Louis Proyect: The Unrepentant Marxist

February 19, 2010

An under accumulation of capital?

Filed under: economics,imperialism/globalization — louisproyect @ 7:03 pm

James Heartfield

James Heartfield, one of the few—perhaps only—members of the Spiked Online collective that still takes Karl Marx seriously, has an article in Metamute titled A Crisis of Under Accumulation that raises some very interesting questions about the recent financial crisis. While much of the article contains the boilerplate calls for the bourgeoisie to return to its heroic past when it was out conducting itself like John Galt in “Atlas Shrugged”, the most compelling parts dealt with the question of the falling rate of profit. James writes:

Sad to say, closer analysis of the real underlying trends in the world economy make it clear that Marx’s celebrated theory of the tendential fall in the rate of profit has relatively little to tell us today. Marx’s theory is that rate of profit to capital invested falls, consequent on a diminished share of surplus value-generating labour (‘variable capital’) relative to a much greater share of investors’ money tied up in dead machinery, raw materials and plant (‘constant capital’), what Marx called the ‘rising organic composition of capital’ (see Marx, 1984: 211-231, Marx: 1969: 492- 516, Mattick, 1981: 43-77). But most of this conceptual framework is a poor fit to today’s circumstances. Marx’s theory assumes intensive growth of industry with a greater share of investment going to machinery, tending to displace living labour. Is that what has been happening in the preceding period, let’s say over the years from 1993-2005? Far from it.

Although I am not that interested in the kind of Talmudic discussions taken up around  Marxist value theory, I am familiar enough with the topic to have my interest piqued. In the course of leading an online class on Marxist theory, I delved into a debate that began not long after Marx died. James refers to Paul Mattick as an example of “classical” Marxist falling rate of profit (FROP) thinking, but my reading focused more on Henryk Grossman who predated Mattick by a decade or so. The two economists are often linked, it should be added.

Much of Grossman’s writings are an attempt to counter the arguments of Mikhail Tugan-Baranovsky and Otto Bauer who interpreted Marx’s analysis of the capital accumulation in cycle in V. 2 of Capital as supporting the idea that capitalism can persist with fewer and fewer workers. Bauer wrote:

Even if all workers were replaced by machinery except for one worker, this single worker would be able to put into motion the vast mass of machinery, and with its help create new machines–and means of consumption…The working class could disappear; this would not disturb in the least the self-expansion of capitalism.

In replying to such arguments, Grossman’s emphasis was on showing the mathematical impossibility for such an eventuality. Here is a flavor of his line of reasoning:

Towards the closing stages of the business cycle the mass of profits (s), and therefore also its accumulated constant (ac) and variable (av) portions, contract so sharply that the additional capital is no longer sufficient to keep accumulation going on the previous basis. It is therefore no longer sufficient to enable the process of accumulation to absorb the annual increase in population. Thus in year 35 the rate of accumulation requires a level of 510 563 ac + 26 265 av = 536 828. But the available mass of surplus value totals only 525 319. The rate of accumulation required to sustain the scheme is 104.6 per cent of the available surplus value; a logical contradiction and impossible in reality.

It must be emphasize above all, however, that Grossman’s discussion revolved around an abstract model. There was no attempt to ground it in the actual historical development of the capitalist system but instead used a case study approach that was strictly meant to debunk the rather Panglossian outlook of reformists like Bauer. The fact that Grossman’s study was written just before the great stock market crash of 1929 gives it added authority.

In distinction to the argument supposedly put forward by gloom-and-doom theorists like Karl Marx, Paul Mattick and Henryk Grosman, James points to the growth of the worldwide labor force—what Marx referred to as variable capital—as opposed to constant capital (machinery, raw materials, buildings, etc.) The net result has been what he describes in the title of his article, an underaccumulation of capital:

It is not easy to map Marx’s analytical categories directly onto empirical economic statistics (which are in any case distorted by many ideological devices). Still, in aggregate, the great growth in the labour force all points in the opposite direction to that indicated by Marx’s theory of crisis – it points to a stable or falling organic composition of capital not a rising one. Not an ‘overaccumulation of capital’, but underinvestment in new technologies. Not intensive growth forcing workers out as they are replaced by machines, but extensive growth sucking up more and more labour. Of course, as a consequence of the crisis, the layoffs are ratcheting up and unemployment is rising. But a declining share of capital invested in labour relative to machinery was decidedly not the cause of the economic crisis.

I think the best reply to James Heartfield came from Patrick Bond, an economist who has long been identified with the “gloom and doom” perspective that is coming into its own now given the entrenched character of what some now refer to as the Great Recession. He argues that the underaccumulation now on display in the world economy is simply the result of a prior period of overaccumulation. In an email reply to James’s article that appeared on the Marxism list, Bond pointed out the relevant time-frame for understanding the decline in investment in constant capital:

Those [1993-2005] aren’t the appropriate years to consider. The slowdown in industrial accumulation began in the 1970s. The period since 1993 has witnessed far more speculative froth and financialisation as the source of profits. But since those profits aren’t grounded in surplus value extraction, of course it becomes an inverted pyramid.

While I agree with Patrick’s time-frame, I have a little bit more trouble making the connection between a growth in the organic composition of capital and the system’s falling rate of profit. For example, Germany’s economy has been far more resistant to downturn despite the fact that it is heavily mechanized. Understanding the world economy is a lot different than the exercises in V. 3 of Capital, where the FROP is analyzed, or in Henryk Grossman et al.

Speaking of whom, it is important to understand that the final chapter of Grossman’s magnum opus, The Law of Accumulation and Collapse of the Capitalist System, is titled “Modifying Countertendencies”. Part two of this chapter is titled “Part 2: Restoring Profitability through World Market Domination”, a fairly good way to describe what has been happening since capitalism ran into a brick wall in the 1970s. While it is impossible to reduce everything to the formulas of V.3 of Capital, it seems plausible that the opening of the Soviet Union, Eastern Europe and China to capitalist investment helped to reinvigorate the system. Even with this breakthrough that David Harvey would categorize as accumulation by dispossession, the system has still had a stagnant quality. The turn toward “financialization”, noted especially by the Monthly Review authors, has been interpreted as the logical outcome of a falling rate of profit.

In an article titled The Age of Monopoly-Finance Capital that appeared in the December 2006 MR, John Bellamy Foster described the thinking that was going on at the magazine:

By the late 1980s (following the 1987 stock market crash) and continuing into the late 1990s, Sweezy was wrestling with the notion of financialization as a more or less permanent tendency of advanced monopoly capitalism—the other side of the stagnationist coin. In 1997 he wrote: “the three most important underlying trends in the recent history of capitalism, the period beginning with the recession of 1974-75 [are]: (1) the slowing down of the overall rate of growth; (2) the worldwide proliferation of monopolistic (or oligopolistic) multinational corporations; and (3) what may be called the financialization of the capital accumulation process.” (Globalization, a fourth trend, he argued, was a much longer, more complex, variegated phenomenon, reflecting the growth of imperialism, and going back to the very beginnings of the capitalist world economy.)

Financialization can be defined as the shift in the center of gravity of the capitalist economy, from production to finance. Financial crisis and instability, Sweezy observed, had always been an element at the peak of the business cycle. But how did one explain the expansion of financialization as a long-term trend? Was it possible that financial speculation now managed to feed not on rapid growth, but on slow growth—inverting past historical experience? It was obvious that corporations and wealthy investors that had surplus at their disposal sought to preserve and expand their money capital in the face of vanishing investment opportunities by pouring it into speculation in a variety of assets. Financial institutions, it was no less apparent, were able to provide a seemingly infinite supply of exotic and opaque financial instruments: all sorts of futures, options, and derivatives. But the continuation of such a “casino economy” over decades—albeit interrupted by credit crunches, with the central banks intervening as lenders of last resort to keep the whole game going—represented nothing less than a qualitative transformation in the capitalist economy.

James Heartfield acknowledges that financialization is taking place but interprets it less as a necessary phase of late capitalism than as a kind of betrayal of the capitalist’s historical role:

The question that arises is why was the speculative bubble allowed to grow for so long without being called to account. Bubbles are a feature of capitalism, but for the last fifteen years we have seen speculative inflation of assets in emerging markets in Eastern Europe, new technology stocks, the fine art market and mortgage lending.

The answer is that motive cause of the turn into speculative investment was a retreat from the world of industrial growth. Surpluses generated by industry were not ploughed back into new lines of production, but redirected instead into speculation. In Marx’s day he could still allow that the historic mission of the capitalist class was to revolutionise production [emphasis added], even if their goal was not increased output as such, but a greater share of the value produced. Industry was for them only a means to the end of increasing profits, and capitalists have often dreamed of cutting out the tawdry business of making things to make money out of money. But in the 1990s, that motive became predominant, as investors retreated from the tortuous challenge of transforming the realm of production, expecting gains without risk. Investors were not interested in new goods and services, but engaged instead in what the economists call rent-seeking behaviour. Their subjective recoil from industrial investments was reinforced by the higher returns offered by financial investments.

This is where the wheels fall off James’s interesting if flawed analysis and where he joins the rest of the libertarians at Spiked Online in adopting a mixture of Ayn Rand and pop psychology to get the capitalists to “revolutionize production” as Marx supposedly put it in the Communist Manifesto.

Despite the breathless evocation of the bourgeoisie revolutionizing the means of production in that classic text, most of its history has been about avoiding risk. In Marx’s final years, the foundations of monopoly capital had already been put in place. It was a calculated effort to make sure that investments would always go rewarded through price-fixing, trade secrets, collusion with the state and a hundred other mechanisms that have become popularly known as Government Sachs today.

Here is Lenin describing this risk-avoidance behavior in Imperialism, the highest stage of capitalism:

Competition becomes transformed into monopoly. The result is immense progress in the socialisation of production. In particular, the process of technical invention and improvement becomes socialised.

This is something quite different from the old free competition between manufacturers, scattered and out of touch with one another, and producing for an unknown market. Concentration has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits) of a country and even, as we shall see, of several countries, or of the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist associations. An approximate estimate of the capacity of markets is also made, and the associations “divide” them up amongst themselves by agreement. Skilled labour is monopolised, the best engineers are engaged; the means of transport are captured—railways in America, shipping companies in Europe and America. Capitalism in its imperialist stage leads directly to the most comprehensive socialisation of production; it, so to speak, drags the capitalists, against their will and consciousness, into some sort of a new social order, a transitional one from complete free competition to complete socialisation.

Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognised free competition remains, and the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable.

I have heard constant complaints over the years that Lenin’s pamphlet has been superseded by history. This might be the case in one detail or another but the tendency of the system to diverge from “free market” ideals remains valid. The only thing that is puzzling is why a sensible person like James Heartfield still believes that the bourgeoisie is interested in behaving according to the flattering imagery found in Ayn Rand’s novels.


  1. Interesting. I too have always encountered “constant complaints over the years that Lenin’s pamphlet has been superseded by history.” But I always ask, particularly in this post-Soviet epoch, “what exactly has superseded the Imperialist stage of capitalism?” Since I never get a satisfactory answer I then go on to argue that Lenin’s analysis of Imperialism is as pertinent today as ever, even moreso since the collapse of the Soviets. Naturally such conclusions are tough for many progressives to swallow. I guess facts are stubborn things, or the truth hurts, but I don’t see how one can make sense of the world and where it’s going by ignoring Lenin’s point of departure.

    Regarding the German economy, nevermind that it hasn’t caught the Wal-Mart scourge (yet), I always thought the secret to their economy was that a huge percentage is based on exports, exports and more exports?

    Comment by Karl Friedrich — February 19, 2010 @ 9:15 pm

  2. Incorporating the vast Chinese working class into production was vital to restoring the ‘health’ of capitalism. It stalled the process of mechanization, opened up an ocean of cheap labor, and diminished the forces that might lead to a falling rate of profit. As wages have slowly risen, it has also opened up a huge market (China has the world’s largest car market right now).

    Asia is very central now , the capitalists are right in that regard. It’s hard to talk about the future of Left politics without focusing on class struggle in China, in particular.

    Comment by purple — February 19, 2010 @ 9:57 pm

  3. Manufacturing as a percentage of the labor force has been declining for years in the West. This fits with the variable capital/constant capital theme. It’s not particularly controversial; everyone knows that machines are doing a lot more. Labor is concentrating in the service industries, which are not central in Marx.

    The only place in the world where manufacturing was increasing as % of the labor force and GDP in the 1990’s to mid- 2000’s was China and some other smaller countries in SE Asia.

    Comment by purple — February 19, 2010 @ 10:07 pm

  4. In regards to China there is increasing talk of over-capacity, indeed we saw that even growth a little less then usual could throw millions out of work. On another track I remember reading about how Ayn Rand came back on the bestsellers list after the 9/2008, weird but then one remembers her own description as a radical for capitalism. As real capitalism blunders I guess its not surprising that some turn to her fictional heroes as an alternative.

    Comment by SGuy — February 20, 2010 @ 2:16 am

  5. I used to think (believing the propaganda, I guess) that family and profession were the twin pillars of bourgeois life, which must then be destroyed. But just as every bourgeois is an adulterer in his heart, if not in his penis, so too every bourgeois really wants to be a rentier. I see it all the time.

    Comment by Alex — February 20, 2010 @ 4:57 am

  6. Of course they long to be Rentiers because they’re not only greedy but ultimately lazy.

    It’s always been considered easier money to be a speculator or landlord renting Boardwalk & Park Place at $2000 per square than an industrialist who has to hire & fire labor like an owner of Reading Railroad that only gets $200 per square. Casino gambling is luxurious compared to the industrialists who had to constantly & exhaustingly dream up new ways to control workers, because workers are always resisting.

    The fundamental contradiction in bourgeois society after all is the irrefraggable fact that it’s in the interest of the worker to get paid the most amount of money for the least amount of work — whereas it’s in the interest of the bosses to get the most amount of work for the least amount of pay from a worker (another reason the State Capitalist argument about the USSR didn’t hold water.)

    It’s that class antagonism at the root of society that makes human history. As a consequence the deliniation of social epochs are wars & revolutions.

    My Marxism is admittedly crude & vulgar but it seems to me that part of the problem of falling profits in light of the current capitalist crisis is the fact that since in Marx’s view only human labor creates surplus value — then in this current epoch of Rentier finance capitalism not only is all the speculation risky but also it doesn’t make real profits but rather it’s just wealth transference from one strata to another.

    Comment by Karl Friedrich — February 20, 2010 @ 6:08 am

  7. I see you’ve slipped in the state-cap’s revisionist titling of Lenin’s pamphlet.

    Comment by David Ellis — February 20, 2010 @ 11:59 am

  8. Yea, Lou. For Lenin imperialism wasn’t just the “latest” (as you wrote) stage but the “highest” (as Lenin wrote).

    That’s why you noted that except “in one detail or another” nothing has really superceded Lenin’s pamphlet (albeit almost 100 years old)– much to the chagrin of most left leaning intellectuals, social democrats and anarchists.

    Must’ve been a Freudian typo as Lou’s last article on the British SWP had lots of heated rebuttals from state cappers anxious to defend their sectarianism.

    Comment by Karl Friedrich — February 20, 2010 @ 1:22 pm

  9. Thanks for the write-up, Louis, and for engaging with the ideas in my piece. Of course there are many ways to look at a question, but it does seem to me that Patrick Bond’s mistake is to treat the world economy too much as a machine ordered according to mechanical laws, and forget that it is in the end only the aggregate of social relations. I would have said (and did say at the time) that the overaccumulation of capital was the decisive problem facing the world economy in the seventies and eighties.
    But the outcome of the class struggles of that era created the new conditions for capitalism’s one-sided development thereafter. Organised labour was substantially defeated (as were the radical nationalist challenges to Capitalist expansion); on the other hand the ruling class that emerged from that period of struggle was one that was uncertain of its ability to take society forward.
    The features of capitalist expansion post-Cold War are indeed extensive growth in eastern Europe and Asia, as those millions who were outside of the wage-labour capital relationship have been drawn in. In the developed west, too, there has been a growth in the numbers in work with historically low rates of investment in technology.
    You say, rather sharply, that I am a capitalist industry booster, but that is not really fair. I do criticise capitalism from the point of view of its failure to develop the forces of production. I guess in today’s rather green environment that sounds like technology boosting.
    James Heartfield

    Comment by James Heartfield — February 20, 2010 @ 3:24 pm

  10. [“In the developed west, too, there has been a growth in the numbers in work with historically low rates of investment in technology.”]

    That’s in contrast to Uncle Sam’s staggering investments in military technology & war expenditures despite the end of the Cold War.

    Utilizing a relatively small volunteer army (and a large reserve of mercenary contractors) the Pentagon has a voracious appetite for technological investments and has managed to get much of the University system to lick their boots for dollars.

    My complaint with much modern theoretical analysis of the socioeconomics underpinning contemporary American Imperialism (such as Heartfield’s) is its profound reluctance to admit its inherently predatory (and hence militaristic) nature. That’s precisely where Lenin’s century old analysis proves indespensible.

    Comment by Karl Friedrich — February 20, 2010 @ 7:21 pm

  11. In terms of the title of Lenin’s book, I found this section in Lenin’s preface to his “The Proletarian Revolution and the Renegade Kautsky” (available at http://www.marxists.org/archive/lenin/works/1918/prrk/preface.htm):

    “Again, in my book Imperialism, the Latest Stage of Capitalism,[This was the original title of Lenin’s Imperialism, the Highest Stage of Capitalism.] written in 1916 and published in Petrograd in 1917, I examined…”

    Comment by Ian J. Seda-Irizarry — February 20, 2010 @ 7:46 pm

  12. Probably in that Russian context when translated those 2 words were interchangable?

    Comment by Karl Friedrich — February 20, 2010 @ 7:52 pm

  13. Well Green jab aside James what of the libertarian nature of Spiked? Trying to shift the blame on to us with predictable stabs at environmentalism doesn’t change the context of what your writing in.

    Comment by SGuy — February 21, 2010 @ 2:42 am

  14. Re comment 3 by purple: As a matter of fact, manufacturing labor force as a portion of total labor force in China fell from 1997-2007.

    Comment by S. Artesian — February 21, 2010 @ 2:29 pm

  15. #11 Ian, that link doesn’t work. Out of genuine interest are you a state capitalist?

    Comment by David Ellis — February 21, 2010 @ 2:33 pm

  16. http://www.marxists.org/archive/lenin/works/1916/imp-hsc/pref02.htm

    A quote from the preface to the French and German editions which I think shows that there is no ambiguity in what Lenin intended the title of his pamphlet to reflect:

    `What is the economic basis of this world-historical phenomenon?

    It is precisely the parasitism and decay of capitalism, characteristic of its highest historical stage of development, i.e., imperialism. As this pamphlet shows, capitalism has now singled out a handful (less than one-tenth of the inhabitants of the globe; less than one-fifth at a most “generous” and liberal calculation) of exceptionally rich and powerful states which plunder the whole world simply by “clipping coupons”. Capital exports yield an income of eight to ten thousand million francs per annum, at pre-war prices and according to pre-war bourgeois statistics. Now, of course, they yield much more.’

    Comment by David Ellis — February 21, 2010 @ 2:51 pm

  17. Actually David it does work when you copy & paste it into your browswer then omit the parentheses at the end.

    What’s interesting though is that if you do a Google search under LENIN HIGHEST you naturally get a bunch of links to Lenin’s famous pamphlet whereas when you try searching under LENIN LATEST you get nothing, that is, you only get links to Lenin’s pamphlet with the word HIGHEST in the title.

    Thus I take back my speculation that the 2 words were interchangeable in translation. Instead I conclude Lenin intended to use only the word HIGHEST and therefore if there was a history of state cappers substituting the word LATEST instead then there was obviously some political motivation behind the switch, the revisionist significance of which I’m unware of not being particularly well versed in the evolution of the State Cap thesis, except that I learned recently from Louis the theory was simultaneously developed by both CLR James in America and Tony Cliff in Britain in 1948, probably (I’ll speculate here) for the same social, political and psychological reasons that George Orwell wrote 1984 in 1948, that is, a reactionary tendency in the socialist movement toward US Imperialism’s ramping up of the Cold War and its proto-McCarthyite propaganda on the one hand and the consolidation of Stalinism over 10 time zones on the other.

    As far as cultural manifestations of these developments it’s no accident this was also the beginning of the age of Film Noir.

    Comment by Karl Friedrich — February 21, 2010 @ 3:11 pm

  18. If folks like Heartfield would actually think long & hard about that passage of Lenin’s that David Ellis has pasted (the very passage that always stuck with me most after reading it 30 years ago) then I think his “Under Accmulation” thesis might include what’s sorely missing — a reiteration of the inherently predatory (and hence militaristic) nature of Uncle Sam’s “decaying & parasitic” system, one that is organically unreformable.

    Comment by Karl Friedrich — February 21, 2010 @ 3:45 pm

  19. Karl: Nice comments. I think the rudiments of a state cap theory were around when Trotsky was writing Revolution Betrayed but it was so ridiculous and weak that he barely eluded to it. It did have to wait until WWII and after until the sophists truely got hold of it and built it into the huge sophistic edifice of ultra-left and yet strangely opportunist shit we see today. Of course, the revision of the title of Lenin’s pamphlet is necessary if a new `stage of capitalism’ is to come after what was previously thought to be the highest.

    Comment by David Ellis — February 21, 2010 @ 5:12 pm

  20. Exactly David. Good point about state caps need for semantic & political revisionism in general and their ultra-leftist yet paradoxically opportunistic thinking in particular.

    As Trotsky reiterated time & again, the consistent tendency on the Left in light of the post-revolutionary Thermidore reaction was to dream up almost anything to somehow prove a causality between Leninism and Stalinism on the one hand, in order, on the other, to justify ignoring the hard work & monumental tasks that lay before the proletariat implicit in Lenin’s prognosis about this highest, imperialist stage of capitalism, which except for a few details as Louis mentioned, has yet to be superceded, despite a century of combined and uneven development full of wars & revolutions.

    If one had to name a single individual that had the greatest impact on the world over the last 100 years it would be have to be Lenin. This is why it’s so hard for any contemporary socialist movement to get past the Russian question, as much as Louis wishes it would, for Lenin is inextricably intertwined with the Russian question on the one hand, and on the other hand, insofaras nothing has really superceded Lenin’s pamphlet, he will inevitably be utilized as a guidepost or compass for action by oppressed & working class movements.

    Comment by Karl Friedrich — February 21, 2010 @ 6:31 pm

  21. 20 Quite so Karl, quite so.

    Comment by David Ellis — February 21, 2010 @ 7:00 pm

  22. The profits of capital intensive industrial capitalism have tended to diminish.

    The automobile industry is making very little profit per vehicle produced. Ford is doing very well because of its finance capital venture in selling cars with low profit from its industrial capitalist side. If all of Ford’s cars were sold for cash instead of through its finance division it would be in trouble also.

    Tom Geohegan from the April, 2009 Harper’s

    “Or think
    of GM, which, like GE, really makes its money by
    running a bank on the side. “After a while,” said
    a friend from Detroit, “the only reason they were
    making cars was so they could make loans.””

    Capitalism beats the capitalists themselves in that capital equipment is idled for lack of demand. When workers are gone wages are gone, demand is gone and surplus is gone; only depreciating devalued capital equipment remains to mock the industrial capitalist.

    Money that should have been paid in wages is now loaned instead. Without wages, finance capitalism is in trouble with bad loans not being paid back and new loans not being made. The system has failed to reproduce itself and required the government to make failed capitalists into capitalists again.

    Comment by Glenn — February 22, 2010 @ 4:39 am

  23. [“The system has failed to reproduce itself and required the government to make failed capitalists into capitalists again.”]

    Bernie Madoff must wonder why when his Ponzi scheme became unsustainable he gets a stint in the can but both the failed industrialists AND the failed rentier speculator banksters get rewarded with a second chance via the withheld income of the workers to play with again.

    This shows why (back to Alex’s point) the Industrialists long instead to be Rentier capitalists. GM had to jump through all kinds of hoops and agree to all kinds of strings to get their relatively meager bailout monies whereas the banksters virtually got an unconditional blank check.

    This not only illustrates conclusively where the ruling class’ priorities are but also vidicates the correctness of Lenin’s century old prognosis: “What is the economic basis of this world-historical phenomenon? It is precisely the parasitism and decay of capitalism, characteristic of its highest historical stage of development, i.e., imperialism.”

    Combined with Obama’s greenlighting of the largest military budget in human history it becomes clear why Lenin’s pamphlet has yet to be superceded.

    Comment by Karl Friedrich — February 22, 2010 @ 2:12 pm

  24. I’m well aware of how much Louis disdains the philosophy of Paul Craig Roberts, the former Assistant Treasury Secretary under Reagan and frequent CounterPunch contibutor, and I agree with about 90% of Lou’s critique, particularly his rancid nationalism, but upon reflection again of Lenin’s aforementioned pamphlet in the context of Heartfield’s article I couldn’t help but remembering this particular article of PCR’s reprinted below:

    October 7, 2009

    Dead Labor
    Marx and Lenin Reconsidered

    “Capital is dead labor, which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks.”

    –Karl Marx

    If Karl Marx and V. I. Lenin were alive today, they would be leading contenders for the Nobel Prize in economics.

    Marx predicted the growing misery of working people, and Lenin foresaw the subordination of the production of goods to financial capital’s accumulation of profits based on the purchase and sale of paper instruments. Their predictions are far superior to the “risk models” for which the Nobel Prize has been given and are closer to the money than the predictions of Federal Reserve chairmen, US Treasury secretaries, and Nobel economists, such as Paul Krugman, who believe that more credit and more debt are the solution to the economic crisis.

    In this first decade of the 21st century there has been no increase in the real incomes of working Americans. There has been a sharp decline in their wealth. In the 21st century Americans have suffered two major stock market crashes and the destruction of their real estate wealth.

    Some studies have concluded that the real incomes of Americans, except for the financial oligarchy of the super rich, are less today than in the 1980s and even the 1970s. I have not examined these studies of family income to determine whether they are biased by the rise in divorce and percentage of single parent households. However, for the last decade it is clear that real take-home pay has declined.

    The main cause of this decline is the offshoring of US high value-added jobs. Both manufacturing jobs and professional services, such as software engineering and information technology work, have been relocated in countries with large and cheap labor forces.

    The wipeout of middle class jobs was disguised by the growth in consumer debt. As Americans’ incomes ceased to grow, consumer debt expanded to take the place of income growth and to keep consumer demand rising. Unlike rises in consumer incomes due to productivity growth, there is a limit to debt expansion. When that limit is reached, the economy ceases to grow.

    The immiseration of working people has not resulted from worsening crises of over-production of goods and services, but from financial capital’s power to force the relocation of production for domestic markets to foreign shores. Wall Street’s pressures, including pressures from takeovers, forced American manufacturing firms to “increase shareholders’ earnings.” This was done by substituting cheap foreign labor for American labor.

    Corporations offshored or outsourced abroad their manufacturing output, thus divorcing American incomes from the production of the goods that they consume. The next step in the process took advantage of the high speed Internet to move professional service jobs, such as engineering, abroad. The third step was to replace the remains of the domestic work force with foreigners brought in at one-third the salary on H-1B, L-1, and other work visas.

    This process by which financial capital destroyed the job prospects of Americans was covered up by “free market” economists, who received grants from offshoring firms in exchange for propaganda that Americans would benefit from a “New Economy” based on financial services, and by shills in the education business, who justified work visas for foreigners on the basis of the lie that America produces a shortage of engineers and scientists.

    In Marx’s day, religion was the opiate of the masses. Today the media is. Let’s look at media reporting that facilitates the financial oligarchy’s ability to delude the people.

    The financial oligarchy is hyping a recovery while American unemployment and home foreclosures are rising. The hype owes its credibility to the high positions from which it comes, to the problems in payroll jobs reporting that overstate employment, and to disposal into the memory hole of any American unemployed for more than one year.

    On October 2 statistician John Williams of shadowstats.com reported that the Bureau of Labor Statistics has announced a preliminary estimate of its annual benchmark revision of 2009 employment. The BLS has found that employment in 2009 has been overstated by about one million jobs. John Williams believes the overstatement is two million jobs. He reports that “the birth-death model currently adds [an illusory] net gain of about 900,00 jobs per year to payroll employment reporting.”

    The non-farm payroll number is always the headline report. However, Williams believes that the household survey of unemployment is statistically sounder than the payroll survey. The BLS has never been able to reconcile the difference in the numbers in the two employment surveys. Last Friday, the headline payroll number of lost jobs was 263,000 for the month of September. However the household survey number was 785,000 lost jobs in the month of September.

    The headline unemployment rate of 9.8% is a bare bones measure that greatly understates unemployment. Government reporting agencies know this and report another unemployment number, known as U-6. This measure of US unemployment stands at 17% in September 2009.

    When the long-term discouraged workers are added back into the total unemployed, the unemployment rate in September 2009 stands at 21.4%.

    The unemployment of American citizens could actually be even higher. When Microsoft or some other firm replaces several thousand US workers with foreigners on H-1B visas, Microsoft does not report a decline in payroll employment. Nevertheless, several thousand Americans are now without jobs. Multiply this by the number of US firms that are relying on “body shops” to replace their US work force with cheap foreign labor year after year, and the result is hundreds of thousands of unreported unemployed Americans.

    Obviously, with more than one-fifth of the American work force unemployed and the remainder buried in mortgage and credit card debt, economic recovery is not in the picture.

    What is happening is that the hundreds of billions of dollars in TARP money given to the large banks and the trillions of dollars that have been added to the Federal Reserve’s balance sheet have been funneled into the stock market, producing another bubble, and into the acquisition of smaller banks by banks “too large to fail.” The result is more financial concentration.

    The expansion in debt that underlies this bubble has further eroded the US dollar’s credibility as reserve currency. When the dollar starts to go, panicked policy-makers will raise interest rates in order to protect the US Treasury’s borrowing capability. When the interest rates rise, what little remains of the US economy will tank.

    If the government cannot borrow, it will print money to pay its bills. Hyperinflation will hit the American population. Massive unemployment and massive inflation will inflict upon the American people misery that not even Marx and Lenin could envisage.

    Meanwhile America’s economists continue to pretend that they are dealing with a normal postwar recession that merely requires an expansion of money and credit to restore economic growth.

    Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions.He can be reached at: PaulCraigRoberts@yahoo.com

    Comment by Karl Friedrich — February 23, 2010 @ 1:54 am

  25. Karl, I like everything you have to say. But speaking of finding Marx, Lenin, communism, in unexpected places (though no radical critique of capitalism will ever be found anywhere near the Nobel Prize in Economics), has anyone here considered the case of Joe Stack, the engineer who flew his plane into an IRS building in Austin? (Paul Craig Roberts has something to say about it on Counterpunch today.) In this case there seems to be none of the usual signs of racism, misogyny, or religiosity. Stack’s testimony/manifesto is an excellent description of the life of the independent middle-class bourgeoisie in monopoly/finance capitalist America. He seems to have been too smart/honest/courageous to have become libertarian, but not smart/honest/courageous enough to have become communist, even as his final words contrast the “communist creed: From each according to his ability, to each according to his need” with the “capitalist creed: From each according to his gullibility, to each according to his greed.” Perhaps he suspected that communism is the only answer to the problems of capitalism, but could not give up being bourgeois without destroying himself entirely.

    Comment by Alex — February 23, 2010 @ 10:43 pm

  26. Alex: I agree with your comments about Stack and thought pretty much the same thing after I read his diatribe. It’s a shame and the great failing of the left that guys like him have few if any organizations to turn to. Instead he wasted his time with letter campaigns and Holiday Inn tax seminars.

    Speaking of Stack & PCR they are both sort of celebrities for the stampeding petty bougeoisie websites like PrisonPlanet.com that have a strange & odious mix of Christian whackos, Ron Paulers, 911 Truthers, alienated leftists, alienated conservatives, angry unemployed, illuminati believers, legit pro-Palestinian anti-Zionists mixed with anti-Semite Z.O.G. believers, most ranting against corporatism in general and the NWO (New World Order) in particular.

    The interesting thing about them is they general view these latest wars as truly criminal & both parties as equally & hopelessly corrupt as well as the commercial media. They tend to identify in a non-racist way with the brown victims of the Pentagon on the one hand but then, paradoxically, scapegoat brown immigrants in a racist way on the other. They despise large corporations and tri-lateral type cabals on the one hand but identify socialism with fascism on the other.

    Bottom line is there’s definitely an immense seething anger brewing in this country with factory workers being displaced by plant closings on the one hand and small businesses being steam rollered by Wal-Marts on the other.

    The tragedy is there’s no viable left to harness this mass energy of discontet on the one hand but on the other, if there were, you might have the preconditions for fascism?

    Comment by Karl Friedrich — February 23, 2010 @ 11:34 pm

  27. I’ve been reading Kristin Ross’ excellent book “Fast Cars, Clean Bodies”, about the post-war modernization and Americanization of France. She mentions Poujadisme, which looks very much like the Tea Party movement. So, yes, petty bourgeois reactionary rebellion, with American characteristics. Indeed America after the Cold War and after 9/11 looks to me more and more like post-war France. But without a strong communist movement, can there be real fascism (i.e. pseudo-revolutionary anti-communism)?

    Comment by Alex — February 24, 2010 @ 1:31 am

  28. An important point about individual terrorism like that of Stack (or even Osama Bin Laden) that both Lenin & Trotsky drove home was that it had always been and will always be the product of the frustrated intellectual that either lacked a mass organization to channel anger into or had profound sense of hopelessness of the ability of the masses to make history.

    Probably the best book ever written on this subject is ALCHEMISTS OF REVOLUTION: TERRORISM IN THE MODERN WORLD (1987) authored by a fellow traveler (not a member) of the Chicago branch of the SWP back in the early 70’s named Richard Rubenstein. He was a Poly Sci professor at Roosevelt University from 70-79 and his mastery of this subject is sheer genius.

    Extremely well written, I encourage anybody interested in this subject to find a copy. Nowhere has anybody compiled the writings of Marx, Lenin & Trotsky so effectively to provide such a convincing sociological explanation for loner guys like Stack or infamous ones like Bin Laden.

    Here’s a link to a book review of it, albeit I diagree with the reviewers criticisms:


    Comment by Karl Friedrich — February 24, 2010 @ 2:26 am

  29. Q: [“But without a strong communist movement, can there be real fascism (i.e. pseudo-revolutionary anti-communism)?]

    A: Not likely, which is why I wrote “if there were [a strong left then perhaps] you might have the preconditions for fascism?”

    Comment by Karl Friedrich — February 24, 2010 @ 2:57 am

  30. My bad. I also note your qualification: “individual” terrorism. Indeed, I think that communists (of course?) shouldn’t wholly reject terrorism, namely red/revolutionary terror, including the great heroic figures of the partisan and guerrilla. But anarchist-style terrorism (if the distinction holds), assassinations and the destruction of signature buildings and monuments, at least in certain conditions, indeed seems like another example of symbolic/token/identity politics, or, yes, futile, nihilist, psycho- (anti-)politics, a kind of political theology.

    Comment by Alex — February 24, 2010 @ 3:41 am

  31. Karl Friedrich – I just ordered ALCHEMISTS OF REVOLUTION on your recommendation. Your comments are right in line with my thought on the Stack event. It seems an organization should be able to channel social discontent productively rather than merely symbolically in an individual violent statement of frustration.

    Comment by Glenn — February 24, 2010 @ 4:54 am

  32. It’s a great read Glenn. A real page turner. For those who’re interested but whose funds are tight I just saw a used copy of Rubestein’s book for under $6 delivered on ebay.

    When reading Rubenstein (who I learned after I read the book was a close friend of my father’s) I was struck by the fact that although I’ve read literally everything written by Marx, Lenin & Trotsky I was utterly amazed at how Rubenstein gathered all their pertinent passages on the socio-political foundations of individual terrorism that I hadn’t recalled reading before, even though I once worked the night shift for 2 years in 88 & 89 as an undergrad at the University of Arizona library whereby I was supposed to be making rounds to ensure food & drinks weren’t smuggled in but instead I’d sit on the carpet in this obscure long 5th floor bookrow that housed socialist literature where I read Marx’s, Lenin’s & Trotsky’s entire collected works — over 100 volumes.

    My coolest sociology professor, Neil Fligstein (now at Berkeley) remarked that it must have all been quite boring. I replied to the contrary, that they all had a pretty good sense of humor!

    Fligstein actually wrote another fascinating book I’d recommend (particularly to Heartfield to stay on topic) called: “The Transformation of Corporate Control” (1993) whereby Fligstein cleverly illustrates how the ruling class was consciously moving away from Vertical integration of industry — like GM which owned car making from the iron ore mines to the dealer showroom — to Horizontal Integration of industry — like Nike shoes which doesn’t own a single factory or rubber plant but instead made a billion dollar industry out of a room with just 10 board members who made an empire out of a big marketing scheme whereby shoes are made and sold by subcontracting out everything in places like Malaysia or wherever then shipped to the Western stores.

    Like Rentier capitalists they get rich on easy money whereby they don’t have to deal with hiring and firing labor or ever having to stick their noses into a filthy sweatshop. If the workers organize they close shop and move to the next 3rd world country who welcomes them with open arms.

    Fligstein argued long before GM could envision its own demise that this inexorable corporate manufacturing trend would have a profound impact on American society and he was right!

    In a 1990 class he gave another example of his thesis at work. He said you’ll notice that when you walk into a Sears store in Tucson in July you’ll see by the front door big circular rack of sweaters on sale, in July! In Tucson! Why? Because it used to be that each Sears Dept had a floor manager that kept track of things at the store floor level. He or she knew exactly what was going on year round and made sure there were no sweaters hanging around, taking up floor space in July. Not anymore. Now they have a high turnover of universal low wage, part-time employees who can’t know what’s going on because all the floor decisions are made by a group of stuffed shirts in some office in the Sears Tower in Chicago. The whole corporate paradigm changed, and for the worse, for both employees AND consumers. Jesus. Does the littany of capitalism’s unrelenting depravity ever end?

    Another professor, Al Bergensen, learned of my peculiar library undertaking and shocked me when he came back from Paris on sabbatical and handed me a gift of an apparently antique 18×20 booklet of about 2 dozen loose leaf color posters of Soviet Revolutionary art, you know, those kind of classic red star propaganda posters showing sparks flying in industrial backrounds with women workers wielding hammers and the like. He said he accidentally found them in a very obscure Parisian antique bookstore off the beaten path and immediately thought of me. Very cool. I still have them. Hell, I must’ve been a vociferous student as I’d only had the one class with him? I still get confused at his thesis that jazz music, as abstract as it sounds to my ear, is actually far more structured than any other kind of music? It made sense when he explained it at the time but now I forget why?

    As an interesting aside, one neat thing I learned at the library job (besides Marxism) is that librarians have this strict radical credo: they’d almost rather get water boarded than let some police snoop get access to what a citizen is reading.

    This credo was confirmed by my father who once told me a story about when he was enlisted in the army working at a medical lab on a New Mexico military base around 1960 that after he check out a copy of “The Communist Manifesto” from the base library some C.I.D. cops were asking the librarian who checked it out and the librarian not only flatly refused much to their chagrin but tipped off my dad to watch his step! “It’s a free country” the heroic librarian said to my dad, “just watch what you read.”

    Comment by Karl Friedrich — February 24, 2010 @ 6:49 am

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