Kapital vol. 3 part 1 chapter 6: The Effect of Price Fluctuations

Part 1 Chapter 6

(This post is part of an ongoing project: a close reading of volume 3 of Kapital, one post per chapter. I hope that others who are tackling this book for the first time might find my summaries and thoughts useful. I also hope that others might leave their own thoughts, criticisms, help, etc. here so that this blog might become a good collective resource for those brave souls who take on Vol. 3.)

The Effect of Price Fluctuations

1. Fluctuations in the Price of Raw Materials, and their Direct Effects on the Rate of Profit

We begin with a repetition of the observation from the previous chapter that changes in prices of raw materials change the cost-price and therefore the rate of profit. (Marx is mostly referring to raw materials that form the circulating part of constant capital, not fixed capital, though later he can’t help but move briefly into this topic.) Higher cost-price means lower rate of profit and vice versa. Thus the cost of transport, the efficiency of world trade and the tariff system all play an important role in the way they effect raw material prices and profit rates.

Since raw materials pass directly into the product while fixed capital’s value is transfered a little at a time over the life of the fixed capital this means that price fluctuations in raw materials have more of a direct effect on prices and profit rates than fluctuations in fixed capital costs. As prices of commodities fluctuate so the demand for them fluctuates, causing expansions and contractions in the supply of the commodity on the market.

Marx, giving us a sneak preview into the soon-to-come explanation of prices-of-production, mentions here that these fluctuations of price would not be quite so extreme in a situation of average profit rates and prices of production. We are still assuming that commodities trade at their values. But if they traded at their prices of production instead, the formation of average profit rates would slightly soften this fluctuation in price caused by the fluctuation of raw material prices.

The increasing productivity of labor means that the same amount of workers produce more product per hour. This increasing productivity requires an increase in the raw materials. If workers are making twice as many shoes as before they need twice as much leather, rubber and thread. Thus the price of the commodity contains less and less labor, and less and less fixed capital value but more and more raw material value. Marx refers to this fall in the value added, per commodity, by labor and fixed capital as a “falling tendency” only counter-balanced by a decrease in the price of raw materials.

Marx ends this first section by noting (I think I am understanding this correctly) that when raw material prices grow inordinately high this causes manufacturers to make better use of waste product. We may see a similar process in our lifetime if prices in oil continue to fluctuate in ways the disrupt production.

II. APPRECIATION, DEPRECIATION, RELEASE AND TIE-UP OF CAPITAL

Appreciation or depreciation of capital refer to changes in the value of any of the factors of production after they have been purchased due to general changes in the economy. For instance, after purchasing a 100 barrels of crude oil the market price of oil might go up due to, say, a new war in the Middle East. What does this appreciation in the already purchased raw material inputs mean for the capitalist who has already purchased this oil? Or a capitalist may spend millions of dollars on a new, state-of-the-art, factory that makes cars only to find out that ten years later foreign car companies have invested in even more state-of-the-art factories at lower prices. How does this depreciation of fixed capital effect the profit rate? Marx intends to tell us in this chapter.

He also intends to tells us about the tie-up and release of capital by which he means this: In order for reproduction to occur a capitalist must devote a certain portion of the price of his products to reinvesting back into constant and variable capital. If he sells a football for $10 he can’t spend that entire $10 on booze and comic books. A certain portion of that $10 is “tied-up” in variable and constant capital. Now, if the price the food goes down and wages fall, or if the prices of raw materials fall this means that some of this previously tied-up capital is “released”. The capitalist can then choose to spend all of this released capital on loose-living and luxury goods or to reinvest in expanding production.

At the beginning of the chapter Marx notes that a full understanding of these factors, appreciation, depreciation, tie-up and release, really requires an analysis of the credit system and the world market. These are topics Marx was reserving for much later in his argument. Unfortunately he never got to them.

Now you may be thinking, “Didn’t we just spend a really long time investigating the effects of changes in the prices of constant and variable capital on the profit rate?” Yes we did. All of those prior investigations assumed that changes in prices happened between production periods, as if capitalists bought inputs at the beginning of the week, turned them into commodities which they sold at the end of the week, and then stepped into the market on Monday to encounter a whole new set of prices. In reality, at any given time parts of the total capital are in the market looking to buy or sell goods while other parts are in production making goods. This is why we need to look at appreciation and depreciation separately from our previous analysis. Remember that the law of value is the law whereby the production is regulated indirectly through market exchange. We produce with an eye on exchange. But we don’t know the full value of our product until we realize it in exchange. While one thing is happening in the private sphere of production quite another might be happening in exchange. Values are constantly changing as changes in productivity, circulation, and politics (tarifs, wars, etc.) effect the socially necessary labor time, socially necessary turnover time, monopoly pricing, scarcity rents, etc. (When we add the credit system to the mix an entirely new aspect of price fluctuations are introduced into the picture.)

If the price of cotton goes up then the prices of commodities that contain cotton go up. If I own a t-shirt factory and have already bought a year’s worth of cotton I will actually benefit from the appreciation of my raw materials. I can sell t-shirts at the new market price caused by the increased price of cotton. Because I bought my cotton at the lower, pre-appreciation, price I can pocket the difference as profit. The appreciation of my stock of cotton actually offsets the fall in profit usually caused by a rise in constant capital values. But if all the competing t-shirt making firms have also purchased a year’s worth of cotton the existence of cheaper cotton in our stock piles will press the price of t-shirts below this new appreciated price. The opposite process takes place if cotton prices fall.

This all make for some confusing results. If my capital looses value through depreciation this can still mean that my profit rate goes up since the profit rate is the excess of surplus value above the value of total capital. If my capital gains in value my profit rate my go down for the same reasons.

A discussion of appreciation and depreciation of fixed capital can’t happen without a theory of ground rent so this will have to wait till later in the book. But Marx makes some remarks about machinery here. If the use-value of machinery is quickly going out of date, this causes machines to loose their value- to depreciate- before the labor contained in them can be fully transferred into commodity form. To take my previous example of the US auto-industry, if I build a fancy new Ford factory in 1940 in Detroit and the Japanese build a much fancier and cheaper factory 15 years later this makes my machines depreciate. I can’t sell my cars at prices that will allow me to recoup my investments in fixed capital. I have to sell at the lower market price set by the Japanese. (Or I can resort to tariffs, lay-offs, attacks on unions, “buy American” campaigns, right-wing populism, etc.) Marx calls this “moral depreciation”. This means that when new machinery comes on-line there is often an urgent need to get the most product out of them before they depreciate. In Marx’ time this meant the prolongation of the working day in order to work the machine as much as possible before it became obsolete. We see similar logic today with the use of night-shifts and overtime in factories. (Slightly related is the desperate urgency to get the most profit out of intellectual property before the monopoly rents associated with it disappear.) This all means that the newest entrants into the market are often not the ones that profit from a new technology. They often go out of business because they can’t compete with new competitors. This devalues their fixed capital. The winners buy up this devalued capital at bargain-basement prices which allows them to have a huge profit margin.

Here, in a few paragraphs Marx lays out the part of the picture of the accumulation cycle that characterizes capitalist crisis. It is the coupling of this picture with the Falling Rate of Profit which allows us to see the way the “counter-vailing influences” against a falling profit rate play out in real time. We saw a few chapters back that the falling profit caused by an increase in organic composition can be offset by a falling price of constant capital. Here Marx shows how this works in a world in which huge amounts of investment go into fixed capital. When fixed capital prices fall we get moral depreciation which means a falling rate of profit which can only be reconciled by crisis and devaluation. This line of argument fits quite well with the description of the US economy in the last 70 years, especially the auto-industry. Marxists like Andrew Kliman, David McNally, Allen Freeman, David Harvey and others point to this moral depreciation of fixed capital as a key element in explaining the current crisis. It is this phenomena that Robert Brenner mistakes for competition in his competition-centered account of crisis in “The Economics of Global Turbulence.”

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“There is still variable capital to be considered. “

Obviously- if the means of subsistence appreciate then wages must go up and surplus value falls. The opposite happens with depreciation.

If a capitalist is used to reinvesting so much a week in wages and the wage begins to fall this will then free up some of that variable capital. Some of the variable capital is “released” and become surplus value. This can be used for new golf clubs or vacations to Buenos Aires or it can be reinvested in production. This makes it possible to expand production by hiring more workers to exploit. The opposite happens with an appreciation of wages. More capital is “tied up” in variable capital which means that if production is to continue at the same scale money must be taken out of the surplus value and spent on variable capital. The rate of surplus value and rate of profit falls.

Marx makes the distinction in this section between the effects of this appreciation or depreciation on newly invested capital or previously invested capital. If depreciation effects a newly invested capital all this does is to change the rate of surplus value and profit. If it effects a previously invested capital this depreciation releases variable capital for new investments.

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“The release and tie-up of variable capital, just analysed, is the result of a depreciation or appreciation of the elements of variable capital, that is, of the cost of reproducing labour-power.”

But variable capital can be released by changes in productivity as well. If productivity increases make is possible to get the same amount of commodities out of half as many laborers this means a releases of variable capital. However, as we have already seen, this most often goes along with an increased need for raw materials which means a tie-up in constant capital costs. The relative amounts of the release of variable capital and the tie-up of constant capital determine the effect on profit rates.

Usually a tie-up of more constant capital goes along with increasing productivity but it can also correspond to the opposite. In agriculture, if the fertility of land is declining, more and more constant capital will be needed to get the same amount of product from the land. Here declining productivity ties-up more constant capital.

As constant capital in the form of raw materials starts to take on more and more of the day-to-day cost of production, price changes in raw materials have more violent effects on profit rates. Fixed capital costs are long-run costs and don’t depend much on the day to day fluctuations of prices. But raw materials must constantly be replenished and thus can cause endless fluctuations.

This is especially true of raw materials whose production involves natural forces out of the control of man. Agriculture is the chief example here. A bad harvest, a blight, etc. can make agricultural prices fluctuate. The products of nature are not nearly as steady and predictable as the products of purely human labor in other spheres of production. Agricultural production also can’t immediately increase or decrease to meet fluctuations in demand. Production is planned around yearly crop  cycles and can’t be adjusted until the beginning of the next planting season. This means that there can be shortages and gluts of agricultural goods.

Fixed capital tends to grow steadily- or even rapidly. This means that there is always a growing need for raw material inputs. This leads to overproduction of machinery and under-production of agricultural goods. And this means higher prices in the agricultural sphere.

In times of spikes in raw material prices capitalists often band together in associations to stimulate production of raw materials. This is one of many ways capitalists act collectively as a class when they are threatened as a class. But as soon as production returns to normal the capitalists return to open competition on the market and their ideology of “free trade”. Funny how disposable economic liberalism is when the capitalist class is threatened. Funny also how the libertarian/neo-liberal/Austrian argument is always that these trusts and other such associations are an imposition upon a rationally functioning market when it is clear from this and countless other examples that just the opposite is the case: these are attempts by the capitalist class to impose order upon an irrational market. Marx concludes this segment by saying that capitalism is totally irrational from the standpoint of agricultural production. It requires “either the hand of the small farmer living by his own labour or the control of associated producers.” Is it no wonder that today the agricultural industry depends on massive subsidies and tariffs?

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The last bit of this section lists examples of the above arguments. There are 1858 factory reports about spindle and looms growing faster than sheep. From the same year Marx quotes reports of the cotton trade not being able to keep up with the increase in self-acting mule spindles and looms. This leads us to the 3rd and final part of the chapter.

III. GENERAL ILLUSTRATION. THE COTTON CRISIS OF 1861-65

This might be painful. I have more or less just summarized the history Marx gives. Why have I done this and should you bother reading it? I don’t know the answer to either question. I think I did it to help me understand the gist of the argument. Feel free to skip all of it. I will make a few remarks at the end in summary.

Preliminary History 1845-60
1845: “Golden Age” of cotton. Cotton prices are low and factories are growing.
1846: Factory capacity has already outpaced cotton production. Cotton prices are rising and factories are working short-time (less than full days) because of shortages. Finished cotton products have saturated the market which means that their prices can’t rise to compensate for the rise in raw material prices.
1847, October: A money panic, shortages continue. I assume that the money panic doesn’t relate to the cotton problem. Marx doesn’t expand much on this.
1849: A recovery happens. Perhaps some of the demand which is stimulating production comes from consignments… (Here we allude to the way credit can displace crisis). Cotton prices have fallen considerably allowing production to continue. This fall in price is not explained in the manuscript (unless I am overlooking something.) As the recovery accelerates large producers start to stockpile cotton supplies, causing anxiety for smaller producers.
1850: Scarcity of cotton resumes and prices rise.
1853 April: Prosperity again.
1853 October: Overproduction of cotton. Depression in the industry.
etc. etc.

1861-64. American Civil War. Cotton Famine. The Greatest Example of an Interruption in the Production Process through Scarcity and Dearness of Raw Material

Here Marx discusses the history of the Cotton Famine in England which was caused by a blockade on American cotton imports in 1861 after the start of the US civil war. There was a huge shortage of cotton just at a time when the market had been over-saturated through overproduction. A severe crisis ensued and huge numbers of workers lost their jobs and had to go on public assistance. Wikipedia has a good, brief history: http://en.wikipedia.org/wiki/Lancashire_Cotton_Famine

1860: The massive expansion of investments in mills and other fixed capital continues while a shortage of cotton begins. (I assume this shortage comes from people hoarding cotton in anticipation of the blockade the following year.) Prices are rising and people are beginning to look for new sources of cotton. There is talk of expanding railroads to India in search of cheaper raw materials. India is already helping absorb the excess production from England. This is still the two-part function of a colony today: absorb excess capital, provide cheap raw materials.
1861: It becomes obvious that manufacturers overproduced in the previous year. It takes several years for the market to absorb all this excess production. Cotton prices are way too high due to the blockade and there is a huge shortage of cotton on the market. Many of the bigger firms stockpiled cotton. The value of  this hoarded cotton appreciated  which averted the usual depreciation of the total capital that we might expect in a crisis.

Manufacturers begin adulterating their cotton products by adding other stuff to the cotton in the spinning process. They weave in flour which increases the weight of the products but, of course, lessens their use-value. These substitute materials are harder to work with and break more and so this lowers the productivity of labor. Hours are decreased, wages start to fall and strikes break out.

1862: Unemployment is high, in some districts as high as 15% with larger numbers working short-time. Many producers are small-scale capitalists and they are hit particularly hard by the crisis. Inferior cotton is being used everywhere which slows down production.
1863: The inferior cotton slows down production thus having a severe effect on wages. The cotton workers are on a piece-rate system. This means that the slower they work the less they earn. Wages sink to almost nothing. Meanwhile workers are being fined for making inferior products.
Unemployment and underemployment sky-rocket. The public relief committees employ workers at poverty wages in public works: street paving, rock breaking, etc. Any worker who complains about the wage is struck from the relief rolls. Marx points out that this drastic devaluing of labor power is a great gift to the capitalist class. Urban development is given a free gift from the industrial reserve army.
1884: The public works employ so many people that is becomes hard to keep wages down. The reserve army of labor dwindles and strikes break out in factories. This will not do for the bourgeois who protest until the Public Works Act is repealed. Though the capitalists class looks to free markets and global trade to eventually bring cotton supplies back to normal and absorb surpluses they don’t advocate the mobility of labor. The bourgeoise work against allowing emigration of workers from the cotton factory districts.

And here the manuscript breaks off…

What can we learn from this history? Obviously it is a great example of many of the themes of the chapter: changing prices of raw materials, appreciation and depreciation, agricultural production cycles not synching up with the rhythm of capital accumulation… I’m sure that in Marx’s time there were diverse opinions as to the cause of the crisis. For many it was probably seen as the result of external political causes. But Marx brilliantly outlines the variety of complicated factors the all weave themselves together. We notice that he begins his story before the blockade caused by the American Civil War. Thus he already establishes a cyclical rhythm of boom and bust caused by over-production and the delay in agricultural production to respond to the market signals being given by the industrial sector. Once the external shock of the cottage shortage is introduced, this boom and bust cycle is taken to an extreme. Not only is Marx able to highlight the way in which this external shock merely amplifies an already existing industrial-agricultural cycle, but he also makes some keen observations about the way in which the capitalist class acts as a class to preserve its class interests in such times of crisis. We might take these themes to heart in our own time. It would be easy to blame the crisis of the 1970’s on the OPEC crisis as many historians do. It would be easy to blame our present crisis just on the sub-prime bubble, or our own oil prices. But the problems caused by these fluctuations in prices only serve to expose much more fundamental rhythms of capitalist accumulation. As in the cotton crisis we can see the capitalist class today acting as a class, through the the state, to preserve itself.

next chapter

Das Kapital vol.3 part 1, chapter 4: The Effect of Turnover on the Rate of Profit

Part 1 chapter 4
The Effect of Turnover on the Rate of Profit
(This post is part of an ongoing project: a close reading of volume 3 of Kapital, one post per chapter. I hope that others who are tackling this book for the first time might find my summaries and thoughts useful. I also hope that others might leave their own thoughts, criticisms, help, etc. here so that this blog might become a good collective resource for those brave souls who take on Vol. 3.)

Part 1 chapter 4
The Effect of Turnover on the Rate of Profit

This chapter is written entirely by Engels. According to Engels all Marx had completed for this chapter was the title.

Turnover time does not effect any of the basic observations about the rate of profit which we have already made. But it does alter the speed at which profits are made, thus effecting the rate of profit. While this may not be the most exciting chapter ever written there are some important concepts here. Most importantly, the faster the turnover time the higher the rate of profit. This means that capital has a marked tendency to decrease the turnover time both in production and circulation. David Harvey even develops a concept of “socially necessary turnover time” which is created by this competition to accelerate the speed of turnover. When people talk about the telescoping nature of our modern experience of time we must look to this socially necessary turnover time as the most important force in this drive to make all things instantaneous. Capital seeks to make production faster through better technologies, more efficient labor processes, different organizations of production (just-in-time production, small-batch production, etc.). It also seeks to make circulation faster through better transport, faster communication networks, and credit.

Engels starts by reminding us of the discussion on turnover time in Volume 2 of Kapital. There is always a portion of capital which is not fully used up in production. This could be all sorts of things: money capital, machines, factories, partially finished commodities, finished but unsold commodities, etc. The faster capital can turnover this portion, the more efficiently it produces surplus value.

The chief means of reducing production time is to increase labor productivity. If this doesn’t require a massive investment in new fixed capital then the profit rate will rise. The chief means of reducing circulation time are improved communications. Engels discusses the improvements in his time (steam boats,  railroads and canals) and says these have doubled or trebled the global turnover time. Even more interesting is his passing comment about the economic crises of 1825-57 in American and India being softened by their growing integration with the European continent through these improved communication networks. Engels is hinting here at the way both temporal and spacial strategies are used to displace economic crisis. This is the big innovation of David Harvey’s geographical work on crisis theory.

Engels provides a short example of how an increase in turnover time increases the profit rate. If I start out advancing $100 in capital which yields $20 profit I have a 20% rate of profit. But if I turnover that capital twice in the same period I will have $40 in profit, all still from the original $100 capital advance. Therefore, all other factors remaining constant, an increase in turnover time increases the profit rate. This effect is due to an increased efficiency on the part of variable capital which has turned over more product in the same amount of time.

Engels’s next point is that the capitalist actually lumps payment for wages along with all other circulating costs, like the cost for raw materials for that week’s workers to use. Circulating costs come from the cash box and the capitalist, says Engels, doesn’t make much of distinction in his record books between how much of this circulating capital goes to wages and how much to constant capital. Thus the grouping of variable capital with the category of circulating capital masks the value-creating power of variable capital in much the same way that cost-price does. Engels ends by saying that in the United States of America business accounting practices do a better job of differentiating between wages and other expenses in their records of the circulating capital. I don’t know but I would expect that nowadays it is easy to see records of the amount of wages paid relative to other parts of the circulating capital. Still it probably is true that to the capitalist the important distinction is not between constant and variable capital but between fixed and circulating capital. The faster capital turns over the higher the profit rate. Thus fixed and circulating capital have an immediate and visible effect on profit rates. Though variable capital is the source of profits, we experience this value-creating power as a result of other forces like circulating capital or even exchange itself. Thus the social productive relations of capital are expressed in a material form which disguises their social nature. Is this not the basic thesis of Kapital?

This last point of Engels’s also points to another problem: the challenge to provide empirical evidence of the labor theory of value. If value is really congealed labor time we should be able to show a statistical correlation of price and hours worked, right? There are many obstacles to carrying out such a project successfully. For one, as Engels points out here, capitalist bookkeeping uses different categories than Marxist economics. The difference between the wages a worker is paid and the amount of value they create is not directly evidenced by a look at the books. Capitalists often have very different classification of expenditures.

Though this is the only obstacle to empirical confirmation I might list others here. For one, much of Vol. 3 is devoted to an explanation of the way capitalists in competition change the market price of commodities away from their Socially Necessary Labor Time. The formation of average profits, credit and rent change prices. Thus the correlation of value and price can only be statistically correlated in the aggregate, as total price of all commodities on the market and total number of hours worked to make these. But, of course, holding these two aggregates next to each other doesn’t prove any causal correspondence. The proof of the labor theory of value can’t be found here, but in its descriptive power and its logical structure. There have been some efforts to provide empirical data on prices and value. I’m suspicious of these attempts but would be curious if others have more information about any of these. In his book “Reclaiming Marx’s Capital” Andrew Kliman briefly criticizes the attempt by Anwar Sheik to do an empirical study (see his “Empirical Strength of the Labor Theory of Value” here,) but this is because Kliman disputes Sheik’s understanding of the transformation problem.

To end with another aside, I am struck by the contrast between this observation that an increase in turnover time increases profits and the theory of round-aboutness espoused by Bohm-Bawerk. Bohm-Bawerk’s criticism of Marx’s theory of exploitation led him to seek other explanations of profit. Leaning on the work of J.B. Say he postulated that profit was a result of different time-preferences: We value present goods more than future goods. Those able to postpone immediate consumption and invest in production for the future will reap a reward called profit. This all assumes, of course, that value is completely subjective- a problematic proposition for sure. But if Bohm-Bawerk’s theory were true wouldn’t we expect the greater profit to come from longer turnover times rather than shorter ones? I am not an expert at all in Bohm-Bawerk and I suspect I may be missing  pieces of his argument here. If any readers can explain how Bohm-Bawerk would explain the rise in profits with decreased turnover time please write in and explain.

next chapter

Manufacturing Consent

Manufacturing Consent

part one:

part two:

[The text in brackets was excluded from the video due to time constraints.]
As the economic crises deepens people have begun to question some of their preconceptions about capitalism. But people have questioned capitalism before. What keeps people from radically challenging our economic order? Why do we consent to the rule of capital? Why do we consent to our own exploitation? This video seeks to offer some insights into the origin of this consent.

Like any other economic order capitalism is a system of social relations- social relations between people as they produce things in order to meet their needs and desires. In a capitalist society these relations take the form of market exchanges- of commodities which are exchanged for money. Thus we often get the impression that money or commodities are in the driver’s seat… that money is what rules the world, or that commodities have value and social influence by themselves. And it is true that through money and commodities we express value and social power, but this value and this social power comes from somewhere else- from the basic social relations that lie behind market exchange: the social relations between people as they produce things.

This should be the starting point for any truly radical social theory. If we understand that economic orders are not magical, that they aren’t endowed with mystical powers or god-given impermanence, but that economies are social relations of our own creation… if we understand that then we have already taken the first step toward figuring out how to change the world.

But this is precisely the opposite of the way we experience capitalism. We experience capitalism in atomized form: each of us an isolated individual wondering through a world of blind, impersonal market forces that act upon us. Though we may not like the state of affairs in the world we don’t engage in actions to change them. Our freedom to act upon the world and change it is restricted to the realm of market freedoms: the freedom to choose which commodities to buy and which capitalist to sell our labor (labor power to be specific) to. We don’t have the freedom to not choose these things: We can’t not buy commodities or not sell our labor to a capitalist (1). We can choose the specific content of our market interaction but we cannot choose the form itself. The commodity is the basic form for the way we exchange the products of labor and wage-labor is the basic form by which workers enter production. This is the limit of bourgeois freedoms. We can choose the specific content of our consuming and producing but we can’t change the basic forms. [ We are free to consume and free to sell our selves but we are not free to challenge the basic form of markets and private property that lay behind this world of bourgeois freedom.]

[This world of bourgeois freedom is an enticing world. In a world which is devoted to producing more and more attractive commodities, the freedom to buy things can seem like the horizon of human freedom. The power of such arguments are easily seen in current attacks upon proposals for a single-payer health-care system. It is claimed that a single-payer system will take away our ability to make choices in the market place. The collective freedom to create a more humane and affordable health care system with equal access for all is demonized as an assault upon the most sacrosanct of bourgeois freedoms: the freedom to consume. Of course, there is nothing about a single payer system that would actually limit one's choice of doctors, but just evoking the specter of an attack on consumer freedom is enough to elicit powerful, emotional responses from Americans.]

Libertarians bask in the glory of bourgeois freedom. For them bourgeois freedom serves to end all discussion of the social relations of capitalism. If I choose to go to work, the libertarian argument goes, then I am consenting to wage labor, which somehow legitimates capitalism relative to all other economic systems. Thus their argument becomes, “Capitalism exists because people choose it in their market interactions.” But this is circular reasoning: market interactions can only express capitalist outcomes. You can’t choose a non-capitalist world through the market. Effecting some sort of anti-capitalist movement requires actions that go beyond these bourgeois freedoms, actions that transcend the market behavior of isolated individuals. It should be no surprise then that whenever we see workers organizing to form a union, or community groups organizing to control development libertarians complain that these collective projects for collective freedoms are distorting the market and attacking our essential freedoms as individuals.

We are free to sing Lee Greenwood songs and make vague speeches about freedom all day long. But as soon as we question the market or private property we come up against the coercive arm of the state. Our vast legal and prison systems and the extensive imperial overreach of the capitalist military form a powerful defense around the sacrosanct private property of the capitalist class. We are free to challenge a lot of things in the capitalist world, but private property forms the border around those freedoms. The state will spare no violence in defense of private property.

Every social order has a limit, a horizon beyond which things cannot be questioned. And this limit is usually enforced by some sort of violent, coercive arm. Feudal Europe had a class of knights that ensured the obedience of the peasant classes. A capitalist society has a state with its legal system, police and military to protect private property, impose order upon markets and maintain the integrity of the currency. Yet this coercive nature is clearly not enough to help us understand the question at hand. No matter how much theory may expose the exploitative basis of wage labor or the brutal realities of capitalist development we must face the fact that most of us freely consent to our lot as wage laborers- that our everyday lives do not compel us forward toward some final confrontation with capital, but instead acclimate us to not think out of the box, to not question the social order. Often, the longer we work the more habituated we become to wage-labor. Why is this? Why do we consent to our own exploitation?

Many people often try answer this question by discussing the way ideology is imposed upon us. The basic idea in such arguments is that through the airwaves, televisions, schools and newspapers we are being inundated with brain-washing propaganda designed to make us happy-workers, devoted consumers, and mindless drones. It is not hard to come to such conclusions when we look at the sheer volume of advertising we absorb daily, all devoted to this cause. It is not hard to see how the structure of capitalist media ownership selects media in a way that reinforces its own view of the world.

As helpful as this view of ideology may be, it is not the whole picture. It makes ideology look like it is something entirely imposed from above. It makes consent look like something stamped onto unthinking, unintelligent lemmings. The reality is that consent and ideology spring out of the basic structure of the market itself and that they would exist with or without televisions, billboards or schools.

We have already seen how the basic structure of the market, free exchange between formally equal individuals, creates the appearance of freedom and equality. [It was from the emergence of markets that our modern notions of freedom and equality come from. In the marketplace all that matters is price. It does matter who you are buying from, whether they be Kings or peasants, black or white.] This world of market freedom and equality masks a world of coercion and inequality in the sphere of property and production. After all, why does a worker need to enter the market place to purchase their means of subsistence? Because they do not have the ability to produce it themselves. Why does a worker enter the market to sell her working life to the capitalist class? Because she does not own any means of producing commodities herself. Thus the very fact that a worker enters the market to buy commodities and sell wage-labor implies that there is an asymmetry in the ownership of production. But we don’t see this in the marketplace. All we see is formally equal people exchanging commodities. Nobody is forcing anyone to buy or sell anything. Thus market exchange itself obscures the coercive asymmetry behind the market.

The market obscures the source of profit as well. Though workers create more value than their wages the capitalist doesn’t receive this value until these commodities are sold in the market. At the end of the working day the worker leaves with a wage and the capitalist leaves with a bundle of commodities worth more than their initial investment. But these commodities must be turned into money in order for the capitalist to complete this process. In the market anything could happen. If workers in competing firms have produced the commodity more cheaply our capitalist will have to sell his commodities under their value. If our capitalist has a monopoly on production he will be able to sell his commodity above its value. Thus the market appears as the source of profit. The creation of surplus value in production, through exploiting workers, is hidden from view. Of course these market prices are the result of the total social productivity of labor, but we can’t see the total social productivity of labor. All we see is market prices. And so the market itself, the act of exchange itself, appears to create value.

Bourgeois economic theory mirrors this world of appearances perfectly. It sees profit emerging from the process of exchange itself. It ignores the wider social relations of production. It ignores the way the total social productivity of labor effects market prices and market behavior. It treats the isolated, free act of exchange in the market as the only interaction worth analyzing. It then deduces that all economic phenomena must be able to be explained through that isolated interaction, without recourse to any wider picture of social relations.

This is the way ideology really works. It is not imposed from above. It grows naturally out of the basic structure of this world of appearances. We don’t even need newspapers, or televisions or schools to brainwash us into obeying the social order. We develop these ideas freely through our daily journeys through this world of appearance.

There is a contradiction between the world of appearance and the social relations behind it: We live in a world of freedom in which none of us are free; A world of formal equality filled with barbaric inequalities. This is not just some illusion imposed upon reality from some conspiratorial elite on high. The coercive and unequal social relations of capitalism can only be expressed through the freedoms of the marketplace. The social antagonisms of capitalism can only be experienced as bourgeois freedom.

Part two:

Workers leave the workplace at the end of the day with enough money to buy their means of subsistence. This means that over the course of their working day they have created enough value to reproduce themselves. Thus the working class reproduces itself each day.

At the end of the day the capitalist finds him/herself holding a wad of profit. This profit comes to him/her merely because he/she owns capital, not because they have created any value. It is the surplus labor of the working class which produces the capitalist’s profit. Thus the worker reproduces the capitalist and capital each day as well.

And this is the true and ugly nature of capitalist alienation. It’s not just that we are dominated by blind, impersonal market forces that we cannot control. It’s that that blind, impersonal world of capital is something that we produce and continue to produce everyday. The workplace is the site of our own domination of ourselves, a domination we reproduce every time we punch in and begin our work. Yet we don’t see this as the result of social relations between people in the workplace. Instead the powers of capital seem to spring from the market itself.

Moreover, this market appears as the realm of individual freedom. It appears to be just isolated individuals making free and equal, fleeting exchanges- free from any wider social relation. From this world of bourgeois freedom springs a conception of the world which becomes our ideology- an ideology where freedom means buying and selling things, and where the individual’s right to buy and consume is sacrosanct. Rather than being externally imposed, this ideology grows out of the very core of the market itself.

This focus on the market takes our gaze away from the workplace where the domination of capital is less obscured. The workplace is clearly a meeting between the propertied and the propertyless. A worker doesn’t exercise unrestrained freedom in the workplace. His labor belongs to the capitalist who may use it anyway he chooses, and he chooses to use it in the most productive way possible. So why then is the workplace not more of a site of all-out class war. Surely we have a long history of militant labor activity in the capitalist world. But we also have a long history of consent: consent to the domination of capital over labor in the workplace. So we must ask, “How is this consent manufactured?”

The manufacture of consent in the workplace is very similar to the way we saw consent produced in the marketplace. Behind any relation of power must ultimately lie a coercive and possibly violent power. The capitalist class owns the means of production and has a vast legal apparatus to back up its claim to the fruits of the working class. But in addition to this coercive threat of violence exists a world of appearance generated by the phenomenon of choice.

We saw that in the market our freedom lay in our ability to choose between different types of commodities to buy and different capitalists to sell ourselves to. We are free to choose the specific content of our consuming and working, but we are not free to choose our way out of the form of commodity exchange or wage-labor. We saw that this is a choice over content, not form.

In the workplace we also see domination masked by a world of appearance- appearances generated by this same logic of choice. If the factory was a site of total domination of the worker, if scientific managers like Frederick Taylor had really gotten their way and created workplaces of total domination, the antagonisms of capitalism would be much more apparent and we would probably have a much more radical working class. But workers always maintain some degree of autonomy in the workplace. The choices they make as they navigate their way through the working day create a world of apparent freedoms that mask the social relations behind them.

Marxist sociologist and writer Michael Burawoy saw this very thing when he worked in a machine shop in the 1970’s. Burawoy noticed that the workers in his shop didn’t direct their energy toward resisting exploitation. Instead they turned their work into a game- a game they played all day, everyday trying to maximize their pay and beat the system. Burawoy’s shop was a piece-rate shop (2) which meant that the men were paid more if they produced above quota. Of course if the men produced too much over quota the quota was raised. So there was a game to trying to produce as much as possible in order to maximize pay, while not producing so much that the quota was raised.

The game was made interesting because workers were given different jobs each day. Each day was a challenge to try to get the best job from the man who handed out jobs, argue with that man about what was the right quota, get the right parts from the guys who gave out parts, follow the instructions right, make the machines work, etc. A worker’s day was entirely consumed with trying to navigate the complex hierarchies among workers, master the machines, pace one’s work just right, etc. They called it “making out”. When Burawoy met other workers in the shop the question was always, “Are you making out?” which meant, “Are you beating the quota?”

In a world of deprivation or domination, relative satisfactions can be quite compelling. In a world in which we are deprived of our ownership over our own labor we must occupy ourselves with lesser pleasures. In Burawoy’s machine shop it was this constant battle to beat quota that gave workers a sense of purpose and excitement throughout the day. It transformed a boring, repetitive job into one in which workers could exercise creativity, skill and a sense of relative autonomy. These small freedoms created a world of appearance in which the real antagonism between labor and capital was transposed into a complex, shifting social hierarchy
among workers and a fight against the machines.

And doesn’t this happen whenever we play a game? When we play a game we must consent to the rules of the game. When we play chess we don’t question why a pawn can’t move backward. If we did we would never win the game.

When we work we play a game. It may not be a game to “make out” under a piece-rate system, but it is a game to survive yet another working day, to make out as best we can, against all the obstacles we may confront. We all have our strategies. We all have a secret formula we try to follow to make it through each day. This world of autonomy that we carve for ourselves is the way we survive the workday. But in playing this game we focus on relative satisfaction. The game becomes an end in itself. We begin to think of work as a place where individuals exercise freedoms in their attempt to maximize their own personal satisfaction, not a place where one class dominates another.

Even in the realm of labor struggles the logic of the game continues. Unions play a game to grow the union and this game implies consent to the rules of the game. If unions were to ever threaten the end of capital they would also threaten themselves. How can we have a union without a capitalist? Once established, unions often become the method by which individual worker grievances are addressed or by which individual workers are punished for breaking the rules. The concept of a collective assault upon capital becomes replaced by the concept of the union as a regulator of class-relations. The union becomes the equivalent of an “internal state” which regulates the capital-labor relationship, reducing it to a matter of individual grievances, redirecting collective power into the concerns of individuals, keeping tensions from disrupting work, and guarding the status-quo of the rules of the game.

This logic of the game, of relative satisfaction from a narrow range of choices, extends to much of our life in a capitalist society. When we comparison shop for the most affordable apartment to rent we forget that the landlord-tenant relationship is purely exploitative. When we engage in electoral politics we allow two nearly-identical political parties to define the political spectrum. This is one of the trickiest things about bourgeois society. We all have no choice but to navigate our way through a capitalist world trying to do the best we can. But as we do so we create a wold of appearances, appearances that distort and hide all of the class relations around us.

The 21st century presents many opportunities for the left, but there is also a lot of theoretical work to be done. As we comb through the long history of the 20th century, examining the failures and successes of the left we should be paying attention to what games were being played, what tacit rules were being obeyed. The labor movement, the civil rights movement, the anti-war movement, the feminist movement…. how were their successes limited by the limits of the game?

And as we think about the creation of future movements how do we confront the enormity and power of bourgeois ideology, an ideology that grows organically out of the basic structure of markets and work. Where are the cracks in this ideology and how do we best exploit those cracks?

Footnotes
(1) Of course there is the Libertarian argument that workers do have the choice not to sell their labor to a capitalist, that is that workers can save money and become self-employed if they choose. Let us look a little closer at this argument. At one level it is just another version of the claim that because all market actors enjoy formal equality in the market (by formal equality we mean that nobody can force anyone else to buy or sell anything- that we are free to buy and sell from whomever we like) that all market decisions imply total consent with no coercion, and that this defines the ultimate horizon of human freedom. etc. As I point out in the video, this mistakes content over form. We have the choice over the content of our wage-labor but not over the form of wage labor. The only working activity in a capitalist society that does not fit into the wage-labor relation is that of the self-employed person. Marxists probably haven’t spent enough time exploding all of the ideology and mythology that grows out of the self-employment idea. Firstly, become self-employed and surviving at it is not easy. For one, there are a relatively small number of occupations that one can choose. Any job that generates a significantly large income will attract the flow of capital, which will flow into the market and dominate it with wage labor. A self-employed person will find it hard to compete against wage labor. A capitalist firm can produce things more cheaply due to the cooperation of many workers and the deployment of labor-saving machinery. A capitalist firm can even deflate prices, a la Starbucks or Wallmart, in order to force smaller competitors out of the market. But there are still all sorts of niches that are available to the self-employed, niches that resist the domination of big capital. In order to start a business people often have to take out loans from a bank or rent property. This means that part of the surplus they produce goes to the capitalist class. That is, instead of working directly for a capitalist who owns means of production, they have to rent or lease the means of production from the capitalist class and thus still end up giving surplus value to the capitalist class. The self-employed person, the small business owner with 1-2 employees, they often act as little more than low-level managers for money-capitalists or landlords. On the grand scheme of things, they do very little to actually escape the circuit of capital.

(2) In a piece rate system instead of being paid an hourly wage workers are paid for the amount of commodities they make. While at first this may appear less exploitative, Marx actually argued that piece-wage were “the form of wages most appropriate to the capitalist mode of production.” (Das Kapital, Marx, Penguin edition 1990, p. 698) Though workers are paid for each product they create, they are never paid the full value of the product they create. If this happened there could be no profit for the capitalist. Instead, workers are given a quota of products they must create and they are paid per product at an average rate. If they work faster than the average rate, creating more commodities, they are paid an extra amount.  Thus the worker has an incentive to work faster and for longer hours in order to make more money. But the faster they work the more surplus value they also create for the capitalist. Thus piece rate system becomes a sinister tool for roping the worker into participating in his own exploitation. Today we see elements of the piece-rate system in all sorts of work, especially in telemarketing and sales.

In Burawoy’s shop workers typically averaged 125%-140% above quota. If too many workers worked too high above quota the company would raise the quotas on the workers. So workers had an unwritten agreement among themselves not to work at more than 140% above quota. Workers who worked above 140% were called “rate busters” and they became the object of extremely hostile social pressure from other workers. So as to not be a good-for-nothing rate-buster, workers who were having an easy time “making out” might save a little of their work on the side as a “kitty”. That is, they would produce more than 140% but they would not turn it all in to the boss at once. They would save a little on the side as a kitty so that they would not have to work as hard later. This became a big part of the game: working really hard to save up a kitty and then sitting back and taking it easy later.

Suggested Readings:

“Manufacturing Consent” by Michael Burawoy.
In this book Burawoy explores many of the ideas in this video, analyzing from first hand experience the way in which the labor process generates its own consent. His ideas are powerful. I highly recommend this book. Many people may notice that the title of this book is the same as one written by Noam Chomsky and Ed Herman. Their book is about the way ideology is constructed in the media. While a good book on many fronts, it fails to identify the way the experience of capitalism itself generates a lived-experience, a world of appearance that generates its own ideology all by itself.

Essays in Marx’s Theory of Value by I.I. Rubin
This is one of the best books on Marx’s economic theory that I have ever read. It has great explanations of the fetishism of commodities which is what a lot of part 1 of the this video is based on.

Das Kapital Vol. 1- Karl Marx
See chapter one, the section on fetishism of commodities.

Robots vs. Luddites

part one:

part two:

Robots vs. Luddites

1812 Nottingham England
In 1812 sabotage crept through the British countryside. By the cover of darkness gangs of weavers organized under their anonymous leader “General Ludd” broke into factories by night and smashed the new automated looms to pieces. Cloaked armies of “Luddites” appeared at factory gates in the day to demand better wages, better working conditions, and the right to produce higher-quality fabric. The weavers had not always been guerilla fighters. For 300 years they had passed down their craft from generation to generation of skilled artisans, weaving fine silk and stockings in the comfort of their own home. But now there was a machine that could do all that. It was called the power-loom.

But why would a worker break a machine? A machine is supposed to make work easier and make life better.  To understand the violence of the Luddite rebellion we need to remember that when a worker uses a machine he/she enters into social relations with people. Work is always a social process entailing some sort of social cooperation. (In a capitalist society we can’t understand this social dimension without understanding the relations of private property which define it.) A machine conceals a social relation. Lift the veil and we see that the machine is an expression of the relationship between capitalist and laborer.

Throughout human history the social relations which we labor under have changed, from the primitive hunter-gatherer, to feudal societies, to modern industrial capitalism. We call these different organizations of social labor the “relations of production.” Different relations of production are characterized by different types ownership, different divisions of labor and different organizations of work.

Throughout human history the relations between people and the tools and machines they use has also evolved. From stone axes and knives to the automated loom to the personal computer the technical “forces of production” have undergone numerous revolutions.

These two aspects of work- the forces and relations of production- form the inner dynamic of human history. We might make some obvious observations about the two: Modern capitalist social relations couldn’t survive if we were constrained to the use of stonge-age tools. Conversely, the internet wouldn’t find much fertile ground for use within the social relations of 16th century European feudalism. We might use these obvious observations to make a more interesting observation: that the forces and relations of production co-evolve over time. This means that changes in one can have a profound effect on the other and that the inability of one to change can constrain the ability of the other to change.

By examining the coevolution of the forces and relations of production we can illuminate much about our history and our future.

So back to our question: why did the mysterious General Ludd and his followers steal through the English countryside under cover of darkness smashing the machines which were intended to make their work easier? To answer this question, let’s take a closer look at the machine in question.

The power loom did something that no loom before had done. It replaced the hands of the weaver with a mechanical hand that moved faster and more efficiently than the the most skilled of weavers. (figures?) The power loom didn’t just happen by accident. It appeared at a distinctive time in history when capitalists were introducing automated machines into production to replace the hand of the worker. Thus behind the machine, lay a social relation: a social relation between capitalists and workers.

By replacing the hand of the worker with the cold steel of a machine the skilled craftsman, the master weaver, was transformed into an unskilled machine-tender, an appendage of the machine. Unskilled workers could be paid lower wages. The pace of work could be dictated by the speed of the machine, not the pace of the human. Thus work could be sped up and intensified. Because less labor went into the product the prices of products fell making it impossible for independent craftsmen to compete with the new machines. In short, the replacement of the human hand with the automated tool meant a huge revolution in the social relations of 19th century Europe as the system of skilled craftwork was transformed into the large scale capitalist industry with its shopfloors of roaring machinery and the unskilled proletariat that tended these machines. The Luddite attack on the powerloom was a last-ditch defense of a dying labor process, a labor process quickly being replaced by modern industrial forces and relations of production.

And the Luddites weren’t the only barrier to the emergence of large-scale capitalist industry. The 19th century was filled with social conflict between capital and labor as workers resisted the impositions of the industrial labor process. The deskilling of work, the disciplining of the labor force and the acclamation of the population to the labor process continued into the 20th century inspiring innovators like Frederick Taylor and Henry Ford to lend their efforts to the problem. These were the major social problems of the times. The need for state regulation of labor conflict was a major factor in the emergence of the modern capitalist state. But of all the political and social attempts to regulate this conflict it may have been the machines themselves that did the most to discipline humans beings to modern capitalism.

But it would be a mistake to say that all of these changes were brought on by machines themselves, as if machine evolution was dragging human history along with it, kicking and screaming. Machines were introduced into production because they gave capitalists power in their conflict with workers. If you can be replaced by a machine you are much less likely to form a union or go on strike. If you are an unskilled machine-tender you can’t bargain for high wages like a skilled craft worker. Before the large-scale Industry of the 1800’s lay a tumultuous 200 year history in which capitalism ate away at the institutions of feudal property, creating the conditions for a modern labor force. The Manufacturing period which preceded the 1800’s still retained some held-over characteristics from the feudal period: There was still a lot of semi-skilled handicraft work, machines were used in a piece-meal fashion, and the size of the workforce was still relatively small.

But as more machines were introduced into the Manufacturing system, that system of production became less and less able to handle the demands of the machine. The powerloom, for instance meant that suddenly a factory could produce a lot more output than before. But this required increased input of raw materials. The sudden increase in demand for raw materials meant that those industries that produced raw materials were also under pressure to automate production. Increased output also meant finding new markets for goods. This required revolutions in transportation and communication: canals, railroads, and eventually automobiles and airplanes…

Automated production eventually meant the linking of all the machines in one workplace together to form one massive mechanical monster. This meant finding a regular, controllable motive power like the steam engine or, later, electricity to power production. Such a motive force became the regulator of the speed of production- the entire factory, its machines and human appendages, fell into rhythm with the rhythm of the steam engine. Once electricity became the prime moving force of production this meant revolutions in the system by which power was transmitted to production: power lines, power grids, etc. By the dawn of the 20th century the entire globe was linked up in interlocking power grids all coordinating the speed of production with a single motive power. Human life changed too, our movements falling into rhythm with the gentle hum of the power grid.

The demand for machines which would all be linked together in one big factory, powered by a uniform motive power, required both a huge increase in machine production and a uniformity of production that the semi-skilled workers of the manufacturing system couldn’t provide. It wasn’t until these workers were replaced by a less-skilled automated production system- the production of machines by machines themselves- that the Industrial Revolution could truly revolutionize European society.

The Luddite movement ended with violent repression and the hanging of its leaders. It seems that the defense of private property was more important to the emerging social order than human life. We see a curious relationship here. The technology that was to make life easier for humans becomes the source of the most violent, anti-human behavior. The social conflict that required the evolution of the machine in the first place is altered by the machine itself. But the conflict between labor and capital isn’t resolved, it’s merely transposed to another level: the social conflict of modern, industrial capitalism. The question then becomes, in this coevolution of the forces and relations of production, of machines and people, is there ever a point in which the technical basis of society can no longer support the class antagonisms of capitalism, in which the tremendous productivity and abundance made possible by technology can no longer function within the distorted social relations of private property?

Why should you care about the coevolution of the forces and relations of production in the 19th century?

Because these are the laws of motion of human history, laws we can see operating right now. We are living in the midst of a similar revolution in productive forces.

If the automated tools of the 19th century replaced the human hand what does a computer replace? The modern computer is the descendent of the Turing Machine. A Turing Machine, put simply, is a machine that can follow changing instructions. Feed in one set of instructions and the machine does one thing. Feed in another set of instructions and the machine does something else. Defined this way, a human being is also a turing machine. Tell Jim to lift pig iron and Jim lifts pig iron. Tell Jim to answer phones and Jim answers phones. With the advent of the Turing Machine it became possible to make a single machine which could do almost anything: a laptop that can check email and edit video, an iphone that can record music and get directions to the airport. One of the things about human beings that had made them so distinct from machines in the 19th century- their ability to follow instructions- had been eliminated.

There is a central contradiction in the replacing of humans with machines. Machines can produce commodities but they can’t create value. So while capitalists replace humans with machines in the search for more short-term profit, in the long run less value is being produced. The prices of commodities fall as less labor goes into them. If the turing machine can follow any set of instructions, the only labor that needs to go into the production process is the creation of these instructions themselves. The production of instructions, or information, then becomes the source of value. [Because the machine can do any task, the information we feed to machines becomes the most important aspect of production.]

Enter the information age- an age where the production and ownership of knowledge is the central thing around which all production revolves. If the speed of life in the industrial age was dictated by the pace of the steam engine or electricity, the speed of life today is dictated by the speed of information transfer. This speed of information transfer has increased rapidly in the last few decades to the point where huge amounts of information can now be sent across the globe with the click of a button. We are only beginning to see the tremendous revolutions in social relations that will be created by this evolution in the forces of production.

The race to improve the speed of information transfer to machines has led to revolutions in all sorts of industries like micro-processing, data storage, personal electronics, and the information infrastructure (cable, wireless, DSL, ethernet, etc.). It’s also causing the destruction of many older industries, industries which derived their profits from their exclusive ownership of the “means of duplication” like the record industry or print media. Recording a phonograph and pressing it used to require a great deal of capital. A record company’s profits relied not just on their ownership of the masters of a record but also on the fact that they had a monopoly over the ability to make more copies of that record. Now a musician can record their own album in their kitchen and distribute it online relatively cheaply. A fan can duplicate that recording a thousand times over with the click of a button. An entire generation of music listeners is now growing up with the expectation that they should be able to listen to any music they want at any time for free. Is this not proof of Marx’s argument that when human labor is removed from a task, the social value of that task falls to zero?

The newspaper industry is facing the same problem. Nobody wants to pay for the duplication of print media when they can get it for free online. Of course recording an album or writing a news article still requires labor from musicians and reporters. This is the information part of the commodity. But the crisis in the newspaper and record industry reveals an interesting aspect of information as a commodity: Information can only be bought and sold as a commodity if the seller has a monopoly over the right of duplication. When printing a newspaper required an expensive printing press and a complicated labor process it was a given that a newspaper was a commodity. But now that the duplication of news can happen at the click of a button that monopoly over duplication has disappeared.

For the newspaper industry the only solution so far has been to give news away for free online and rely on advertising for revenue. Meanwhile the recording industry has resorted to extravagant lawsuits against internet “piracy” and increasingly exploitative recording contracts with musicians called “360 deals” which demand a cut of all a bands revenue from merchandise sales to ticket sales.

If the monopoly on duplication is the only thing that makes information a commodity we are left wondering what is the true nature of information when this monopoly disappears. It seems increasingly obvious that information has an inherently social dimension. Where social knowledge leaves off and one person’s private contribution to social knowledge starts seems an increasingly arbitrary distinction defined by a narrow legal definition of intellectual property (a definition based in old-fashioned notions of commodity duplication.)

It’s not just that newspapermen and record industry executives are old-fashioned, or aren’t savvy enough with computers. It’s that the basic parameters of production and profit, the social relations, are changing as the forces of production evolve. As many times as they sue Napster or PirateBay the reality is that Napster and PirateBay represent the inherent nature of the new technology and the emergence of a new type of social relation that suggests a collective ownership of information. From wikipedia, to the blogosphere, to Linux, to the open-source software, new models of production and distribution are being experimented with on a collective level never before seen. But what kind of society is emerging? Clearly there are all sorts of problems with the way knowledge is created on the internet and there is a great deal of room for capitalism to expand into the internet for its own purposes of commodification and control. And outside of the internet there is still a great deal of real production that is done by human labor. What do the emerging models of information transfer of the internet-age have to offer the real-world labor process?

Industrial capitalism emerged from the manufacturing system of the early 1800’s spurred on by revolutions in the forces of production. But in order to come into its own as a new system of social relations it had to revolutionize the existing social relations. Today we can see the new forces of production overthrowing the established economic order. But what sort of society will emerge from this is yet to be seen.

Marx saw that despite of all the misery and exploitation of the Industrial Revolution that there were great socializing processes at work. The working class was being stripped of its antiquated, local superstitions. In being reduced to an unskilled, proletarian appendage to the machine, all workers were equalized, sharing the same social solidarity and common material interests. The labor process was becoming increasingly collective even as it became more degrading. Capital on the other hand was encountering greater and greater crisis and causing more and more people to question whether it could survive for much longer without destroying itself. But the great revolution that Marx had hoped for didn’t happen. It seemed that capitalism was not done learning how to displace crisis and finding new avenues of growth. And it seems revolutionary theory wasn’t ready to live up to the potential Marx saw in a post-capitalist society.

We have a lot of work to do in our time. These tectonic shifts in the forces and relations of production have coincided with global economic crisis and environmental crisis. At such times the future is uncertain. Anything can happen. If the left is to seize the initiative in the 21st century it has much theoretical work to do examining the trajectory of these new forces and relations of production and discerning what sort of possibilities they present for radical breaks from the present order.

Recommended reading:
Das Kapital, Karl Marx, the chapters on manufacturing and large scale industry
Cutting Edge, Technology, Information Capitalism and Social Revolution; ed. Jim Davis. This is a great collection of essays about the information age and value theory.
“Digitalization and the Monadization of Power”, a lecture by Dylan Suzanne: http://www.archive.org/details/suzannemainelecture2 . I am curious to acquaint myself more with Suzanne’s work. This is a good lecture.
Soderberg, Johnathan. “Copyleft vs. Copyright; A Marxist Critique.” First Monday volume 7, number 3 (March 2002) URL: http://firstmonday.org/issues/issue7_3/soderberg/index.html     This is an early work of Soderberg’s which eventually turned into his book Hacking Capitalism which I haven’t read yet because it’s way too expensive. If anyone has access to a digital version please let me know.

The P2P Foundation blog has a lot of interesting stuff: http://blog.p2pfoundation.net/

music by a great Trio from the West Coast called “Beep”. Check them out at myspace.com/beeptrio

Interview with Andrew Kliman

Here is an interview with Andrew Kliman in which Kliman discusses the Marxist theory of capitalist crisis. Kliman is professor of economics at PACE university and author of the very important book Reclaiming Marx’s Capital. Kliman talks about some of his work with the theory of the Falling Rate of Profit, criticizes some of the other theories of crisis floating around in the left today, and discusses the countervailing tendencies to a Falling Rate of Profit. Kilman then goes on to discuss the public reception of his work debunking the transformation problem, problems in academic marxism, and his thoughts about beginning to theorize a future socialist society. I interviewed Andrew on 4-17-09, the evening before we shared a panel together at the Left Forum.

This interview has been translated into Norwegian.

Left Forum ‘09- Marx’s Capital and the Economic Crisis

I was quite fortunate to be invited to speak on a panel at the Left Forum this year (4-18-09) with some writers I greatly admire. Here I have posted the videos of all four speakers, the text to my portion, links to  other speaker’s work (when available), and video of the discussion that followed.

Chair: Radhika Desai

Radhika Desai is a professor in the Department of Political Studies, University of Manitoba.  She is the author of Slouching Towards Ayodhya: From Congress to Hindutva in Indian Politics (2004) and of numerous articles in Economic and Political Weekly, New Left Review, Third World Quarterly and other journals.  With Alan Freeman, she is currently working on a book series on The Future of World Capitalism. Here’s a recent article by her on neoliberalism’s crisis.

Speakers:

Andrew Kliman, author of “Reclaiming Marx’s Capital” and a leading figure in the Temporal Single System Interpretation (TSSI). Regular viewers will recognize Andrew’s name from my video on the transformation problem. His book was the main source of my arguments in that video. I highly recommend it. Andrew presented some research he is still engaged in which charts profit rates since WWII. His research shows that profit rates have declined steadily since the recovery after the Great Depression, falling toward what he calls the “long-term-labor rate of profit”. This is striking evidence of the explanatory depth of Marx’s theory of the Falling Rate of Profit.

Alan Freeman, co-editor of “The Politics of Empire: Globalisation of Crisis” is another influential figure in the TSSI field. He has a number of great papers on the falling rate of profit and crisis theory here. There are also some videos of him already on youtube. He is also co-editor of Critique of Political Economy and coordinator of the Association for Heterodox Economics (UK). Along with Radhikha Desai, he is working on a book series called “Future of World Capitalism.” Alan spoke about how WWII got the global economy out of the Great Depression and about the sort of progressive alternatives to war that we might currently be pushing for. Pay close attention to how Alan conceptualizes the role of the state in capitalist crisis.

Brendan Cooney- that’s me. I talked about bourgeois ideology and how it fails to explain crisis. And then of course I talked about how well marx’s value theory explains crisis.

The second speaker on the panel asked not to have his portion posted online.

Brendan Cooney’s text:

Left Forum talk

As leftists we’ve all had the experience of being told “Hey man, that’s just the way things are.” In the middle of some brilliant analysis of how lame Obama is, or how much the prison industrial complex sucks someone says to us “Hey man that’s just the way things are.” Is this not the essence of any dominant ideology? The point of a dominant ideology is the idea that the present is eternal and unchangeable- that the existing institutions, power structures and injustices are as natural as making babies, that any attempt to critique them or change them is futile. [Though ideologues may try to dress up the message with fancy theories of Pareto Optimality, or fancy algebra, the message is still the same: "Hey man, that's just the way things are."]

In order to do this ideology has to paint the present as something static and unchanging. The feudal landlord had the catholic church which imbued the class relations of society with an eternal christian mysticism. Today we have mainstream economics which projects its own categories backwards and forwards in time to create the illusion that there is nothing unique about modern capitalism and that there are no alternatives to the present.

There is a great, unfinished task before us- not just of how to understand this crisis, but how to understand capitalist crisis in general; and then, specifically to understand the future of capitalism, the openings that will arise for radical breaks from the present order, and the sort of new social orders that might emerge. This task of understanding capitalism also must be a radical critique of dominant ideology- bourgeois ideology. This is why Karl Marx subtitled Kapital “A Critique of Political Economy”. He was very clear that alternative ideas develop in relation to hegemonic ideas. When we aren’t clear about how our ideas relate to dominant ideology we run the risk of allowing bourgeois ideas to subtly influence our own thinking. And I think this is why a lot of leftist takes on the current crisis fall short of being truly radical- that they are not fully conscious of the master narrative and its influence on their ideas.

How does ideology paint the present as eternal? It does this by misusing the process of abstraction. It must abstract away from its description of the present anything which is historically specific, leaving only those vague categories that transcend time.

For instance, take the modern, neoclassical definition of capital which basically says “Capital is stuff that you use to make more stuff.” Now it is true that we can observe throughout human history the phenomenon of people using (stuff) tools to increase the productivity of their labor.  According to this vague bourgeois definition there is no real distinction between the bows and arrows wielded by the Iroquois Nation and a Ford Motor plant. And so this definition passes the test of ideology: it makes capital seem universal, timeless, natural and stable. And it does this by abstracting away all historically specific production relations.

By such a definition there is really nothing in capital that could cause a capitalist crisis. How can there be a crisis between a man and his tool? And this is why bourgeois economics must always paint crisis as something external to the system: famine, drought, or maybe malevolent manipulations of the market by governments or unions. But rarely do we hear anyone dare suggest that capital itself might be causing the crisis. (Even some self-proclaimed Marxists are hesitant on this point.) Such an explanation would suggest that there was something historically unique about capital. And after all, what could go wrong between a man and his tool?

The problem is that in a capitalist society those tools are not the property of the people who wield them. The means of production are privately owned by the capitalist class. Class relations are basic to the way production is organized. We might also note that work is a social process mediated through wage labor, not just a relation between individuals and tools. But now we are talking about people in groups, something bourgeois economics avoids at all costs.

Bourgeois economics treats society atomistically in a souped-up version of supply and demand: demand is the product of isolated individuals interacting with commodities; supply is the product of isolated individuals relating to tools. And  because people have always wanted stuff, and because there has always been a limited amount of stuff on the planet this is considered all we need to know to understand the economic universe. Mainstream economics substitute some eloquent algebra for what should be the fundamental question: what determines demand and supply? Demand is a function of one’s income from working and socially conditioned preferences from a consumer-driven culture. Supply is determined by the amount of labor apportioned to various tasks and the productivity of this labor. So we see how quickly the image of the atomistic individual falls apart and is replaced by a vast mode of social regulation all regulated by the class relations of a labor process.  The picture of the individual, atomistic consumer/producer can only be sustained by abstracting away all mention of these social relations.

This is Marx’s starting point in Kapital: this world of individuals interacting with commodities conceals a deeper world of social relations. By ignoring these relations ideology paints a picture of an eternal world of people interacting with objects in perfect equilibrium. All other factors are considered an external interference. [When a union organizes for better wages, this is not seen as a a direct result of the antagonisms of private ownership of property, but instead as something external to the picture which interferes. When the state intervenes to open markets, or protect capital from itself (like it is currently doing) this is not seen as an inherent reality of a crisis-prone capitalism, but as an external interference.]

Let’s take a look at an actual society with no internal crisis: the primitive hunter-gatherer society. Here work was a collective effort with little or no differentiation of activity. [This undifferentiated form of social labor was probably the simplest of economic systems.] It was immune to internal crisis because, as a large undifferentiated whole, there were no different internal parts to go awry. Crisis then was purely external- drought, famine, earthquake.

The productivity of capitalism is such that we rarely have to worry about an external threat causing a crisis. Hurricane Katrina was horrible but it didn’t make global stock markets tank. In our ability to store up enough social surplus to survive against these external shocks the crisis has been internalized. Now crisis is a problem with the internal mechanisms by which social labor and its surplus is apportioned.

In a capitalist society social labor is wage labor. The ability to work is bought and sold in the market as a commodity as are the products of that labor. Those commodities have value to the extent that they are part of the social labor process. It is in studying this value that we can begin to understand the way capitalism works.

The goal of the capitalist is to amass value, measured in money, for the sake of amassing value. The capitalist wakes up in the morning with money and at the end of the day has accumulated more money. And he doesn’t need to perform any labor at all in order to do this, nor does he care what kind of or how many commodities he has produced. The only question for the capitalist is “Tomorrow what will I do with all this money?” And the answer is always “Try to turn it into more money.”

Thus the total amount of value in society is expanding, by some estimates an average of 3% a year. This is growth for the sake of growth, regardless of the social consequences. Here is where the absurdity of the conspiracy theory becomes clear. The basic idea of a conspiracy theory is: “There is such an amazing coincidence of messed up stuff in the world. This can’t be an accident. There must be some evil will behind it all.” But the conspiracy theorist misses the point. The motor of society, growth- blind, inanimate capital accumulation- doesn’t happen for a reason. There is no will behind it. It’s growth purely for the sake of growth.

But how far is bourgeois economics from the conspiracy theorist? Surely, this is what was most fascinating about the Ron Paul phenomenon: how Ron Paul fused the libertarian and conspiracy causes. If we take libertarianism to be the basic ideological distillation of modern economics isn’t it revealing how close the bourgeois theories of crisis coincide with the conspiratorial notion of an evil, outside force destroying the fabric of society- governments, the FED, jews, aliens. Neither can see that capitalist crisis is indistinguishable from capitalism itself.

When we ask if crisis is internal to capital we are asking if there is a limit to this growth. Clearly capital can only grow at the expense of the laborer. We, the laborers, are the active agents in a vast field of capital comprised of the products of past labor- machines, tools, raw materials, partially finished commodities. Marx called this ratio of past labor to living labor, of machines to man, the “organic composition of capital” and he observed that over time the composition of capital becomes more and more dominated by machines- all intended to improve the productivity of labor. But just because more widgets roll off the conveyor belt doesn’t mean that more value is being produced.

You may know those beautiful Diego Rivera murals in Detroit- his homage to the American industrial worker. In the murals there is a busyness of motion, of swirling gears and conveyor belts, the clanging and rumbling of great industrial machinery. And in the middle of it all, their bodies falling in to rhythm with the machines, are the the muscular forms of the American proletariat. Here is a brilliant illustration of several of Marx’s key insights about capital. In its explosive growth, capital flows through more and more of our reality until everything around us takes on the rhythm of accumulation. In the acceleration of turnover time, the construction and reconstruction of physical space, the gyrations of the stock market and the interest rate, we are always in the presence of the thumping rhythm of “the machine” that is capital. But we are the solitary living ingredient in the equation. As our bodies fall in with the rhythm of the conveyor belt we breath life into the machine.

The bodies in Rivera’s mural are totally dependent on capital for their survival and capital is totally dependent on the exploitation of those bodies for its survival. Yet despite their mutual dependence the two sides are antagonistic. What happens if we perform that careless abstraction of the bourgeoise economist- if we wave our magic wands and make one of the two elements disappear?

If we were to make capital disappear the wage laborer would cease to exist. Yet, human beings would still exist and they would still labor. In fact humans have labored without capital before and hopefully they may again one day. Thus the self-negativity of the worker is that (s)he can say “no” to being a wage laborer. This is what gives a union power- it’s ability to say a collective “no” to capital. This is also why labor creates value in the first place- the ability to say no is the essence of a social contract. The ultimate “no”, the ultimate self-negativity of labor is revolution. This is when we transcend wage labor.

If the human species were raptured this very minute, imagine the world we would leave behind: Diego Rivera’s mural falls silent, the still machines rusting in dark factories; empty schools and prisons, money lying in dark vaults, oil lying still in its barrels- a dead, motionless world. Capital is nothing without the laborer. Thus the self-negativity of capital is that to the extent that it eliminates labor it eliminates itself.

If we were to paint a dozen more machines into Rivera’s mural, the physical output might double. Perhaps we might erase the workers altogether and replace them with machines. What could be better for capital? A machine increases physical output and frees capital of its reliance on labor. But while this may create short-term competitive profits for the individual capitalist it comes at a high price. The less workers we have in our mural, the less value we produce. The more we spend on machines the higher our costs. This is why efficiency is the self-negating part of capital: efficiency destroys the very thing which creates value in the first place.

This may seem intuitively puzzling. If we erased all the workers from Rivera’s mural, wouldn’t cars still be produced? Wouldn’t people still buy them? Wouldn’t profit still be made? This is precisely the argument of those who maintain that profit is physically determined- that an increase in efficiency/productivity must mean more profits. But this is counter to the tenants of value theory: that only labor can produce value and that to the extent that capital accumulates at the sake of labor it is self-negating.

The debate over these rival concepts of productivity, capital and value is crucial. It is important not to dismiss this debate as mere scholasticism. When the bourgeois economist looks at those great murals of Diego Rivera’s he sees only people using stuff to make more stuff, existing in static equilibrium, besieged on all sides by hostile external forces. From the perspective of value theory the roaring machines conceal a social relation which pervades our reality and is contradictory at its core. Those “hostile external forces” are caught up in the gravitational field of capital and become internal to capital. Capital subsumes money, the state, culture and physical space and leaves its mark on all of them forcing them to express its contradictions.

Bourgeois economics may project its categories back and forth in time to create the illusion of a timeless capitalism in equilibrium. But in times of crisis the veil is torn. In a crisis it becomes clear that all things are in flux, that nothing is certain, that social systems don’t grow on trees- that they must be reproduced. We see motion and change all around us. When capital can’t reproduce itself, anything can happen. A crisis is a horrible time for people, but it’s also a great time for radical theory.

Frederick Taylor- the biggest bastard ever

Part One:

Part Two:

Frederick Taylor- the biggest bastard ever

At the turn of the century many historians wrote cute-sy fluff pieces in the media about who had been the most influential person of the 20th century. Many names were floated: Hitler, Stalin, Churchill, Einstein, Ghandi, etc. One name that didn’t appear on many lists was Frederick Taylor. While Taylor is a common name in labor history circles, his name is unfamiliar to most. Yet Taylor’s impact on the 20th century was profound, so profound that his ideas continue to shape the day-to-day lived experience of most people today.

Taylor was a management theorist- a theorist of the labor process. In an era where the capitalist firm was becoming larger and larger, employing more and more workers, a fundamental problem was emerging: How do we get workers to work more? Of course this had always been a problem for capitalists. But the rapidly expanding size of the factory was demanding more nuanced control over workers to ensure maximum output.

(When the length of the working day can’t be extended then one must turn to the labor process itself. One must find a way of increasing the intensity of labor so that it produces more per hour. Remember that the capitalist doesn’t buy labor. He buys labor power- the ability of the worker to labor. How long and hard those workers work is an issue to be struggled over. )

During the late 1800’s and the early 1900’s Frederick Taylor studied, experimented with, and wrote about the theory of work. His goal was to find ways of controlling the motions of workers so as to attain the highest possible output for every dollar spent on wages. His writings are an incredibly lucid and frank distillation of the capitalist perspective on class struggle. Very rarely do we see the capitalist class engaging in such open discussions about how to control and exploit a labor force. The frankness of his writings almost eliminates the need for interpretation- thus much of this video will just be excerpts of his writings.

For Frederick Taylor there was an enormous problem afflicting modern society: workers didn’t work hard enough. He called such laziness “soldiering”.

“We can see our forests vanishing, our water-powers going to waste…. The end of our coal and iron is in sight. But the larger wastes of human effort, which go on everyday through such of our acts as are blundering, ill-directed or inefficient are less-visible, less tangible and are but vaguely appreciated…. And for this reason, even though our daily loss from this source are greater,… the one has stirred us deeply while the other has moved us but little.” (Taylor, iii)

Taylor is shocked that the inefficiency of workers hasn’t created a national outcry: “As yet there has been no public agitation for ‘greater national efficiency’, no meetings have been called….” (Taylor, iii)

Taylor was often upset that others around him didn’t share his obsession with efficiency- and it was an obsession. Taylor was obsessive-compulsive. As a child he counted his steps and timed all of his actions so as to make his motions as efficient as possible. In his adult life he sought to impose his obsessive compulsions on all those around him and eventually the entire capitalist world. And the capitalist world was ready for a Taylor. In the late 19th century capitalism was growing fast, competition was accelerating, the firm was growing in size and with it the number of workers employed on a single shop-floor. The need for increased control over this mass of workers was growing as was the need for them to work more efficiently to stay competitive.

“…in a majority of cases the man deliberately plans to do as little as he possibly can- to turn out far less work than he is well able to do- in many instances to do not more than one-third to one-half of a proper day’s work…. This constitutes the greatest evil with which the working people of England and America are now afflicted.” (Taylor, p.3)

For Taylor a “proper days work” meant the maximum level of output humanly possible. He often called it “a fair days work”. When workers were not physically capable or unwilling to work “a fair days work” he fired them.

Why did workers soldier? Taylor never was able to give an answer to this question. To him it represented one big misunderstanding between capitalists and workers. Actually, Taylor argued, there was no fundamental antagonism between workers and capitalists.

“The majority of these men believe that the fundamental interests of employees and employers are necessarily antagonistic. Scientific management, on the contrary, has for its very foundation the firm conviction that the true interests of the two are one and the same.”(Taylor, page 1)

Soldiering was made possible because management didn’t even know how much work it was possible to extract from workers.

“The greater part of the systematic soldiering is done… by the men with the deliberate object of keeping their employers ignorant of how fast work can be done.” (Taylor, page.7)

Taylor’s goal was to seize this knowledge of the labor process from the worker and put it in the hands of management to be used as a tool for control. He called this “scientific management”. As a science management could refine the labor process to a point of efficiency far greater than any worker could achieve on their own.

“..the science which underlies each workman’s act is so great and amounts to so much that the workman who is best suited to actually doing the work is incapable, either through lack of education or through insufficient mental capacity, of understanding this science.”

Note the wording “the workman who is best suited.” Who were these workers who were best suited for particular jobs? Workers who were too intelligent, too strong-willed, or incapable of working at maximum speeds were not best suited.

Taylor envisioned a perfectly harmonious social order where all workers were employed in occupations where they could work most efficiently. They would be accompanied by a strata of scientific managers who analyzed their motions and reorganized them for maximum output. Anyone one who didn’t fit into this perfect vision of the world would be fired.

“the greatest prosperity can exist only when that individual has reached his highest state of efficiency; that is when he is turning out his largest daily output.” (p2)

“The search for better more competent men… was never more vigorous than it is now…. It is only when we fully realize that our duty as well as our opportunity lies in systematically cooperating to train and to make this competent man… that we shall be on the road to national efficiency.” (iii)

The entire structure of production and society would revolve around the creation of this new efficient human. “In the past man has been first; in the future the system must be first.” “The fundamental principles of scientific management are applicable to all kinds of human activities, from our simplest individual acts to the works of our great corporations…. the same principles can be applied with equal force to all social activities: to the management of our homes; the management of our farms; the management of the business of our tradesman, large and small; of our churches, our philanthropic institutions, our universities and our governmental departments.” (iv)

We can just imagine how satisfying such a rationalized fantasy-world must have seemed to his obsessive-compulsive mind. A big part of this fantasy world was Taylor’s concept of harmony between classes. Taylor believed that all the workers he was retraining to work harder were his friends and that he had their best interest at heart even if they didn’t know that. He persisted in this fantasy even when workers threatened to kill him (p.24)

“…the men who were under [me] were [my] personal friends…. [I ] used every expedient to make them do a fair day’s work, such as discharging or lowering the wages of the more stubborn men who refused to make any improvement….” (p.23)

Midvale Steel- testimony before Special Committee of the US House of Representatives:

Taylor started his management career at the Midvale Steel Company outside Philadelphia.

“As soon as I became gang boss the men who were working under me and who, of course, knew that I was onto the whole game of soldiering or deliberately restricted output, came to me at once and said, “Now Fred, you are not going to be a damn piecework hog, are you?”

“I said ‘If you fellows mean you are afraid I am going to try to get a larger output from these lathes,’ I said ‘Yes; I do propose to get more work out.’ I said ‘You must remember I have been square with you fellows up to now and worked with you…. I have been on your side of the fence. But now I have accepted a job under the management of this company and I am on the other side of the fence, and I will tell you perfectly frankly that I am going to try to get a bigger output from those lathes.’ They answered ‘Then you are going to be a damned hog.’”

“I said ‘Well if you want to put it that way, all right.’ They said, ‘We warn you Fred, if you try to bust any of these rates, we will have you over the fence in six weeks.’ I said, ‘That is alright; I will tell you fellows frankly that I propose to try to get a bigger output off these machines.’”

“Now that was the beginning of a piecework fight that lasted for nearly three years, as I remember it… in which I was doing everything in my power to increase the output of the shop, while the men were absolutely determined that the output should not be increased….”

“I began, of course, by directing some one man to do more work than he had done before, and then I got on the lathe myself and showed him that it could be done. In spite of this, he went ahead and turned out exactly the same old output and refused to adopt better methods or to work quicker until finally I laid him off and got another man in his place. This new man- I could not blame him in the least of circumstances- turned right around and joined the other fellows and refused to do any more work than the rest.”

Notice that Taylor says he couldn’t blame this man for not wanting to work harder. In several accounts of his battle at Midvale Steel Taylor does admits to some sort of fundamental antagonism between management and workers.

“As a truthful man, [I] had to tell them that if [I] were in their place [I] would fight against turning out any more work, just as they were doing, because under the piecework system they would be allowed to earn no more wages than they had been earning, and yet they would be made to work harder.” (p.24)

Taylor was convinced that workers needed a material reward for working harder. A fundamental part of his theory of scientific management was the permanent raising of wages for workers who conformed to this new scientific work ethic. Taylor thought that capitalists would consent to higher wages because the increased cost of higher wages would be compensated for by the increased size in output and by the diminished size of the workforce(increased efficiency and “scientific selection of workers” meant massive layoffs for many of the firms Taylor laid his hands on.) But, to Taylor’s great dismay, once new levels of efficiency had been reached most employers chose to slash rates and wages returned to normal or even lower.  In fact, the effect of scientific management was to reduce the skill-set of the working class as a whole which in turn reduced labor’s bargaining power and lowered wages. It seemed there were fundamental class antagonisms immune to Taylor’s utopian philosophy.

But back to Midvale…

Taylor decided to take the next step:

“I hunted up some especially intelligent laborers who were competent men… and I deliberately taught these men how to run a lathe and how to work right and fast. …and every solitary man, when I had taught them their trade, one after another turned right around and joined the rest of the fellows and refused to work one bit faster.”

Frustrated Taylor decided to take the next step. He said to the men, “Now, I am going to cut your rate in two tomorrow and you are going to work for half price from now on. But all you have to do is to turn out a fair day’s work and you can work better wages….”

Eventually the men caved in and production rose at the Midvale Steel factory.

“After that we were good friends, but it took three years of hard fighting to bring this about.”

Emboldened by this success Taylor went on to become a highly sought-after and influential management consultant. Over the years he perfected his system of “scientific management.” Here’s how the system worked.

First Taylor would observe the labor process as it existed. He cataloged all the motions of the workers and timed them. He then set about, through trial and error, devising the most efficient flow of motions possible.

“…there are many different ways in common use for doing the same thing…. there is always one method and one implement which is better than any of the rest. And this one best method and best implement can only be discovered or developed through a scientific study and analysis of all the methods and implements in use, together with accurate, minute, motion and time study.” (p.9)

No job was too simple or complex. Taylor famously spent 26 years studying the best way to cut metal. (The task seemed impossible to rationalize as there were too many variables. Even famous mathematicians told him it couldn’t be done. But Taylor’s obsessive compulsive genius prevailed.) But simple work could be rationalized as well.

In a famous example Taylor sought to come up with a more efficient method for loading pig-iron into a train car. Men had to pick up a piece of pig-iron, walk up a plank and drop the pig-iron into a train car. On average a worker could load about 12 1/2 tons of pig iron a day. After careful study Taylor “discovered” that 47 tons a day was a “proper day’s work”. He did this by analyzing the tiring effect of physical labor on muscle. He discovered that a man’s muscles require a certain percentage of rest for an amount of work exerted. The trick was to time the ratio of work to rest for each worker so that they could work the hardest without tiring out.

The second step was to pick the right worker. Any old worker wouldn’t do. In fact only about one in eight men could load 47 tons of pig iron a day.

“With the very best of intentions’ the other seven out of eight men were physically unable to work at this pace. Now the one man in eight who was able to do this work was in no sense superior to the other men who were working on the gang. He merely happened to be a man of the type of the ox, — no rare specimen of humanity, difficult to find and therefore very highly prized. On the contrary, he was a man so stupid that he was unfitted to do most kinds of laboring work, even.”

Taylor started with just one man: a large Pennsylvania Dutchman named Schmidt. These were his instructions to Schmidt:

“…you will do exactly as this man tells you to-morrow, from morning till night. When he tells you to pick up a pig and walk, you pick it up and you walk, and when he tells you to sit down and rest, you sit down. You do that right straight through the day. And what’s more, no back talk. Now a high-priced man does just what he’s told to do, and no back talk. Do you understand that? When this man tells you to walk, you walk; when he tells you to sit down, you sit down, and you don’t talk back at him.” (p.21)

Taylor’s next comments tell us more about the “scientific selection of workers”:

“This seems to be rather rough talk. And indeed it would be if applied to an educated mechanic, or even an intelligent laborer. With a man of the mentally sluggish type of Schmidt it is appropriate and not unkind, since it is effective in fixing his attention on the high wages which he wants and away from what, if it were called to his attention, he probably would consider impossibly hard work.” (p.21)

Throughout his writing Taylor stresses the idea of selecting only workers who are able to work at the very highest level of efficiency. This always meant firing all of the other workers. Taylor had no sympathy for these displaced workers.

“And indeed it should be understood that the removal of these men from pig-iron handling, for which they were unfit, was really a kindness to themselves, because it was the first step toward finding them work for which they were peculiarly fitted…” (p.31)

The result was a drastic reduction in the number of workers employed and at the same time a rise in output. Workers were given raises though, as mentioned earlier, these raises usually did not stay in effect. Meanwhile the size of management grew. There was an office where labor was planned out. When workers came to work in the morning they were given a set of written instructions as to how exactly to work. Time-study men patrolled the factory floor timing motions. There was a proliferation of managers all dedicated to different aspects of labor control.

Divorced from the knowledge of the labor process, the worker became less and less skilled. Work was more repetitive and it was harder to bargain for higher wages when it was so easy for employers to replace a workforce.

Taylorism was also fiercely resisted. It produced much shopfloor conflict and militant strikes. Taylor consistently left this detail out in his own versions of his successes claiming that: “…during the thirty years that we have been engaged in introducing scientific management there has not been a single strike from those who were working in accordance with its principles….” Such blatant omissions were typical of a man who could not tolerate anything the interfered with his utopian vision of a planned, rational universe.

While Taylor’s perfect world- a world free of class conflict, where worker and capitalists worked toward a common goal of perfect efficiency- never came into being, his ideas about the labor process became part of the basic fabric of working life. The planning of motion in work and management’s monopoly over the knowledge of work are a basic fact of the way we experience much of modern work. Scientific management is still taught in industrial engineering schools and its concepts still inform the way workplaces are built and the way jobs are structured.

While some of management theory has moved on since Taylor the basic questions he was grappling with are still crucial. As the productive powers of labor increased rapidly over the course of the 20th century there was much thinking about how production and society were to be organized and how the worker would be habituated to the demands of capital. As we begin to look at the history of capitalist crisis it will be important to keep these basic questions in mind.

Bibliography:
“The Principles of Scientific Management” Frederick Winslow Taylor; Dover Publications 1998; originally published in 1911. I have condensed some sentences/paragraphs to make some quotes more You-tube friendly. This is indicated by the traditional “…”. (I have not in any way changed the meaning of the text. See my comment below.) “Principles” can be read online at the marxist internet archive: http://www.marxists.org/reference/subject/economics/taylor/principles/index.htm

Taylor’s narration of the Midvale battle comes from Taylor’s testimony before “A Special Committee of the House of Representatives to investigate the Taylor and other Systems of Shop Management” as quoted in Harry Braverman’s “Labor and Monopoly Capital”, 1998 Monthly Review Press

I also enjoyed “Frederick Taylor: A Study in Personality and Innovation” by Sudhir Kakar. MIT Press 1970

Work

Work.

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Part Two:

Human beings have always worked. But the way we work has changed over time. In working we not only create the necessities for our own survival but we create the world around us and create ourselves. Work not only defines our relation to the natural world which we work upon. It also defines our relations with each other and how we understand ourselves. As our labor becomes more powerful- more productive and impressive in its achievements- it takes on more complexity and calls forth a more sophisticated social system to coordinate all of these diverse and complex labors.

Certainly other animals are capable of very complex and impressive work: a bee hive, an ant colony, etc. But yet there seems to be something distinctive about the way humans work, the way we relate to the natural world, the way we build societies… Karl Marx says about this question, “What distinguishes the worst of architects from the best of bees is that the architect raises his structure in imagination before he builds it.” (1) I think Marx was on to an important point here. While the bee, the bird, the ant, all engage in instinctive acts of work, acts they have repeated for hundreds of years, the human thinks creatively about work. Humans look at the world and dream up new things to build and new ways to build them. We can separate the conception of work from the execution (the carrying out of) of work. (2)

In this daily act of doing, we construct not only houses, bridges and fields, but also all of the social relations of a labor process. Human labor has always been a collective process. Our social labor is greater than the sum of its parts. When we work we enter into relations of cooperation with each other. The labor process is this organization of our social cooperation. As our social relations evolve, as our relation to nature evolves, and as our collective knowledge evolves so too does the labor process evolve.

Capitalism
To understand our current condition, to understand modern man, it is crucial to understand what is unique about work in a capitalist society and the ways this labor process has evolved over the history of capitalism. [We should start by remembering three things about work in a capitalist society: 1. Work happens under conditions of private ownership over the means of production. That is, a small group of people own the main productive apparatus of modern society and the rest of us sell our labor to them for wages. 2. A capitalist only invests in production in order to make a profit. 3. The exchange of labor and the products of this labor is coordinated by a concept of value which we measure in money.]
We should start by noticing the distinctive way labor is used in a capitalist society. When a worker produces a product for a capitalist he doesn’t sell his labor, he sells his labor power. That is, a worker doesn’t sell a definite amount of work to the capitalist. He sells his ability to work for a given amount of time. It is up to the capitalist to get the most labor out of this period of time as possible in order to maximize profits. Thus with capitalism we get the problem of management: of how to control and organize the labor process for maximum efficiency. This is why the question of time becomes so important in capitalist society. The capitalist is constantly seeking ways to get the most value out of every minute. This constant question of time in relation to productivity permeates all of society, even outside the workplace, the more capitalist social relations become dominant.

Capitalism didn’t just create a new labor process from the start. It inherited a preexisting labor process and a preexisting division of labor. Work in feudal society was mostly skilled craft work. Goldsmiths, cobblers, weavers, etc. all owned their own means of production and had total control over their own labor process. Their trade took years of study to master and required an extensive period of apprenticeship. The agricultural work of the peasant classes, though not generally considered craft-work, was a form of skilled labor that took years to learn. Parents passed down their collective knowledge of farm work to their children as the whole family shared in a collective labor process.

In order to transform this craft-work into a capitalist labor process these workers had to be separated from their own means of production and be turned into wage laborers totally dependent on capital in order to survive. This was a long, complex and painful historical process (called primitive accumulation) that will have to be discussed elsewhere. We can still see this process at work in parts of the 3rd world where free trade policies like NAFTA destabilize traditional agriculture sending people out into the job market looking for work as wage laborers.

One of the first innovations in the capitalist labor process was to bring all of these workers together into one workplace. This allowed  the capitalist more control over the labor process thus beginning the long history of a conscious manipulation of the nature of work in order to extract as much value as possible from a workforce.

One of the simplest ways to do this is to increase the total amount of time workers work. The early history of capitalism was one of long working hours and constant battles over the length of the working day. It wasn’t until 1833 that a legal length of the working day was established in England. It lasted from 5:30am to 8:30 pm. Children were forbidden from working more than 12 hours a day. French workers workers won a 12-hour day in 1848. The battle for the 8 hour day began in the US after the Civil War:
“The first and great necessity of the present, to free the labor of this country from capitalistic slavery, is the passing of a law by which 8 hours shall be the normal working day in all the States of the Union. We are resolved to put forth all our strength until this glorious result is attained.”- The General Congress of Labour held in Baltimore, August 1866(3)

It wasn’t  until 1936 that the battle for the 8-hour day was won in the US.

The issue of the length of the working day is still an ever-present issue in capitalism. It manifests itself in petty struggles to stop workers from milking the clock, to battles over vacation time, retirement age, over-time, and, still, the length of the work-week. As long as labor power remains a commodity there will always be struggles over time.

To the extent that the working day can no longer be extended (whether because of class struggle or because the working day itself just isn’t long enough for the voracious appetite of the capitalist class) the capitalist is driven to increase the amount of surplus value workers produce for the capitalist within a given period of time. This means exerting more control over the labor process- controlling how workers work- in order to make this work the most efficient.

The history of work in capitalism is full of experiments and theories (management theory, industrial sociology, human-relations theory, etc.) all devoted to this problem of labor-control. One of the most influential of such theorists was Frederick Taylor who pioneered the concept of “scientific management”. [Taylor's theories, a pure distillation of capitalist management, deserve a video of their own.] Taylor sought to separate conception and execution within the labor process. A task was studied in detail by an engineer, all of its motions mapped out, timed and measured and then reorganized so as to achieve maximum efficiency. The worker was then trained to work in this new efficient method thus depriving workers of any control over their own work.

A management guide about office work from 1960 broke down the category “open and close” like this (4):
File drawer, open and close, no selection – .04 minutes
Folder, open or close flaps- .04 minutes
Desk drawer, open side drawer of standard desk- .014 minutes
Open center drawer- .026 minute
close side- .015 minutes
close center-.027 minutes

This information was collected in order to organize the placement of objects in the office and the motions of workers so as to achieve maximum efficiency.

A big part of scientific management was the breaking down of work into its component tasks which could then be spread out amongst many workers. This is different than the division of labor in society in which the labors of autonomous producers are coordinated through a market. Here the labor process itself is divided and reorganized via the authority of management. We often associate this concept with assembly lines where each worker performs a simple, repetitive task before the commodity passes to the next worker. But actually, most work in a capitalist workplace is divided up like this. We rarely see a product through from start to finish. This allows work to be reduced to just a few simple, repetitive motions requiring little skill. The worker needn’t know anything about the labor process as a whole or even know what it is he or she is making. This process is called the “rationalization” of work.

This has several implications:

The worker looses control of the pace of work. As a cog in a much larger mechanism the worker is forced to work at a given speed, a speed which can be controlled by management. This in turn gives management more control over the amount of value workers produce within a given period of time.

Though more and more science and planning may go into the organization of the labor process by engineers and managers, the worker understands the process less and less. The worker, instead of being a skilled craftsman with years of training could be anyone able to follow simple directions. The traditional craft-worker is undermined and the “ideal worker” comes to resemble an unskilled worker-drone.

Unskilled labor is cheaper labor. This raises profits. The more work is “deskilled” the more all jobs start to resemble one another in skill. It becomes easy for workers to move from one occupation to another. It is also easier to replace workers.

This new labor process calls forth a whole host of new occupations. Engineering departments are created to map out shop-floors, design new machines, time-workers and design labor processes. The job of management becomes too complicated for the individual capitalist to handle. The job of controlling workers is actually rationalized itself, and a class of salaried managers is created to do this work of management for the capitalist. (In the upper levels of management the role of capitalist and manager blur together in CEO’s. And of course, in the modern corporation the CEO comes closest to the personification of the individual 19th century capitalist. More on the evolution of the capitalist in a future video.)

The increasing size of these rationalized, planned factories requires a massive extension of bookkeeping. Inventories, debts, payroll, profits, etc. all must be tracked meticulously. The job of bookkeeper is rationalized, broken down into a large gradation of occupations all involved in tracking the flow of value in and out of the company. (And because nobody can be trusted all counting of value happens twice via a system of double-bookkeeping. Outside the firm accounting agencies, government regulators, and tax-offices all duplicate this booking again. Thus even though the labor process of bookkeeping has been rationalized, it is all grossly inefficient from a social standpoint. But the tracking of value flows is an indispensable task in the modern capitalist firm so society tolerates this duplicate labor.)

The increased efficiency of labor means that there are a lot more commodities to be sold. This calls forth a tremendous increase in marketing. The job of marketing is essentially to produce the consumer. The modern capitalist firm has a huge marketing department and this work of marketing is also broken down into all of its component pieces and rationalized. Marketing becomes more and more a part of the experience of living in a modern capitalist society. Try to imagine how different society and people would be without advertising and you will understand how effectively marketing has been at producing the consumer.

Now if you are thinking critically at this point you may be saying “…but all work in a capitalist society is not unskilled!” This is true. The process of rationalization of labor is the tendency in which capital moves. But this tendency also calls forth scientists to design efficient machines, engineers to design factories, management experts, etc. The greater the pool of unskilled workers at one pole the more there is a need for a small amount of specialists at the other end. And the work of these specialists can also be rationalized…

An important principle here is Babbage’s principle (named for Charles Babbage) which states that the breaking down of a job into component parts always saves money. If you have a skilled worker like a doctor, why should this doctor waste time filling out insurance forms, or doing simple things like weighing people and taking their blood pressure? You could hire less doctors if you had people like nurses to do the simpler work, secretaries to fill out forms, billing offices to bill patients, lab technicians to analyze data, etc. A hospital is the perfect example of the Babbage principle at work. We see a gradation of skill from doctors to janitors as management has broken up all the tasks required to run the hospital, separating out each layer of skill so as to cheapen the worker whenever possible. This is why most of your time at the doctor’s office doesn’t involve you actually seeing a doctor. You probably only see the doctor for 10 minutes if you are lucky. The rest of the time you are talking nurses, med students and secretaries.

When new industries are created like, say the the computer industry, there is often a large degree of skill involved in the labor process. Over time this labor process is rationalized and skill is squeezed out of the labor process as much as possible. Computer work today is now broken up between software designers, code writers, designing and manufacturing hardware, tech support, etc. While there is still lot of skill that goes into computers it has also become a lot easier to do things like, replace parts, write code, design webpages etc. Many aspects of the computer world have become less-skilled reserving the skilled jobs for a smaller group of workers. (Smaller in portion to the amount of commodities being produced.)

Ever had a really frustrating time on the phone to a customer service representative? After going through a computerized menu for 5 minutes, listening to Kenny G for 10 minutes, you finally get a human being. But the person doesn’t know how to help you and doesn’t know any one in the office who can help you. Customer service work has been extremely rationalized. Workers have computers which guide them through answering all the expected questions. But if a question deviates from their script they are totally helpless. The modern worker doesn’t understand the entirety of the labor process. They are just given a tiny, repetitive task to repeat. So when the customer service agent tells you that there is nobody that can solve your problem this is literally true- the labor process controls the worker, the worker doesn’t control the work. There really is nobody there that knows what is going on or who can deviate from the script.

And this is the night-marish potential in modern capitalism: That there really is nobody that knows what is going on. We becomes a cog in a very large process that we can’t understand. We perform repetitive, simplified tasks and the motion of our work is controlled by forces outside of us, beyond our control.

But labor hasn’t always been like this and it doesn’t have to be like this. There is nothing about labor itself that requires it to be unskilled, repetitive or brutish. But once a change has become generalized throughout society we tend to think that life has always been this way: that labor has always been a commodity and that it is “progress” to attempt to cheapen labor whenever possible. From the perspective of capital this is indeed progress: the progress of making profit. But from the perspective of humanity there is nothing progressive or efficient about wasting human life and potential merely to feed the insatiable appetite of capital.

Footnotes:
1. Karl Marx, Das Kapital. Vol. 1 p. 284 (Penguin edition) from the beginning of the chapter “The Labor process and the Valorization Process.”

2. In chapter one of “Labor And Monopoly Capital” Harry Braverman points out that there are some other animals that problem solve in their work, that can use simple tools in creative ways, but that the difference in degree to which this predominates in human labor is enough to signify a qualitative difference between man and other animals. He cites the Hegelian idea of change in quantity becoming a change in quality.

3. Quoted in Das Kapital p.414
In 1866 Karl Marx himself drafted a proposal for the 8-hour day as one of the demands of the International Workingmens’ Association. Das Kapital p. 415, bottom footnote (Penguin edition)

4. The manual was “A Guide to Office Clerical Standards: A compilation of Standard Data Used by Large American Companies” (Detroit 1960) Quoted in Labor and Monopoly Capital by Harry Braverman, p.221. The manual goes on to time walking, walking in confined spaces, turning while walking, reading a line of typed copy, “jogging” paper, cutting paper with scissors, stapling, opening mail, folding paper, and even punching time clocks!

What Transformation Problem?

Nerd alert: I know that my videos normally represent the height of fashion. I know that my massive popularity, on the account of all the violence, sex appeal, and sports references have launched me into the top ranks of viral culture, making me a real trendsetter.

But this video will not be like that. So I’m warning you now, this video gets an extremely high nerd rating. It will try to explain the details behind probably one of the nerdiest theoretical debates in marxist economics. But if you watch this video you could very well be set to join the ranks of other fashionable revolutionaries like these guys… (nerd quiz: can anyone name these guys?)….
That being said, the topic I am going to discuss is an important one, but only because the debate behind it lies at the core of claims that Marx’s labor theory of value is “discredited”, “contradictory”, etc. One does not have to look to far into Marxist economic theory before one stumbles upon the quagmire that is “the transformation problem”. And the sheer magnitude of algebra and technical gobbledy-gook involved in most of the discussion of the transformation problem scares most people away from ever really looking into the debate further.

Over the last 100 years there has been furious debating back and forth over the meaning of Marx’s theory of “the transformation of values into prices of production” and over the various criticisms of it- debates of such a stunningly polarized and mathematical nature that it is hard for us normal folks to wrap our mind around the issues at stake enough to know what to make of it all.

The goal of this video is to explain the basic nature of the problem and to defend Marx’s transformation procedure on the basis of some new scholarship on the topic. I will do all of this without any math or any algebra. On my wordpress blog ( http://kapitalism101.wordpress.com/transformation-math-supplement/ ) you will be able to find a supplement with a more detailed discussion and some math examples for all of you super-nerds who want to plow into some simple math. [If you aren't afraid of a little division and subtraction I recommend you check out the math supplement and learn how to solve some transformation problems of your own. It's kind of fun- like a sudoku puzzle for marxists. Then you can scribble them out on paper napkins at bars and parties to impress people. It's always a real hit.]

Value

So everything in Marxist economics centers around the idea of value. Without a theory of value we wouldn’t be able to make most of the arguments that are considered a crucial part of marxisim: exploitation, crisis, class, etc. Value is not some abstract, metaphysical concept. It is a real tangible thing that effects all of us everyday. It is the reason we go to work in the morning. It’s what allows us to buy groceries. It’s why countries go to war. It’s why we have banks and railroads and stockmarkets. The unfolding of the “law of value” is the unfolding of the inner mechanisms of a capitalist society. So it’s important that the concept of value is internally consistent and logical or else its status an explanatory concept is questionable.

If you’ve seen many of my videos then you probably know by now that value is created by human labor, and human labor only! Machines can’t create value. Buying and selling commodities doesn’t create value. Differences in subjective preference don’t create value. Let’s review a few different arguments as to why this is the case. The point of any economy is to coordinate human labor in such a way as to provide stuff for people. There are many different ways this labor has been coordinated throughout history, and there will likely be many more ways it will be coordinated in the future. In a capitalist economy labor is coordinated via commodities.  That is, I make a commodity and you make a different commodity. When we exchange them we are exchanging our labor. That’s how our collective labors are organized.

The only reason all of these diverse commodities can exchange with each other is because they are all products of human labor in the abstract. This is what gives them their value. But commodities don’t walk around with their value written all over them. (If they did, capitalism would be a lot easier to understand and you wouldn’t need to watch this video.) You can’t buy a toothbrush and read on the toothbrush how many hours it took to make it, how many people worked to make it, what their working conditions were, how it was shipped to the store, who put it on the shelf, etc. Value has to be expressed through money. Money prices are an expression of value.

But here is where things start to get confusing. How is value measured in money prices? Is price always equal to value? What happens when price doesn’t equal value? Since anyone can set any price they want when they sell a commodity it may at first seems hard to see how price could realistically reflect value. But we know from our own lives that there seem to be some sorts of forces at work in the universe- some hidden hand of the market that keeps prices from being totally arbitrary. A toothbrush or a new car costs more or less the same anywhere you buy it. Not only that, but the car will always cost more than the toothbrush. So what are these forces that make prices converge? And is it just a coincidence that things that take more work to make usually cost more than things that take little time to make?

The more perfect competition is in a capitalist society, the harder it is to arbitrarily set prices above values. Perfect competition makes it impossible to just conceive of prices as arbitrary or of profit as a mere “mark-up” above costs. (Of course competition is never perfect, but if we are building an abstract model of a capitalist economy we have to identify the inner logic of capitalism in the abstract before we see how outside forces distort this model.) We also can assume that supply and demand balance each other. Obviously if supply ever shrinks this will create a rise in prices above values. But this rise in prices means a rise in profits for those capitalists producing scarce goods. This rise in profits encourages more capitalists to invest in producing this good and this, in turn, increase the supply until prices are back down to an equilibrium point. The opposite happens with decreases in demand.

The argument of the labor theory of value is that, behind all of these fluctuations there lie equilibrium prices and that these equilibrium prices correspond to the value of commodities. Now, what happens when monopoly, trickery or demand allows someone to get away with arbitrarily charging more for a commodity than its value? The answer to this question is really crucial, so listen closely: The total amount of value in society corresponds to the total amount of prices. So if someone is getting away with arbitrarily high prices it means that someone else is not getting the full value of their commodity. In this way, though profit can’t be created through exchange, it can be shuffled around between people. Through monopoly, fads, whatever people can benefit from an inequality in exchange- a defect in the manifestation of capitalist competition. But such an inequality does not create more value! The real source of profit in a capitalist society is the difference between the value of commodities and the wage paid to workers. This, of course, is the theory of exploitation.

So if we abstract from disturbances in competition, or minor fluctuations in supply and demand we see that commodities, in general, have prices that are relatively proportional to their values…. or at least, they would if there wasn’t one other complicating factor…

It is this other factor that required Marx to theorize about “the transformation of values into prices of production” and which has created all the fuss for all these years. It is very similar to what I just described about the way supply and demand equalize. The same way in which supply and demand fluctuate around equilibrium price also creates an average rate of profit amongst capitalists. That is, if one capitalist is making more profit than the rest, other capitalists will start doing whatever (s)he is doing and thus eat into his/her profits. Through this sort of competition an an “average rate of profit” is established among capitalists.

But this average rate of profit seems, at first, to conflict with something else that I’ve talked about in other videos: the organic composition of capital.

Let’s illustrate this with an example. Let’s say there are two industries: one makes coffee and the other cars. Within both industries there is competition to make their workers the most productive by introducing the newest labor-saving machines. Thus within each industry there is about the same ratio of workers to machines. (This is what the “organic composition of capital” is- the ratio of machines to workers. When there are a lot more machines than workers we say the organic composition is high. When there are more workers, we say the organic composition is low.) But between industries this ratio differs.  Some industries just naturally have a higher ratio of machines to workers than others. In our example, the automobile industry uses a lot of machines! The coffee industry uses a lot more workers.

Now if value can only be created by human labor, it would seem that the coffee industry creates a lot more value than the car industry. And, actually this is the case- the more work that’s done in an industry, the more value it creates. Yet, under conditions of competition, under the law of the average rate of profit, both industries receive the same profits, even if one creates much less value.  An average rate of profit means that each capitalist receives the same rate of return on their total investments, regardless of what proportion of this investment goes to workers or machines. How is this possible? (Do the workers in the auto industry just work harder? Are they more exploited? There’s no necessary correlation between the ratio of machines to workers and their wages so lets assume that the rate of exploitation is equal in both industries.)

Here is the solution to this puzzle. The total amount of value in society is equal to the total amount of prices. The total amount profit is equal to the total amount of surplus value (Surplus value is the difference between the value of a commodity and the cost of paying workers and paying for raw materials, machines, etc.) The total rate of profit measured in value, in society as a whole, is equal to the total rate of profit measured in money.

These are the “three aggregate equalities” that form the holy trinity of the theory of the prices of production. Individual capitalists can have money prices or profits that diverge from their values, but in the aggregate these equalities prevail. But how?

All capitalists contribute to the total amount of surplus value according to how much labor they employ.  So if coffee makers have more workers, they contribute more to the aggregate surplus value than car manufacturers. But capitalists withdraw their money profits from this total surplus value according to the average rate of profit- that is, in proportion to the total cost of their production. Regardless of how many workers they actually employ, they all receive the same rate of return on their investment, even if all of their investment goes into machines!

Thus the price of a commodity is not the cost of inputs plus surplus value. It is the cost of inputs plus the average return on those investments. We call this price the “price of production”. The total prices of production equal the total amount of value. But individual commodities do not trade at their values. They trade at their prices of production. The price of production is still a function of value, but it is not necessarily directly equal to it.

This is why it is possible to have a falling rate or profit (see “Falling Rate of Profit video). Individual capitalists have no way of knowing that they are destabilizing the collective rate of profit, because they don’t receive less profit when they replace workers with machines. It is only when automation has spread throughout the economy to a substantial extent that it can drag down the profit rate.

This relationship between individual action and wider social forces is true to the spirit of much of marxist theory. Individuals are always free to act as they choose. That’s the easy part of social theory.  The hard part of a good social theory is to explain why those free actions coalesce around certain norms. For Marx, it is value which is the central mediating force between individuals and so it is the laws of motion of this value that ultimately govern the success or failure of individual actions.

A Little Bit Of History.

Marx took the ideas of classical political economy to their logical end. After Marx one couldn’t operate as a political economist without accepting the notions of exploitation and crisis that he had so thoroughly developed. And so those who were interested in doing truly bourgeois economic theory had to abandon the notion of a labor theory of value if they were to save economic theory from Marx. In so doing, thinkers like Leon Walras developed what is now called “neoclassical economics”. Neoclassical economists abandoned the notion of value altogether. They essentially took price as a given- refusing to look behind it for any deeper meaning. In doing so they also abandoned the whole notion of social class, and all of the other wider social phenomena that Marx had woven into his theory. Their restricted, narrowed perspective soon developed an obsession with number-crunching and fancy algebra.

I say all this because it was out of the neoclassical school that the critique of Marx’s transformation procedure developed. And it was this new way of thinking about economics that produced the sort of assumptions that led to this critique. In 1907, Ladislaus Bortkiewicz, a Russian economist, published a paper which claimed that Marx’s transformation procedure was internally contradictory- that when taken to it’s logical conclusion it produced mathematical results that simply didn’t add up. Ever since, people doing Marxist economics have had to contend with this accusation that their fundamental theoretical category, value, is not logically valid. Over the course of the 20th century many Marxist economists embraced the neoclassical models of Bortkiewicz and his successors in various, attempts to rescue Marx’s value theory from within the framework of bourgeois economics. It wasn’t until the 1980’s that some scholars began to challenge the assumptions behind this neoclassical critique and to construct a defense of Marx from within the logic of value theory. The most promising of these new defenses is the “Temporal Single System Interpretation” or “TSSI” for short. Let’s take a closer look at the Bortkiewicz argument and the TSSI response.

The neoclassical tradition that Bortkiewicz came out of had several major differences from the Marxist tradition. Where Marxist theory builds a model of capitalism that is dynamic, constantly evolving, prone to disproportion and crisis, the neoclassical school views capitalism in a static, unchanging equilibrium state where the hidden hand of the market naturally smoothes out imperfections. It is important to keep this difference in mind when viewing Bortkiewicz’s critique.

It was Bortkiewicz’s fascination with these static, equilibrium models that led him to question Marx’s transformation procedure. Bortkiewicz put Marx’s argument into a standard neoclassical input-output model.  On the input side went machines, raw materials and wages all measured in their values. On the output side came newly produced commodities, all now priced at their prices of production. Bortkiewicz then asked, quite logically, shouldn’t the inputs into the production process be bought at their prices of production and not their values?

Indeed Marx himself had acknowledged that it only made sense for inputs to be bought at prices of production, but this did not lead him to the same conclusions as Bortkiewicz. Bortkiewicz took those end prices of production and plugged them back into the input side of his equation. When he did this all hell broke loose with the math. Specifically it became impossible to maintain all three of Marx’s original equalities: total money profits equal total surplus value, total money price equals total value, total money rate of profit equals total value rate of profit. Only one equality could be maintained at a time but only by arbitrarily imposing that condition at the expense of the other two equalities. To Marx’s critics this was the end of the labor theory of value.
[Here I decided not to explain the way in which Bortkiewicz created a dual system of value and price.]

The TSSI critique of Bortkiewicz is simple and elegant. They argue that it is illogical to plug output prices back into the inputs of the same production period. They accuse him of two false assumptions: simultaneism and physicalism. Let’s look at each in turn.

Simultaneism

For Bortkiewicz the prices of inputs and outputs are simultaneously determined. In other words, input and output prices have to be equal. Let’s say we have an industry that makes corn. It also needs seed corn as an input. Bortkiewicz would argue that if at the end of the production period corn sells for 10 dollars a bushel then it must also enter production as an input at 10 dollars a bushel. There can be no change in price. But he seems to be arguing for some theory of time travel, as if a farmer would go back in time and sell themselves corn at their future output price. In the real world, the opposite happens.  Values change over the course of a growing season due to the productivity of labor and soil, weather, changes in technology, etc. The price of corn at the end of the production period doesn’t have to equal its price at the beginning. The new prices of production become input prices for the NEXT production period, not the one that’s already happened.

In contrast to Bortkiewicz’s simultaneous determination of prices, the TSSI is “temporal”. It tracks changes in the prices of production through time, from one production period to the next. In each period the input prices are the output prices of production from the previous period. In this way the TSSI is much more faithful to the marxist project- to build a dynamic model of value as it moves through time, constantly expanding.

Physicalism

Bortkiewicz, in a way, defended his simultaneism by constructing his model within the framework of an economy with no growth. He argued that in an economy with no growth prices wouldn’t change over time and thus it would make sense to simultaneously determine input and output prices. This model of an economy with no growth actually came from Marx himself who theorized about Simple Reproduction- an economy with no growth in which the entire social product was produced and sold each production period. Simple Reproduction was an abstract model Marx used to simplify some arguments about exchange before he introduced his more complex model of expanded reproduction. Yet, still the theoretical possibility for simple reproduction to occur does exist and so we do need to consider whether the transformation of values into prices of production works under conditions of zero growth.

The problem is that Bortkiewicz assumed that no physical growth meant no growth in value. This is the essence of physicalism: that changes in value are directly tied to changes in the amount of actual physical commodities. ie. If I produce ten apples instead of five I have twice as much value. This seems to make sense. But look at the way this actually plays out in the real world. (21)When a supply expands its value falls. When a supply shrinks its value rises. In a drought the same amount of apples is worth more than in a glut. So just because there is more of something in physical terms doesn’t mean its value is more. In fact, value can change while physical output remains the same if the production process becomes more efficient or input values change.

This is precisely what happens in the TSSI version of the transformation “problem”. From one period to the next the physical outputs stay the same. The same amount of goods are produced and consumed. But the value of those goods changes overtime. Each production period, new work is done; new labor is added to the social product. And so total value rises each production period. This total value becomes the input for the next production period.

From the TSSI illustration it becomes clear that it would be ridiculous to take the prices from the end of the production period (prices representing an increase in value) and plug them back into the equation at the beginning of that same production period. The Bortkiewicz solution flies in the face of the basic logic of value theory and so it necessarily produces absurdist results.

Conclusion
Bourgeois economics is often thought of as an objective, rational science for number-crunching specialists, divorced from political bias. But all of these matrices and graphs exist within a very narrow range of assumptions. By leaving out questions of value, by treating capitalism as a static, universal entity without change, and by ignoring class it prevents itself from addressing the most essential elements of economic analysis. It is these assumptions which have led to the entire notion of a “transformation problem”, and to the general attack on marxian economics.

While it can be intimidating to wade through the specialist literature on a topic, we should never forget that underneath the numbers lie arguments and assumptions about the real world and that  these are, in the end, the crucial things to be concerned about. There is no reason why you and I should have to take a graduate course in economics in order to understand the debate over value and price. We should never be intimidated by “experts” into not thinking for ourselves and not challenging assumptions. Such timidness in the face of algebra has led to far too much meekness from the left. In the coming economic crisis it will be crucial to assert our ideas clearly and boldly, and without bowing to the tools of bourgeois economics. It is high time to put an end to this tiresome debate about the transformation problem.

Bibliography

“Reclaiming Marx’s Capital” by Andrew Kliman

“One System or Two? The transformation of values into prices of production vs. the transformation problem” a paper by Andrew Kliman and McGlone. This available on Kliman’s website: http://akliman.squarespace.com/

Marx’s Theory of Value and the ‘Transformation Problem- an essay by Anwar Shaikh from the book “The Subtle Anatomy of Capitalism” ed. Jesse Schwartz

“Limits to Capital” by David Harvey

“Das Kapital” vol. 3 Karl Marx

In Defence of Teleology

I wrote this essay not as part of my normal youtube series on Marxist economics (youtube.com/brendanmcooney) but, instead, for the Daniel Singer Millenium Prize (www.danielsinger.org).

A Defense of Materialist Teleology
Motion and Contradiction

By Brendan Cooney
August 2008

“What recent event or political process that you have participated in, witnessed or studied has given you inspiration and confidence that ‘a better world is possible’ and why do you think the fight for a better world will succeed?”

A good answer to any question begins with a critique of the question itself. Times have changed since a good socialist would claim, “a better world is inevitable”. Beyond the fall of the Bolshevik experiment and the slow demise of the liberal welfare state lie even more disturbing realities that have pushed teleology- the belief in the historical inevitability of socialism- out of the picture.

The hardest blow to the romantic teleology of old-school Marxism has come from the study of capitalist crisis itself. The concept of regulation has entered the foreground. Now we recognize that crisis is good for capitalism. It is an essential, cleansing process within the cycle of accumulation. Each new round of devaluation creates new modes of displacing and regulating crisis, through financial, political, productive and cultural institutions, which allow capital to recover and reconstitute the accumulation process anew. Instead of seeing crisis as a sign of the downfall of capital, Marxist literature increasingly stresses the ways in which crisis is merely a way of evolving the contradictions of capital to a new level of capitalist regulation.

Yet, the regulation school still holds a progressive view of history. The evolution of one mode of regulation to the next implies a dialectical assumption about the relation between structural contradictions that determine the motion of capitalism and the agency of individuals within these structures to alter the form that this evolution takes. For example, we recognize the diversity of forms that Neoliberalism has taken yet still argue that all Neoliberal formations share a common vision of resolving the contradictions of capital through free markets, strong states, deregulation, accumulation by dispossession, etc. This basic content of Neoliberalism reveals itself through its specific historical incarnations. As much as these forms are shaped by contingency there seems to be no escape from the basic form itself and its heightening contradictions. Furthermore, in the transition from the Fordist era to the Neoliberal era we see this basic form revealing itself as a necessary response to the crisis of the welfare state.(1)

So, in this sense, Marxists still recognize the essentially progressive movement of capital in the way in which contradictions necessitate solutions, which merely move contradictions to higher levels. Individuals acting within these structures create the basic form of the appearance of this contradiction. The aspect of teleology that is out of style is the belief that the ultimately unresolvable nature of these contradictions will necessitate a proletarian revolution.

It is precisely this second aspect of teleology which I wish reinsert into the discussion, though not quite in the traditional sense. Capitalism is all too hegemonic, all encompassing, and powerful to still hold onto a Leninist vision of inevitable, violent, global revolution. In fact, the version of socialist teleology that I advance here fits more squarely within the theoretical structure of Marx’s historical materialism than a Leninist vision that depends solely on human agency and contingent action in the face of actual historical conditions.

Marx’s observations about history were formed at a time when capital was rapidly disintegrating the social relations of European feudalism. A new mode of production was emerging from the old, replacing or appropriating old institutions and cultures with a new bourgeois social order. The emerging capitalist order took many forms. Many feudal institutions coexisted with capitalist institutions for a long time, forming contradictory or parasitic relationships. Though often sudden and violent, this process took several hundred years. From this privileged perspective, watching two modes of production rub up against each other, Marx was able to make the sort of observations that are less apparent to observers lodged thoroughly within one mode of production. The friction between these two worlds allowed for a type of transcendent critique allowing Marx to see past the appearances of bourgeois society and reveal its inner laws of motion.(2)

I believe a theory of post-capitalist social relations needs to come from a similar transcendent perspective. Where in the current crisis facing capital do we see the emergence, or possibility for emergence, of some sort of new social relations? Is the emergence of some new world discernible within the current one? If so, what does the rubbing together of these two worlds tell us about the nature of a potential new order?

Here we must make the distinction between progressive and reactionary social formations. Progressive formations are an unfolding of the contradictions of capitalism in the direction of either higher stages of contradiction or toward some communist society free of social dissonance. As stated above, the theory of successive modes of regulation is still progressive in this sense while still refusing to speculate about a communist future. Reactionary formations are attempts to restrain this unfolding- to hold the social order in place by force. The current militarism of the Bush administration is a good example of such a reactionary politic: In order to stop the basic crisis in value creation embodied in its falling dollar and crumbling financial system the US government has launched two aggressive wars and countless interventions aimed at maintaining the value of the dollar by sheer military force. This desperate, reactionary gesture has in no way changed the actual reality of the contradictions besetting the American economy. It has merely altered the form of appearance of the crisis. Like all reactionary gestures, there is a certain Oedipal tragedy to the Bush wars: the unfolding of these contradictions will happen regardless of how hard we try to stop them. In speculating about how crisis will evolve over the next century it will be important to keep in mind this distinction between progressive and reactionary formations. It is important not to see reactionary forms like authoritarian states as representing, in themselves, a qualitatively new mode of regulation. Such fetishism is common amongst the left today and has created a culture of defeatism and fear which we must not fall into if we are to understand the truly radical potential that exists within the coming crisis of capital.

There are many aspects of crisis converging within our lifetime. I argue here that within many of these crisis we can see the emergence of possible resolutions which point the way toward a new form of post-capitalist social relations- in short, some sort of socialist order which we do not yet have the perspective to fully comprehend. The transformation to a fully new mode of production will most likely take time. We will likely see new forms of socialist relations coexisting side by side with capitalist institutions in all sorts of contradictory and symbiotic relationships. The specific forms that such a transformation will take and the types of reactionary responses that may constrain the emergence of these new forms will be determined by all manner of contingent factors. What is crucial is to see the essentially progressive nature of socialism as it appears in nascent form within the heart of capitalist crisis.

Despite the diversity of forms that the transition to capitalism took, some sort of primitive accumulation was essential to the creation of private property and labor markets. I argue here that a similar process of socialist primitive accumulation will also be necessary to create the conditions for a true emergence of socialist social relations. Following Marx’s logic, we can look to capitalism to prepare the ground for us. Capital has already reduced heterogeneous labor to abstract, socially necessary labor to create a universal class with universal material interests. When we follow the logic of the evolution of the forces of production to its logical conclusion we see the possibility of a socialist primitive accumulation emerging.

Capitalists in competition with each other must revolutionize the productive forces in a never-ending attempt to extract more surplus value from workers. In their individual attempts to make labor more efficient they undermine their own basis for value creation, creating a crisis. In addition to this crisis, something else happens when labor efficiency is taken to the level of total automation, eliminating labor from a task altogether: The task becomes decommodified- essentially value-less. Capitalism began by appropriating free things and turning them into private property through a process of primitive accumulation. But through the evolution of productivity it eventually eliminates this very basis and creates a new basis for free, socially-owned production. Let us look at how this process could play out in the future.

Intellectual Property

If we are looking for an example of fully evolved forces of production, the technological revolutions in computing and the Internet are the obvious starting point. Among the many fetishes that exist in our culture, one of the most dominant is the one that attributes magical qualities to computer technology- that somehow computers in themselves will liberate us from the raw, physical world of capitalism and launch a new era of human freedom, free from want, scarcity or work. Furthermore it is made to seem as if the evolution of this technology has come about through some natural law of technological evolution determined solely by the natural properties of the machines themselves.(3)

We must always remember that technological evolution is driven by class struggle. The primary drive of this class struggle is to make labor more efficient and increase control of that labor. In the computer age we now find that many tasks, primarily those of duplication and distribution, have been automated to the point of rendering them valueless and hence free. In some sectors of the economy the only thing left to transfer value to a commodity is intellectual labor. But when this intellectual labor can be immediately duplicated and distributed for free it becomes clear that the attempt to keep this intellectual labor embodied in traditional commodity form is an essentially reactionary force that contradicts the basic nature of its technological basis.

The information commodity contains an inherent contradiction. It represents a narrow legal enclosure between two open spaces. On one side is the open space of intellectual production. Intellectual creation is an essentially social process. It is difficult to draw the line between one person’s ideas and the next. On the other side is the open space of computerized distribution in which it is virtually impossible to control the dissemination of intellectual ideas. The attempt to control these open spaces with a complex legal code, the violent power of the capitalist state, and technological surveillance is a reaction to the essential openness of this new technology. The concept of an information commodity embodies this point of conflict in which capital and labor battle for control of the means of intellectual and cultural production. Let us look closer at what is at stake in this struggle.

The struggle over intellectual property is a class struggle. Though it doesn’t bring to mind the traditional, shop-floor images of class struggle, I think it actually embodies a more advanced form of this struggle. Once the battle over labor efficiency creates a fully automated system it becomes hard to control the ownership of those means of production. In the case of intellectual property, increasingly powerful computers were sold to the working class at a decreasing price until the means of production were essentially collectivized. In this process we have seen the emergence of new forms of collective cultural production which have emerged to challenge all forms of capitalist cultural production. A proliferation of bloggers, independent journalists and other independent media-makers has challenged the capitalist press. The open source movement has proven that open communities of programers can outperform traditional capitalist software producers.(4) Hackers have consistently undermined copyright laws and profits, “playing Robin Hood” with the capitalist form of production and distribution. The language of these communities, especially the open source and hacking communities, increasingly moves in an open direction, seeking more ways to open up systems of cultural production in this democratic, socialized sense. Alternative models of economic organization are evolving spontaneously, prompting a wide variety of labels: gift economies, library economies, free-economies, etc.(5) Not surprisingly, people have begun theorizing about the way we can expand this collectivized virtual space into the physical world.(6) Within these developments we can see possibilities for radically different economic modes.

In response, capital has sought to commodify this open space with legal and technological enclosures. Before we discuss these enclosures we need to return to the distinction between progressive and reactionary formations. Obviously, the open-source movement and various forms of collective cultural production that have emerged with the new technology are progressive in the sense that they grow out of the nature of the technology themselves and seek to move these technologies and the accompanying social relations forward toward a new type of society. The question is whether the effort of capital to commodify this same space is also progressive. If it could be shown that this enclosure is similar to the sort of primitive accumulation that early capitalism was founded upon- if it could be shown that the commodification of the internet was an opening up of new sources of value creation that would launch a new stage of capitalist production- then we would have to label these enclosures as progressive as well. Then the theoretical question becomes merely one of historical contingency in a struggle between two progressive options. It should be pointed out, again, that this is still a teleological argument in the sense that we are admitting the progressive nature of history, but not teleological in the sense of leading towards socialism.

If the enclosures of capital are seen as essentially reactionary then we must take a different approach. We must identify the power of this reactionary force to hinder the progressive direction of the new technology and make guesses as to how successful these efforts will be, recognizing that at any stage in this process we will be examining contradictory formations- contradictions which must eventually be resolved progressively. I argue here that these enclosures are essentially reactionary. Let us look closer.

The commodification of virtual space is dominated by advertising revenue- not the selling of physical commodities. Contrary to those leftists who would dismiss the radical potential of the Internet because of the vast proliferation of Internet sales, it must be understood that this represents a symbiotic relation between two different modes of production. The sale of real physical commodities that embody real, socially necessary labor is external to the crisis of value production within the problem of intellectual property. The two worlds do not threaten each other at this abstract level. What we should be concerned with is the crossing over between the physical and virtual worlds- the ways in which an emerging virtual socialism might spill over into the physical world and the ways in which capital can infiltrate the virtual universe. The selling of t-shirts and I-pods online does not threaten the socialist potential of the Internet.

Advertising is a different issue. Much of virtual space is funded by advertising. Capitalist media, which have been forced to lower their prices to zero, exist solely through these advertising dollars. At the same time much of the server space that supports the mass-culture of the Internet is paid for through advertising revenue. Is this dependence on advertising a structural flaw in the progressive socialism of the Internet? I argue against such a conclusion for three reasons: 1. The same emergence of new forms of economic organization that has spurned the open source movement could equally spill over into alternative ways of funding server space. Perhaps this is even a way in which virtual democracy might first cross over into the physical world. 2. It has been suggested that in the same way that transistors and microchips have gradually seen a drop in value due to increased productive efficiency, storage space may soon see a significant enough drop in value to render it more or less free.(7) 3. Advertising does not create value. Because there is no real connection between the amount of money spent and the actual amount of sales advertising is, in some ways, a fictitious investment. But, unlike true fictitious capital, advertising is aimed at realizing surplus value, not creating it. Advertising cannot sustain an economy in the long run.

In order to create a secure business climate capital must be able to have some control over consumer information.(8) To that extent the rise of Internet surveillance has become a major force of enclosure. Capitalists collect consumer information in increasingly secretive and centralized ways, threatening the autonomy and anonymity that sustains much of the hacker and blogger communities. Combined with an increasingly reactionary, authoritarian state, this power of surveillance threatens to give capital an overwhelming force in which to quell dissent and mold the 21st century into a century of its choosing. But as we see the myth of the bourgeois, liberal utopia disappear into a new age of authoritarian capitalism we must remember that authoritarian state forms are always reactionary and unsustainable in the long run. Authoritarianism is a sign of weakness. It seeks to iron out the contradictions of capital by force and to impose absolute social harmony. Because this absolute social harmony is a falsity imposed over the real social dissonance of capitalism it is doomed to fail as a political project, especially in the face of an essentially open new technological world in which the means of cultural production have already been sold to consumers in the form of computers.

This is why forces of enclosure have turned to the infrastructure of the Internet in order to extend control over the virtual world. This battle has taken two fronts: the code infrastructure, and the physical infrastructure (cable and phone lines). There are plans underway to change the basic coding languages of computers, down to the basic machine code, in ways that make hacking impossible. (9) This would protect the intellectual property of the capitalist class though it wouldn’t necessarily stop the open source movement. Meanwhile, in the battle over net-neutrality, telecommunication companies threaten to use their control of the physical infrastructure of the net to determine web content and limit the use of the Internet.

How should we read this attempt to exploit infrastructure to redefine the Internet? After all, if we assume that technology is neutral and its evolution determined by class struggle; and if we assume that capitalists can and do evolve technology in progressive ways in order to displace crisis endlessly, can’t this rebuilding of the internet along lines more fit for capitalist accumulation be seen as progressive? I argue against such an interpretation for three reasons: 1. Even with such an infrastructural enclosure the absence of value creation is still a central issue in the Internet age. Intellectual property is still contradictory. The attempt to keep that contradiction in a static state is doomed to fail. An attempt to build an entire economic sector upon something that basically contains no value means that revenue increasingly comes merely from purely parasitic monopoly rent. This is not a sustainable model. 2. Competition over this rent will lead to a democratization of the infrastructure. We can imagine competition over wireless devices and other sorts of infrastructure leading to consumer ownership of some parts of infrastructure. How will hackers find ways to highjack this infrastructure? 3. Such infrastructural changes are still merely enclosures around an open concept. Machine code can always be hacked. When people own the same machines that capitalists do there is no way to maintain any real monopoly over code.

As the conflict evolves along these lines we can predict a plethora of possible historical outcomes, all moving forward through the contingent action of free agents acting on a variety of motives. At the same time we must see these actions within the context of an essentially progressive technological paradigm in which the abolition of labor value for certain commodities creates an opening for a new type of social relations. Regardless of the frightening forces of reaction, this essentially progressive dimension is key to the formulation of revolutionary strategy. The theoretical space for teleology is opened.

Ecological Design

There is much doom and gloom about the impending environmental crisis. But it is not often pointed out that environmental crisis could potentially be healthy for capitalism. Hurricane Katrina showed us that environmental disasters can simulate the same sort of devaluation that is such an important antidote to capitalist overaccumulation. After Katrina, the City of New Orleans launched a massive project of rebuilding and gentrification opening up spaces for new investment. As the plot thickens in the ecological crisis we can imagine a world of increasing disasters followed by more “capitalist field-days” of maniacal gentrification.

Yet there is possibility for the ascendance of ecological design in energy, industry and agriculture. The rise of a new type of capitalist green design would require a vastly different set of inter-class alliances and a more desperate political climate. It is possible to imagine a world in which the rising cost of non-renewable resources or the rising cost of global warming pushes constant capital costs to a point where we see schisms in the capitalist class and the rise of a truly green politic. An inter-class division between coal and oil on one side and the rest of the capitalist class on the other could open up space within the bourgeois state for radical politics as well as green politics. (In the future we will likely see lots of divisions within the capitalist class and should be ready to take advantage of them.) If some green political agenda is to be initiated it will, by its very nature, have to be centrally coordinated and dictatorial. The anarchy of capitalist competition will have to be subjugated to the political will of a long-term green program.

For those who see in this the immediate possibility for a socialist politic, it must be pointed out that the rise of a green agenda will probably mean the rise of a new class of green capitalists. The transformation of the global power grid will require massive investments in infrastructure, fierce competition between emerging technologies, the redirecting of overaccumulated capital into newly emerging sectors, etc. We can predict an economic boom following in the footsteps of a “green revolution”

This is why it is essential to take the logic of the evolution of the forces of production to the next level. The principles of efficiency and sustainability that dominate ecological design can easily be seen as the next stage in the evolution of capitalist efficiency. Much of current capitalist industry externalizes its social costs. Pollution and resource depletion are displaced into other areas. This is only possible as long as capitalism has room to expand. The progress of “globalization” is rapidly eliminating such spaces, bringing these costs back into the production process. These displaced social costs will be increasingly factored into the collective costs of social production. (Remember that value creation is a social process from which capitalists withdraw their profit.) Current capitalist production is extremely inefficient from this global perspective. Green design (in its most progressive forms) is extremely efficient from this perspective because it sees these social costs as internal to the system of value production.

This also means that a truly green system requires much less labor to maintain. Consider the difference between a solar panel and a pile of coal. Not only does coal produce pollution and require strip mining which all must be cleaned up at great expense but it also requires much labor before it can become energy. Once this energy has been consumed the process must start over again. Nonrenewable resources are perfect examples of planned obsolescence. In contrast, once a solar panel is built it continues to provide energy without any more labor. Given the proper technology, renewable resources are essentially free goods. Nobody has a monopoly over sun, wind or geothermal power. An explosion of green capitalism will soon arrive at an interesting crossroads where the basic profitability of the system is undermined by its very efficiency. Out of this we will most likely see a decentralized socialization of energy in a similar way to the decentralized socialization of culture provided by a second Internet revolution. To this end, radicals within the ecological movement need to recast the green movement as a “free energy” movement.

Space does not permit it here, but I think similar arguments could be made in respect to green agriculture. If we follow the logic of permaculture to its logical conclusion we can imagine the emergence of a second agricultural revolution which would redraw the map of food production in such a way that would suggest the emergence of new social relations of food and land.

Money

In both of the above examples I have argued that the logic of capitalist efficiency leads to a process of “decommodification” which turns privately owned commodities into collective property. Of course, this is not a sci-fi picture of a socialist utopia in which machines do all the work. As far as we know, economies must be based on some organization of human labor in order to function. The argument here is that by socializing cultural production, energy and agriculture we can create models for and momentum towards a future socialism. Free culture, free energy and a decentralized agricultural system would also drastically reduce the dependence of labor on capital thus creating space for a more effective resistance to exploitation.

As a movement for real socialism moves forward, it will have to confront the question of how value is measured, produced and distributed. I am not ready to answer this question now, but I would like to point to some of the theoretical openings that I believe the current crisis in money points towards. In the same way that I followed the logic of “decommodification” above, I will here expand upon the theme of “demonetization”.

In Marx’s theory of money we are faced with the ever-present contradiction between money as a measure of value and money as a medium of circulation. As this contradiction evolves, money takes on more functions, like hoarding and credit, which are merely extensions of this original contradiction. As money circulates in order to circulate commodities it begins to loose its relationship to its original value as a commodity. This process, which Marx initially relates to shavings taken from gold coins, is called the “dematerialization of the money commodity”. I will simply use the term “demonetization”.(10) Our current system of credit money, no longer backed by a gold standard, may be seen as the ultimate stage in this insane process of demonetization. Money can circulate at lightening speed in the form of computerized digits yet it has no basis of value whatsoever. When prodded, it reveals its fictitious nature leaving panic in its wake.(11)

Marxists have debated without resolution what the meaning of this non-commodity money is for Marx’s commodity theory of money. Perhaps it is best to see this as the logical progression of a process of demonetization which exposes the hideous inadequacy of measuring and distributing value in a capitalist society. We should be able to find a way in which the highest stage of this contradiction might lead to a new stage of measuring and distributing value and thus a new form of social relations.

For one, the high speeds as which modern consumer and producer signals are coordinated via a centralized computerized system of banking and credit is a central-planner’s fantasy come true. The problems of coordination which plagued the Soviet experiment might disappear with such a system. It also brings to mind Michael Albert’s “Parecon” in which loosely coordinated cooperative networks of consumers and producers organize production through computerized signals of demand and supply.(12)

We should see the calls for a return to a gold standard as essentially reactionary- a misunderstanding of the basic evolution of the financial and monetary logic of capitalism. Instead the left should begin to theorize about the possibilities afforded us not just by impending economic catastrophes brought on by money but by the most advanced forms of money itself. Instead of dismissing money as merely a mystifying agent, we need to recognize that it lies at the heart of the commodity form. Whether an anarchist, a market socialist or a central-planner, everyone needs to take a good look at the way money is evolving and posit ways of moving the money form to the next, post-capitalist, level.

Conclusion

There is a hypothetical aspect to the above argument. When Marxists make predictions about the future we often get into trouble. Marx himself oscillates between fiery, absolutist predictions and staid, careful argumentation. Still, even those predictions which are most often derided for failing to come true contain a theoretical foundation with strong explanatory potential. Thus, the failure of modern society to develop the sort of starkly polarized class system that Marx predicted is best explained using the same theoretical tools of class analysis Marx used to make that prediction. Thus, even within our theory we must distinguish between the form of appearance of a prediction and the actual theoretical meat that underlies it.

This essay attempts to provide such “theoretical meat” to the theory of history in a late capitalist society. I argue that teleology must be rooted in the sort of transcendent critique available only to those who straddle two modes of production. To this end we must examine the state of class struggle for signs of truly progressive forms of alternative social relations from which to base our theory. Radical politics must then proceed with an understanding of what is truly progressive and what is reactionary in these struggles. The endgame lies too far into the future for clear, bold predictions. But such predictions are not the point of a materialist teleology anyway. The point is to identify the forces of forward motion within the contradictions of capital and to use this knowledge to push history forward- to be both the subjects and the objects of our history. (13) It is in such a theoretical space that we can begin to argue that a better world is inevitable.

1. Harvey, David. The Condition of Postmodernity: An Inquiry into the Origins of Cultural Change. Blackwell Publishing, 1989

2. Meghnad Desai. Marx’s Revenge: The Resurgence of Capitalism and the Death of Statist Socialism. Verso, 2004

3. Perhaps the guru of such high-tech fetishism is Wired mogul Chris Anderson. Despite the fetish, he has a lot of important things to say:
Anderson, Chris. “Free! Why $0.00 is the Future of Business.” Wired. Feb. 25, 2008

4. Soderberg, Johnathan. “Copyleft vs. Copyright; A Marxist Critique.” First Monday volume 7, number 3 (March 2002)
URL: http://firstmonday.org/issues/issue7_3/soderberg/index.html

5. StefenMerten “Contemporary Germ Forms” Oekonux Wiki. http://en.wiki.oekonux.org/StefanMerten/CapitalAndClass/ContemporaryGermForms

6. For instance, the “propertyleft” extension of the copyleft movement: http://www.bluestack.org/PropertyLeft

7. Anderson, Chris. The Long Tail, http://www.thelongtail.com/

8. Soderberg, ibid.

9. Soderberg, ibid.

10. De Brunhoff, Suzanne. Marx on Money New York: Urizen Books, 1976

11. Harvey, David. Limits to Capital. Verso: 2nd ed. 1999, chapter 10

12. Albert, Michael. Parecon. NY: Verso, 2003
http://www.zmag.org/zparecon/pareconlac.htm

13. Much of my thinking about the relation between agency and determinism in dialectical theory has been formed by a lecture by Slavoj Zizek on Lacan and Hegel. He argues, in short that human beings are determined by their past, but that their actions simultaneously recreate that past.
Zizek, Slavoj. “A Master Class on Jacques Lacan: A Lateral Introduction.” Birkbell College, London: 2006. http://www.discoursenotebook.com/