Is capitalism approaching its limits?
In the first years of the 20th century, Rosa Luxemburg (1) expressed great alarm when she discovered that Marx’s formulas of expanded reproduction in Volume II of “Capital” suggested that capitalism can in principle go on forever. These formulas appeared to contradict Marx’s famous Preface in “A Contribution to a Critique of Political Economy.” There Marx wrote: “No social order ever perishes before all the productive forces for which there is room in it have developed [my emphasis — SW] and new, higher relations of production never appear before the material conditions of their existence have matured in the womb of the old society itself.”
If, however, capitalism can engage in expanded reproduction without limit, how can capitalism ever develop all the productive forces “for which it has room”? Didn’t Marx himself mathematically demonstrate that capitalism can develop the productive forces without limit? However, a closer look reveals this apparent contradiction to be an illusion.
In the Volume II formula, the productive forces expanded only quantitatively but not qualitatively. There is no growth in labor productivity or what Marx called the organic composition of capital — the ratio of constant capital, which does not produce surplus value but merely transfers its value to the commodities it helps produce, and variable capital, the sold labor power of the workers, which replaces its value and produces additional surplus value. (2)
It is also assumed that the correct proportions of production, including the correct proportions between Department I, which produces the means of production, and Department II, which produces the means of consumption, are maintained without explaining how they are maintained. And — almost always overlooked — among the correct proportions between the various branches of production that must be maintained is that between the production of money material and all other branches of commodity production. (3)
In reality, the concrete history of capitalism has been marked by growth in labor productivity. The rate at which productivity grows is largely regulated by the competition between the industrial capitalists and the workers. To maximize their profits, the industrial capitalists as the buyers of labor power try to pay the workers the lowest possible wage. The workers as the sellers of labor attempt to get the highest possible wage right up to the mathematical limit where surplus value — and therefore its monetary form, profit — disappears altogether.
If Marx’s formulas show expanded capitalist reproduction running forever, it must be assumed that the quantity of auxiliary materials and the ores out of which money material is produced, and the supply of labor power that produces the means of subsistence for the workers, must be available in infinite quantities. If this is true — which it obviously is not — then the population, including the fraction of the population that consists of workers, can grow to the mathematical limit of infinity and capitalism can indeed go on forever. Otherwise, it can’t.
In reality, capitalism exists in a material environment that excludes it lasting forever. In every successive economic boom, the demand for labor power rises faster than the quantity of labor power available on the labor market. This leads to rising wages, which forces the capitalists to replace workers with machines so they can once again increase the rate of surplus value. However, this causes the organic composition of capital to rise. A rising organic composition of capital leads to the tendency of the rate of profit to fall. The law of the tendency of the rate of profit to fall is the most important law of all political economy, according to Marx.
Profit is the only motivation of production under capitalism. Yet the resulting development of the productive forces that capital is forced to undertake undermines profit itself. Taken to its logical conclusion, the development of the productive forces would lead to the elimination of all living labor from production and therefore the end of wage labor. Without wage labor, there would be no surplus value and therefore no profit. Capitalism would no longer exist. (4) These not unimportant “laws of motion” of capitalism are abstracted from the formulas of expanded reproduction in Volume II of “Capital.”
What Marx’s formulas of expanded reproduction do show is how capitalism for the period in the history of production that it rules reproduces itself on an expanding scale. Capitalism’s incessant need to expand explains why economists and capitalist politicians are so obsessed with an ever-rising GDP.
Unlike real-life capitalism, the abstracted capitalism in Volume II does not have to worry about the material environment in which it is embedded. Real-life capitalism doesn’t have that luxury. To explore how long capitalism can go on, we have to examine the interaction of capitalism with the material environment in which it is embedded. And today’s capitalism is running into ever graver environmental obstacles. One problem, but not the only one, is global warming. Many experts believe that environmental disruptions are behind the COVID-19 pandemic, which over the last few months has radically disrupted capitalist expanded reproduction.
What at first glance would appear to be unrelated to the growing environmental crises is the problem of finding ever-expanding markets for the growing volume of commodities produced as expanded capitalist reproduction proceeds. All capitalists must expand their sales over time if they are to stay in business. While individual capitalists can accomplish this by taking markets away from rival capitalists through advertising and other methods, the capitalist system as a whole cannot do this. Indeed, the problem of “growing the economy,” as bourgeois politicians like to put it, comes down to “growing the market.” The discipline of “macro-economics” that has grown up since the 1930s revolves around policies the central bank and the government must follow to grow the market as rapidly as possible.
Early in the 20th century, the Ukrainian bourgeois, quasi-Marxist Mikhail Tugan-Baranovsky (1865-1919) pointed to Marx’s Volume II reproduction formula to prove that a problem of markets doesn’t exist for capitalism as long as it maintains the correct proportions between the various branches of production. But as we have seen in this blog, a sufficient quantity of money material must be produced if markets are to expand such that capitalism expands at a “healthy” rate.
Capitalism came into existence in the 16th century when vast gold and silver deposits were discovered in the “New World,” which led to the birth of the world market. The two great “booms” of the 19th and early 20th centuries are linked to the discovery of rich new goldfields. The so-called “mid-Victorian boom,” which set in immediately after the 1848 revolutions, followed the discovery of gold in California in 1848 and Australia in 1851. The next great economic “boom” of capitalism, which lasted from 1896 to 1913, was linked to the discoveries of gold in Alaska and Canada in the mid-1890s. Since then, there have been no comparable gold finds.
The absence of a comparable gold discovery between 1848-51 and the mid-1890s caused the mid-Victorian “boom” to give way to the “long depression” of 1873-1896. The long depression continued until it was finally broken by the Alaskan and Canadian gold discoveries. In the absence of further major gold discoveries, it took the Great Depression of the 1930s to create the conditions of a new “great boom” between 1945 and the 1970s. Since then, in the absence of a new “gold rush” on the scale of 1848-51 and the 1890s and a new “Great Depression,” the rate of growth of world capitalism has slowed down. We have seen how the depletion of the South African goldfields at the turn of the 21st century led within a few years to the “Great Recession,” followed by the slowest economic recovery in the history of modern capitalism. Perhaps a “Greater Depression,” assuming capitalism survives it, might give capitalism breathing room for a couple of decades or so, but even that would be no long-term solution.
How capitalism expands its markets
Why is this so? Capitalism expands its markets in two basic ways. (5) One is by increasing the quantity of money material, and the second is by reducing prices so that a given quantity of money material can circulate more commodities. Under a gold standard, insufficient gold production leads to declining currency creation and a slowdown in the growth of commercial bank reserves. This leads to tight money and rising interest rates. These in turn lead to credit and banking crises due to the difficulties sellers run into in making payments that were contracted with the assumption of higher prices, which trigger acute crises followed by depression or stagnation.
Under a “fiat currency system,” periods of declining gold production lead to currency devaluation — rising currency prices of gold — and currency devaluation inflation. At a certain point, the central banks have to restrict their creation of new currency under pain of runaway inflation. To hold inflation in check, the central banks must follow “tight money” policies that lead to rising interest rates and then recession/crisis followed by depression and stagnation.
If goldfields are being depleted, the value of gold relative to non-money commodities will rise. This will mean that the value of commodities will express themselves in lower and lower golden prices (prices measured in ounces of gold). This will lead regardless of the currency system in effect — whether a gold standard, a gold exchange standard exchange, or a “fiat currency” system — to deeper and longer recessions and weaker recoveries. As goldfields become depleted, the process of expanded capitalist reproduction faces a growing headwind causing it to slow down. No policies, whether fiscal or monetary, available to the central banks and the capitalist governments can get around this.
When economic growth slows down for an extended period, the centralization of capital accelerates and the gap between the wealth of the capitalist class and the rest of the population widens. Class antagonisms increase as the ability to reduce them through timely concessions by the capitalist class to the working class dries up. This will then inevitably be reflected in the political arena, where the most important class battles are fought out. This is exactly what we have seen over the last few decades, especially since the Great Recession of 2007-09.
One person who is well aware of the limits that the environment is placing on the continued “healthy development” of capitalism is Jeff Bezos. Mr. Bezos regularly trades places with Bill Gates — depending on the movement of stock market prices on a particular day — for the title of the world’s richest capitalist. His personal fortune is estimated as well north of $125 billion and climbing. Bezos is considered a leading candidate to become the world’s first U.S. dollar trillionaire.
Bezos complains: “We have become big as a population, as a species, and this planet is relatively small. We see it in things like climate change and pollution and heavy industry. We are in the process of destroying this planet.” Yet if capitalism is to continue to expand and breed ever-richer capitalists — the John D. Rockefellers, Bill Gates, and Jeff Bezoses of tomorrow — it will need even more surplus value-producing wage workers. This implies a still bigger population, meaning even more pollution and even more rapid climate change as well as more gold depletion and resulting “secular stagnation.”
Bezos’ solution is for capitalism to learn to exploit the resources of the solar system because the resources on planet Earth are simply too small to support capitalism much longer. Bezos says: “We send things up into space, but they are all made on Earth. Eventually, it will be much cheaper and simpler to make very complicated things, like microprocessors and everything, in space and then send those highly complex manufactured objects back down to earth, so that we don’t have the big factories and pollution-generating industries that make those things now on Earth.”
Jeff Bezos’ nightmare vision
Bezos’ scheme to keep capitalism going is to breed workers who will live in “giant cylinders” that orbit the Earth or the sun. Eventually, these “space structures” will in Bezos’ vision support a population perhaps 10 times larger than the population on Earth today. These workers will then use the raw materials from asteroids or other bodies of the solar system — which will also provide the money material needed to realize the value and surplus value of the vastly increased quantity of commodities that will be produced — to produce surplus value for the capitalists, who will live on a “residential zoned” Earth.
Such a solution might enable capitalism to survive another century or so, though not forever. And it is far from certain that today’s decadent and increasingly stagnant capitalism will be able to realize the vast and radical technological revolution necessary to make Bezos’ nightmare vision of a century or so more of capitalism a reality — not to mention overcome the resistance the working class will put up to being sent off into space to produce surplus value for the Bezoses and lesser capitalists of tomorrow.
This does not exclude the possibility that a future communist society and not a capitalist society will be able to realize the technological revolutions necessary to enable it to use the natural resources of the solar system and transform Earth into a garden planet, thus escaping the Earth’s “planetary limits.” Unlike a capitalist society, a communist society has no need for an infinitely growing population and working class to produce an ever-greater quantity of surplus value for the capitalist class. Such a society of material abundance for all as foreseen by the Marxist classics would then be possible. We would then see the development of our productive forces well beyond anything existing today without destroying the ability of our home planet to maintain life, including human life.
However, here on planet Earth, the possibilities for the continued existence of capitalism are fast disappearing, leading to today’s environmental crisis and capitalist secular stagnation. This forms the material background in which the movement to abolish the police — not reform the police — has been developing in the United States and spreading around the world.
Demands that can and cannot be won under capitalism
Many mass movements have erupted during the history of the U.S. from 1775 onward raising progressive demands. Though these demands have been resisted by the ruling classes — and after 1865 there has been but one ruling class, the capitalist class based on the exploitation of wage labor — all these demands were realizable, at least to a degree, under the capitalist system.
Let’s look at some of these. Before the War of the Slave Owners’ Rebellion, the most important of these (bourgeois) democratic movements demanded the abolition of slavery. The movement to abolish African slavery had reformist and revolutionary variants.
In the antebellum period, there was a widespread attitude among whites, that slavery was somehow wrong and should perhaps be restricted and would and should die. But the demand that slavery is simply abolished by the action of the State was considered among white people extremist and unreasonable. Slavery was, after all, a form of private property recognized by the U.S. Constitution. If you abolished one form of legally recognized private property, wouldn’t this undermine other forms of private property — for example, in land and capital?
If the founding fathers were about anything, it was about the right to private property. Therefore, the prevailing attitude in the North, where legal chattel slavery had indeed died by the 1830s, was that slavery should be allowed to die out naturally in the South without any more action by the State to abolish it. However, even in its most revolutionary form, there was nothing anti-capitalist in the demand that African chattel slavery be abolished. On the contrary, the further development of U.S. capitalism demanded it, if only because slavery kept a considerable portion of U.S. working people — enslaved African-Americans — off the “free labor market” and therefore lowered the mass and rate of profit for the capitalists.
The same can be said of the demand to extend the right to vote to women of both races. In the late 19th century, what we would today call the radical left of U.S. politics pursued both the demand to extend the right to vote to the African-American ex-slaves and to women of both races, which were often seen — and correctly so — as interlocked. It was often an uphill struggle, but finally, in the1960s it had been largely won.
Today, the modern Republican Party — as much a descendant of the historically racist Democratic Party as it is the historical Republican Party — is trying to take the vote once more from African-Americans and other people viewed as unlikely to vote Republican. A struggle must be waged against these attempts, and indeed we should demand a long-overdue amendment to the U.S. Constitution that would guarantee the right to vote to all. Today, the struggle for women’s right to vote has extended far beyond that right and has given birth to the modern LBGTQ movements. Here we see a radical expansion of the concept of (bourgeois) democratic rights within the framework of the capitalist system.
It says a lot about the present-day Democratic Party — which insisted on nominating Joseph Biden over Bernie Sanders — that it fails to take up the proposal of African-American and former Civil Rights leader Congressman John Lewis for an amendment to guarantee to every person over the age of 18 — or 16 — the right to vote. This is true even though under current political conditions it would strongly favor the Democrats over the Republicans. Sure the Republicans would oppose it, but they then would be exposed as the anti-democratic – with a small “d” — party that they are. And isn’t the U.S. supposed to be all about “democracy”? But the Democratic Party and their current central leader, Joseph Biden, are more interested in keeping the racist Republican Party alive than they are about defending the most important principle of formal bourgeois democracy, that principle being one person one vote.
Let’s look at another mass movement, the movement to unionize U.S. workers. Mass movements for the unionization of wage workers have periodically occurred throughout U.S. history. Outside of certain crafts, it was repeatedly beaten down. But finally, during the 1930s, it was largely realized in basic industry with the rise of the Congress of Industrial Organizations. Naturally, the capitalists bitterly resisted unionization because it reduces the rate of surplus value and lowers the rate and mass of profit.
However, the right of wage workers to band together to suppress competition among themselves so that they can sell the only commodity they possess — their labor power — at a better price is also perfectly compatible with the capitalist system. The political evolution of the new industrial unions of the CIO after the 1930s made this as clear in practice as it is in theory.
The same can be said about the demand for “single-payer” health insurance, or Medicare for All. This is shown by the fact that this demand has been more or less won in every developed capitalist country and some not-so-developed capitalist countries.
Capitalism cannot abolish the police
But the demand to abolish, or “defund,” the police — if what is meant by the latter is “not a penny for the police force” — is not compatible with the continued existence of capitalism. It is the first mass movement in U.S. history that is not. But why is the demand incompatible with the continued existence of capitalism?
The reason is that capitalism is a form of class society where one class — the ruling capitalist class — has a monopoly on the major means of production. Because of this, another class — the working class — has to sell its labor power to the monopolistic owners of the means of production. Because the contradiction between the classes grows sharper as capitalism develops and decays, capitalism cannot survive without a massive repressive state. And the police are the main part of the state that carries out the repression on a day-to-day basis.
Therefore, the police cannot be abolished — at least not for long — without the smashing of the rest of the capitalist state, which includes the capitalist standing army topped by its officer corp; the “intelligence” apparatus with its spies; and the prison system, both buildings and prison guards; as well the capitalists courts, judges and prosecutors. Abolish the police and the entire capitalist state will begin to unravel.
Therefore, to demand the abolition of the police, if it is to be really carried out, means the abolition of the entire capitalist state. The Democratic and even to some extent the Republican politicians are expressing sympathy for the anti-police protesters. They are doing everything they can to get people off the streets. They are trying to deflect the demands to abolish the police into various schemes to reform the police. Joseph Biden, however, is proposing that funding for the police be increased to “reform” them. But, up to now, these types of reforms have failed to curb police violence, at least for very long.
The state and the socialist transformation of society
The socialist transformation of society cannot begin before a political revolution destroys — or smashes — the capitalist state, which includes the police. When the working class and people in general can no longer tolerate the day-to-day violence of the capitalist state, a movement against the police and police violence develops. When the police can no longer handle the situation, the capitalist government calls out the military to act as the police of last resort.
For the situation to end in a successful political revolution that transfers political power from the capitalists to the workers, the soldiers the capitalist government attempts to use as a police force against the people must in their majority “go over to the side of the people.” Once this happens, the police are overwhelmed — in effect “abolished” — and a workers’-led government is established. If this does not happen, the working class and the people are crushed and the authority of the police is reestablished.
If a workers’ government is established, a new system of “public safety” based on the armed and organized working class is established. We now enter the period Marx called the transition between capitalist and communist society. The new state power is then able to begin the expropriation of the capitalist class and the political revolution leads to a socialist revolution.
This is true even if the initial demands of the revolution do not go beyond reforms within capitalism. We don’t have to look any further than Cuba to see an example of how a revolution against the massive police and military violence endured by the Cuban people under the Batista dictatorship led to a successful political revolution that turned into the Cuban socialist revolution.
To the extent that a communist society is built — classes disappear and with them class antagonisms — the new “system of public safety,” also called the “dictatorship of the proletariat,” or a workers’ state, becomes less and less necessary. While the capitalist state must be abolished — smashed — the new state established by the victorious working class either progressively withers away or is overthrown by a bourgeois counterrevolution.
In contrast, the capitalists will never “wither away” because neither of the two main antagonist classes of capitalist society — the workers and the capitalists — wither away. Far from withering away, the capitalist state as an organization of violence only grows stronger.
For these reasons, the mass movement to “abolish the police” is the most radical mass movement in U.S. history because it is the first mass movement that is truly incompatible with the continued class rule of the capitalists. Though the movement is not as such “demanding socialism” — any more than the Cuban movement against the Batista dictatorship did in the 1950s — in the course of its further development, it can only lead to the end of capitalist class rule and the socialist revolution.
An important feature of the anti-police movement in the U.S. is that it has spread around the world. U.S. imperialism is well known as the leading counterrevolutionary force in the world. A growing revolutionary movement within the U.S., therefore, has the power to pull the rug out from under capitalism within the U.S. but also throughout the entire world.
Back in February and early March, just before the extent of the COVID-19 epidemic had become apparent and the lock-down and stay-in-place orders began to go into effect, U.S. politics was revolving around the Bernie Sanders campaign for the Democratic presidential nomination. The main plank of Sanders’ program was Medicare for All. Under Sanders’ plan, once Medicare for All went fully into effect medical care in the U.S. would be transformed from a commodity into a basic human right.
A massive campaign was organized by the capitalist masters of the Democratic Party to deny Sanders the Democratic nomination for the presidency. Sanders’ remaining major rivals in the Democratic Party dropped out on the eve of the March 3 super-Tuesday primary. In the end, the nomination was handed to Joseph Biden, who is an opponent of medical care as a human right. Biden went as far as indicating he would veto it in the unlikely event that a Medicare for All bill was passed by a Democratic House and Senate that might emerge out of the 2020 election. Overall, Biden was the most right wing of the major Democratic presidential candidates.
At the beginning of this series of posts, I pointed out that by stage-managing the Biden nomination, the capitalist ruling class was slamming the door shut on any major reforms within the U.S. capitalist system. I indicated that if the ruling class persisted in this course of denying long-overdue reforms such as health care and college education as human rights, the road to revolutionary struggle would be opened.
Now, not decades or even years later but within only a few months, we have a mass movement that by its inner logic, whether consciously understood by its participants or not, is raising what could become a demand to end capitalist class rule. While a socialist revolution in the U.S. won’t occur next week, it is no longer a question for the distant future and future generations. It is something that the current generation of young people must and can realize within their lifetimes.
On this note, I will end this series of weekly posts. Unless events unexpectedly accelerate — and that is possible — the time has come to return to the schedule of monthly, rather than weekly, posts. Look for the next post on July 26.
1 Luxemburg attempted to prove that capitalist expanded reproduction cannot occur in the absence of a non-capitalist class of simple commodity producers. Simple commodity producers are people who own their own means of production and produce commodities but do not employ wage workers. In practice, most of these people belong to the peasantry. As capitalism develops, this layer declines as both a percentage of the population and absolutely. A small portion of the simple commodity producers become capitalists employing wage labor while the greater portion lose their means of production and become wage workers. According to Luxemburg, imperialism arises because capitalism is increasingly forced to find the extra markets it needs in largely pre-capitalist countries where simple commodity producers remain numerous.
As the class of simple commodity producers becomes exhausted, according to Luxemburg’s theory, expanded capitalist reproduction becomes increasingly difficult. Capitalism, therefore, approaches the point where it can no longer develop the productive forces, which makes the socialist revolution both possible and inevitable. Luxemburg’s theory is both a theory of imperialism and a “breakdown” theory.
Most other Marxists rejected Luxemburg’s theory on the ground that she failed to prove that the realization of surplus value is mathematically impossible in a purely capitalist society consisting of only industrial capitalists and wage workers. The most famous Marxist who rejected Luxemburg’s theory of both imperialism and capitalist breakdown was Lenin, whose theory of imperialism based on capitalist monopoly and the role of finance capital is very different from Luxemburg’s.
For her part, Luxemburg rejected the other popular capitalist breakdown theory based on the tendency of the rate of profit to fall. According to Luxemburg, the falling rate of profit in capitalism is compensated for by a growing mass of profits. Therefore, any movement of the rate of profit would not, she argued, prevent capitalism from lasting until “the sun burns out.” Henryk Grossman (1881-1950) agreed with Lenin and other Marxists that Luxemburg’s solution to the “breakdown” problem was incorrect and tried to prove mathematically that, contrary to Luxemburg, capitalism will inevitably break down due to the falling rate of profit.
It must be pointed out that neither Luxemburg nor Grossman expected capitalism to transform itself into socialism automatically but assumed that once the tendency of capitalism to breakdown reached a certain point the growing social and resulting political crisis would oblige the working class to seize political power. The working class would then use its political power to transform dying capitalism into socialism well before capitalism had reached its absolute mathematical limits. (back)
2 The only way the correct proportions among the various branches of production, including the industries of Department I and Department II and the separate branch of production that produces money material, can be achieved is through the competition between industrial capitalists to maximize their individual rates of profit. The attempt of each capitalist to maximize its profit gives rise to the tendency for the equalization of the rate of profit. Therefore, in the anarchic capitalist economy that lacks an overall plan, the correct proportions of production can only be achieved through constant disproportions that are constantly being reproduced and corrected as capital flows from branches of production with a lower than average rate of profit to branches with a higher than average rate of profit. This process — especially as it concerns the correct proportion between the branch of production that produces money material and all other branches of production — produces the industrial cycle.
In Volume II, Marx examines the circulation of capital and capitalist reproduction, both simple and expanded. However, the competitive struggle is abstracted out. Indeed, Marx doesn’t even examine the equalization of the rate of profit until Volume III. No examination of concrete real-world capitalist competition, crises, let alone the ultimate limits of capitalism can be made without an understanding of the equalization of the rate of profit and the consequent transformation of values not into direct prices, which would be exactly proportional to labor values, but rather into prices of production that equalize rates of profit among capitals of equal sizes over equal periods. (back)
3 Today’s Marxists, with few exceptions, ignore the production of money material — gold bullion — relative to all other branches of production, a relation that explains why periodically there is a general relative overproduction of commodities. They accept the view that today’s money is “non-commodity” money that somehow reflects the value of commodities rather than being a commodity with its own value that measures the value of all other commodities in terms of its own use value.
The anti-Marxist theory of money held by of our modern Marxists reflects the claims of the economists and the capitalist central bankers that they have learned how to create money “out of thin air” without any connection to a money commodity. However, as you can see by the obsession with the dollar price of gold in the financial pages, these claims of the economists and central bankers — and yes, our modern Marxists — are not taken seriously by the practical capitalists.
Why then are these false claims about “non-commodity” money so widely accepted on the Marxist left today? One reason is of course the end of the U.S. dollar’s international convertibility into gold by the Nixon administration in August 1971. The other reason is that before World War II very few Marxists were hired by university economics departments, In those days, Marxist economists worked directly for the workers’ movement — the parties, trade unions, and after the Russian Revolution, the workers’ state(s).
Today, many Marxist economists have found jobs in university economics departments. However, these departments are as a rule willing to hire only “reasonable” Marxists who among other things accept the view that today’s central bankers have learned how to create “non-commodity” money that is independent of gold. Therefore, with some help from fiscal policy both the bourgeois economists and academic Marxists agree that the government and central bankers now “know how” to create enough demand to keep the economy “fully employed” if they want to.
In this view, if “full employment” isn’t maintained, it is because of either the mistakes of the central bankers and governments, or the deliberate policies of the capitalist governments to create unemployment to “discipline” the workers, or due to accidental “shocks” like the current pandemic. Therefore, according to the economists and “modern Marxists,” you do not have to abolish capitalism to achieve “full employment.” All you have to do is fight for the central banks and capitalist governments to follow “full employment policies.” This leads many modern Marxists to declare that Keynesian policies and even Modern Monetary Theory are compatible with Marxism. The result is a prettified, and false, picture of capitalism. (back)
4 While the Marxist theory of money is simply assumed to be irrelevant in academic circles due to the end of the gold standard, Marx’s law of the tendency of the rate of profit to fall has come under active attack by those few bourgeois economists who specialize in criticizing Marx and have some knowledge of Marxist theory. Since World War II, bourgeois economists themselves have done an about-face on the historical tendency of the rate of profit. Before World War II, it was widely assumed that the historical tendency of the rate of profit was downward. The economists’ explanation for the falling tendency of the rate of profit, in contrast to Marx, was that capital gets less scarce as capitalism develops.
However, during the Cold War, it became known that Marx believed for quite different reasons than those held by the bourgeois economists that the rate of profit tended to fall. Cold War-era bourgeois political economy considered it particularly important to claim in opposition to the Marxists that capitalism was the final form of human economic organization and would persist indefinitely. How then could capitalism be the final form of human economic organization if the very development of capitalism undermines its driving force — profit?
Marxists were much more likely to be hired into academic economic departments if they could use their knowledge of Marxism — and mathematics — to “prove” that Marx was wrong about the tendency of the rate of profit to fall as capitalism develops. The “academic Marxist” critique of Marx raises various arguments.
For example, it was argued that the organic composition of capital does not necessarily rise because modern inventions were (constant) capital-saving rather than labor-saving. Therefore, the organic composition of capital does not rise and the rate of profit does not tend to fall but if anything tends to rise. Or it is claimed that the rising rate of surplus value is as likely as not to offset the negative effects on the rate of profit of a rise in the organic composition of capital so that the historical tendency of the rate of profit is indeterminate. And finally, it is claimed that the capitalists would never adopt a technique of production that would lower rather than maintain or raise the rate of profit. All these arguments imply that the development of capitalism does not undermine profit and there is no reason why capitalism cannot go on indefinitely. (back)
5 Also, it is always possible to expand the market through the development of clearinghouses that reduce the quantity of money necessary for making payments by requiring cash payments for only those transactions that do not offset one another. This is the method widely used in commercial banking. Second, the velocity of circulation of money can be accelerated, which reduces the quantity of money necessary over a given period. And finally, credit money and just plain credit as a means of purchase develop, though in the latter case debts are created that later must be paid off.
However, only so many payments offset one another, the increase in the velocity of circulation runs into the obstacle that one piece of money cannot settle two transactions at one time. And only so much credit money can be created on a given monetary base without triggering a credit and banking crisis. Therefore, the only way, once clearinghouses and modern credit have been fully developed, to expand the market is to either lower prices in terms of money material or create additional money material by the gold mining and refining industries. (back)