Che Guevara and Marx’s Law of Labor Value

March 1, 2015

This March marks the 30th anniversary of the election of Mikhail Gorbachev to the post of general secretary of the then-ruling Communist Party of the Soviet Union. At first, the election of Gorbachev seemed to involve a long overdue shift of power to a new generation of Soviet leaders. As we now know, it involved a lot more.

A process was unleashed that was soon to be called “Perestroika.” In the name of “radical economic reforms,” the Soviet planned economy was progressively dismantled. Perestroika ended not only with the restoration of capitalism but the breakup of what had been the Soviet federation.

The combined process of the restoration of capitalism and breakup of the Soviet federation was accompanied by a massive collapse of both industrial and agricultural production. The living standards and life expectancy of the working class plummeted. A generation later, the economies of not only the Russian federation but the economies of the other former republics are yet to recover.

Perestroika led to a wave of capitalist counterrevolutions that in 1989 swept through eastern Europe with the active support not only of imperialism, as would be expected, but also the Gorbachev government. As part of this process, Germany was reunited on a capitalist basis while staying in NATO. The former socialist countries that had been members of the now dissolved Warsaw Pact joined NATO as did the former Soviet Baltic republics of Latvia, Lithuania and Estonia. The Georgia Republic—Stalin’s homeland—is very close to NATO and openly striving to become a formal member, while the new right-wing government in Ukraine has joined NATO in all but name.

Perestroika, therefore, resulted in a massive expansion of the U.S. world empire into the one area of the planet—the Soviet Union and its allies—that remained outside the Empire after World War II.

The destruction of the Soviet Union and the Soviet bloc and their planned economies would have been enough if that was all that was involved. But it was not. The capitalists and their spokespeople everywhere pointed to the Soviet collapse as final proof that “socialism had failed.” The result was a wave of demoralization that spread through a workers’ movement that was already in retreat before the neoliberal capitalist offensive symbolized by such political figures as Ronald Reagan and Margaret Thatcher.

National liberation movements were also pushed back, though the hopes of political figures such as Ronald Reagan and George W. Bush that the old-fashioned colonialism that had dominated the world in 1914 would return—with the difference that the United States and not Britain or France would be the chief colonizer—has not been so easy to achieve.

Between November 7, 1917, when the Bolshevik-led Congress of Soviets seized power, and the election of Gorbachev as general secretary of the CPSU Central Committee in March 1985, the peoples of the oppressed nations got accustomed to the idea that they should be independent and not colonial slaves of the West. Therefore, attempts by the U.S. world empire to push these nations and peoples back into something like pre-1914 colonial relationships have met, to the chagrin of the imperialists, unexpected and growing resistance.

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Update on Status of eBook

February 13, 2015

Back in 2010, I announced my intention to begin drafting an ebook based on the posts in the main section of this blog. See here for the initial announcement.

Subsequently, I reported on the status of this project here.

Late last year, a reader asked about the current status of the project. So here is an update.

The first draft of the book is finished. It consists of 37 chapters divided into seven sections plus a general introduction and introductions for each section. Editing of the first draft is more than half completed. This editing will continue while work begins on a final draft. The second draft will then undergo a final edit.

I hope this project can be completed and the work published sometime next year (2016).

Sam Williams
February 12, 2015

David Harvey, Michael Roberts, Michael Heinrich and the Crisis Theory Debate

February 1, 2015

Recently David Harvey, the well-known writer on Marxist economics, criticized Marxist economics blogger Michael Roberts’ views on crisis theory. According to Harvey, Roberts has a “monocausal” crisis theory. What Harvey objects to is Roberts’ emphasis on Marx’s theory of the tendency of the rate of profit to fall (FRP for short) as the underlying cause of capitalist crises.

Harvey goes further than simply criticizing Roberts’ FRP-centered crisis theory. He says that he is skeptical that a tendency of the rate of profit to fall even exists. He indicates that he agrees with the views of the German Marxist economist Michael Heinrich on the invalidity of Marx’s theory of the falling rate of profit. Heinrich’s views are developed in “An Introduction of the Three Volumes of Karl Marx’s Capital” (Monthly Review Press, 2004). He elaborated them in this article.

In this work, Heinrich tries to demonstrate that Marx himself in the final years of his life moved away from his own theory of the tendency of the rate of profit to fall. Heinrich holds that an examination of Marx’s manuscripts that form the basis of Volume III of “Capital” show that Marx had moved toward a theory of crises centered on credit. Heinrich accuses Frederick Engels of editing the manuscripts in such a way as to hide Marx’s alleged movement away from an FRP-centered theory of crises to a credit-centered theory of crises.

In his defense of the falling rate of profit school from the criticism leveled by Harvey, Roberts makes an indirect reference to this blog: “… recently, one Marxist economist from the overproduction school called me a monomaniac in my attachment to Marx’s law of profitability as the main/underlying cause of capitalist crises (see Mike Treen, national director of the New Zealand Unite Union, at the annual conference of the socialist organization Fightback, held in Wellington, May 31-June 1, 2014, and a seminar hosted by Socialist Aotearoa in Auckland in November 10, 2014 http://links.org.au/node/4156).”

Mike Treen, a New Zealand Marxist, is indeed an organizer of the New Zealand trade union Unite (not to be confused with the U.S. trade union of a similar name, UNITE HERE, which also organizes fast food and other low-wage workers). The “overproduction school” Roberts refers to is actually the position of this blog, of which Mike is an editor.

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Russia, Oil, the ‘Strong Dollar’ and the Economic Conjuncture

January 11, 2015

A major feature of the current global economic conjuncture is the financial-economic crisis that has hit Russia.

On Dec. 16, 2014, the central bank of the Russian Federation raised its benchmark interest rate to 17 percent from 10.5 percent. This is a far cry from the zero to .25 percent the U.S. Federal Reserve System maintains for its key interest rate, the federal funds rate. During 2014, the Russian ruble fell 45 percent against the U.S. dollar, while the Russian central bank sold some $80 billion of its foreign reserves in an attempt to halt the fall.

By raising its benchmark interest rate to 17 percent, the Russian central bank hopes to stem the bleeding of its reserves while checking the ruble’s decline. The catch is that such a dramatic and sudden rise in interest rates is almost certain to plunge the Russian economy into recession in 2015, with rising unemployment. As demand contracts within the home market, Russian businesses will be forced to sell more of their national production on the world market and import less of the production of other countries, causing a decline in Russia’s standard of living. Eventually, the balance of trade will swing back in Russia’s favor but on the backs of the Russian working class and other Russian working people.

The current financial-economic crisis in Russia is made worse by the sanctions the U.S. and its West European satellites have imposed on Russia. These sanctions are in response to Russia’s defensive move in the Crimean Peninsula. Responding to widespread demands within Crimea in the wake of the seizure of power by far-right anti-Russian forces in Kiev in February 2014, Russia agreed to allow Crimea to rejoin the Russia Federation. The crisis in Ukraine, which at times reached the level of civil war during 2014, resulted from the U.S.-supported neo-liberal/fascist coup after months of right-wing demonstrations in Kiev.

The coup government has severely restricted civil liberties in Ukraine, forcing Ukrainian working-class parties underground while re-orienting the Ukrainian economy towards Western Europe. In addition, Ukraine has all but in name joined NATO, the main military wing of the U.S. imperialist world empire. Kiev hopes to make its NATO membership official at the earliest possible date.

Rising tension between the U.S. empire and Russia

The move by the U.S. empire to draw Ukraine into its military and economic domain has increased tension between Russia and the U.S. to its highest level since the restoration of capitalism in Russia a quarter of a century ago.

The imperialist media and certain people on the left have pictured present-day Russia as a virtual “second coming” of Nazi Germany. Russia, it is claimed, attacked Ukraine without provocation. As a result, a resurgent Russia is now threatening virtually all the countries of eastern and central Europe and ultimately “the West” itself. Unless something is done to check Putin’s “aggression,” it is claimed by imperialist propagandists, there is a danger of all of Europe falling under the Kremlin’s domination.

Other people on the left have drawn a quite different conclusion. They argue that far from a resurgent Russian imperialism, the U.S. and its European satellites have launched a new “cold war” against Russia.

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The Marxist Theory of Ground Rent (Pt 2)

December 14, 2014

Landed property and the housing crisis

In its Dec. 5, 2014, editorial, the San José Mercury News commented on the city of San José’s heartless move to close down once and for all a homeless camp. “The dismantling of San Jose’s Story Road homeless encampment known as the Jungle has drawn national attention,” the Mercury News noted. “Once again, it’s those crazy Californians—in the middle of one of the wealthiest regions in the United States, they managed to amass what may well have been the country’s largest homeless encampment, with estimates as high as 300 residents.”

The Mercury News went on to observe: “The ranks of the homeless increased dramatically during and since the recession because so many individuals and families lost jobs and homes. Then, when the economy picked up, rents quickly soared—but many of the jobless had to re-enter the workforce at lower pay.”

The closing of San Jose’s “Jungle” encampment is part of a much larger housing crisis many workers and even middle-class people are feeling. For many workers, the crisis takes the form of rapidly rising apartment rents, which force workers to move to distant suburbs, perhaps a hundred or more kilometers from their places of work. In the worse cases, workers like unfortunate former residents of San José’s “Jungle” are facing complete homelessness.

Nor are the homeless necessarily among the unemployed. (1) Low-wage workers are often unable to afford the rent on even substandard apartments. Some are forced to live in their cars, which end up serving the dual use values as means of transportation and means of shelter. Or low-paid workers are forced to divide up their apartments with other low-paid workers. It’s either that, their automobile—if they have one—or the street.

Frederick Engels on the ‘housing question’

In the early 1870s, articles appeared in the press of the German Social Democratic Party claiming that the relationship between house owners and tenants was analogous to the relationship between industrial workers who sell their labor power and industrial capitalists who buy it. According to these articles, the key to the “social question” was workers’ ownership, whether individual or collective, of their own housing.

Karl Marx’s co-worker Fredrick Engels sounded the alarm and wrote his booklet “The Housing Question” to refute this view. Engels’ basic point was that the key to the “social problem”—the evils caused by the capitalist mode of production including the lack of housing—is to be found not in the ownership of the means of shelter but in the ownership of the means of production.

In his booklet, Engels gave many examples of the housing crisis of the 19th century. A lot of this material is necessarily dated and largely of historical interest. But there is still much in the booklet that is all too familiar for today’s workers. Once again, the housing question is growing acute with rising homelessness, unaffordable house rents and “gentrification.”

Read more …

The Marxist Theory of Ground Rent (Pt 1)

November 16, 2014

Mike Treen, a good friend and an editor of this blog who lives in New Zealand, suggested during a visit to the U.S. last May that I examine the question of real estate and house rents. I promised him that I would try to get to it. I couldn’t do it immediately because the 100th anniversary of World War I was fast approaching and demanded the blog’s immediate attention. But with no anniversary of similar importance approaching over the next few months, I now have some time to examine the question of real estate, rents and landed property in general.

I will begin with an examination of Marx’s theory of ground rent that he develops in Volume III of “Capital.” I will then examine how Marx’s theory relates to the related but different question of house rents, prices and mortgages, which Marx gave relatively little attention to.

After that, I hope to examine the latest developments in the world economy, which I have neglected recently because of the needs arising from the World War I anniversary. While much has been written over the years on the theme of the “decline of the dollar,” we now have the opposite phenomenon of the “strong dollar.”

The strong dollar refers to the U.S. dollar’s current rise against gold, the money commodity, and other currencies. These developments raise important theoretical questions on the nature and function of money, as well as a series of practical questions. For example, what does the current strong dollar imply for the evolution of the world economic situation, the new war in the Middle East, and the war danger in general?

Finally, another important anniversary is approaching early next year. Next March will mark the 30th anniversary of the election of Mikhail Gorbachev to the post of general secretary of the Central Committee of the Communist Party of the Soviet Union. Long before the Gorbachev election, a debate had been raging within the socialist countries around these questions: If and too what extent are the products of socialist industry commodities? How relevant, if at all, is the law of value and commodity-money relationships to the construction of socialism? What are the historical limits to the law of value?

With the election of Gorbachev, the economists who strongly defended the view that commodity-money relations and the law of value either do or rather should prevail during the construction of socialism won the day. The consequences of their victory are all too obvious today.

The famed Argentinian-Cuban revolutionary Che Guevara, who was killed by the CIA in 1967, many years before the election of Gorbachev, defended what even then was the minority opinion among economists in the socialist countries on this matter.

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World War I—Its Causes and Consequences (Pt 4)

October 19, 2014

Could it happen again?

This August marked the 100th anniversary of the outbreak of World War I. Could it happen again? Before exploring this question, I should review how the world has changed since those European summer days of a century ago.

I have already examined in this blog the changes in imperialism—the underlying cause of the “Great War”—over the last hundred years. But before I explore the question of whether something like the Great War could happen again, I should briefly summarize these changes.

The main powers in Europe

At the start of 1914, there were a number of independent imperialist “powers,” as they were called, that were in economic, political and, as events were soon to demonstrate, military competition with one another. In Europe, the main powers were Britain, Germany, France, Russia and Austria.

Britain had been for the preceding century—since the defeat of Napoleon—the most powerful country in the world. Britain’s military power was largely naval. As the British chauvinists put it, Britannia ruled the waves. It was naval power that held the English empire—“where the sun never set”—together. In turn, British naval power was made possible by its highly advanced—for the time—industry.

France, which had been Britain’s primary rival in the world war that followed the French Revolution, was a significant imperialist power in its own right. It had a large empire in Africa, Indochina and elsewhere. Its industrialization, however, had always lagged behind that of Great Britain.

As a result, large amounts of idle money capital tended to pile up in France compared to the situation in the more dynamic capitalist countries. Since the French capitalists converted a relatively smaller amount of their money capital into industrial capital, a relatively larger amount was converted into loan capital—finance capital. Much of this capital was loaned abroad, especially in Russia.

By the beginning of the 20th century, however, France was no longer Britain’s most important rival within Europe. Germany, due to its rapid industrialization, had replaced France in that role. In Germany, capitalist production based on the latest technology was developing fast. Because its industrialization had come later than Britain or France’s—Germany wasn’t even unified as a country until the 1870s—Germany had relatively few colonies.

However, unlike the case in France and increasingly Britain, the German capitalists tended to quickly convert the money capital that passed through their hands into productive capital—both constant and variable. Therefore, finance capital developed somewhat differently in Germany than it did in Britain and France. In Germany, there was a need to mobilize every spare penny and place it in the hands of the industrial capitalists. As a result, Germany’s banking system was ultra-modern, with both commercial and investment banking centralized in a small number of huge “universal banks.”

This stood in contrast to the older British and to a large extent even the U.S. pattern, where commercial and investment banking were conducted by separate companies. The biggest of the German universal banks was the Deutsch Bank, which remains to this day Germany’s most powerful bank.

Read more …

World War I—Its Causes and Consequences (Pt 3)

September 21, 2014

Some particularly unpleasant consequences of the ‘Great War’

During July and August, 2014, Israel waged a brutal one-sided “war”—if it can be called a war—against tiny Gaza. More than 2,200 Palestinians, the vast majority civilians, and around 500 children were killed. The Israeli slaughter created a worldwide wave of outrage. Demonstrations against the Israeli actions were held around the world.

This latest Israeli assault on the Palestinian people is part of a long-running conflict rooted in what the Palestinians call al Nakba—“the catastrophe,” in Arabic—that occurred in 1948. In that year, Jewish settlers systematically drove the majority of the residents of Arab Palestine out of their native country into refugee camps, where survivors and their descendants are still to be found 65 years later.

There have been many attempts by well-meaning people to solve this conflict. Why can’t the Israeli Jews and the Palestinians, both Muslims and Christians, learn to live together in peace? Though “historic Palestine” is a small country, there is room enough for all present Jewish residents of Israel and all Palestinians in the refugee camps and the Diaspora to live happily together. The real question is not why can’t they live together but why don’t they?

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World War I—Its Causes and Consequences (pt 2)

August 24, 2014

Wars rarely turn out the way their initiators expect. In our own time, we can point to many examples. George W. Bush and Tony Blair, when they ordered the invasion of Iraq on March 19, 2003, believed that the U.S.-British forces would defeat Iraq’s armed forces—weakened by years of sanctions, continued military attacks, and forced unilateral disarmament—within weeks with hardly any casualties on the side of the invaders. It would then be “mission accomplished.”

But now in August 2014—100 years to the month since the outbreak of the “Great War”—the U.S. has resumed bombing Iraq as the government it created crumbles. The reason this government is failing is that virtually no Iraqi wants to fight and die for it. Why should an Iraqi fight for a foreign-imposed government?

Nor should we forget the war against Afghanistan launched by the Washington war-makers in October 2001 against the Taliban government, which had no modern armed forces, only a militia. Within weeks, U.S. media were writing about that most unequal war in the past tense. But now, 13 years later, the U.S. is still struggling to find a way to exit that war without the return of the Taliban to power. That war didn’t turn out as the Washington war-makers expected either.

Nor has the air war fought by U.S-NATO against Libya in 2011 turned out the way the Obama administration, which launched that war, expected. And the same will probably be true of the most recent war—if it can even be called a war—launched by Israel, with at least the tacit support of the U.S., against the people of tiny Gaza, which has no army, air force or navy.

This August marks not only the 100th anniversary of the beginning of World War I but also the 50th anniversary of the infamous Gulf of Tonkin Incident. If we were to believe the U.S. propaganda of the time, (North) Vietnam’s tiny navy attacked without any provocation the mightiest navy the world had ever seen! This “incident” occurred—or rather didn’t occur—on August 2, 1964, just two days short of the 50th anniversary of the start of the “Great War.”

The U.S. Congress used this faked incident to grant the Johnson administration cart blanche to wage war against Vietnam, which the administration took full advantage of by launching a series of bombing raids on the Democratic Republic of Vietnam that August. This gave way to a steady air bombardment of (North) Vietnam—the South had been subject to steady U.S. bombardment for the preceding five years—the following year after Johnson won re-election as the “peace candidate.”

While the Washington war-makers succeeded in killing millions of Vietnamese people and doing incalculable damage to the environment with Agent Orange and other forms of environmental warfare, in the end the war against Vietnam did not turn out the way the war-makers in the White House, the Pentagon and Congress expected. For example, the renaming of Saigon Ho Chi Minh City was probably not part of Washington’s war plans.

Nor did the war against Korea, which is usually seen as beginning in June 1950 but really began when Washington occupied the southern part of Korea in 1945, turn out exactly as the Washington war-makers intended, though they succeeded in killing millions of Korean people and left no multistory building standing in the northern part of the country.

The rule that wars seldom turn out the way those who start them expect was certainly true of the general European war that began exactly a century ago. To the generation that actually fought, it was known as the “Great War” or “the World War,” ”the war to make the world safe for democracy,” or, most ironic of all, “the war to end all wars.” But as a result of unintended consequences of the war, it had to undergo a name change. It was renamed World War I, a mere prelude to the even greater bloodbath of World War II.

‘Before the leaves fall’

When the general European war commenced on August 4, 1914, each warring imperialist power was convinced that it would be a short war and that it would emerge victorious. Or as was said, the war would be over “before the leaves fall.”

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World War I—Its Causes and Consequences (pt 1)

July 27, 2014

Owing to the author’s and editors’ participation in this weekend’s Gaza protest, the following has been posted a little later on the scheduled publication day than usual.

Almost exactly 100 years ago, on June 28, 1914, shots rang out in the city of Sarajevo, then part of the Austro-Hungarian Empire. Assassinated on that day were the heir to the throne of Austria-Hungary, Archduke Franz Ferdinand, and Sophie, his wife and Duchess of Hohenberg. Serbians and other “south Slav” nationalists struggling to create a federation of the small south-Slav nations—Yugoslavia, in their language—were held responsible. Within little more than a month, the entire world order as it had existed prior to June 28 completely unraveled. First Europe and eventually the world plunged into what was to become known as World War I.

Among the pillars of the world order that collapsed in 1914 was the international gold standard. Under this system, central banks issued banknotes that were actually promissory notes payable in gold coin of a definite fineness and weight to the bearer on demand. As late as mid-1914, in the imperialist countries, gold coins still circulated side by side with banknotes, which along with bank checks were used for large transactions. Everyday purchases and wages were paid in coins made out of silver or base metals.

The fact that currencies of the imperialist nations were defined as a certain weight of gold of a given fineness meant that there was, within the narrow limits of the “gold points,” fixed rates of exchange among the imperialist countries. In effect, a single currency—gold—existed among the imperialist countries, with pound-sterling, dollars, marks, francs, and rubles merely local names for the universal currency, gold.

The international gold standard encouraged a massive growth of world trade and international investment rivaling today’s “globalization.” Individual countries on the gold standard had to remain on it or their access to the London-based capital markets would be undermined.

Things had not always been this way. In the mid-19th century, currencies of most European countries—with the exception of Britain—were defined in terms of weights of silver, not gold. The Russian ruble was a paper currency and was not convertible into either gold or silver at the state bank. In contrast, the United States defined both a silver and gold dollar, along with a fixed legal rate of exchange between the two. This system was known as bimetallism.

But since the value of gold and silver—the quantity of abstract human labor needed to produce a given weight of gold and silver bullion—constantly changes, it was the “cheaper” dollar that actually circulated. Originally, this had been the silver dollar, but by the middle of the 19th century after the gold dollar was made slightly lighter—in effect devalued—the U.S. was, like Britain, for all practical purposes on the gold standard.

By mid-1914, all these currencies, including the Russian ruble, were on the gold standard. Only the currencies of semi-colonial or colonized countries such as China and Mexico were still defined in terms of weights of silver or were paper currencies. And in 1914, after years of populist resistance to central banking, the U.S. Federal Reserve System began operations establishing the centralized management that the U.S. gold standard had previously lacked.

Before 1914, the U.S. gold standard was managed by a combination of private for-profit bankers, such as J.P. Morgan, and the U.S. Treasury. The flaw in this system was that there was no mechanism to meet a sudden increased demand for currency as a means of payment such as tends to develop during crises. Under the old U.S. national banking system, when a crisis hit, panic-stricken depositors would attempt all at once to convert their deposits into cash. As a result, the crisis would rage unchecked until money capital, in the form of gold bullion eager to take advantage of the sky-high U.S. interest rates caused by the panic, arrived from overseas.

The cyclical crisis of overproduction that hit with full force in the fall of 1907, as had happened periodically during the 19th century, triggered a panicky run on U.S. commercial banks as depositors rushed to convert their deposits into cash. But the changing conditions of the early 20th century made bank runs much more dangerous than they had been earlier.

By 1907, the U.S. had emerged as the world’s leading industrial power. Far fewer of the unemployed could return to their family farms to ride out the crisis like many still could during the 19th century. But there was another factor at work. Because the U.S. had now emerged as the world’s leading industrial as well as agricultural power, a run on the U.S. commercial banking system threatened to crash the entire global capitalist economy. Therefore, a U.S. central banking system had to be created to allow a rapid expansion of the quantity of means of payment in a crisis.

The danger was that if this were not done, during a crisis so much money capital in the form of gold bullion in search of the highest rate of interest would be shipped to the U.S. from Europe and elsewhere that the European central banks would be forced off the gold standard. To protect the international gold standard, it was therefore necessary for the U.S. to create a system of central banking just as the European countries already had done that would make it easy to issue extra dollars in a crisis. The very knowledge by bank deposit owners that extra dollars could be created during a crisis would make bank runs far less likely. When the Federal Reserve System began operations at the beginning of 1914, the international gold standard was now secure. Or so it seemed.

Read more …


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