP).
The JCP fails to understand the essential point that the “system of consumption”
has an immanent necessity for capitalism, and this cannot be removed through
reforms. The attempts to change this are complete nonsense and bring about
no results (in the case of the attempt to overcome a recession this effort
produces the “opposite result”). The expansion of consumption of the
masses is thus a dilemma for capital. Even though this is intended to overcome
the recession (through the expansion of the market for capital), this is
a policy that would deepen and expand the recession (because the expansion
of consumption through a wage increase would decrease profits for capitalists).
Marx clearly recognized that limited consumption itself (i.e. the greatest
possible limitation of consumption; that is, the greatest possible exploitation
of the workers) is the basis of and starting point for large profits and
thus capitalist prosperity.
An increase in workers consumption means a decrease in profit. Therefore,
the dilemma is that an expansion of the workers’ consumption would mean
a loss of the (most important) basis of capital’s prosperity, and the
conditions for the development of a crisis would become greater. The JCP
has been completely unable to “solve” this practical contradiction thus
far, and will be unable to do so in the future.
The JCP has been unable to understand that the idea that a rise in wages
could expand the market and play a role in “reviving the economy” is
nothing but a simple fantasy, a mistaken one-sided view within the bourgeoisie.
If a crisis deepens, the bourgeoisie will immediately listen to “reason”
and drop this fantasy under the pressure of reality, but the foolish petty
bourgeoisie (i.e. JCP) scramble to pick up this discarded illusion.
The idea that the market can be expanded through increased wages and thus
a crisis -- the concentrated expression of the contradictions of capitalistic
production -- can be combated, is a bourgeois viewpoint, and moreover a
temporary and superficial viewpoint.
If it were in fact possible under capitalism for the people’s consumption
to be enlarged to the point where profits were zero, then certainly all
“insufficient consumption” could be eliminated and all crisis and depression
would be finished. However, this in fact cannot and will not occur. The
basis of the JCP’s politics is the incredibly sweet fantasy (suitable
for the petty bourgeoisie) regarding the capitalist mode of production,
which lacks an awareness that the “system of consumption” that signifies
the exploitation of workers is necessary for capitalism and that essentially
this base of capital cannot be alleviated
Certainly if it were possible to expand the workers’ consumption with
no regard for profit, then it could be said that “insufficient consumption”
in every sense could be eliminated, and capitalist recession could be solved.
In that case the sublation of profit would mean that capitalism had ceased
to be capitalism. However, before this stage could be reached, capital
surely would have begun to counterattack. It is certainly impossible for
wages to be raised to the point where the consumption limits of the workers
were decisively eliminated. For this to happen the rule of capital would
have to be abolished. Workers should never forget for a moment the essential
limits of capital, i.e. capitalism is production for profit, not for consumption.
The fantasy of the JCP in the end revolves around the idea that capitalism
is not capitalism, and production is not for profit, but directly for consumption.
As a result of this fantasy, they replace the class struggles of the workers
with collaboration with the bourgeoisie, and attempt to convince the bourgeoisie
to eliminate the contradictions of capitalism and work together to obtain
capitalist prosperity. In other words, the view that raising the wages
of the workers would be in the interest not only of the workers themselves
but also the bourgeoisie because the increased consumption would expand
the market and thus be the path towards eliminating overproduction and
overcoming the economic recession; as a result this would be a policy that
would be good for all of the people. The reason why the bourgeoisie would
not be aware of such a wonderful position can only be explained by saying
that they are dim-witted. They believe that this dogma is the truth, and
that convincing the bourgeoisie of this can save society. In fact, however,
they fail to understand the reality of capitalism and have completely lost
a class-based perspective, only spending their time babbling away inside
their own fantasy world. Their policy would never succeed because it lacks
(or has “overcome”) the awareness of the truth of class division and
class struggle in capitalist society. Consequently, the “practice” of
the JCP which is isolated from reality will inevitably collapse.
4. The Contradiction Between Production and Consumption Under Capitalism
(But not as the Underconsumption Theorists Understand It)
Just because the surplus value produced by workers is realized doesn’t
mean that production and consumption, or purchases and sales, are directly
the same thing without any contradictions. As Marx emphasized, under capitalism
production and consumption, purchases and sales, and supply and demand,
while being internally united, are externally independent moments with
their own movement, and herein lies the possibility for crisis to occur
and develop. Already under simple commodity production and circulation
the possibility of crisis developed, but under capitalistic production
this develops further with the greatest opportunity for crisis being in
the relation between capital and labor.
The fools in the JCP say that “limited consumption” exists under capitalistic
production. Of course! The question is not whether it exists or not, but
rather what its character and significance is. The balance between production
and consumption, supply and demand, and sales and purchases is obvious
in the case of the exchange of products, and in the case of simple commodity
production this also seems a reasonable proposition at a glance. This is
because the person who receives money for selling a commodity is also the
person who purchases a commodity. Under these conditions, any “limited
consumption” would be illogical. If one only abstracts from this simple
relationship, one could insist, in the manner of Mill, Say or Ricardo,
that sales and purchases, and purchases and sales are in agreement and
that production and consumption are essentially identical, and hence general
overproduction and crisis could be refuted. However, under capitalistic
production, this simple argument is already completely meaningless. Say’s
theory of equilibrium, by dissolving commodity exchange into the exchange
of products, ignores the historical limitations of commodity production,
and thereby making possible the denial of the possibility of crisis.)
If we look at crisis in a purely formal manner, supply and demand are split
and in disagreement. Commodities are supplied (produced) which exceed the
demand capable of purchasing them. Here Say’s simple theory of “harmony”
and “market theory,” which states that since production is consumption
and purchases are sales there is agreement between supply and demand, breaks
down from the start.
Marx argues that the possibility of crisis -- for the moment only a possibility
? is already given with simple commodity production and develops further
under capital.
“Nothing could be more foolish than the dogma that because every sale
is a purchase, and every purchase a sale, the circulation of commodities
necessarily implies an equilibrium between sales and purchases…But no
one directly needs to purchase because he has just sold. Circulation bursts
through all the temporal, spatial and personal barriers imposed by the
direct exchange of products, and it does this by splitting up the direct
identity present in this case between the exchange of one’s own product
and the acquisition of someone else’s into the two antithetical segments
of sale and purchase. To say that these mutually independent and antithetical
processes form an internal unity is to say also that their internal unity
moves forward through external antitheses. These two processes lack internal
independence because they complement each other. Hence, if the assertion
of their external independence [aausserliche Verselbstandigung] proceeds
to a certain critical point, their unity violently makes itself felt by
producing -- a crisis. There is an antithesis, immanent in the commodity,
between use-vale and value, between private labour which must simultaneously
manifest itself as directly social labour, and a particular, and a particular
concrete kind of labour which simultaneously counts as merely abstract
universal labour, between the conversion of things into persons and the
conversion of persons into things [personification of things and reification
of persons -- footnote in Penguin edition]; the antithetical phases of
the metamorphosis of the commodity are the developed forms of motion of
this immanent contradiction. These forms therefore imply the possibility
of crisis, though no more than the possibility. For the development of
this possibility into a reality a whole series of conditions is required,
which do not even exist from the standpoint of the simple circulation of
commodities.” (Capital Vol. I, pp. 208-9)
However, this disagreement between supply and demand is simply a possibility,
and in normal conditions of capitalist production it does not occur. Of
course, there is some possibility for this to occur partially (i.e. in
the case of individual commodities or a certain sector of industry), but
this does not occur in general. It might not be possible to sell a given
product, but in fact they (usually) can be sold. In general a disequilibrium
between supply and demand does not occur wherein too many commodities are
supplied and (produced) ? or there is too little demand (purchases), which
amounts to the same thing. A perpetual crisis cannot occur in capitalism.
Commodities are swallowed up by the market and are able to be sold smoothly.
It is an abnormal or particular case that they are not sold.
However, in simple circulation it occurs in some cases that the agreement
between supply and demand and purchases and sales is lost. For example,
a person who sells a commodity hoards the money from this sale instead
of purchasing a commodity. This person puts a commodity into circulation,
but that is all. He does not pull a corresponding commodity out of circulation.
That is, instead of using the money earned from the sale of his commodity
to pull a commodity out of circulation, he elects to save this money. Since
we have to admit that this is not merely a random occurrence, but a necessity
that can generally occur, it appears that even in the case of simple commodity
circulation, supply and demand and sales and purchases are not always in
balance. This is a formal possibility but definitely not an arbitrary one.
Rather, it is a possibility that is inseparably and internally linked to
commodity production. Under capitalistic production this occurs on an even
greater scale, and appears in this production as something inevitable.
Since the goal of the capitalist is normally accumulation, and accumulation
is achieved through the transformation of surplus value for capital, it
is an everyday occurrence that a purchase does not follow a sale. Of course
the actions of individual capitalists are offset. When one capitalist sells
but doesn’t buy, another capitalist buys but doesn’t sell. Therefore,
if the capitalist class is taken as a whole it could be said that supply
and demand and purchases and sales are roughly in agreement. However, even
with capitalists taken as a whole, can it really be said that there is
a moment or time where there are only purchases and no sales, or only sales
and no purchases? This occurs in the case of the individual capitalist,
but even when the capitalists are taken as a whole, can the possibility
be denied that this will not be offset? Considering the capitalist class
en masse, can one declare that the situation would not arise in which there
were only purchases and no sales, or an avalanche in the opposite direction?
Formally the possibility of this occurring could not be denied (and if
this occurs it would signify a crisis). This thus signifies the possibility
of crisis and its development. At any rate, it can and does occur that
sales and purchases can appear as the independent moments of supply and
demand, as unrelated moments.
We also know, of course, that under the system of capitalist production
not only are there cases where there are only sales and no purchases, but
also cases with only purchases and no sales. For instance, in the case
of large-scale industries which require a long period of time to be established,
a number of years are dedicated solely to the purchase of the means of
production (machinery, factory facilities, etc.) In this case, no commodities
are thrown into circulation for the simple reason that production has not
yet commenced. It is worthless to insist that with the commencement of
production the case will be reversed and sales would be greater than purchases
and thus it could be said that in the end it is offset and purchases are
sales and sales are purchases. Although this is probably true in the long
term, if we take a given moment, there is aa decisive gap and huge difference
between supply and demand, and purchases and sales.
“If we were to consider a communist society in place of a capitalist one,
then money capital would immediately be done away with, and so too the
disguises that transactions acquire through it. The matter would be reduced
to the fact that the society must reckon in advance how much labour, means
of production and mass of subsistence it can spend, without dislocation,
on branches of industry which, like the building of railways, for instance,
supply neither means of production nor means of subsistence, nor any kind
of useful effect, for a long period, a year or more, though they certainly
do withdraw labour, means of production and means of subsistence from the
total annual product. In capitalist society, on the other hand, where any
kind of social rationality asserts itself only post festum (after the feast: too late to have any effect), major disturbances can
and must occur constantly. On the one hand there is pressure on the money
market, while conversely the absence of this pressure itself calls into
being a mass of such undertakings, and therefore the precise circumstances
that later provoke a pressure on the money market. The money market is
under pressure because large-scale advances of money capital for long periods
of time are always needed here. This is quite apart from the fact that
industrialists and merchants throw the money capital they need for the
carrying on of their businesses into railway speculations, etc., and replace
it with loans from the money market. The other side of the coin is pressure
on the society’s available productive capital. Since elements of productive
capital are constantly being withdrawn from the market and all that is
put into the market is an equivalent in money, the effective demand rises,
without this in itself providing any element of supply” (Capital Vol. 2. Ch.16)
In capitalist production the stage of simple commodity production has been
superseded, and thus the possibility of crisis is magnified. For example,
let’s consider the relationship between capitalists and workers. Here
the purchase and sale directly appear as two different things.
First let’s look at the capitalist. He must “sell at a higher price than
he purchased”. This can be said because he sells commodities which include
more value than the ones he purchased. The commodities he purchases and
takes out of circulation take the form of means of production and labor
power (commodities as constant capital and variable capital), but the commodities
he sells and puts into circulation are commodities in which the value of
the means of production and labour power have been added, and which include
the surplus value exploited from the workers in the process of production
(commodities as the body of value in which surplus value has been added
to the variable and constant capital). Of course, this has nothing to do
with the arbitrary decision of the capitalist to sell the commodity at
a higher price, which is merely a necessary action for as long as a capitalist
remains a capitalist and a normal occurrence in a capitalist society. The
motive and goal of the capitalist’s productive and economic activity is
the acquisition of this surplus -- that is, to “buy cheap and sell dearly”
gives rise to a gap between sales and purchases. For this reason, for the
individual capitalist “supply” and “demand” do not, and cannot, directly
be in agreement.
In the case of the workers it is the same. If the capitalist doesn’t buy
or doesn’t sell, the worker sells more and consumes less, i.e. “under”
consumes. What the worker is paid (wages, i.e. constant capital) and what
he hands over to the capitalist in exchange (value) include the surplus
value part in addition to the constant capital part. However, what the
worker is paid is purely the constant capital part. For instance, even
though the workers produces value for the capitalist of 1 million yen,
they are merely paid half that amount, 500,000 Yen, in wages for the price
of their labour power commodity. The capitalist receives 500,000 yen as
profit. In other words, the workers are exploited. Although this part was
produced by the workers, it is not realized by them. Even though the workers
(through the mediation of the capitalist) put commodities with a value
of 1 million yen into circulation, they only withdraw half of that in paid
compensation with commodities From the workers’ viewpoint the commodities
with a value of 500,000 yen are a surplus. The workers “underconsumption”
appears as an unmistakable reality. Since this phenomenon is simply accepted,
the mistaken theory of underconsumption was born, this is the basis for
the fact that this theory spread so easily.
Thus, under relations of capitalist production and class relations, the
proposition that at a glance production and consumption are in agreement
appears as something irrational because the working class cannot “purchase,”
and as a result “consume,” everything that they themselves have produced.
The workers only produce as long as they produce surplus value, i.e. as
long as they produce something above their production for themselves. In
other words, production and consumption only take place as long as things
are produced in addition to production for the workers’ own consumption,
that is, production of surplus value for the capitalist. If the worker
only produces for his own consumption, that is if no unpaid labor for the
capitalist is carried out, no surplus value will be produced and the worker
will certainly cease to work. If the worker does not produce surplus value
for the capitalist, he also will not (cannot) produce for his own consumption.
So as long as the workers produce, they must produce surplus value for
the capitalist, i.e. labor performed in excess of that done for their own
consumption, in this way they are wage workers. In this sense, the workers
always produce “too much”, and produce in excess of consumption. Say’s
simple proposition that production and consumption, and supply and demand
are in agreement, appears at a glance to be mistaken in the case of the
workers, i.e. in the case of the relation between capital and waged labor.
In the case of commodities consumed individually in which one’s labor
is objectified as value, not to mention those commodities industrially
consumed, the workers are certainly unable to purchase all of them. Production
and consumption each appear as separate, independent and mutually unconcerned
moments. Here the “internal unity” between the two appears meaningless
at a glance.
Of course, this is a consequence of capitalistic production but this does
not directly mean that this is “impossible” or “unrealizable” in capitalism
(Rosa Luxemburg and Narodnik theorists often understood it in this way).
Marx emphasized in the following passage that even if the limits of workers’
consumption give birth to partial overproduction in the production sector
of consumption goods, which leads to overproduction in related production
sectors, this in itself still does not signify general overproduction:
“This argument, however, cuts two ways. If it is easily understood how
overproduction of some leading articles of consumption must bring in its
wake the phenomenon of a more or less general overproduction, it is by
no means clear how overproduction of these articles can arise. For the
phenomenon of general production is derived from the interdependence not
only of the workers directly employed in these industries, but of all branches
of industries which produce the elements of their products, the various
stages of their constant capital. In the latter branches of industry, overproduction
is an effect. But whence does it come in the former? For the latter continue
to produce so long as the former go on producing, and along with this continued
production, a general growth in revenue, and therefore in their own consumption
seems assured.” (MECW Vol. 32, p. 153)
This passage shows the errors of the JCP’s simplistic “theory of underconsumption”
(the theory which explains crisis as a result of underconsumption, particularly
the underconsumption of workers). In other words, Marx says that the limited
consumption of workers can be understood to lead to overproduction in certain
production sectors of consumption goods, but this is all; it cannot explain
general overproduction. Marx’s view creates serious havoc for the vulgar
view of the JCP. Overproduction in general must be explained from a different
moment.
Believers in the JCP’s theory of underconsumption are completely unable
to understand that in order for workers to continue their own production,
and hence their consumption, it is necessary for them to produce in excess
(extension of labor time) of the production needed for their own consumption
(labor time), i.e. they must produce surplus value for the capitalist.
Moreover, if this does not occur, even the production for themselves will
not be carried out, and thus their own “consumption” will become impossible.
Following their pathetic wisdom, they reach the conclusion that if the
workers would only produce for their own consumption, overproduction would
definitely not occur since the workers would only be producing for themselves
and nothing would be superfluous (JCP theorists only vaguely say that the
consumption of the workers would be increased, but they don’t say that
this increase would make surplus value impossible). However, this is only
correct if workers are understood as small producers, not exploited by
capital, whose consumption is based on the sale of what they have produced
themselves. (However this can only be said in the abstract theoretical
meaning.)
Incidentally, the JCP claims that crisis can be evaded through the expansion
of workers consumption, but do they mean to say that consumption can be
expanded to any extent, and that if consumption is expanded to any extent
a crisis can be avoided? If the workers were to consume all they had produced,
this would be the negation of capitalist production which aims for the
production of surplus value, and would thus signify socialism. However,
the JCP usually posits its demands “within the framework of capitalism,”
and hence its demand for increased consumption not only does not contradict
the production of surplus value, but exists comfortably within this framework.
In other words, the JCP pursues the absolutely contradictory and utopian
demand of eliminating the workers’ limited consumption without eliminating
the very basis of their limited consumption.
Under capitalistic production relations, production, and hence consumption,
can only occur as long as surplus value is produced for capital. Herein,
the “system of consumption” is included as an essential moment, and these
relations can only be sublated by overcoming capitalistic production. On
the one hand, the JCP appears to be opposed to the “limited consumption”
of the workers, but in the next breath they say that they don’t deny the
base of this “limited consumption,” i.e. capitalistic production, and
hence approve of the continuation of the workers’ “limited consumption.”
Since they declare that as long as the worker’s consumption is limited
recessions will continue and worsen, it could be said that they are promising
the eternal existence and continuation of recession, and are defending
the basis of this society.
Marx certainly emphasized that consumption is “limited” under capitalism,
not in the simplistic manner of the underconsumption theorists (the impossibility
of realizing surplus value), but always as the opposition under capitalism
between the productive power and the anarchical development of production.
Under capitalism, production and consumption (market) are separate things,
mutually isolated and independent, and governed by distinct laws of motion.
Therefore, even though originally they are internally united, they become
decisively distanced from each other. Furthermore, Marx discussed
each of the laws that govern production and consumption (market). Under
capitalistic production relations, production is expanded through anarchical,
and accelerated development. On the other hand, consumption, or in capitalistic
terms the market, cannot expand in proportion to productive power and production,
but is limited under capitalistic production relations (i.e. relations
underpinned by the exploitation of labor). Let’s now look more closely
at this phenomenon.
5. “The Cause of Crisis”
-“Limited Consumption” and the Development of Unrestricted
Productive Power
Marx also emphasized that “limited consumption” has important meaning
for crisis. However, the question is what meaning, and in what sense does
it hold important meaning. It is completely meaningless to explain crisis
as merely “insufficient consumption” and thus propose solving crisis
simply through an expansion of consumption, i.e. a wage increase and an
alteration of distribution.
Marx repeatedly said that the true cause of crisis is not limited consumption,
but capital itself, the limits of capital. The cause and basis of crisis
is precisely the limits of capital; crisis is not the result of insufficient
consumption. Likewise, the basis of overproduction is not insufficient
production, but the “limits” of capital. The problem is capital itself.
What does Marx mean, exactly, by the expression “the limits of capital”
or “capital itself”?
The most characteristic phenomenon of crisis is overproduction. In other
words, a situation in which commodities are produced which do not find
a demand, so that unsold commodities pile up (in some cases they are burned
and in others thrown into the ocean). The superficial view, when faced
with this phenomenon (currently represented by the JCP and trade unionists,
as well as Keynesianism), says that since consumption is insufficient there
must be overproduction, i.e. production that exceeds consumption. Since
capitalistic production always keeps the workers wages at the minimum level
needed for its existence this view seems to be entirely justified. These
are the actual conditions for the prevalence of the theory of underconsumption.
Marx was in fact opposed to this common view and consistently denounced
the theory of underconsumption and emphasized that the problem was not
simply one of underconsumption, but the original “limits” existing in
capital itself, the essential limits within the capitalistic means of production.
According to Marx, the expression “overproduction” conveys a mistaken
understanding because it gives the illusory impression that society’s
most essential needs are satisfied. However, as any worker knows, despite
even the most urgent needs of the workers being limited, the occurrence
of crisis, i.e. overproduction, is not at all rare, but in fact common.
In this sense, it is definitely not a question of the demand or the “absolute”
needs of society. At issue for Marx is “the capitalists’ profit,” not
the needs of society, i.e. the producers. On this same point Marx criticized
Ricardo who, following Say, offered up the concept that demand is supply
and supply is demand (or production is consumption and consumption is production).
For Marx this view completely ignored the particularity of capitalist production.
Marx wrote:
“But the whole process of accumulation in the first place resolves itself
into surplus production, which on the one hand corresponds to the natural
growth of the population, and on the other hand, forms an inherent basis
for the phenomenon which appear during crises. The criterion of this surplus
production is capital itself, the scale on which the conditions of production
are available and the unlimited desire of the capitalists to enrich themselves
and to enlarge their capital, but by no means consumption, which from the
outset is inhibited, since the majority of the population, the working
people, can only expand their consumption within very narrow limits, whereas
the demand for labour, although it grows absolutely, decreases relatively,
to the same extent as capitalism develops. Moreover, all equalisations
are accidental and although the proportion of capital employed in individual
spheres is equalised by a continuous process, the continuity of this process
itself equally presupposes the constant disproportion which it has continuously,
often violently, to even out.” (MECW Vol. 32 pp. 123-4)
Many things are discussed in this passage. The first point emphasized is
that the “limit” of capitalistic production, that is, production with
the aim of surplus value, is not limited production, but “capital itself.”
Marx positions “the scale on which the conditions of production are available”
on one hand, and “the unlimited desire of the capitalists to enrich themselves
and to enlarge their capital” on the other, and emphasizes the contradiction
and struggle between them. This is the foundation for the explanation of
crisis. The repeated use of this concept in the same expressions shows
us that this is fundamental to Marx’s thought. Expressed in slightly different
and more general terms, this is the contradiction between the capitalistic
relations of production and the rapid, anarchical development and expansion
of the productive forces within them.
In this passage Marx also insists that the limits to the production of
surplus value are not consumption limited from the outset, which should
make it even more clear that the JCP’s theory of underconsumption has
nothing to do with Marxism. In terms of consumption, under capitalistic
production consumption is limited “from the outset” -- the exploitation
of the working masses by capital is the condition which precedes their
labor and existence. Removing this condition leads to a circular argument
which amounts to the same thing as proving the “impossibility of capitalistic
production.”
The impulse to gain wealth and the impulse of capitalization are definitely
not the same thing. The impulse to save is not particular to the capitalist,
but can be seen in ruling classes preceding the capitalists. The essential
characteristic of capitalists is not only their impulse for surplus value,
but the impulse for capitalization, i.e. to accumulate capital and expand
reproduction. This objective is not merely to expand consumption or accumulate
wealth, but to reinvest capital, exploit labor on a greater scale, and
obtain ever larger profits. Moreover, this inevitably includes, or is internally
connected to, a lowering in the value of commodities through general competition
and the increase in productive power, the ruin of many capitalists, and
the concentration of capital, an increase in the organic composition of
capital, and a trend towards decreased profit ratios.
Let’s look at a few representative passages:
“Assuming the necessary means of production, i.e. a sufficient accumulation
of capital, the creation of surplus-value faces no other barrier than the
working population, if the rate of surplus-value, i.e. the level of exploitation
of labour, is given; and no other barrier than this level of exploitation,
if the working population is given. And the capitalist production process
essentially consists of this production of surplus-value, represented in
the surplus product or the aliquot portion of commodities produced in which
unpaid labour is objectified. It should never be forgotten that the production
of this surplus-value -- and the transformation of a portion of it back
into capital, or accumulation, forms an integral part of surplus-value
production -- is the immediate purpose and the determining motive of capitalist
production. Capitalist production, therefore, should never be depicted
as something that it is not, i.e. as production whose immediate purpose
is consumption, or the production of the means of enjoyment for the capitalist.
This would be to ignore completely its specific character, as this is expressed
in its basic inner pattern.
“It is the extraction of this surplus-value that forms the immediate process
of production, and this faces no other barriers than those just mentioned.
As soon as the amount of surplus labour it has proved possible to extort
has been objectified in commodities, the surplus-value has been produced.
But this production of surplus-value is only the first act in the capitalist
production process, and its completion only brings to an end the immediate
production process itself. Capital has absorbed a given amount of unpaid
labour. With the development of this process as expressed in the fall in
the profit rate, the mass of surplus-value thus produced swells to monstrous
proportions. Now comes the second act in the process. The total mass of
commodities, the total product, must be sold, both that portion which replaces
constant and variable capital and that which represents surplus value.
If this does not happen, or happens only partly, or only at prices that
are less than the price of production, then although the worker is certainly
exploited, his exploitation is not realized as such for the capitalist
and may even not involve any realization of the surplus-value extracted,
or only a partial realization; indeed, it may even mean a partial or complete
loss of his capital. The conditions for immediate exploitation and for
the realization of that exploitation are not identical. Not only are they
separate in time and space, they are also separate in theory. The former
is restricted only by the society’s productive forces, the latter by the
proportionality between the different branches of production and by the
society’s power of consumption. And this is determined neither by the
absolute power of production nor by the absolute power of consumption but
rather by the power of consumption within a given framework of antagonistic
conditions of distribution, which reduce the consumption of the vast majority
of society to a minimum level, only capable of varying within more or less
narrow limits. It is further restricted by the drive for accumulation,
the drive to expand capital and produce surplus-value on a larger scale.
This is the law governing capitalist production, arising from the constant
revolutions in methods of production themselves, from the devaluation of
the existing capital which is always associated with this, and from the
general competitive struggle and the need to improve production and extend
its scale, merely as a means of self-preservation, and on pain of going
under. The market, therefore, must be continually extended, so that its
relationships and the conditions governing them assume ever more the form
of a natural law independent of the producers and becomes ever more uncontrollable.
The internal contradiction seeks resolution by extending the external field
of production. But the more productivity develops, the more it comes into
conflict with the narrow basis on which the relations of consumption rest.
It is in no way a contraction, on this contradictory basis, that excess
capital coexists with a growing surplus value; for although the mass of
surplus-value produced would rise if these were brought together, yet this
would equally heighten the contradiction between the conditions in which
this surplus-value was produced and the conditions in which it was realized.”
(Capital Vol. 3 pp. 352-3)
“In short, all the objections raised against the obvious phenomena of
overproduction (phenomena that remain quite impervious to these objections)
amount to saying that the barriers to capitalist production are not barriers to production in general and are therefore also not barriers to this specific, capitalist mode
of production. But the contradiction in this capitalist mode of production
consists precisely in its tendency towards the absolute development of
productive forces that come into continuous conflict with the specific conditions of production in which capital moves, and can alone move.
“It is not that too many means of subsistence are produced in relation
to the existing population. On the contrary. Too little is produced to
satisfy the mass of the population in an adequate and humane way.
“Nor are too many means of production produced to employ the potential
working population. On the contrary. What is produced is firstly too great
a section of the population which is in fact incapable of work, which owing
to its situation is dependent on the exploitation of the labour of others
or on kinds of work that can only count as such within a miserable mode
of production. Secondly, not enough means of production are produced to
allow the whole potential population to work under the most productive
conditions, so that their absolute labour-time is curtailed by the mass
and effectiveness of the constant capital applied during this labour time.
“Periodically, however, too much is produced in the way of means of labour
and means of subsistence, too much to function as means for exploiting
the workers at a given rate of profit. Too many commodities are produced
for the value contained in them, and the surplus-value included in this
value, to be realized under the conditions of distribution given by capitalist
production, and to be transformed back into new capital, i.e. it is impossible
to accomplish this process without ever-recurrent explosions.
“It is not that too much wealth is produced. But from time to time, too
much wealth is produced in its capitalist, antagonistic forms.” (Ibid.
pp. 366-7)
“Overproduction is specifically conditioned by the general law of the
production of capital: to produce to the limit set by the productive forces
(that is to say, to exploit the maximum amount of labour with the given
amount of capital), without any consideration for the actual limits of
the market or the needs backed by the ability to pay; and this is carried
out through continuous expansion of reproduction and accumulation, and
therefore constant reconversion of revenue into capital, while on the other
hand, the mass of the producers remain tied to the average level of needs,
and must remain tied to it according to the nature of capitalist production.”
(MECW vol. 32 pp. 163-4)
“The ultimate reason for all real crises always remains the poverty and
restricted consumption of the masses, in the face of the drive of capitalist
production to develop the productive forces as if only the absolute consumption
capacity of society set limit to them.” (Capital Vol. 3, Ch. 30)
As is clear from this last passage, for Marx it was not simply the limits
of consumption in itself that was considered the cause of crisis, but rather
at issue was the limited consumption of the masses in contrast to the impulse
to develop productive power as if the only limit were society’s “absolute
consumption capacity.” The consumption of the people is limited by the
capitalistic mode of production, and thus also by its mode of distribution.
In capitalistic development, this consumption ultimately is restricted
and explodes as crisis.
“To express this contraction in the most general terms, it consists in
the fact that the capitalist mode of production tends towards an absolute
development of the productive forces irrespective of value and the surplus-value
it contains, and even irrespective of the social relations within which
the capitalist production takes place; while on the other hand its purpose
is to maintain the existing capital value and to valorize it to the utmost
extent possible (i.e. an ever accelerated increase in this value). In its
specific character it is directed towards using the existing capital as
a means for the greatest possible valorization of this value. The methods
through which it attains this end involve a decline in the profit rate,
the devaluation of the existing capital and the development of the productive
forces of labour at the cost of the productive forces already produced.
“The true barrier to capitalist production is capital itself. It is that capital and its self-valorization appear as the starting and
finishing point, as the motive and purpose of production; production is
production only for capital, and not the reverse, i.e. the means of production are not simply means
for a steadily expanding pattern of life for the society of the producers. The barriers within which the maintenance and valorization
of the capital-value has necessarily to move -- and this in turn depends
on the dispossession and impoverishment of the great mass of the producers
-- therefore come constantly into contradiction with the methods of production
that capital must apply to its purpose and which set its course towards
an unlimited expansion of production, to production as an end in itself,
to an unrestricted development of the social productive powers of labour.
The means -- the unrestricted development of the forces of social production
-- comes into persistent conflict with the restricted end, the valorization
of the existing capital. If the capitalist mode of production is therefore
a historical means for the developing the material powers of production
and for creating a corresponding world market, it is at the same time the
constant contradiction between this historical task and the social relations
of production corresponding to it.” (Capital Vol. 3, pp. 358-9)
In capitalist society, the market does not create production, production
creates the market -- no matter how illogical this appears, it is nonetheless
profoundly true for capitalistic production. In other words, production
and the market are definitely not in agreement, and usually production
exceeds the market. The market does not expand in proportion to production,
or does not develop or expand as rapidly as production. This is a contradiction,
but an inescapable contradiction under capitalism. Under capitalism production
exceeding consumption and the market and supply exceeding demand appear
as one inevitable law.
According to Marx, production usually expands rapidly. This is because,
first of all, the capital invested in production always increases (capital
accumulation and the transformation of capital into surplus value is the
nature of capital); and secondly, through capital becoming increasingly
productive. Hence, production increases rapidly, but the market does not,
and cannot, expand to meet this. This does not mean that surplus value,
i.e. the value exploited from the workers, is not realized (or “consumed”),
but the failure of the expansion of consumption to keep pace with the expansion
of production is one contradiction which at a certain stage necessitates
a forced readjustment. If a certain stage of disequilibrium is reached,
a violent retraction must occur.
It is absurd to ask the question why this takes a violent form under capitalistic
production, and whether this is indeed necessary. In a society in which
there is anarchy in production and the various internally united moments,
such as value and use value, production and consumption (market), supply
and demand, value and its realization, or productive capital and money
capital, etc., are externally independent and move and develop according
to their own particular laws; that is, in a society penetrated by this
sort of disequilibrium, a general crisis is the only means for a readjustment
to achieve equilibrium.
Hasn’t the bourgeoisie always stressed that things can be safely left
to the movement of the “market economy” and advocated its usefulness
(the usefulness of its anarchistic movement)? In that case, isn’t crisis
also one of the “automatic” harmonizing effects of the market economy?
If they are going to praise the splendid movement of the market, they would
also have to accept crisis to be consistent. It is self-contradictory to
praise the harmonization and adjustment function of the market, but be
frightened by crisis which is the sharpest and most decisive manifestation
of this function. If one accepts the market, one must also accept crisis;
if one applauds the market, one must also applaud crisis -- because they
are both fundamentally the same, and are both the essence of the same capitalistic
mode of production. Apart from crisis, there is no other way that equilibrium
can be reached in such a thorough form for the sake of capital and its
continuation, and those who can’t understand this reveal their ignorance.
One cannot only credit the market economy for fortunate circumstances without
recognizing crisis as a characteristic manifestation of this market economy.
“The market expands more slowly than production; or in the cycle through
which capital passes during its reproduction -- a cycle in which it is
not simply reproduced but reproduced on an extended scale, in which it
describes not a circle but a spiral -- there comes a moment at which the
market manifests itself as too narrow for production. This occurs at the
end of the cycle. But it merely means: the market is glutted. Overproduction
is manifest. If the expansion of the market had kept pace with the expansion
of production there would be no glut in the market, no overproduction.
However, the mere admission that the market must expand with production,
is, on the other hand, again an admission of the possibility of overproduction,
for the market is limited externally in the geographical sense, the internal
market is limited as compared with a market that is both internal and external,
the latter in turn is limited as compared with the world market, which
however is, in turn, limited at each moment of time, [though] in itself
capable of expansion. The admission that the market must expand if there
is to be no overproduction, is therefore also an admission that there can
be overproduction. For it is then possible -- since market and production
are two independent factors -- that the expansion of one does not correspond
with the expansion of the other; that the limits of the market are not
extended rapidly enough for production, or that new markets -- new extensions
of the market -- may be rapidly outpaced by production, so that the expanded
market becomes just as much a barrier as the narrower market was formerly.”
(MECW Vol. 32, pp. 153-4)
According to Marx’s view, production and consumption (market) are distinct
from each other, and under capitalism develop and move in a mutually independent
and autonomous manner. Certainly both are united and internally connected,
but one character of capitalism is that because they are also inescapably
mutually independent and in opposition, at a certain stage this contradiction
must explode as a crisis. Say, Mill and Ricardo said that production and
consumption are simply identical; that production is consumption, and consumption
is production (or sales are purchases, and supply is demand). However,
the underconsumption theorists as well simply juxtapose production and
consumption in the same manner as the equilibrium theorists. They are more
or less the same as the equilibrium theorists, since their theory is based
on an incorrect understanding (surplus value cannot be realized, etc.)
and offers a simplistic account of disequilibrium between production and
consumption (market), thus failing to understand the real contradiction
within capitalistic production. They understand the contradictions of capitalism
in an extremely narrow way.
6. Crisis and the Fate of the Capitalist Mode of Production
Crisis is the essence of capitalism, and thus its evaluation is at the
same time an evaluation of capitalism. It is nonsense to say that capitalism
is good and only crisis is bad (e.g. capitalism would be an ideal society
if crisis were eliminated). Crisis is the concentrated expression of the
contradictions of capitalism which explode in a visible form.
Marx emphasized that crisis revealed the inevitable limits of capitalism
and the inevitable limits of this mode of production, which must be transformed
into socialism. This conception is precisely the same as the materialist
conception of history. For Marx, the recognition of the essential content
and limitations of capitalism in itself elucidates the nature of crisis.
In this sense, the viewpoint that “there is no systematic theory of crisis
within Marxism” or that “Marx was unwilling to construct a theory of
crisis” is mistaken.
“Beyond a certain point, the development of the productive forces becomes
a barrier to capital, and consequently the relation of capital becomes
a barrier to the development of the productive forces of labour. Once this
point has been reached, capital, i.e. wage labour, enters into the same
relation to the development of social wealth and the productive forces
as the guild system, serfdom and slavery did, and is, as a fetter, necessarily
cast off. The last form of servility assumed by human activity, that of
wage labour on the one hand and of capital on the other, is thereby shed,
and this shedding is itself the result of the mode of production corresponding
to capital. It is precisely the production process of capital that gives
rise to the material and spiritual conditions for the negation of wage
labour and capital, which are themselves the negation of earlier forms
of unfree social production.” (Grundrisse in MECW Vol. 29, pp. 133-4)
Marx said that each of the essential aspects of capitalism was represented
in the theories and thought of Ricardo and Sismondi. Ricardo represents
the “positive” side of capitalism by disregarding the limits of demand,
consumption and the market and how these limits impact the development
of the productive forces, and how this trend itself prepares the material
conditions for socialism, while Sismondi, for his part, theoretically represents
the “negative” side of capitalism and its limits, such as the explosions
of crisis. According to Marx, in the opposition between these two representative
theories, the essence of capitalism, and hence the essence of crisis, is
revealed.
“The universality towards which it (capital) irresistibly strives encounters
barriers in its own nature, which will, at a certain stage of its development,
allow it to be recognized as being itself the greatest barrier to this
tendency, and hence will drive towards its own suspension.
“Those economists who, like Ricardo, conceived production as directly
identical with the self-realization of capital -- and hence were heedless
of the barriers to consumption or of the existing barriers of circulation
itself, to the extent that it must represent counter-values at all points,
having in view only the development of the forces of production and the
growth of the industrial population -- supply without regard to demand
-- have therefore grasped the positive essence of capital more correctly
and more deeply that those who, like Sismondi, emphasized the barriers
of consumption and of the available circle of counter-values, although
the latter has better grasped the limited nature of production based on
capital, its negative one-sidedness…Sismondi, by contrast, emphasizes
not only the encounter with the barriers, but their creation by capital
itself, and has a vague intuition that they must lead to its breakdown.
He therefore wants to put up barriers to production, from the outside,
through custom, law, etc., which of course, as merely external and artificial
barriers, would necessarily be demolished by capital. On the other side,
Ricardo and his entire school never understood the really modern crises,
in which this contradiction of capital discharges itself in great thunderstorms
which increasingly threaten it as the foundation of society and of production
itself.” (Grundrisse pp. 410-1)
“Sismondi is profoundly conscious of the contradictions in capitalist
production; he is aware that, on the one hand, its forms -- its production
relations -- stimulate unrestrained development of the productive power
and of wealth; and that, on the other hand, these relations are conditional,
that their contradictions of use value and exchange value, commodity and
money, purchase and sale, production and consumption, capital and wage
labour, etc., assume ever greater dimensions as productive power develops.
He is particularly aware of the fundamental contradiction: on the one hand,
unrestricted development of the productive power and increase of wealth
which, at the same time, consists of commodities and must be turned into
cash; on the other hand, the system is based on the fact that the mass
of producers is restricted to the necessaries. Hence, according to Sismondi,
crises are not accidental, as Ricardo maintains, but essential outbreaks
-- occuring on a large scale and at definite periods -- of the immanent
contradictions. He wavers constantly: should the State curb the productive
forces to make them adequate to the production relations, or should the
productive relations be made adequate to the productive forces? He often
retreats into the past, becomes a laudator temporis acti (eulogiser of the past), or he seeks to exorcise the contradictions by
a different adjustment of revenue in relation to capital, or of distribution
in relation to production, not realising that the relations of distribution
are only the relations of production seen sub alia specie (from a different aspect). He forcefully criticises the contradictions
of bourgeois production but does not understand them, and consequently
does not understand the process whereby they can be resolved. However,
at the bottom of his argument is indeed the inkling that new forms of the
appropriation of wealth must correspond to productive forces and the material
and social conditions for the production of wealth which have developed
within captialist society; that the bourgeois forms are only transitory
and contradictory forms, in which wealth attains only an antithetical existence
and apears everywhere simultaneously as its opposite. It is wealth which
always has poverty as its prerequisite and only develops by developing
poverty as well.” (MECW, Vol. 32, pp. 247-8)
The significance of these representative passages should be clear. Here
it is revealed that the fundamental contradiction of the capitalistic mode
of production is the contradiction between productive power and the relations
of production, and that crisis is also determined by this.
Finally we need to consider the practical significance of the theories
that explain crisis from underconsumption. However, the answer can already
be found in the history of capitalism where several varieties of underconsumption
theories have appeared and been met with unsparing criticism from the camp
of revolutionary Marxists.
Marx criticized the petty bourgeois theorists who hope for “harmony”
between production and consumption through the agreement of “demand and
supply” in the following way:
“Fuit Troja (Troy is no more). This correct proportion between supply and demand,
which is beginning once more to be the object of so many wishes, ceased
long ago to exist. It has passed into the stage of senility. It was possible
only at a time when the means of production were limited, when the movement
of exchange took place within very restricted bounds. With the birth of
large-scale industry this correct proportion had come to an end, and production
inevitably compelled to pass in continuous such cession through vicissitudes
of prosperity, depression, crisis, stagnation, renewed prosperity, and
so on.
“Those who, like Sismondi, wish to return to the correct proportion of
production, while preserving the present basis of society, are reactionary,
since, to be consistent, they must also wish to bring back all the other
conditions of industry of former times.
“What kept production in correct, or more or less correct, proportions?
It was demand that dominated supply, that preceded it. Production followed
close on the heels of consumption. Large-scale industry, forced by the
very instruments at its disposal to produce on an ever-increasing scale,
can no longer wait for demand. Production precedes consumption, supply
compels demand.
“In existing society, in industry based on individual exchange, anarchy
of production, which is the source of so much misery, is at the same time
the source of all progress.
“Thus, one or the other:
“Either you want the true proportions of past centuries with present-day
means of production, in which case you are both reactionary and utopian.
“Or you want progress without anarchy: in which case in order to preserve
the productive forces, you must abandon individual exchange.” (The Poverty of Philosophy, International Publishers, pp. 61-2)
There is nothing add to this passage, because on a daily basis we can confirm
that the JCP have become defenders of the “old” petty bourgeois relations
on the one hand, and have prostituted themselves as bourgeois
clerks seeking to reform, not revolutionize, the capitalist relations of
production, on the other hand. Instead of choosing Marx’s proposal of
“one or the other,” for the time being they mix up the two. Of course
their progress (degeneration) into the bourgeois-like liberalism of petty
bourgeois “civic activists” [jiminshugisha] is inevitable, and this shameless development continues right in front
of our eyes.
Lenin exposed the practical meaning of the Narodnik (today’s JCP) theory
in the following way:
“Indeed, if we explain crises by the impossibility of realising products,
by the contradiction between production and consumption, we are thereby
led to deny reality, the soundness of the path along which capitalism is
proceeding; we proclaim this path to be a "false one," and go
out in quest of "different paths." In deducing crises from this
contradiction we are bound to think that the further it develops the more
difficult will be the way out of the contradiction…On the other hand,
if we explain crises by the contradiction between the social character
of production and the individual character of appropriation, we thereby
recognise that the capitalist road is real and progressive and reject the
search for "different paths" as nonsensical romanticism. We thereby
recognise that the further this contradiction develops the easier will
be the way out of it, and that it is the development of this system which
provides the way out.” (A Characterization of Economic Romanticism, Collected Works Vol. 2, p. 173)
At the time of Lenin’s criticism, capitalism was beginning to develop
in Russia. This was thus a period in which the problem was not one of overcoming
the capitalistic mode of production, but what path should be pursued to
break free of the feudalistic relations. Consequently, Lenin position was
that the progressive meaning of capitalist development had to be recognized.
Nonetheless, Lenin correctly described the essential nature of crisis and
the meaning it held within capitalist production and resolutely countered
petty-bourgeois views.
Finally, let’s examine the relation between crisis and the fate of the
workers.
One conspicuous phenomenon which crisis exposes is the surplus in labor
power. Companies suddenly notice that they possess too much labor power
to be able to increase profits. As a result, they begin severe restructuring
and focus their attention on firing workers. They are never short of excuses,
because if “excess” labor power is not reduced capital cannot continue
to exist. As long as capital survives, “morality” can never exist in
this society. Capital doesn’t care if workers become homeless or don’t
have enough to eat. To protect itself, capital will permit anything, whether
it be firing workers or indirectly killing them For capital anything that
is useful is “good” and ethical.
Crisis is the violent re-unification and re-adjustment of various independent
moments under capital. For this reason, crisis stems from the nature of
capital and is a chance for capital to sweep away the surplus population
it is burdened by and rid itself of “excess” labor power for the sake
of production for profit and the achievement of equilibrium. It is natural
that labor power is subordinated to production for profit, and in this
topsy-turvy society anything else is unthinkable.
Crisis and the high unemployment that accompanies it means that labor power
has also become “in excess” and this is an essential side of overproduction
and surplus capital. But what is excess labor power? An absolute surplus
of labor power is unthinkable, and the concept itself is self-contradictory.
Under capitalism, like consumption, this is only a surplus for capital.
Labor power becomes a surplus for capital when it is not possible to obtain
surplus value through employing it. The rapid development of the productive
power of labor has led to a contraction in labor time. For capital, however,
this only appears as the contradiction of surplus labor power and the inability
of obtaining surplus value through the employment of workers. It is clear
that if labor time were reduced rapidly, there would be no problem of an
excess of labor time for production. Under socialistic production the problem
would appear in such a simple form, but capitalist society is different.
Under capitalism, for example, the reduction in labor time through the
development of productive power appears as mass unemployment which prepares
the resistance of the workers. Under socialism, the total labor of all
the people could be reduced on a large scale, and for the individual this
would appear as the rapid reduction in labor time, but in capitalist society
the development of productive power leads to the abolishment of a large
number of workers’ jobs, i.e. the loss of the means of living, and if
this progresses to an extreme it prepares a revolution. Outside of a revolution,
the possibility of a large reduction in labor time of capital is turned
into mass unemployment. In other words, a process which should increase
the welfare of the workers becomes a source of their misery because
this upside-down system continues to exist.
7. The Stalinists’ Concept of Crisis
-Mendelson’s Theory and History of Crisis
If we look back at the history of the theoretical debates, Engels’ expression
of the contradiction between “the social character of production and the
private character of appropriation” has frequently been cited to explain
crisis (especially among Stalinists). The plausible argument has been spread
that crisis should not be explained solely through a theory of “underconsumption”
or “disequilibrium” but rather must be defined through an explanation
of the fundamental contradictions of the capitalistic mode of production.
It is not a question, then, of denying the theory of underconsumption or
disequilibrium, but of correctly positing it within an overall theory of
crisis. According to this logic, if this is not done, a correct understanding
of crisis cannot be reached. Now is the time to completely break with this
vulgar theory. As a result of the spread of this “Stalinist” dogma
the “Marxist” theory of crisis has grown stale and become a boring and
obscure heap of redundancy. Today there is nothing as dried up and unappealing
as the “Marxist” theory of crisis, and it is no exaggeration to say that
the responsibility for this lies with the Stalinists (JCP) and their dogma.
Of course, it is absolutely correct to say that a theory of underconsumption
or disequilibrium by itself is mistaken since it superficially explains
the contradictions of the capitalistic mode of production, and is thus
utilized by reformists and revisionists to serve their own opportunism.
Moreover, it is a correct formulation of the problem to say that crisis
must also be explained from the fundamental contradictions in the capitalistic
mode of production (as Marx said, crisis is the “concentrated expression
of the contradictions of capitalism”). Nevertheless, we certainly cannot
say that the Stalinists’ conception is justified. Conversely, this theory
has become a source of confusion
A criticism of Stalin has already been carried out, but there has yet to
be a complete discussion of works that were written under the influence
of Stalinism such as Lev Abramovich Mendelson’s representative theory
of crisis in his book The Theory and History of Crisis [title translated from Japanese]. In this work, which “modeled after”
Engels and Lenin, the “fundamental cause” of crisis is found in the contradiction
between “the social nature of production and the private (capitalistic)
form of acquisition.” But this Stalinist concept has many twists and turns
and it is not easy to find the way out.
“The total sphere of the relations which provide the conditions for the
necessity of crisis develop together with the capitalistic mode of production.
Further, they stem from the fundamental contradiction of capitalism, i.e.
the contradiction between the social character of production and the private,
capitalistic form of appropriation. The social nature of production appears
in the fact that every product of labor is created through the collected
efforts of many people and satisfies some social need.” (The Theory and History of Crisis p. 44 -- passage translated from Japanese)
The cliched idea above forms governs everything else as the basis of the
Stalinist theory of crisis. This central cliche leads to a great number
of cliches, one after another.
Is this concept just a different way of expressing the contradiction between
the relations of production and productive power? If so, it would mean
that he has not totally misunderstood the basis of crisis. If, however,
this is something different from the concept of the contradiction between
the relations of production and productive power it would likely be a “Stalinistic”
dogma that cannot fundamentally explain crisis clearly or correctly. In
the conception above, the “private, capitalistic form of appropriation”
corresponds to the relations of production, and the “social character
of production” corresponds to the productive power. However, it cannot
be said that this correspondence is justified. For example, “the social
character of production” and productive power are different things. Although
they have a close relationship to each other, this does not mean that the
two are equivalent concepts. The same thing can be said of the concept
of the “private, capitalistic form of appropriation” and the capitalistic
production relations. It is clear that the two concepts are not immediately
the same thing. The latter concept forms the basis of the relationship
between capital and wage labor, while this is not directly true in the
case of the former. Of course, in a sense the former could be said to be
the same since it is inseparable from the concept of capital and wage labor.
Moreover, the relations of production exist prior to the relations of “appropriation”
which is subordinate to them. The relations of “appropriation” do not
precede the relations of capitalistic production as a “condition.” Could
it be said then that “relations of appropriation” is just another way
of expressing the relations of private property? If this is the case, we
would have to question the necessity or importance of introducing the term
“appropriation” instead of “private property”. Furthermore, the laws
of private property are not directly the relation between capital and wage
labor. Certainly private property fundamentally determines these class
relations, but there are several “mediating factors” that are necessary
-- in reality, and thus in theory -- between private property and the class
relation between capital and wage labor.
“The socialization of labor is inseparably linked to the increase in labor
productivity, and the introduction of improved methods and means of production,
transportation, and communication.” (Ibid. p. 48)
Of course, this proposition is unquestionable. However, this statement
if not simply repetitive, is nothing but a hollow truth.
The Stalinists say that this “socialization of labor” is not unrelated
to the development of productive power, but “connected” to it. However,
we should not be fooled by the vague expression “connected” because this
is related to the decisively important question of the basis of capitalist
contradictions. Of course, to say that it “is connected” could mean anything.
Certainly the “socialization of labor” is in fact inseparable from and
“connected” to the development of productive power. As the socialization
of labor develops the productive power of labor also reaches a higher level.
We recognize that the two progress in parallel. Nevertheless, they are
two separate things; the concept of the “socialization of labor” cannot
be equated with productive power.
Of course, the Stalinists don’t declare that these two things are the
same, they merely say that they are “connected.” However, by using this
expression, they create the impression that the socialization of labor
and productive power are the same concept. This vague concept is thus perfectly
suited to the Stalinists, who can use this truthful sounding expression
to conceal the reality of capitalism.
Moreover, this “fundamental contradiction” is also not unrelated to class
struggle.
“The fundamental contradiction in capitalism is the contradiction between
the social character of production and the private form of acquisition.
This is because this contradiction expresses the fundamental characteristics
of the capitalistic mode of production, and the split of bourgeois society
into confrontational classes, i.e. the split between the bourgeoisie who
monopolize the social means of production, and the proletariat who are
exploited by the bourgeoisie and only possess their own labor power
“The contradiction between the social character of production and the
private form of appropriation is expressed in the collision between the
character of large-scale capitalistic production relations and the capitalistic
property form including all the other production relations (? ? H. H.).
At times, bourgeois economists recognize this or that contradiction in
the capitalist economy, but they always deny or conceal the contradiction
between the social character of production and private appropriation. If
they were to admit this contradiction, it would mean recognizing that the
capitalistic property form of the means of production no longer corresponds
to, and collides more and more profoundly and violently with, the character
of the productive power, and for this reason historically its fate is sealed,
and it will be replaced by the socialistic form of property.
“Since the contradiction between the social character of production and
private, capitalistic appropriation is the fundamental contradiction within
the capitalistic system of production, and expresses the fundamental characteristics
of this system, all of the contradictions of bourgeois society are encompassed
within this contradiction. In other words, the contradiction between the
social character of production and capitalistic appropriation is revealed
and expressed in each of the other contradictions of capitalism. The reciprocal,
dialectical relation between the fundamental contradiction of capitalism
and the other various contradictions is extremely important. Starting from
this reciprocal relation, the fundamental problems of the theory of crisis
could be correctly solved for the first time.” (Ibid. pp. 50-1)
What Engels, when characterizing capitalistic production, referred to as
the private form of acquisition, was the fact that even though the capitalistic
commodity becomes a thoroughly social product in the sense that it is already
the product of the workers collaborative labor, the capitalist appears
as an individual property owner and as such brings the product to market
and sells it; in short, the relations of private property. Engels emphasized
that in capitalism the relations of small commodity production had already
been superceded, and that individual production had come to an end, but
even though production is carried out socially, ownership, as before, is
still private and individualistic -- it was here that Engels saw a contradiction.
Of course this is clearly a contradiction, but it cannot be simply (or
directly) said that this is “the fundamental contradiction of capitalism”
and that crisis can be explained from this contradiction. We cannot understand
why one would deny the simple but fundamental and comprehensive concept
of the contradiction between the capitalistic relations of production and
productive power. What is gained by taking this or that word of Engels
-- and the words alone-- and turning it into a dogma? Only the Stalinists
stand to gain from such a practice. The JCP and others employ such means,
and do nothing but scatter around their dogmas. It should be clear to anyone
who has read even a little Marx, that when he explained crisis he emphasized
the contradiction and conflict between the limits of capitalistic production
(the limits of “capital itself”) and the expanding productive power that
crashes into these limits.
As petty bourgeois private property is transformed into capitalistic private
property (capitalistic property relations), the class conflict between
the bourgeoisie and proletariat develops. This is an unquestionable proposition.
However, to call this “the contradiction between the social character
of production and capitalistic appropriation” and to say that “within
this contradiction” the capitalistic class relations “are revealed”
(!?) only serves to blur the essential relations of capitalistic production
and sow confusion among the workers by drawing them into a chaotic storm
of meaningless jargon. This is one of the “systematic” ideologies of
the Stalinists which was born out of the system of state capitalist society
(the system, mistakenly called socialist, of the USSR and China), in other
words, a reactionary “doctrine”.
What the bourgeoisie refuses to “accept” is not the dogma of the “the
contradictions between the social character of production and capitalistic
appropriation,” but rather the contradiction and conflict between capitalistic
production relations and productive power, which is a truly revolutionary
theory. Of course, under capitalism “contradictions between the social
character of production and capitalistic appropriation” do exist, but
there is no reason to call this the “fundamental contradiction.” Moreover,
if one says that this is a “fundamental contradiction” in a sense, but
only a different and not necessarily superior way of expressing the contradiction
and conflict between the relations of production and productive power,
then all of the rationales advanced by the Stalinists appear as a nonsensical
repetition that amounts to nothing more than a different manner expression.
In other words, “the contradiction between the social character of production
and capitalistic appropriation” expresses the contradiction between the
relations of production and the productive power, and has the same meaning,
etc. However, even though this is too simplistic, the Stalinists say that
the former includes or expresses the later, and dress up their arguments
to look plausible, which only serves to reinforce the confused and ambiguous
nature of their theory.
“The contradiction between production and consumption and between the
potential of production and the low consumption ability of the masses,
is an expression of the contradiction between the social character of production
and capitalistic appropriation”. (Ibid. p. 51)
“The contradiction between the social character of production and capitalistic
appropriation is also an expression of the anarchy of the capitalist economy”
(Ibid. p. 52)
“Even societies of simple commodity production were characterized by a
‘lack of planning,’ but under conditions of capitalism, based on the
contradiction between the social character of production and the capitalistic
form of appropriation, the anarchy of production begins to take a destructive
form in the entire course of reproduction.” (Ibid)
Furthermore, according to Mendelson, this is “conditioned by a series
of factors,” and these “conditions” are, first of all, “the enormous
socialization of labor,” secondly, “a constant imbalance,” thirdly,
“the conflict between classes and the contradiction between production
and consumption, which is one of its manifestations” and, finally, increasingly
severe, and destructive “competition.”
It is extremely difficult to understand clearly what the author is trying
to say here, but it is immediately clear to us that this is nothing but
a bunch of jargon. He continues in the following way:
“The contradictions between the social character of production and capitalistic
appropriation appears clearly in the “antagonism between the organization
of production in the individual workshop and the anarchy of production
in society in general.” (Ibid. p. 55)
“The contradictions between the social character of production and capitalistic
appropriation is also revealed in the form of the contradiction between
the conditions for the production of surplus value and the conditions of
its realization.” (Ibid. p. 56)
“Of the many forms in which the contradiction between the social character
of production and capitalistic appropriation is revealed, we have only
discussed those which are particularly essential for explaining the inevitability
of crisis. Of these, the most important are the confrontation between the
proletariat and the bourgeoisie and the anarchy in production.” (Ibid.)
“The contradiction between the social character of production and capitalistic
appropriation is the basis and inescapable cause of crisis. This is because
this contradiction is the synthesis of all the contradictions of bourgeois
society, and manifests itself in each particular contradiction. Each contradiction
(i.e. the anarchy of production, the contradiction between production and
consumption, the contradiction between the conditions for the production
of surplus value and the conditions for realizing this surplus value, etc.),
as the manifestation of this fundamental contradiction of capitalism, can
become the cause of crisis.” (Ibid. p. 57)
Mendelson seems to be saying that the contradiction between the social
character of production and capitalistic appropriation is the basis of
crisis, but on the other hand when this fundamental contradiction is manifested
as the contradiction between production and consumption this in tern becomes
the cause of crisis. However, this is simply the repetition of the same
thing, and is akin to saying nothing at all. This is the argument that
the fundamental contradiction is the cause of crisis, but is only the cause
of crisis when it appears as the contradiction between production and consumption,
and would not be the cause if it didn’t appear as such. He says that the
fundamental contradiction between production and consumption is not inevitable,
but rather that it sometimes manifests itself and sometimes does not. In
place of the contradictions of capitalistic production he substitutes some
arbitrary or random relations. This line of reasoning is nothing more than
sophistry and nonsense.
Enough already! We can already confirm that Stalinism has done nothing
but bring confusion and chaos to the workers through its flood of confusing
expressions and deceitful theory. The theory of the Stalinists is, generally
speaking, dogma and the distortion and revision of Marxism, with their
theory of crisis certainly no exception to this. Since the theory of crisis
deals with the most fundamental contradictions of capitalism, it is probably
inevitable that the Stalinists” theory of crisis would be total nonsense
and degenerate to the point of being nothing but thoroughly reactionary
cliches. Based on this theory of capitalism and crisis it is impossible
to organize the rebellion of the working class against capitalism. It was
certainly no accident that the Stalinists stood idly by and allowed the
best opportunity for world revolution to slip away during the Second World
War -- as well as the best opportunity for revolution in Japan. They lacked
a theory for the overall rebellion and insurrection against capitalism.
The expression: “the contradiction between the social character of production
and the private character of appropriation,” which was used by Engels
and then Lenin as a concept to fundamentally explain crisis, has assumed
a life of its own ? in words only -- in the Stalinist movement.
In an essay criticizing Narodnik economists, Lenin exposed Sismondi’s
theory of crisis in the following way:
“Sismondi says: crises are possible, because the manufacturer does not
know the demand; they are inevitable, because under capitalist production
there can be no balance between production and consumption (i.e., the product
cannot be realised). Engels says: crises are possible, because the manufacturer
does not know the demand; they are inevitable, but certainly not because
the product cannot be realised at all. For it is not true: the product
can be realised. Crises are inevitable because the collective character
of production comes into conflict with the individual character of appropriation.”
(A Characterization of Economic Romanticism, p. 171)
The Stalinists use the concept of the “the contradiction between the social
(collective) character of production and the private (individual) character
of appropriation” to explain crisis and smugly “apply” this everywhere
to “crush” their rivals. It is as if this were a magical charm which
only required the Stalinists to declare: “all enemies be gone!”.
8. Modern Capitalism and Crisis
Finally, let’s consider the question of modern capitalism and crisis.
Through the establishment of two financial bills, a huge sum of thirty
trillion billion yen is being allotted to come to the aid of financial
institutions and capitalistic production in general. The banks have jumped
at this money and all say that “if we all receive it everything will be
fine”. The terrified industrial businesses that have not been able to
receive loans have also breathed a sigh of relief and are also celebrating
the rise in stock market prices. The money infused through various means
by the Bank of Japan to be circulated in the financial markets has swollen
to the scale of tens of trillions of yen, and loans issued by the state
financial organs have also increased.
However, this massive infusion of state funds is not the characteristic
thing about modern capitalism. The characteristic point is that despite
being criticized severely by the public just two or three years ago for
investing hundreds of billions of yen in public funds when faced with the
collapse of the housing loan companies (and solemnly pledging to never
again provide public funds to businesses who went bankrupt due to careless
management), the government has now openly infused a huge sum of public
funds, amounting to ten times the previous sums. The shamelessness, opportunism,
and total inconsistency of this action hardly merits mention
This is characteristic in the sense that without the nearly unlimited injection
of state capital, which is poured in by means of every form, as if it were
water, modern capitalism would not be able to “directly” exist.
In fact, even apart from the new state funds and so on, every year billions
of yen in state funds are expended on public enterprises. Expenditures
on various forms of “welfare” are on the scale of billions of yen, and
military expenditures have grown increasingly large. The total sum of state
money thrown into circulation and trusts to improve the economy, either
consciously or by custom, has swelled.
To get a grasp of the scope of this huge sum of money, one need only look
at the accumulation of state bonds (debt) that has already reached the
sum of hundreds of trillions of yen. The state organs have no prospect
(or intention) to repay this debt. Nevertheless, a great amount of new
debt is going to be accumulated to add on to this already enormous amount.
The bourgeoisie and politicians are not unaware that there is a huge amount
of state debt, and they can vaguely foresee that this debt is a grave problem
for the state and society ? i.e., the rule of capital -- that prepares
their own collapse. For this very reason they criticize Keynesianism and
find it to be the incarnation and root of evil (how very ungrateful of
them!). This is also why they are making a fuss over the necessity of “state
restructuring”, i.e. financial reconstruction; and “neo-liberalism,”
the antiquated thought of two hundred years ago, takes on a radiance unbefitting
its age (of course modern capitalism itself has already reached an “advanced
age” and is quite senile).
However, they are unable to put an end to state expenditures. This is exactly
like some sort of drug addiction. The bourgeoisie realizes that if they
continue this will harm their health and progressively ruin their body,
but nonetheless they are unable to stop. This is because it is better for
them to not know the acute pain that would arise from their chronic disease
if they were to give up their medication. They fear crisis, and for this
reason they have elected to reduce the pain through state expenditure --
this choice was unavoidable. The arrival of the evil can thus be forestalled,
but crisis and unemployment are in fact a direct and imminent problem.
The bourgeoisie makes every effort to overcome the dangers it immediately
faces and has no room to think about the consequences.
In fact, it wasn’t that long ago that oaths were sworn that such a terrible
economy could never occur again after the experience of the bubble economy.
The bubble economy wreaked damage through the collapse of land and stock
prices, the bank recession, and the accumulation of enormous bad debt,
which even today continues to have a seriously corrosive effect on the
Japanese economy, and is one of the reasons it cannot stay afloat. It could
be said that the task of the bourgeoisie these past ten years has been
to avoid another bubble economy, and sweep away the aftereffects of the
bubble economy as quickly as possible.
However, recent maneuvers teach us that the bourgeoisie cannot stop using
inflationary policies, and they have begun to feel that there is no salvation
outside of a bubble, or inflationary economy. Clearly they prefer the direction
of inflation to that of crisis and recession.
In the mid 1990s, for the first time since the end of the war a national
debt appeared, although the finance minister at the time, Fukuda, solemnly
swore that this was only temporary, and that when the recession was overcome
and the economy revived, tax revenues would be restored and the national
debt could be easily repaid. Since that time the bourgeoisie has repeated
this same pledge innumerable times. However, not only has the national
debt not been repaid, it has grown consistently larger. The national debt
would not be repaid even if the economy were to revive, merely the speed
of its accumulation would be temporarily slowed somewhat. With the arrival
of Prime Minister Tanaka any hope of halting this process was lost.
The nearly ten years since the end of the bubble economy -- especially
the experience of the past two or three years -- have made it clear that
this bourgeois society cannot cease inflationary policies since this would
lead to extraordinary failure. One cannot safely say where this will all
end up, but we do know that the bourgeoisie today will continue to rely
on inflationary policies. Despite their stated principles, they already
have essentially thrown out the slogans of financial reconstruction and
reform.
For the modern bourgeois state there is no choice but to pile up inflationary
policies and accumulate state debt. Only through these policies can the
actual contradictions of overproduction and various imbalances be solved
to some extent or postponed. Of course, the contradictions and imbalances
are not eliminated by this approach, but in fact become even greater. The
policies intended to solve the imbalances in turn create new ones or expand
already existing ones, and lead to an uncontrollable situation. This is
the trap into which modern capitalism has fallen. Will the bourgeoisie
be able to break free, and if they are not able to do so, who exactly (which
class or political party representing a class) will be able to show the
way out of the impasse?
In one sense, the progression of inflation is a process of stabilizing
disequilibrium. Apart from the disequilibrium between production and consumption,
the largest as well as most important of these imbalances has been between
real capital and money capital. The inflationary policies or the spreading
of currency has meant that compared to other forms of capital -- industrial
or real capital -- money capital has abnormally swelled. The issue of national
bonds itself is an act of self-trust, and is formally completely different
from issuing additional paper money. The former simply signifies an expansion
of the national debt and national bonds are nothing more than certificates
of debt. However, in this form the expansion of state credit (this expanded
credit is not necessarily generated from “private” natural necessity)
causes an enormous accumulation of currency capital relative to productive
and industrial capital, i.e., it inevitably leads to disequilibrium. Moreover,
it is only through the decrease in the value of currency, i.e. inflation,
that the “excess” money capital can be restored close to its former equilibrium.
In this sense, inflation is the “violent” solution of the causes of abnormally
intensified disequilibrium under the managed currency system, and in this
sense it carries out the same function as crisis.
Of course, money capital can easily be turned into “currency” and as
it appears as increased currency inflation can progress. If money capital
is fixed as money capital, no matter how much the Bank of Japan issues
bank notes the phenomenon of inflation will not appear. However, we must
never forget that in modern capitalism, money capital is currency, and
currency is money capital, this is true even apart form the system of controlled
currency. However, presently money capital is entangled in circulation
and to some extent can become currency, and does become so in some circumstances.
In this sense, it can be distinguished from metallic money which is only
absorbed into circulation to the extent of its volume needed for circulation.
This part, this “excess” money capital, can easily be transformed into
currency, and therefore it is clear that it can become one of the causes
of inflation. Under the current system, the excess of money capital means
that inflation penetrates as one necessity. This is an action or movement
of capitalism to gain a new equilibrium by means of reducing “excess.”
This “excess” money capital must be reduced because the foundation and
basis of the capitalist mode of production is industrial capital, not money
capital, and if money capital expands at the expense of industrial capital,
this is an indication that the society is becoming increasingly parasitical
and declining. Money capital may secure an income for its owner in the
form of interest. However, since interest is only income as a part of the
profit generated from industrial capital, if industrial capital dos not
produce a profit or if interest receipts swell excessively compared to
industrial profits, then this can only mean the decline of interest, and
therefore money capital. If money capital becomes “excessive” to the
point that interest exceeds profit, there is a necessity for this society
to dissolve this “excess” money capital (at least to the point where
capital can obtain profit and once again resume “smooth” reproduction)
and regain a sound footing. For example, in Germany after the First World
War and Japan after the Second World War, there was the outbreak of strong
inflation, but in this process “excess” money capital was eliminated,
and capital was able to begin to reproduce and reaccumulate upon a new
basis and equilibrium in order to produce prosperity for capitalist society.
Of course, however, this was also the process of the accumulation of new
contradictions.
Keynes said that one positive role of inflation is that it causes the ruin
of the rentier. For the owners of money capital, who comes to occupy a
great relative importance and even become a burden on society, and that
class that garners enormous wealth from society in the form of interest,
inflation is the most severe blow, which plunders them and brings about
their ruin. Even if one has a savings of ten billion yen, the arrival of
severe inflation can shrink the value of money to one-thousandth of its
former value so that this ten billion yen comes to have the value of just
ten million yen. And if this value is reduced to just 1/10,000th of its
former value, this savings will have shrunk to just a million yen, so that
our hypothetical big capitalist slips down to the level of a miserable
petty bourgeois. For the class which had lived an elegant, luxurious life
on the interest on savings of a 100 million or 1 billion yen, this inflation
would in fact spell ruin, and this is why Keynes could smugly speak of
the “euthanasia of the rentier.” And this “euthanasia” of the enormous
rentier class, which had grown until it posed a problem to society, means
that the problem of debt disappears like magic, and this in term lightens
the burden of society as a whole and that of industrial capital.
The bourgeois state, which is suffering under enormous debt, would also
likely be the greatest beneficiary of the progression of inflation. If
we look at the postwar Japanese state, it should be perfectly clear that
the state can also be saved by inflation. The postwar Japanese state was
able to free itself of the enormous debt that it had accumulated by borrowing
from the Japanese people as a whole to fund its war effort. In other words,
the state was in fact able to bilk the public, and do this by legal means.
This likewise reminds us of the inevitability and significance of the postwar
inflation. This postwar inflation was of course a harsh additional exploitation
of the workers, and the process of the “realization” of this exploitation.
The war itself was also pursued by placing an enormous “additional” burden
on the people, for which they were repaid after the war with a rapid worsening
of their standard of living and collapse of their livelihood resulting
from the severe inflation of the time.
Apart from the nearly ten year long Great Depression that began in 1929
and lasted up to the Second World War, the 20th century has not known a
crisis in the true meaning of the word on a global scale. Of course there
have been several recessions since the Second World War, and the experience
of several periods of economic crisis and difficulties, such as the “dollar
shock” and the “oil shock,” but these could not be called crisis in
the true meaning of the word. In this sense, modern, post-war, monopoly
capitalism has not known crisis.
Still, it would be wrong to declare that this means that in the future
there will be no explosion of the contradictions of capitalism (crisis).
It would be certainly incorrect to make such a statement. In fact, no matter
how thoroughly “deregulation” is carried out, or the principles of free
competition are allowed to reign supreme so that the merciless “law of
the jungle” penetrates society, there is no guarantee that this will not
bring about a crisis in the “classic” sense of the word (i.e. panic).
Indeed, the crisis and bankruptcy last year of not only small and medium
size businesses, but also large-scale capital shows that crisis is very
possible under modern capitalism and this bewildered the bourgeoisie. If
the government had not intervened, it is highly possible that the situation
would have escalated to a panic. In this sense, it can be said that through
the aid of the state modern capitalism is able to temporarily avert a panic.
Even though the role of the state is “enormous,” it would be a fantasy
to think that the capitalist economy could become free through state policies
or “managed” according to the wishes of the bourgeoisie. The ability
of the state to “manage” is temporary or partial, only extending to a
certain level or depth. Even if it may appear that a crisis or overproduction
is eliminated by means of state intervention, this intervention does not
get rid of the contradictions and disequilibrium, but rather preserves
them in a twisted form and carries them forward, so that ultimately the
crisis continues and steadily worsens. In order to reduce this aggravated
crisis in turn requires state intervention on an even larger scale, thereby
representing a vicious circle that heads in the direction of bankruptcy
and a general collapse.
Seen historically, there were times when the “appropriate” intervention
of the state was effective. For example, in the age of Marx, the English
state implemented mistaken economic policies that aggravated the crisis
of 1848-9 on the basis of Ricardo’s theory of the volume of currency,
but Marx wrote that by just abandoning these mistaken policies “the crisis
was foiled.” The mistaken policy that the state had implemented was to
have the distribution of currency “strictly” adhere to the circulation
of metallic money -- based on the idea that a crisis stemmed from the issuance
of an excessive amount of currency and the resultant economic bubble, and
thus it was possible to avoid a crisis through the strict management of
currency -- and the technique employed was to remove bank notes from circulation
in proportion to the gold that was sent overseas. This, however, in fact
lead to an outbreak of crisis resulting from withdrawing currency from
circulation at the very moment that it was most needed, and this abnormally
aggravated an economic crisis. This “experiment” failed, and just by
removing this system, the peak of the crisis was surmounted and it came
to an end. This is an example of the influence of a negative action by
the state, but it is certainly possible that it is possible to break the
momentum of a crisis by freely and intentionally supplying currency.
This is precisely why monopoly capital society moved from the system of
metallic money to a system of controlled currency, i.e. a system in which
bank notes are the currency.
If bank notes are covered by metallic money (i.e., if the conversion of
bank notes for gold is ensured), then the issuance of bank notes (currency)
clearly has a limit. This is not to say that the number of bank notes issued
cannot be increased, but if there is a simultaneous demand for the conversion
of currency to gold, the central bank will be faced with immediate collapse.
Therefore, in order for currency to be issued more freely, the conversion
of currency to gold was suspended and then banned. Indeed, it was in the
age of monopoly capital, with the intensification of capitalistic contradictions,
that the conversion of currency to gold was halted, and indeed had to be
halted. Even today the gold system in which currency was convertible has
not been “resurrected.”
Certainly inflation is, on the one hand, the extreme development of disequilibrium,
but on the other hand this is the process whereby the great amount of disequilibrium
that has been inevitably accumulated and developed by the capitalist mode
of production is reduced, so that this is both the explosion of contradictions
and at the same time the process of the “violent” resolution of these
contradictions and a process of attaining equilibrium, and in this sense
inflation had the identical social function as crisis. The rapid development
of inflation is indeed a crisis, and therefore it is completely wrong in
this sense to say that modern capitalism has eliminated crisis. Of course
not only inflation, but war as well is the same, since it is clear that
war is a waste of an enormous amount of capital. It was only by means of
a large-scale, world war that the overproduction that was manifested with
the Great Depression could be finally eliminated, and war was able to bring
about the “smooth” reproduction and expanded reproduction, that is, the
resumption of the accumulation process of capital. In this sense, war can
also be said to be crisis, with the same movement as crisis -- that is,
it plays the a social role that is intrinsically necessary to capitalism.
In capitalist society even war (and the bigger one the war the better)
has a certain “economic” role to play (an effective and meaningful role!)
and a necessity. As the possibility to evade or crush an economic crisis
becomes smaller, the social and economic pressure (desire) for a “solution”
in the form of inflation or war grows stronger and the likelihood of its
realization increases. This is the reality of the society in which we live,
the reality of the society of monopoly capital.
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