Global Economic and Financial War Erupts

As I write these lines the Russo-Ukrainian war is entering its second month. The main fighting is in the Donbass region. The Russian military is attempting to encircle and destroy a Ukrainian army spearheaded by the fascist Azov brigade, variously estimated as between 50,000- to 100,000-strong. Russia also sent ground forces toward Kiev, the Ukrainian capital, with no attempt to storm and seize the city. Kiev is revered by Russians, Belarusians and Ukrainians alike as the city of origin of their respective nations. (1)

Putin indicated Russia does not want to occupy or rule Ukraine. Russia has been fighting a limited war. Its demands are that Ukraine acknowledges the independence of the Lugansk and Donestk People’s Republics as well as Russia’s claim to Crimea. Before 1954, Crimea was never Ukrainian. Since the 19th century, it’s had a Russian majority. Russia further demands Ukraine stay out of NATO, be demilitarized, not acquire nuclear weapons or allow NATO to put nuclear weapons or other weapons of mass destruction on its territory, disband the fascist militias operating there and recognize the rights of Russian-language speakers.

Russia hopes to negotiate a peace treaty with Ukrainian president Volodymyr Zelensky’s government meeting Russia’s basic demands. At the start of the war, Russia opened peace negotiations. It would not have done so if it intended to occupy and rule the entire country. Additionally, on March 29 Russia announced as a measure of good faith that it was scaling back, but not ending, its military operation near Kiev and other areas in northern Ukraine.. Regarding the western region, Russia launched cruise missile attacks aimed at military targets but has not moved ground forces into the area.

The U.S. government and NATO — controlled by the United States — encouraged Ukraine to continue to resist Russia’s defensive demands. The Western media are flooded with stories of unexpectedly strong Ukrainian resistance that has supposedly prevented Russia from entering Ukrainian cities and taking over the entire country. The Kremlin knows if it did attempt to take Kiev and other cities, it would not only meet strong resistance, the military action would indeed become a quagmire. This is what the U.S.-NATO empire is aiming for. Many pro-imperialist commentators reflecting White House views openly speculate that if Russia is forced to remove the Ukrainian government by force, partisan warfare will lead to a prolonged war. These U.S.-NATO policymakers hope to bring about regime change in Russia itself. (2)

Imperialist policymakers hope to repeat their victorious strategy in Afghanistan in the late 1970s and 1980s, where they think they tricked the Soviet Union into getting bogged down in a U.S.-supported guerrilla war. This they claim led to the downfall of the USSR. (3) Imperialist commentators do not hide their hope for Putin’s Russian nationalist government to fall into a similar trap in Ukraine.

Ukraine’s right to self-determination

If Ukraine does not agree to its demands, Russia threatens to storm Kiev and other Ukrainian cities to remove Zelensky’s right-wing pro-imperialist Euromaidan government. That regime came to power in a U.S.-supported, fascist-spearheaded coup in 2014. It’s followed a program of so-called decommunization.

For context: capitalism was restored in Ukraine as a result of the 1985-91 political and social counterrevolution, not the 2014 Euromaidan coup. The term decommunization employed by Euromaidan is complete demagogy. What it means is the Ukrainian Communist Party and other left parties have been banned as well the display of any Soviet symbols. Almost all World War II monuments were removed, with some being replaced with monuments to Nazi collaborators. In 2016, 51,493 streets and 987 cities and villages were renamed — “decommunized” — and 1,320 Lenin monuments and 1,069 monuments to other communist figures were removed. (Source Wikipedia)

A more honest term for Euromaidan policies would be de-democratization. In one of Putin’s speeches, he threatened to give the Ukrainians a lesson by taking the decommunization of Ukraine to its logical conclusion.

Putin declared in a televised speech at the beginning of Russia’s military operation, “Ukraine was entirely created by Russia, to be more precise, Bolshevik, communist Russia. This process began practically right after the 1917 revolution. … Soviet Ukraine is the result of the Bolsheviks’ policy and can be rightfully called ‘Vladimir Lenin’s Ukraine.’ He was its creator and architect. This is fully and comprehensively corroborated by archival documents. … And today the grateful descendants have overturned monuments to Lenin in Ukraine. They call it decommunization.

“You want decommunization? Very well, this suits us just fine. But why stop halfway? We are ready to show what real decommunization would mean for Ukraine.” (Source thePrint.in)

Putin hits the nail on the head. The roots of Euromaidan that dominated the Ukrainian government since 2014 can be traced back to those property-owning Ukrainians who rejected the socialist revolution. While wrapping themselves in the Ukrainian flag, their real aim was to save — and later reestablish — the system permitting them to live on the unpaid labor of other people. In pursuit of these aims, Euromaidan’s forerunners allied themselves successively with imperial Germany, Nazi Germany — the German Nazi leaders considered Slavs, including Ukrainians, sub-human — and finally the U.S.-NATO world empire.

In contrast, the 1917 October Socialist Revolution gave Ukraine national independence, as well as the rich industrial Donbass region.

Euromaidan, in rejecting all Russian influence, has killed almost 15,000 in the Donbass since 2014 and has succeeded in completely alienating the Russian-speaking people from Ukraine. The logic of the Euromaidan decommunization campaign is about rejecting the October Revolution’s socialist as well as democratic aspects. That includes the right of nations to self-determination, and thus the Euromaidan logic points to the destruction of the Ukrainian nation itself. Putin threatens that if the Euromaidan government does not meet Russia’s defensive demands, he will be forced to finish the decommunization of Ukraine by ending Ukrainian independence entirely.

To avoid any misunderstanding I reject Putin’s implicit threats to destroy the Ukrainian nation if its leaders do not agree to Russia’s demands. The Ukraine nation has the right to self-determination despite its current leaders. Putin’s remarks reflect the kind of Great Russian bullying — resembling good old-fashioned Yankee bullying — of nations historically oppressed by Russia that Lenin warned against.

Putin’s remarks on decommunization point to the likely fate of Ukraine if the people follow the Euromaidan nationalists to the end. Euromaidan was a coup aimed at subordinating Ukraine to the U.S.-NATO world empire in return for a few crumbs of surplus value squeezed out of the workers and the exploited working people of the entire world by capitalist oligarchs ruling the U.S.-NATO empire.

Lenin wanted the Donbass industrial region, though it was Russian speaking, to be part of Ukraine because it provided a strong working-class base for Soviet power within an otherwise agricultural peasant country. And so it turned out. Even after Soviet power was destroyed as a result of the 1985-91 counterrevolution, the Donbass remained part of the now bourgeois independent Ukrainian Republic.

But the U.S.-supported right-wing Euromaidan coup created a new situation. The coup government and its Washington masters are determined to bring Ukraine into NATO, integrating it into the U.S.-NATO empire. Under Euromaidan, all Soviet symbols were made illegal. The Communist Party of the Ukraine and other left-wing groups were banned. As part of its decommunization campaign, it has done everything possible to whip up anti-Russian chauvinism. The rights of the Russian minority were repressed, including a ban on the use of the Russian language.

These policies violate the principles of bourgeois democracy that forbid a government from banning the communist parties as well as the oppression of national and ethnic minorities. As a result, communist and other left-wing Ukrainians were driven underground or forced to take refuge in the peoples’ republics of Lugansk and Donetsk. (Understanding the war in Ukraine,” Vijay Prashad, March 9, 2022) Formal bourgeois democracy indicates that since the 2014 coup, the political regime is less (bourgeois) democratic than Russia, where Soviet symbols and communist parties remain legal.

U.S.-NATO declares economic and financial war on Russia

The U.S.-NATO world empire is avoiding entering the shooting war against Russia in Ukraine. It wants Ukrainians to do the fighting for them. The obvious reason is that Russia inherited a powerful nuclear deterrent from its Soviet past. In this sense only, Russia remains a superpower. Even if Russia could be defeated in a conventional war, it’s always possible for Russia to retaliate with a nuclear counter-attack, devastating the United States as well as Western Europe. (4)

There are other reasons besides the nuclear one for U.S.-NATO to avoid directly entering a shooting war. Despite overwhelming firepower and undeniable technological prowess, the U.S.-NATO military operations have performed poorly in all the shooting wars they’ve been involved in. The most recent example of this is the 20-year war against the people of Afghanistan. Why have U.S.-NATO armies performed so poorly on the battlefield compared to the performance of the armies of colonialist-imperialist countries in the past? I discussed this last September, but I will repeat it here.

I believe the answer can be found in the development of the productive forces, especially in agriculture. Up until almost the mid-20th century, the colonizing powers’ soldiers were promised the opportunity of farming — and sometimes mining — in the conquered territories. This is the origin of the United States itself, growing out of the commercial wars fought by British colonial-settler soldiers colonizing North America at the expense of the Native peoples.

When Hitler invaded Ukraine, he planned to make some of the German surplus population into small capitalist (petty-bourgeois) farmers on Ukrainian land. This would convert the surplus population into something like the Boers of South Africa. Local Ukrainians would be akin to the Bantu (local African) peoples providing cheap labor to Boer farmers (white European settlers). Ukrainians are white Europeans, but Nazi racial theorists considered them, like all Slavs, an inferior race. Despite their light skin, blond hair and blue eyes they were ranked near the bottom of the Nazi racial hierarchy along with black Africans. Hitler believed doing this would assure big capitalist domination and stabilization of Germany for a prolonged period. Hitler, an admirer of the United States, knew that the fertile lands of North America stolen from the Native peoples by the U.S. equivalent of the Boers — called pioneers in the schoolbooks — played a major role in stabilizing the rule of the U.S. capitalist class. (5)

The current stage of productive forces has increasingly sent small-holding agriculture and small-scale capitalist farming into steep decline. Only large-scale capitalist farming is commercially viable. There is little prospect for a significant part of the U.S. surplus population to be converted into Boer-type farmers, or pioneers, in Ukraine any more than they could be converted into farmers in the fertile farmlands of Afghanistan. That U.S.-NATO soldiers had no prospect of farming Afghani land, even in the event of victory, meant they had little incentive to risk their lives on the battlefield. The same would hold true in Ukraine.

Washington launches global economic and financial war

Policymakers in Washington have decided not to use U.S. soldiers in Ukraine but rather launch a worldwide economic war. The target of the war is not only Russia but Western European competitors on one side and rising China on the other.

Throughout this blog, I have referred to the Western European imperialist countries including Great Britain, France, and Germany as U.S.-NATO satellites. Some may say this is overstated. Perhaps junior partners, not satellites. But recent events show my claim to be true.

Using the Russo-Ukrainian war that the U.S. itself provoked as the reason, the United States is forcing its Western European satellites, particularly Germany, to shift from purchasing natural gas from Russia to the United States or the Arab oil monarchy of Qatar, which President Joe Biden has officially designated a major non-NATO ally, meaning close ties with the U.S. armed forces. The “Major non-NATO ally” designation was first given to Australia, Egypt, apartheid Israel, Japan and South Korea.

Germany announced the suspension of the Nord Stream 2 pipeline. This is a decision no sovereign German government would have made. While natural gas can be piped into Western Europe from Russia, U.S. and Qatari gas must be liquefied, then shipped by sea to Europe. Liquefied natural gas has a higher value than piped-in gas because it takes additional human labor to liquefy the gas, ship it to Europe, and then convert it back into gas. Its higher value means gas from the United States and Qatar has a higher price than that delivered by pipeline.

For U.S. capitalists, this serves two purposes. First, it opens additional markets for U.S. gas and shipping companies. Second, by increasing the value of gas and fossil fuels that form part of the constant circulating capital used by West European industry, it increases the value of individual commodities European industry produces relative to commodities produced by U.S. industry — or industry owned by U.S. capitalists in other countries. The result is that European industry is rendered less competitive. This increases the possibility that U.S.-owned industry will be able to take markets away from German and other European capitalists.

Further emphasizing the satellite status of European states, it’s been announced the long drop in U.S. troop levels in Western Europe (including Germany) is over. U.S. troops deployed in Europe are to be doubled. (See “Where 100,000 U.S. troops are stationed in Europe,” Axios)

These additional troops remind German capitalists, who will be none too happy about the German government’s quick capitulation to U.S. demands, that Germany remains very much an occupied country. In reality, the Federal Republic of Germany, built on the ruins of the defeated Third Reich by U.S. occupiers, has never been a truly sovereign country. And the situation regarding sovereignty is not much better for the other Western European countries.

Up to now the interests of West European capitalists, including German ones, have coincided with those of the U.S. But Washington’s need to reverse the long-term decline of U.S. industry’s position in the world market has begun to change that. First came Trump’s trade war and now Biden’s economic war with Russia, underscoring the divergent interests of the U.S. and European capitalists. Will the European capitalists find a way to shake off U.S. control, and if so, what form will this take? Only time will tell.

Background of the current global economic war

Since the 1985-91 political and social counterrevolution destroyed the USSR, Russia and Ukraine have emerged as exporters of minerals, agricultural products, fertilizers, and fossil fuels. Western Europe has become increasingly dependent on Russian commodities. The industrialized countries of Western Europe exchange finished industrial products for Russian raw materials, energy, fertilizers, and agricultural products.

Russia is economically far weaker than the United States but it is not without weapons to defend itself in the economic war. Russia can withhold materials from the West. Or it can demand payment in something other than dollars. The Putin government announced that it will demand payment in rubles from “unfriendly countries” — meaning the European Union, Britain and the United States in particular. Rubles are not now and never have been an international means of payment. This has created a demand for rubles, much to the chagrin of Washington, causing the Russian currency to rally on the international foreign exchange market. This momentarily staved off Washington’s hoped-for collapse of the ruble and the Russian economy.

Further east, a newly industrialized China launched its “Belt and Road” initiative. This initiative has been moving toward linking industrialized Western Europe, with producers of primary commodities — Russia, Ukraine, and India — into an economic bloc. If this bloc crystallizes, Western Europe will supply industrial products and technology, Russia and Ukraine raw materials, India cheap labor, agricultural and industrial products, and China industrial products and, increasingly, technology as well. The entire globe will provide markets for the commodities produced. If this comes to pass what will happen to the U.S. capitalist economy?

I suspect the immediate catalyst of the newly declared global and financial war is rooted as much in the events in Afghanistan in August 2021 as it is in Ukraine. U.S.-NATO fought a 20-year shooting war to hold on to Afghanistan with its colossal, if still untapped, mineral wealth. [See Afghanistan – Past, Present and Future, a Marxist Analysis.] Ultimately the United States, faced with the Afghani people’s resistance, was forced to withdraw last August under humiliating circumstances. There was no face-saving interval, no transitional or coalition government, nothing. Instead, the Taliban simply moved into Kabul while U.S.-NATO camped out at the airport flying out its remaining forces and some of its Afghani collaborators.

The Biden administration responded to this humiliation by declaring an economic and financial war against Afghanistan. As part of this war, it froze the U.S.-dollar reserves of the Bank of Afghanistan, reported to be $9.5 billion. This immediately threw the money-commodity of Afghanistan, which had expanded considerably under the 20-year war and occupation, into deep crisis. Large-scale famine and suffering among the Afghani people, especially those dependent on the capitalist money-commodity economy, were predicted. But the Biden administration couldn’t care less about the suffering of the Afghani people.

This leaves Taliban-ruled, mineral-rich Afghanistan with no place to turn but to China. Unlike the United States, China makes no attempts to impose political regimes to its liking on other countries. China does business with the crown prince of Saudi Arabia, the Afghani Taliban, the Putin government in Russia, the Euromaidan government in Ukraine, the Bolivarian government in Venezuela, the Sandinista government of Nicaragua, and the socialist government of Cuba. The emergence of a Euro-Asian economic block led by a rising China is simply not compatible with the continued existence of the U.S.-NATO world empire.

The Biden administration was compelled to expand the economic war against Taliban-ruled Afghanistan to Russia. The United States was already involved in economic wars with Venezuela and Iran, not to speak of Cuba. Now the entire world is involved in what has become a global financial and economic war. As a result, we are entering the most dangerous period so far in the history of the human species. (6)

The first aim of the current war is to force Russia to withdraw from Ukraine. If U.S.-NATO achieves this, Ukrainian natural resources, including its rich farmland, will be bought up by U.S. corporations and wealthy individual capitalists. Zelensky’s Euromaidan administration has just passed laws to make this legal.

With U.S.-NATO rule and its Euromaidan puppet government consolidated in Ukraine, the hope is to overthrow the Putin government. When perestroika was launched after Gorbachev’s 1985 rise to power, one of the chief aims was to link the Soviet economy with the U.S.-NATO-dominated world capitalist economy. U.S. capitalists demanded the USSR give up its state-owned, planned economy. Inspired by the neoclassical theory, this was the goal of perestroika and post-perestroika economists.

The U.S.-NATO capitalists celebrated, but it was not enough. They want Russia to allow capitalists to buy up its farmland, mineral and energy resources as the Euromaidan government does. Perhaps a Russian government, in the name of peace and disarmament, will give up Russia’s nuclear weapons as well. This way the U.S.-NATO empire can wage a conventional war without fear of a Russian nuclear counter-attack. Remember the United States insisted that Iraq get rid of its chemical weapons and Scud missiles before the U.S. armed forces invaded. (7)

The Biden administration openly says its sanctions warfare aims to drive the Russian economy into runaway inflation and deep recession. What would people in the U.S. think if a large and very powerful foreign country’s government declared it will create runaway inflation, recession and mass unemployment in the United States? If currency depreciation generates runaway inflation and a deep recession engulfs Russia, U.S. capitalists will be able to buy Russian assets for a song. If the ruble does hyper-inflate, the Russian economy will become increasingly dollarized. This will give the international dollar standard a whole new lease on life.

The dollar standard and the global economic war

Much attention has been focused on the effect that Washington’s economic and financial war will have on the prices of oil, industrial metals, natural gas, fertilizer and food. The consequent shortages and high prices of fertilizers threaten a worldwide disastrous harvest for the 2022-23 growing seasons. The U.S.-NATO empire had removed some Russian commercial banks from the SWIFT interbank messaging system. But the most dangerous move involves the Russian central bank and the future of the dollar-dominated international monetary system.

The radical — not Marxist (8) — economist Michael Hudson (1939-) has drawn attention to this aspect of the financial war in a March 8 article. Hudson writes, “During the half-century since the United States went off gold in 1971, the world’s central banks have operated on the Dollar Standard, holding their international monetary reserves in the form of U.S. Treasury securities, U.S. bank deposits and U.S. stocks and bonds.”

Here is the distinction between money and credit, two different economic categories often confused by economists. Many Marxists mistakenly believe modern money is non-commodity money. Traditionally central banks kept their reserves in the form of gold and silver with gold increasingly pushing out silver after silver’s value dropped near the end of the 19th century. By the beginning of the 20th century, some imperialist central banks began to hold some of their reserves in treasury bills of other imperialist countries. This system, which led to the gold-exchange standard, enabled central banks to earn interest on their reserves, something they couldn’t do with gold bars.

However, a central bank with its reserves in treasury bills of another country is relying on the ability and willingness of that other country’s government to pay the principal and the interest. Gold bars are money because they are products of human labor and because gold bullion is the money commodity. Gold bars are world money because they represent human labor that, unlike the labor represented by non-money commodities, is directly social. Therefore the value of gold bars is not dependent on the credit of its producers or issuers. The value of Treasury bills is dependent on the credit of those issuing them. Credit and money are not the same things.

Just before World War I, growing tensions between European imperialist powers made imperialist central banks doubt that governments of other imperialist countries would pay the interest and principal on their treasury bills. Inter-imperialist tensions were destroying the trust between imperialist countries that international credit depends on. European central banks moved back to holding their reserves only in gold bars. The resulting scramble for gold at that time explains why the 1913-14 world recession occurred only six years after the preceding 1907 world recession.

Holding gold bars has another potential disadvantage besides the fact they yield no interest (surplus value) to their holders. Gold bars, like physical cash you keep in your home, can be stolen. After Adolf Hitler came to power in Germany in 1933 the countries of Europe feared that they would be occupied by Germany, after which Germany would take their gold reserves. So some shipped their gold to the United States for safekeeping. They assumed the U.S. government wouldn’t seize the gold and would return it when requested. Generally, this happened, with some exceptions. One example: in 1948 when Czechoslovakia’s Communist Party seized power the United States seized their gold that was in U.S. vaults for “safekeeping.”

More recently, the gold owned by Venezuela’s central bank kept in the Bank of England for safekeeping was seized as part of the economic and financial war against Venezuela waged by the U.S.-NATO empire. It’s as though your commercial bank or credit union froze your bank account because the bankers disapproved of your political activity. If commercial banks and credit unions behaved this way, people with politics divergent from those of the banks would take their chances and keep their cash at home.

When the U.S.-NATO withdrew in defeat from Afghanistan and the Taliban returned to power in August 2022, the U.S. government froze the dollar reserves of the Bank of Afghanistan. This threw the economy of Afghanistan into a deep crisis. Washington hopes the resulting economic crisis and hunger it’s causing in Afghanistan will lead to the Taliban’s downfall.

Until now large countries’ central banks assumed Washington’s freezing of monetary reserves held in U.S. Treasury bills or other dollar-denominated liquid assets was confined to small countries like the above-mentioned countries. It’s as though commercial banks froze small accounts of customers with disapproved political activities but never did this with larger depositors. If other countries, like the People’s Republic of China, fear their central bank reserves are likely to be frozen by the U.S.-NATO world empire, won’t they quickly shift their reserves to gold? When credit is gone, only money remains. This is what Michael Hudson fears.

Hudson writes, “For many decades now, the U.S. Federal Reserve and Treasury have fought against gold recovering its role in international reserves. But how will India and Saudi Arabia view their dollar holdings as Biden and Blinken try to strong-arm them into following the U.S. ‘rules-based order’ instead of their own national self-interest? The recent U.S. dictates have left little alternative but to start protecting their own political autonomy by converting dollar and euro holdings into gold as an asset free from political liability of being held hostage to the increasingly costly and disruptive U.S. demands.”

In reality, the conditions enabling the U.S. dollar to function as world money have been in decline for years. Researchers working for the Wall Street bank Goldman Sachs have pointed this out. Harry Robertson, writing in Business Insider, notes that Goldman’s researchers say that the dollar standard confronts a number of challenges. These “include the fact that the U.S. has a relatively small share of global trade compared to the dominance of the dollar in global payments.” The researchers compared the situation of the dollar to the decline and eventual end of the British pound sterling as the world’s reserve currency during the 20th century. Further, Robertson notes, “the move by the U.S. and its allies to freeze Russia’s central bank out of much of its foreign currency reserves has raised concerns that countries could start moving away from using the dollar, due to worries about the power the currency grants the U.S.” If your bank or credit union threatened to freeze your account because the bankers don’t like the way you’re leading your life wouldn’t you seek an alternative?

What would be the consequence if the dollar standard were to end? Until the early 1970s, the United States ran a surplus in its balance of trade. The foreign trade surplus reflected that industry and agriculture both in terms of productivity of labor and volume of production were the most productive in the world. The superiority of U.S. industry and agriculture enabled the country to maintain a large middle class. In addition to the traditional, if declining, layer of family farmers and small business people this included a growing layer of white-collar employees and highly-paid labor union workers. The existence of a prosperous middle class has been essential for the stability of U.S. capitalist class rule.

Since the 1979-82 Volcker shock, the United States has been able to maintain its high standard of living for the middle strata – if to an ever declining degree – only through its ability to import far more commodity use-values – wealth – than it exports. The United States has been able to do this because the dollar standard has given it the ability to borrow back the money it spends on imports.

If the United States couldn’t borrow back the money it spends on imports, the resulting outflow of money would force it to reduce imports and increase exports. This would lead to a sharp decline in the standard of living – falling not on the rich, as they would continue to live “high on the hog,” or the very poor, as the standard of living of homeless people who live on the streets cannot decline much more – but on the middle strata of relatively well-paid blue and white-collar workers. A growing section of the middle class would be driven toward poverty. This process has already begun but would rapidly increase if the dollar standard ends. Such a development would pull the economic rug out from under what’s left of U.S. capitalist class stability.

We begin to understand why the Biden administration launched its global economic and financial war. It’s not because Biden cares about self-determination for Ukraine or any other country. Biden is counting on a Euromaidan-like regime to replace the Putin government in Russia. Then, U.S. corporations would buy up Russia’s extractive industries, fertilizer, minerals and agriculture. These companies will then accept the dollar in exchange for the goods produced by those companies. And Russia’s economy would become dollarized as we see in Central and South America as well as Africa.

This would strengthen the dollar standard for years to come. The U.S. middle class gets reinforced and the U.S. capitalist class rule gets consolidated. The U.S. Treasury gets access to money to spend on the U.S. military machine to hold down the people of the rest of the world.

Why is the Democratic Party is so hawkish?

This outcome is more important for the Democratic Party than for the Republican Party. The Democratic Party depends on a strong prosperous middle class to strengthen capitalist rule. Wasn’t this the essence of Roosevelt’s New Deal? The modern Republican Party is dependent on appeals to racism, bigotry and alliances with fascist groups. All this becomes necessary for the ruling class as the middle class faces ruin. To simplify, Democrats favor alliances with fascists abroad — like the Ukrainian Azov brigade — while Republicans favor alliances with fascists at home.

Before returning to Anwar Shaikh (see “The neoclassical system versus the Marxist system”), I’ll mention another development. On April 1, the U.S. 10-year Treasury bond yielded 2.38% interest. A two-year note yielded 2.44%. This is the (in)famous inverted yield curve. It indicates an approaching recession that could well arrive before the next presidential election is held in November 2024. The yield curve is called inverted because normally money lent for longer periods yields a higher rate of interest than money loaned for shorter periods. The highly inflationary and unstable COVID-aftermath boom has been made considerably more unstable by the world economic and financial war that has begun. The danger has now been increased that this coming global recession will not be the Federal Reserve System’s hoped-for slight inventory recession, but will instead be long and deep. I will analyze this situation as it develops in posts to come.

Now I must return to the economic writings of Anwar Shaikh.

Some general observations of Shaikh’s “Capitalism”

Now we come to Shaikh’s magus opus “Capitalism: Competition, Conflict, Crises” Oxford University Press 2016. This book is almost a thousand pages — a very long book. But Shaikh attempts to complete Marx’s critique of bourgeois political economy. Marx originally intended to write a book on the world market, competition and crises. Did Shaikh succeed in writing the book Marx intended but was unable to write?

Shaikh’s work and this book have a dual character. He accepts the theory that modern money is non-commodity money. That Shaikh does this shows he has not fully grasped Marx’s theory of value. So no, Shaikh’s “Capitalism” is not Marx’s intended book.

Shaikh is hardly alone. This is the vulgar side of his work. The real scientific sides of Shaikh’s work stand in contradiction to the theory that modern money is non-commodity money. Shaikh tries to bridge the contradiction running through his work with the theory of real competition.

It is clear Shaikh’s book was written at different times for different audiences. Sometimes his audience appears to be political activists and trade-union militants, well educated in Marx’s economic theories. Other chapters are written for fellow professional economists, educated in neoclassical, or as Shaikh calls it, orthodox economics. Therefore much of Shaik’s “Capitalism” is unreadable to people not educated in university economic departments or otherwise well versed with neoclassical theory. Some parts of the book use mathematical formulas not meaningful to readers not trained in the math, or the mathematical symbols employed, though there is a “Note on Abbreviations” on the variables he uses. It’s a very long note, but it does help a bit. Other parts of the book rely on natural language.

Significant parts of the book will be fully accessible to readers who have a good grasp of Marxist economics. However, these sections of the book will not be easily accessible to readers whose knowledge of economics was obtained from university economic departments. Shaikh wanted to be published by a major academic publisher – Oxford University Press – and to that end, he had to show he was a serious economist, not just a leftist radical writing for left-wing publications. So in places, Shaikh employs Marxist terminology while in others he uses university economic department lingo. Even professional economists will not find it easy unless they are familiar with Marxist economics, and most are not. So “Capitalism” is not light reading. Nor is it a good introduction to basic Marxist economic concepts.

Shaikh is wrestling with the question of how surplus value is produced. Then how it is transformed into money and distributed as profit through real-world competition. This is the process driving the real-world capitalist economy. Shaikh is only partly successful, for the reasons given above. But Shaikh being Shaikh, even his failures are interesting.

In this review, I begin with the strongest parts of Shaikh’s book, those dealing with the production of surplus value and the evolution of the rate of profit. The scientific core of this work is his emphasis that capitalist production is production for profit not production for use. The problem he struggles with is that profit arises in two acts. The first is the production of surplus value. If no surplus value is produced there is no profit.

Surplus value is not yet profit, but the necessary precondition of profit. Surplus value is embodied in what Marx called commodity capital, or in common business terminology, inventory. Commodity capital consists of unsold commodities that contain surplus value not yet realized in money form. The second act is the realization of surplus value in the form of money. Commodities, once produced, must be sold at profitable prices. Once commodity capital is converted into money capital, we have profit. Profit appears to the capitalist as a sum of money greater than what was advanced to produce the commodities. Profit is the difference between the money the capitalist receives from the sale of commodities and the smaller sum the capitalist advanced to produce the commodities.

In Shaikh’s work and Marxist economics in general, 156 years after the publication of the 1866 first edition of Marx’s “Capital,” the theory of the production of surplus value is more developed than that of the realization of surplus value.

Marx’s critique of classical political economy versus neoclassical economics

Shaikh stresses and any practical business person will affirm, that capitalist production is production for profit, not production for use. This is in contradiction to the neoclassical school that treats capitalist production as production for use. Neoclassicals assume that each individual economic actor pursues their own material interests, so assuming perfect competition, the outcome is the maximum satisfaction of human wants possible given the scarcity of goods. Neoclassical economics dissolves the economic classes of capitalist society into the classless category of consumers.

Once you understand that surplus value is nothing but the unpaid labor of the working class, you understand that the interest of the two main social classes is antagonistic. It is not possible to analyze society as it is by ignoring class and dissolving all members of society into the category of the consumer.

The consequence of the division of society into antagonistic classes is that the market makes industrial capitalists produce commodity use values in proportion necessary to reproduce capitalist society, not to maximize consumer satisfaction. Since the end of the Ricardian age, scientific economics has been the critique of bourgeois political economy. It is the science that studies how this outcome is achieved and what the consequences are.

Under capitalist production, only the capitalist ruling class and the large landowners get an approximation of the maximum satisfaction as consumers. This is why people who belong to these classes are such strong supporters of a market economy. Even as regards the members of the ruling class, as consumers we have to consider that advertising to a great extent shapes human wants. The consumer never operates in a vacuum independent of the producer. Industrial capitalists will often produce products with additive drugs to create and intensify human wants to maximize their profits. The tobacco and alcoholic beverage industries are classic examples. The current scandals over habit-forming opioids in pain-killing drugs are yet another example of this. But I will leave this aside for now.

Capitalist production is not interested at all in the maximum satisfaction of human wants. Capitalist production aims to keep the working class alive and healthy enough so it can produce more surplus value for the capitalists, the landowners, and their hangers-on. Still, less does capitalist production aim to provide maximum satisfaction for members of the reserve industrial army. Instead, producers are guided by the market to keep the industrial reserve army in such miserable conditions that performing unpaid surplus labor becomes the lesser evil.

It is no accident that after the publication of Volume I of “Capital,” the neoclassical theory arose that in mathematical terms “proved” that interest — interest is the closest neoclassical and Austrian theory gets to surplus value — is produced by consumers who subjectively value products that can only be consumed in the future compared to those products that can be consumed immediately. Surplus value arises in the neoclassical analysis in the sphere of consumption, not in the sphere of production! Even here, surplus value — “interest” — represents subjective psychological factors. Neoclassical economics makes no distinction between use values that are products of nature and those that are products of human labor. Once you understand the real origins and nature of surplus value, the claim that capitalist production, with or without perfect competition, achieves maximum consumer satisfaction falls to the ground.

Because the Marxist theory of the production of surplus value is more developed than the explanation of how surplus value is realized in money, it is easy to fall into the assumption that once surplus value is produced, its realization is a matter of course. This is Marx’s basic assumption throughout most of “Capital” and it is a powerful abstraction. Without understanding how it is produced, we cannot raise the question of how it is realized. To pretend to explain profit while covering up that surplus value is the unpaid labor of the working class is the essence of what Marx called vulgar economics. The highest form of vulgar economics is neoclassical economics.

The importance of a correct theory of money

Once we achieve a correct understanding of surplus value production, we have to answer the question of how it is realized.

Since it is realized in the form of money, you must have a correct theory of money to understand profit. Under capitalist production, money is a commodity with its own use value, measured by a unit appropriate to its use value. Use the example of some unit of weight of precious metals. Next, examine how capitalist production sees to it that over time, the money commodity is produced in the proportion required, allowing capitalist production to realize expanded reproduction. Within this framework then examine the relations between the accumulation of real and money capital. You must understand the commodity nature of money to understand how surplus value is realized.

A correct theory of money is vital to understanding how the market expands under the capitalist mode of production. Most importantly, markets expand more slowly under developed capitalism than the ability of capitalism to increase production. A correct theory of money is needed to examine the evolution of the relationship between the supply and demand for commodities. And without this, you will not be able to develop a correct theory of competition and monopoly. While Shaikh correctly rejects the neoclassical fantasy of perfect competition, he accepts at least sometimes the false idea that modern money is non-commodity money. He is therefore not completely successful in developing a theory of real competition and stumbles over the question of monopoly.

Unlike so many other academic Marxists, in “Capitalism” Shaikh at times comes close to a correct theory of money. He offers many crucial insights to understand capitalism’s concrete history. He turns away from the correct money theory at the last moment. He comes so close before he makes his false turn! While Shaikh does not successfully complete Marx’s critique of political economy, he does come close. His theory, and mistakes, offer the possibility of further development.

Shaikh is much stronger when he deals with the production of surplus value than when he attempts to explain the realization of surplus value. I will first examine Shaikh’s defense of Marx’s law of the tendency of the rate of profit to fall against the so-called Okishio theorem. The Okishio theorem, named after Japanese economist Nobuo Okishio (1927-2003) who originated it, claims the rate of profit won’t fall unless there is a rise in the real wage. The Okishio theorem is best known for its argument against the law of the tendency of the rate of profit to fall, though there are other arguments against the tendency of the rate of profit to fall which I will not deal with here. . Marx only presents his “falling rate of profit” theory in Volume III of “Capital.” The tendency of the rate of profit to fall is the foundation of Henryk Grossman’s breakdown theory which greatly influenced Shaikh.

Bauer-Grossman crises and the falling rate

There are no crises in Marx’s Volume II model of simple or expanded reproduction. (9) Marx’s model runs forever. Opportunist Social Democrats and bourgeois economists have used these models to advance the claim that Marx himself thinks capitalism can last forever. One answer to the claim was that Marx held both rate of surplus value and organic composition of capital constant. But once you assume a rising organic composition of capital, if the rate of surplus value remains constant, the rate of profit falls. Since profit is the sole motive of capitalist production, shouldn’t the fall in the rate of profit caused by a rising organic composition of capital lead to the downfall of capitalist production?

Otto Bauer improves Marx

The Austrian-Marxist Otto Bauer decided to improve on Marx. (10) He produced a model of expanded capitalist reproduction to include a rising organic composition of capital, a constant rate of surplus value, and a falling rate of profit. The socialist opportunist Bauer wanted to demonstrate that capitalist production could last indefinitely, and also to prove that capitalism could maintain full employment. He assumed a working-class population growth of 5% a year. He assumed the value of labor power and the rate of surplus value to remain constant. He did not assume the real wage was constant. Since Bauer’s model assumes a rising organic composition of capital, it implies a rise in labor productivity, a fall in the value of the commodities making up the real wage, and an ever-rising real wage.

To achieve this wonderful result, Bauer assumed a 5% annual rate of growth for the working-class population. To maintain full employment, capitalists must keep the variable capital growth rate at 5%. One parameter allowed to vary in Bauer’s model is the amount of capital capitalists devote to accumulation as opposed to their personal consumption. Since Bauer’s capitalists are confronted with a falling rate of profit, they’re required to devote an increasing proportion of the total surplus value, or profits, to accumulation at the expense of their personal consumption. Since in this model constant capital grows faster than variable capital, the overall rate of capital accumulation, including constant and variable capital, must accelerate if the growth in variable capital is to remain at the 5% necessary for full employment.

According to Bauer’s model, the percentage of the surplus value transformed into new capital with each new production cycle increases relative to the portion of the surplus value used for capitalists’ personal consumption. Henryk Grossman did the math and showed that eventually, the Bauer model of endless capitalist growth with full employment and no rise in the rate of exploitation of the working class must break down. The reason? The portion of surplus value left over to meet capitalists’ consumer needs — after deducting the portion needed to maintain the accelerated rate of capital accumulation needed to maintain full employment — must eventually drop to zero. By carrying out the calculation beyond Bauer’s four periods, Grossman showed Bauer’s model to be the opposite of what Bauer was attempting to demonstrate.

Grossman and his followers call the breakdown of the Bauer model, emerging from his calculations, a breakdown crisis. Whether these breakdown crises are an accurate model of what happens in real-world cyclical crises is another matter. Shaikh believes they are. The crises Shaikh describes are Bauer-Grossman crises. Bauer-Grossman crises do not involve any problems with the realization of value or surplus value. Everything proceeds smoothly in this regard as they do in Marx’s own model of expanded reproduction with a constant organic composition of capital and rate of surplus value. There are no realization difficulties within the Bauer-Grossman model, thus these are not crises of general relative overproduction of commodities but crises of insufficient production of surplus value.

No particular Bauer-Grossman crisis is terminal for capitalism. There are various routes out for capitalism. One possibility is variable capital grows less than 5%. This causes unemployment or a reserve industrial army to appear. This does not mean the further existence of capitalist production is impossible. The opposite is the case. Capitalism needs a reserve industrial army. The Bauer-Grossman breakdown crises arising in the model move it closer to the real world.

The second way for capitalism’s escape from a Bauer-Grossman crisis is to increase the rate of surplus value from 100% to a level beyond 100%. The value wage must decline, not necessarily the real wage. This is because the ever-growing organic composition of capital means a considerable growth in labor productivity. This implies the commodities constituting the real wage fall in value. The value wage can fall while the real wage increases.

A third solution is to combine the first two solutions. Unemployment grows, increasing competition among the sellers of labor power, causing the value wage to fall and the rate of surplus value to rise. This is the beauty of the Bauer-Grossman model. Features marking real-world capitalism, such as unemployment and wage-cutting, emerge from the model itself.

But the model raises a question. Though capitalism can emerge from the Bauer-Grossman crises, if we adjust it periodically by raising the rate of surplus value won’t capitalism run forever? No. The longer the model runs with periodic increases in the surplus value rate, the closer the value wage must approach the mathematical limit of zero. The model points to an eventual permanent breakdown of the capitalist system.

Grossman himself stressed the final breakdown of capitalism will not occur through the pure mathematical operations of the Bauer-Grossman model. It will occur through the conquest of political power by the working class. Grossman believed the model captures the evolution of the capitalist mode of production forcing the working class to seize power, sooner or later.

A note on Okishio theorem and neo-Ricardianism

Bauer, though an opportunist operating within the pre-1914 Social Democratic movement, was closer to Marx than Okishio who was more of a neo-Ricardian. When Ricardo first became interested in political economy his concern was how to explain the distribution of the national income between wages, profits (including interest) and ground rent. To do this Ricardo compared the incomes of the three main social classes in capitalist society: wages of the working class, profits of the capitalists, and rents of the landowners. He ran up against the problem of reducing the incomes of the social classes to a common substance to make them comparable. Commodity use values consumed by the working class, on one side and capitalists and landowners on the other, differed quantitatively and qualitatively. How do you compare the cheap clothes purchased by the workers with their wages, with fine wines, coaches, and horses purchased by the capitalists and landowner’s profits and rents? Ricardo’s first solution assumed only one consumer commodity for personal consumption: corn.

He soon realized that pretending the workers, capitalists and landowners all consumed only corn was a violent abstraction. There was a much better solution: Not to compare different commodities’ use values but the quantity of labor socially necessary to produce them – to compare their values. While previous economists had done this, Ricardo did it with greater consistency than anyone before Karl Marx.

Explaining the value of commodities in terms of the labor socially needed to produce them leads to the theory of surplus value as unpaid surplus labor. Bourgeois political economics couldn’t take this path — it exposed capitalism’s exploitative nature hiding behind the exchange of equal quantities of labor. Bourgeois political economics’ break with the labor value concept is today’s neoclassical economics.

In academic circles, talking about surplus value as unpaid labor is not respectable. Even in the New School where Anwar Shaikh is employed, neoclassical economics is its economics department’s predominant economic theory. It’s as though a university biology department taught primarily creation science has its main approach to the origin of species but employed a few Darwinists as well.

The neo-Ricardian school attempts to maintain an intermediate ground between Marxist and neoclassical economists. It tries to dance around the question of surplus value as unpaid labor by retreating to an early Ricardo of the corn models. Their models assume a “very simple economy producing only two commodities corn and iron.” This is why Okishio talked of the real wage when he should have talked of the value wage and rate of surplus value. Shaikh admires Piero Sraffa and other modern classical economists. He considers himself one. He is both a critic and an admirer of the neo-Ricardians. Shaikh sometimes slides into neo-Ricardianism and talks about the real wage when he should be talking about the value wage (value of labor power) and the rate of surplus value.

The Okishio theorem boils down to the claim that no rational capitalist will adopt a production method that will lower the rate of profit. The profit rate is defined as the total surplus value over the total capital advanced. This should not be confused with surplus value divided over the capital used up in a production cycle. This raises the question, does the industrial capitalist choose the production method yielding the lowest cost price? (Shaikh insists they will.) Or, as Okishio and his followers claim, does the industrial capitalist choose the production method yielding the highest profit rate?

Doesn’t the production method with the lowest cost price yield the highest profit rate? Not necessarily. A production method requiring less total advanced capital may yield a higher profit rate at a given selling price, while another production method requiring a greater amount of advanced capital yields a higher profit rate than the first at a lower selling price. If true, which method will the industrial capitalist adopt? The Okishio theorem says the method the industrial capitalist chooses is the method yielding the higher profit rate at a given level selling price. But Shaikh says real competition obliges the industrial capitalist to adopt a method yielding a lower cost price, even if it means a lower profit rate. Here is a numerical example taken from Shaikh’s “Capitalism” (p. 263)

Source: “Capitalism: Competition, Conflict, Crises,” Anwar Shaikh

Before proceeding to the numerical example, it should be noted that I discovered an error while checking the calculations in table 7.2, column 3.. In the table, the selling price of the commodities produced is assumed to be $89.50. The unit cost — or cost price — is subtracted from the selling price to calculate the profit per unit. The result is then rounded up by .50 in column 3 in table 7.2. A rounding up of this magnitude would never be done in real-world business accounting. On checking, Shaikh’s profit rates matched my corrected results, Shaikh did the profit rate calculation correctly but careful readers should watch for the error.

Let’s assume we have two methods of production: method A and method D. The commodity produced sells for $100.00 per unit. Method A has a unit cost — cost price — of $82.00 and a profit rate of 15%. Total advanced capital is $12,000.00. the profit per unit is $18.00. Since 100 units are produced, total profit ($18.00 x 100) = $1,800.00. Dividing $1,800.00 by the total capital of $12,000.00 yields a total profit of (1800 / 12000) or 15%. Method D uses more constant capital. It needs $21,000.00 in total capital to produce 100 units that sell for the same price of $100.00 each. The total cost price of method D is only $76.00, $6.00 lower than method A. Method D produces 130 units. The profit rate with method D is (3120 / 21000) or 14.86%. Method A has a higher profit rate. Method D has a lower cost price. Okishio supporters say industrial capitalists would adopt method A, boosting their profits by holding down the organic composition of capital. But Shaikh believes they would choose method D, with its lower cost price.

Assuming method A as the production method and method D is introduced as an alternative. The Okishio theorem posits that D won’t be adopted by rational profit-maximizing capitalists, the profit rate won’t fall, and there won’t be any Bauer-Grossman crises, nor the ultimate breakdown of the capitalist system. But what would happen if commodity selling prices fall from $100.00 to $89.50?

Let’s recalculate the profit rate using method A and method D assuming a selling price of $89.50. With A, the industrial capitalists produce and sell 100 units but now will have to sell them at $89.50. The cost price with A is still $82.00. The total profit falls to $750.00. Dividing the total profit of $750.00 with a total capital of $12,000.00 (750/12000) the profit rate is 6.25%

Using method D, the industrial capitalists sell 130 units at $89.50 at a cost price of $76.00 for a total profit of $1,755.00. The total profit rate is $1,755.00 divided by total capital of $21,000.00 (1755/21000) 8.36%. Therefore at a selling price of $89.50, D yields a higher profit rate of 8.36% compared to method A at 6.25%. While the fall in selling prices reduced the profit rates of both, the profit rate yielded by method A – the low organic composition of capital method — will fall more than the profit rate of profit of method D — the high organic composition method.

The takeaway: When selling prices are well above the cost price, a production method with a somewhat higher cost price might yield a higher profit rate because it saves constant capital and thereby reduces total capital.

But if the selling price falls, the production method yielding the lowest cost price, even if it uses more capital, will yield the highest profit rate. To take it to the mathematical limit, as the selling price falls, profit disappears last for the production method with the lowest cost price no matter how much additional constant capital it uses.

Shaikh sees this as the Okishio theorem’s fatal flaw. Okishio assumes capitalists behave rationally to maintain higher selling prices. Shaikh believes real competition forces capitalists to lower selling prices until those with the lowest individual cost price successfully undersell those with higher individual cost prices. Shaikh believes this error is made because their analysis begins with the perfect competition of neoclassical economics, not with the real competition characterizing real-world capitalism. I’ll return to this in a later post.

To be continued


(1) Russia, Belarus, and Ukraine trace their origins back to a feudal state centered in Kiev called the Kievan Rus’. This state existed between the late 9th century to mid-13th century, according to a Wikipedia article on Kievan Rus’. (back)

(2) The U.S.-NATO empire is attempting to replace Putin’s capitalist nationalist government with a Russian equivalent of the Ukrainian Euromaidan regime that will do what the U.S.-NATO policymakers tell it to do. But remember, there are other possibilities for regime change. If Putin’s capitalist, Russian-nationalist regime is replaced by a revived Soviet state, Washington will rue the day it attempted to replace the Putin government. The only real solution to the Russo-Ukrainian crisis is for both countries to return to the road of the October socialist revolution. (back)

(3) Zbigniew Brzezinski (1928-2017) was an adviser to U.S. Democratic presidents and a major strategist of U.S. Cold War policies. He claimed credit for entrapping the Soviet Union by obliging it to send troops into Afghanistan. He claimed this was the Soviet Vietnam that led to the downfall of the USSR. While the Afghanistan war certainly didn’t help, I don’t believe this was the main cause of the USSR’s downfall. However, to thoroughly explore the causes of the 1985-91 political and social counterrevolution, though a question of vital importance to Marxists, would take us beyond the subject of this blog: the study of capitalist economic, financial and political crises. (back)

We now know that the United States itself fell into the same trap that Brzezinski boasted he set for the USSR in Afghanistan. Future historians may conclude the 2003 ill-fated U.S. invasion of Afghanistan ending in defeat in August 2021 was the beginning of the end of the U.S. world empire and of capitalism itself. It is possible that frustration with its humiliation in Afghanistan led the Biden administration to encourage its Euromaidan puppets in Kiev to launch an offensive against the people’s republics in the Donbass. The confrontation provoked between Russia and U.S.-NATO now threatens to unravel the dollar system. If this occurs, the U.S.-NATO empire will fall, which could well trigger the capitalist system’s downfall. (back)

(4) In that case Russia would face destruction as well. (back)

(5) The existence of cheap land stolen from the Native peoples not only stabilized U.S. capitalist class rule during the 19th century but also acted as a safety valve for European capitalism. People who might otherwise have become leaders of the workers’ movement were instead lured to the land of unlimited opportunity, the United States. Settler colonialism was a powerful stabilizer for European as well as U.S. capitalism. Today, the development of the productive forces in agriculture has reached such a point that the family and small-scale capitalist farming that formed the foundation of settler colonialism has ceased to be economically viable. (back)

(6) The world may have been closer to a massive nuclear exchange during the 1962 Cuban missile crisis, the October crisis as it is called in Cuba. But the way out of that crisis was relatively simple. The Soviets agreed to withdraw their missiles in exchange for a U.S. promise not to invade Cuba and the removal of U.S. missiles aimed at the Soviet Union in Turkey. President Kennedy was able to control Pentagon hawks, like Air Force General Curtis Le May, who were pushing for World War III. But the current crisis, going far beyond Ukraine, is much deeper because it involves the very survival of the U.S.-NATO-dollar world empire. No real lasting compromise is possible, though short-term agreements and truces are. The only real way out of the broader crisis is a new world war which could very well go nuclear or a world socialist revolution. And so the most dangerous period in human history begins. (back)

(7) I remember from 2003 the pictures of Iraqis dismantling Scud missiles just as the first U.S. troops were landing in southern Iraq. U.S. policy first demanded that Iraq get rid of any weapons that might slow a U.S. invasion or increase its expense — with the support of a part of the Western peace movement — and then the U.S. invaded. (back)

(8) Hudson is a supporter of Modern Monetary Theory. (back)

(9) Only one economist, Dr. François Quesnay (1694-1774), a member of the French physiocratic school of classical political economy, dealt with the problem of reproduction before Marx. In 1759 Quesnay published his “Tableau Economique” which greatly influenced Marx’s work on reproduction. Neoclassical economics has contributed nothing to the study of reproduction so the work done by economists in the neoclassical tradition in the form of modern input-output tables is cribbed from Marx’s work. (back)

(10) Austrian-Marxism refers to a trend that was associated with the Social Democratic Party of Austria. Though the Austrian-Marxists made valuable contributions to Marxist theory in the years before World War I, politically they were closer to German Social Democratic centrists than they were to the revolutionary left wing of the German Social Democratic Party associated with Rosa Luxemburg and Karl Liebknecht. They had a definite tendency toward opportunism and tended to take the revolutionary edge off Marxism. (back)