Just as he promised he would, Donald Trump has refused to concede the U.S. presidential election to Joseph Biden. However, on Nov. 23, Emily Murphy, the Trump-appointed head of the General Services Administration, or GSA, finally allowed the Biden transition team to begin preparations for Biden’s assumption of the U.S. presidency on Jan. 20, 2021.
Between Nov. 3 and 23, Murphy had stubbornly refused to grant access to the Biden transition team on grounds that, in Ms. Murphy’s judgment, it wasn’t clear that Biden had won the election. Her decision to begin cooperating with Biden’s transition team was seen as a de facto admission by at least some in the Trump administration that Biden had won the election.
Widespread relief was felt in financial circles that a contested election outcome leading to widespread unrest in the streets, if not outright civil war, had been adverted. The stock market celebrated by rising to new all-time highs and the U.S. dollar rose against gold. However, Trump himself along with many if not most Republican politicians still refused to concede the election. Trump continued to claim that he had in fact won and that Biden and the Democrats had stolen the election through massive fraud.
In a normal U.S. presidential election, the losing candidate concedes the election and congratulates the winner within hours after the polls close on election day. If the election leads to a new president, the outgoing and incoming presidents and their aides work closely with one another until the transition is officially completed. Since the 1896 presidential election, when the losing “silver” Democrat William Jennings Bryan conceded to the victorious “gold” Republican William McKinley, the concession statement from the losing candidate has become an unwritten part of the U.S. Constitution.
This election year had unusual complications because of COVID-19, which made voting at traditional polling stations extremely dangerous. As a result, many voters voted by mail. This had the paradoxical effect of making voting easier for many voters. Perhaps of even greater importance, the racist and bigoted reelection campaign of far-right incumbent Donald Trump led to an extreme polarization of the U.S. electorate. Usually, the differences between the Democratic and Republican presidential candidates are obviously not very deep, if not virtually nonexistent. As a result, most voters, though they generally prefer one candidate to another, do not care that much whether their preferred candidate wins or loses.
But not this time. While Joseph Biden created even less excitement than the usual Democratic candidate, Donald Trump in contrast was either hated — the clear majority view in the U.S. and even more so in the world — or loved by his bigoted white racist supporters. The result was the largest turnout of voters for a U.S. presidential election in decades. As a consequence, the large number of mail-in ballots, combined with COVID-19, messed up the computer algorithms that since 1952 have enabled the networks to accurately call the election with only a minority of the votes counted.
Republicans and especially Donald Trump encouraged their often fanatical and ill-informed voters to vote in person, while the anti-Trump voters generally voted by mail. Since in-person votes were in most states counted first, Trump wracked up huge initial leads in most of the swing states as returns began to trickle in on the evening of Nov. 3. At that point, Trump declared victory. However, by the following day, as the mail-in votes were counted, Trump’s large leads in those states began to melt away. By Friday, it became clear that Biden had won the Electoral College as well as the popular vote.
However, the Associated Press, which unofficially declares the president-elect, and the other capitalist media monopolies that follow AP’s lead, held out for another day before AP finally, on Nov. 7, proclaimed Joseph Biden the president-elect of the United States and the leader-in-waiting of the “free world” — aka the U.S. world empire.
Trump and Republicans attempt to steal the election
This unusual delay gave Trump and the Republicans a considerable head start in their campaign to steal the 2020 election. The archaic U.S. Constitution, written in 1787, never designed to be a (bourgeois) democratic constitution, provided Trump and the Republicans many ways to disregard the majority vote against Trump.
First, Trump and the Republicans demanded recounts and looked for evidence of voter fraud. By voter fraud, Trump and the Republicans did not mean the suppression of the African-American vote and other voters unlikely to vote Republican. Rather, they meant ballot box stuffing, Democratic voters “voting early and often,” sending mail-in ballots and then voting in person, non-citizen immigrants voting, ballots sent in the name of dead people, computerized voting machines programmed to flip a certain percentage of Trump votes to Biden, all combined with the throwing out of Trump ballots. Indeed, in past decades the big-city Democratic machines often used such methods to “win” elections — except for computerized vote-flipping since computers had not yet been invented.
But these traditional methods of electoral fraud have not been used by the Democrats or anybody else very much if at all in recent years. Trump and the Republicans, though they filed dozens of lawsuits, could not provide evidence that the Democrats, or the Biden campaign, had used such methods in this election. Trump’s lawyers were almost literally laughed out of court, often by Republican and even Trump-appointed judges, because they provided no evidence. Worse, the Republican attempts to throw out as fraudulent or illegally cast ballots amounted to an attempt to throw out the African-American or working-class Hispanic votes.
Second, the Trump team played with having the legislatures choose the state delegates to the Electoral College. Under the Constitution, which went into effect in 1789, individual state legislatures select how the presidential electors are chosen. In the first U.S. presidential elections held in the 1790s, state legislatures themselves chose the presidential electors. This is how George Washington was elected president without a single dissenting vote.
Trump’s idea was to claim that in the swing states the popular elections of delegates pledged to either Biden or Trump were so corrupt that the legislatures would have no alternative but to step in and pick the state’s delegates to the Electoral College. Since the state legislatures in swing states are dominated by Republicans — mostly due to brazen gerrymandering — these legislature-chosen electors would be pledged to Trump.
Finally, Trump and his Republican supporters considered the possibility that there would be so much confusion and ligation that many states would not be able to decide on their delegations to the Electoral College (which must elect the president and vice president on Dec. 14). That would mean that neither Trump nor Biden would have the necessary 270 votes to win in the Electoral College. As a result, the election would be thrown into the House of Representatives. Here though the Democrats have a majority of members, it is the Republicans who have a majority of the individual state delegations. Therefore, with each state having just one vote regardless of its population, the House would elect Donald Trump and Mike Pence for a second term as president and vice president respectively.
All the above maneuvers might be constitutional, and might or might not be legal, though lawyers could probably argue about this until the universe ends. But they would break the many unwritten provisions of the U.S. Constitution that have grown up over the 231 years since it was approved. Above all, if any of these maneuvers had been successfully carried out resulting in a second Trump term, it would have completely unmasked U.S bourgeois “democracy” before both the American people and the entire world.
Trump might have even played, or perhaps is still playing, with the idea that if he created enough constitutional and legal chaos, including large-scale violence between Trump supporters and their opponents in the streets, Joseph Biden and the Democrats would concede the election to Trump in the “broader interests of the country.” During his first “debate” with Biden, Trump had told the fascist Proud Boys to “stand down and stand by.” Hadn’t Albert Gore and the Democrats done just that in the 2000 election when they conceded the election to George W. Bush after the Supreme Court halted the Florida recount?
Finally, there are fears that if all else failed, Trump will simply declare martial law and seize dictatorial power. Trump’s shakeup of the Pentagon leadership has certainly raised eyebrows, and his attempt to remove civil service protection from most federal employees makes little sense for a president that will be leaving office in less than two months.
But if the U.S. capitalist ruling class including the military tops allows Trump to follow this path, they will lose the crucial legitimacy that 231 years of uninterrupted constitutional rule has given them. This would be a big price for the ruling class to pay simply to keep their lifelong servant Joseph Biden out of the White House!
Finance capital tells Trump and the Republicans that its time for Trump to go
As is always the case in U.S. presidential contests, in the 2020 election individual capitalist magnates had differing opinions on whether the Democrat or Republican candidate should be president. While many capitalists preferred Trump, others backed Biden. The argument for Trump is that as a big capitalist and landowner he always takes the capitalist point of view as his own. Over the last four years, Trump has run the most “pro-business” U.S. administration in history. He won over to his side many originally skeptical capitalists.
For example, Trump tried to drive tens of millions of people off health insurance — and succeeded in reducing those covered by millions. Trump gutted regulations designed to protect workers and the environment. Along with the congressional Republicans, Trump pushed through a massive tax cut for the rich in 2017. He has consistently opposed any policy to combat climate change and even took the U.S. out of the already rather toothless Paris Climate Agreement. Then during the COVID-19 pandemic, he pulled the U.S. out of the World Health Organization. Trump has also filled the federal judiciary from the Supreme Court down and National Labor Relations Board with pro-business and anti-labor judges.
The capitalist case for Joseph Biden
Other top capitalists, however, believed Biden was the safer bet for their class. These capitalists have seen that Trump’s protectionist policies have encouraged a revival of anti-U.S. nationalist tendencies in Germany, France, and possibly Japan, which threatens to break up the U.S. empire. They also fear that Trump is completely mishandling relations with China by encouraging the Chinese to follow more anti-U.S. nationalist policies economically, politically and militarily. They fear that Trump’s policies could sooner or later lead to a war with China that the U.S. might lose. (1)
Domestically, the anti-Trump capitalists fear that Trump’s racist policies are backfiring and producing a working-class radicalization among the soon to be majority “black and brown workers,” which is already infecting a growing number of younger white workers as well. What good, these capitalists believe, is electing a few more “pro-business” Republicans now if the price over the following decades is an increasingly socialist class-conscious working class?
To these capitalists, the seasoned Joseph Biden seemed like the safer bet. He can be expected to patch up relations with Germany and other U.S. “allies” — actually imperialist U.S. satellite states — thereby damping the rise of anti-U.S. nationalist tendencies in these countries. More importantly, they think Biden is the better bet for working out a less dangerous — and more profitable — relationship with a rising China. And they believe Biden is more likely to continue the colonial wars in Afghanistan, Iraq, Libya and elsewhere.
Indeed, one of the fears expressed in the New York Times and other “resistance” newspapers is that Trump might use his position as commander-in-chief of the armed forces to end the ongoing colonial wars in Afghanistan and Iraq before Jan. 20. On the other hand, there can be no doubt about Joseph Biden’s lifelong dedication to the cause of U.S. imperialism. Biden has supported every war that the U.S. has fought in recent decades from Afghanistan and Iraq to Libya and beyond.
One of the problems with Trump from the viewpoint of the capitalists is that because he is so hated by so many people in the U.S. and around the world it is far more difficult for Trump to wage what the “resistance” views as necessary wars. If one or more of the ongoing colonial wars heat up or a new large-scale war — for example, a war with Iran — were to break out, the capitalist “resistance” feared the widespread hatred of Trump among the American people would create ideal conditions for building a massive anti-war movement. This means that, at least initially, it will be far easier for Joseph Biden to wage war than it would have been for Donald Trump. (2)
But even those capitalists who hoped that Trump would win the election are now convinced that the attempts of Trump to stretch both the Constitution and the law in general, perhaps to the breaking point, to cling to office, is doing far more damage to their class interests than will any slight moderation of Trump’s “pro-business” policies by Biden.
The Nov. 23 edition of the New York Times reports, “Concerned that President Trump’s refusal to accept the election results is hurting the country, more than 160 top American executives asked the administration on Monday to immediately acknowledge Joseph R. Biden Jr. as the president-elect and begin the transition to a new administration.”
Signers of this letter “included the chief executives of Mastercard, Visa, MetLife, Accenture, the Carlyle Group, Condé Nast, McGraw-Hill, WeWork and American International Group, among others. They included some of the most important players in the financial industry: David M. Solomon, the chief executive of Goldman Sachs; Laurence D. Fink, chief executive of the asset management giant BlackRock; Jon Gray, Blackstone’s president; and Henry R. Kravis, a prominent Republican donor who is the co-chief executive of KKR, a private equity firm.”
The Times also reported that the vehemently pro-Trump Stephen A. Schwarzman, chief the Blackstone private equity — merchant banking — firm and one the richest finance capitalists in the country, though he declined to sign the statement of his fellow mega capitalists, issued a separate statement stating that “the outcome is very certain today and the country should move on.”
Therefore, on Nov. 23, finance capital told Trump and the Republican bigwigs backing (at least in public) Trump’s attempts to cling to office that enough is enough and that it’s time Trump “get with the game” and prepare to hand over the White House to Joseph Biden come Jan. 20. It was also on Nov. 23 that GSA head Emily Murphy duly carried out the commands of finance capital and ordered the GSA to cooperate with the Biden transition team.
Other results of the election
Much to the chagrin of progressives, the Republican Party in the Nov. 3 election did much better than Donald Trump did. The GOP picked up five or so seats in the House of Representatives though the Democrats retained an overall majority. If the U.S. was a European-style parliamentary democracy, this would mean that the Democrats would have been the victors in the Nov. 3 election but by a reduced margin.
This shows that there was a layer of highly conservative voters, many so-called suburban voters (3), who did not support Donald Trump, preferring the conservative Democrat Joseph Biden. Other voters split their tickets because they didn’t want to give a monopoly of power to either party. The theory is that just as different branches of the U.S. government — executive, judiciary and legislative — check each other, so do the two ruling political parties. For example, the highly “progressive” state of Vermont, represented in the Senate by Bernie Sanders, has a Republican governor.
It is worth noting that the small minority of “progressive” Democratic congressional candidates who supported Medicare for All did very well in this election, even when they ran in swing districts. In contrast, conservative Democrats who opposed Medicare for All often lost to Republicans who also opposed Medicare for All. In these cases, “corporate Democrats” were seen by the voters as little different than the Republicans, which encouraged “ticket splitting” among anti-Trump voters.
The other big story of the U.S. autumn was the dramatic surge in cases of COVID-19 as cold weather set in. Various viruses that cause flu and the common cold, some of which are closely related to the virus that causes COVID-19, tend to behave in this way. But while the change in seasons may be a factor behind the latest surge to record numbers (and still climbing) of new cases, there seem to be other factors at work. In the absence of a vaccine, the only factors that have slowed the pace of the pandemic have been the use of face masks and the shutdown of non-essential activities and businesses.
However, such measures dramatically reduce the sale of commodities and slow the turnover of capital. When sales do not proceed at the normal pace, credit is undermined. The credit system is based on the assumption that A pays B at a certain time so that B can pay C. As a result, capitalist governments have been under great pressure to reopen businesses as soon as there is the slightest sign of a decline in the pandemic.
The moves to reopen business have, just as the experts warned would happen, been followed by surges to new highs in the pandemic. These have been followed by renewed but always more limited shutdowns than those that preceded them as capitalist governments attempt to keep as many businesses open as possible. The result has been that the pandemic forms a higher base after each shutdown and then surges to still greater highs as soon as the restrictions are relaxed.
As leaders of state and local government, many of them Democrats, announce the easing of restrictions, the general public gets the impression that the danger from the pandemic has largely passed. For example, on Nov. 29 even as new cases of COVID were soaring, New York’s liberal Democratic Mayor William de Blasio announced the reopening of New York’s public elementary schools.
These moves to ease restrictions encourage people to wear masks less often and resume in-person visits with family and friends. This is exactly what the “business community” wants since it encourages people to resume their normal spending habits, particularly during the current holiday season. But it also creates ideal conditions for the virus to spread. It is therefore no surprise that new COVID cases are once again soaring and that hospitals are running out of beds as they fill up with critically ill COVID patients.
Over the last month, a new twist has been added. In various countries, including Russia, China, Britain, and, not least, socialist Cuba, various vaccines against COVID-19 have been developed, though these reports have been downplayed or completely ignored by the U.S. media. But in mid-November the U.S. media heavily reported claims the Pfizer vaccine candidate has been put on the fast track for FDA approval and Moderna’s will probably quickly follow. The problem here is that the profit motive combined with commercial secrecy makes it hard to objectively evaluate the claims of Pfizer and Moderna for their respective vaccine candidates.
Are these vaccines 90 to 95 percent effective, as Pfizer and Moderna claim? And, if so, are they effective only against a particular strain of the SARS-CoV-2? What happens when the virus mutates? COVID is caused by the SARS-CoV-2 virus, which is a form of coronaviruses that include those that cause the common cold. However, no effective vaccine has ever been developed against the common cold because those viruses continuously mutate. Will SARS-CoV-2 be any different in this respect?
It was reported that the Pfizer vaccine in addition to requiring two doses a month apart itself causes illness. Is this illness any less dangerous than COVID-19 itself? For many, perhaps most people, a SARS-CoV-2 infection causes a minor cold-like illness and sometimes no symptoms at all. In this sense, SARS-CoV-2 is just another cold virus. But in certain people, generally older people but not only older people, it also produces severe illness sometimes ending in death.
One reason SARS-Co-V2 infections can be so serious is that in certain people it causes severe autoimmune responses. In this case, the body’s immune system attacks the body itself. How do we know that the various COVID vaccines will not also produce autoimmune responses in certain people? In that case, the vaccine might be as bad as the disease itself. For example, though the U.K. has begun to vaccinate certain high-risk people such as people over the age of 80 with the Pfizer vaccine, it is warning that people with allergic reactions should not be vaccinated.
Trump desperately hoped that some kind of vaccine would be approved before the Nov. 3 election. He called it “Operation Warp Speed” and put severe pressure on federal regulatory agencies to quickly approve the vaccine. This would have allowed him to claim during the election campaign that it was his administration that had broken the back of the COVID-19 pandemic.
Once Trump is gone, the new Biden administration will be under the same intense pressure from the capitalists to show that it is quickly ending the pandemic and thus allowing the pace of business and consequently the flow of profits to return to normal. This situation greatly increases the danger of an ineffective or, even worse, dangerous vaccine being approved.
I am not saying that the various vaccine candidates are not promising, and they may very well break the back of the pandemic once and for all. What I am saying is that the profit motive and commercial secrecy, combined with the pressure being exerted by the capitalists on the government to “fully reopen,” make it extremely difficult for the experts, not to say laypersons like myself, to objectively evaluate the claims for-profit drug companies are making for their vaccine candidates.
Monopoly profits
But there is another question raised by the involvement of for-profit drug companies such as Pfizer and Moderna in the search for a safe and effective vaccine. Political economy has known since the days of the classical political economists that the rate of profit under the pressure of competition tends to equalize. To put it more precisely, the rates of profit on the various capitals that make up the capitalist economy are driven by competition towards the point where capitals of equal size — as measured in terms of the use value of money material — make equal profits in equal periods of time. The freer competition is the more quickly this process occurs. Even under monopoly capitalism, super-profits, though they last much longer than they do under conditions of “free competition,” eventually disappear.
The one exception to this is the case where capitalist monopoly is backed up by genuine shortages that arise from nature — such as the limited quantity of the richest ore-bearing land. To distinguish monopoly profits that do not tend to disappear over time, these monopoly profits were given a special name by the classical economists. That name was ground rent. While the term “rent” is often used by economists these days to describe all profits that exceed the average, this a loose use of the term.
True rents excepted, sooner or later monopoly profits will always disappear. This is because the higher the rate of profit for a group of capitalists in a given sector of production is above the average rate, the stronger will be the pressure of other capitalists themselves seeking profits to break into the sector. Sooner or later they will succeed. Besides, even if new capitalists do not invade the monopoly sector, the capitalists in that sector will inevitably overproduce sooner or later causing the monopoly profits to disappear.
For example, the super-profits made by the U.S. automobile monopoly General Motors seemed eternal. GM managed to make hefty profits even during the super-crisis of the early 1930s. But in the years leading up to the crisis of 2008, not only did General Motors’ super-profits disappear but so did its normal profits. Eventually, the old GM went bankrupt and its stockholders were wiped out. A new General Motors corporation with government support was organized under the Obama administration to prevent a massive contraction of the ability of U.S. industry to produce automobiles. (4)
When an industrial capitalist such as a drug company develops a commodity with a new use value such as a desperately needed COVID-19 vaccine, that industrial capitalist will for a while make super-profits. But if the market is “free,” it won’t be long before other industrial capitalists will find ways of producing the same commodity at a lower cost price. As a result, the quantity of the new commodity measured in terms of its use value will soon flood the market. The result is that the market price of the new commodity will fall below its price of production. At that point, capital will flow out of the given sector of production and eventually market prices will more or less stabilize around the price of production.
The search for super-profits among competing capitalists that follows the invention of new use values is pointed to by economists as the mechanism by which capitalism encourages the development of new products that by satisfying existing needs and creating new ones drives society forward. One example of this process would be a safe and effective COVID-19 vaccine.
But here the capitalists and economists find a flaw in the whole system of “free competition.” To develop a new type of commodity requires expenditures of money on research and development — R&D. However, these expenditures do not directly produce surplus value. Therefore, before capital can be expanded by producing new types of commodities, capital must first contract reflecting the outlays for R&D. Only when the new types of commodities enter mass production can capital again expand — after all, the only point of capitalist production.
This state of affairs encourages industrial capitalists to wait until new types of commodities are developed and then simply copy the new commodities developed by the research and development of their competitors. This way our capitalist does not have to include R&D expenditures when the cost price is calculated. As a result, industrial capitalists who do not engage in research and development themselves have little trouble underselling the capitalists who do incur such costs.
Since it is a better strategy for individual industrial capitalists in their never-ending struggle for profit not to engage in research and development, why will any capitalists ever engage in it? It turns out that free competition, far from being a spur to the development of new products, including desperately needed products such as a safe and effective COVID-19 vaccine, can be a massive obstacle to the development of new types of commodities.
Enter the state
The solution to this contradiction is two fold. Industrial capitalists attempt as much as possible to pass the costs of research and development onto the shoulders of the state. Let the taxpayers take on the burden of R&D, the capitalists say, and leave it to us to pocket the super-profits!
The other solution involves legal documents called patents. The state establishes a special organ called the patent office. (5) The job of the patent office is to determine that a new invention, for example, a COVID-19 vaccine, has a new use value never seen before. It then issues a patent to the inventor of the new use value that establishes a legally enforceable monopoly on the right to produce the new product for a limited period. The resulting super-profits then compensate the inventor for the R&D expenses.
Sometimes the inventor is the person who performs the special type of labor necessary to develop products with new use values. If the inventors are not already industrial capitalists or cannot become one, they must license their exclusive legal rights to produce the products to actual industrial capitalists. But often the patent is awarded not to the actual inventors, who are increasingly highly skilled salaried employees of capitalists, but rather to the capitalist employers of the actual inventors. In this case, the owners of the patents are people who have not performed any of the labor of invention at all. Engineers who work for large companies are often forced to sign contracts that grant exclusive patent rights to their capitalist employers.
Patents are a form of fictitious capital
A patent, which is only a legal document, can be bought and sold as if it were a commodity. The ownership of a patent provides its owner with a flow of income over the lifetime of the patent. What determines the price of the patent? If I am a capitalist who is thinking of purchasing a patent, I will want at the very least the same income that I would obtain if I invested in a government bond that runs for the same length of time as the patent. Indeed, I will demand more because there is always a “risk” that the demand for the new product won’t be as high as expected. An example would be a COVID-19 vaccine that turns out to be ineffectual or dangerous. In this way, fictitious capital is formed. The process of forming fictitious capital is called “capitalization.”
In recent decades, the capitalists and their spokespeople have come up with a new term to describe the fictitious capital associated with patents as well as the fictitious capital represented by legal contracts known as copyrights, which apply to written works and software. The term they use is “intellectual property.” This term sounds more respectable than “fictitious capital.” Imagine American business demanding that the U.S. government do more to defend their “fictitious capital,” which would at least have the merit of using the correct economic term.
Some companies do nothing but accumulate patents. Sometimes companies purchase patents to prevent the production of a cheaper or better commodity before their existing fixed capital has been fully depreciated. The owner of the patent has the right to sign contracts giving specific industrial capitalists the right to produce the commodities in question in return for a portion of the profits, called royalties.
Patents run for only limited periods. Once they expire, every industrial capitalist is entitled to produce the commodity use value in question without having to pay royalties. The problem is that the capitalist patent owners have an incentive to use their political power to lengthen the period of patent protection to prolong their ongoing super-profits. The U.S. government under the joint control of the bought-and-paid-for Democratic and Republican politicians has under the pressure of capitalist patent owners progressively extended the lifetimes of patents.
U.S. drug companies, commonly called “Big Pharma,” are notorious abusers of the corrupt patent system. They have had the U.S. government through the World Trade Organizations ban companies in other countries from selling so-called “generic drugs.” These are drugs produced by industrial capitalists who own no patents and who do not pay royalties to any patent owner. Competition among the producers of generic drugs results in these drugs selling at market prices that fluctuate around the prices of production.
If the drug in question is a lifesaving drug like a COVID-19 vaccine, the difference between the monopoly price and the far lower price of production means needless deaths. The higher the patent-supported monopoly price is relative to the price of production, the greater will be the number of deaths. Even if governments buy the vaccine to distribute free of charge, or at least at affordable prices, the governments of poorer countries may not have the financial resources to buy enough of the vaccine for their populations.
Much of the research on developing effective vaccines for COVID-19 has been carried out with government money. To the extent that governments finance the research and development, all justification for patents disappears. However, this does not prevent the drug companies from demanding them and the corrupt U.S. government from granting them.
India has a huge ability to produce generic drugs. The Indian capitalists sell these drugs at prices that fluctuate around the price of production. U.S. drug monopolies like Pfizer and Moderna have indicated they are willing to use their patents to license the right to produce their COVID-19 vaccines to the Indian and other industrial capitalists, but they expect royalties. To the extent that Indian and other industrial capitalists are forced to pay royalties to the likes of Pfizer and Moderna, the drug-making industrial capitalists will be obliged to sell the COVID-19 vaccines at market prices above the prices of production leading to unnecessary deaths. (6)
There is now a real danger that an effective COVID-19 vaccine will be sold by drug companies to either individuals or governments at such high, patent-inflated prices that many millions of people, especially people in the nationally oppressed and economically exploited neo-colonies of the global south will not be able to be vaccinated. There is a real danger that the people of the “first world” may be vaccinated and no longer have to worry about contracting and possibly dying of COVID-19 while the super-exploited workers and toilers of the global south will continue to be ravished by the pandemic.
It would be a real crime if U.S. drug monopolies such as Pfizer and Moderna and U.S. imperialism, after bungling the response to the pandemic costing the lives of more than 256,000 (and rising) Americans as of this writing, not to speak of the deaths in other countries, now get to make huge super-profits by selling a vaccine at patent-guarded monopoly prices that will themselves cause many more unnecessary deaths. There are alternatives. China has promised to give priority access for their vaccines as a public good especially for developing countries. Going even further China has promised to give other countries the technology to produce the Chinese-developed vaccines on their own.
The approaching replacement of the racist and corrupt Trump administration by the incoming Biden administration offers little comfort here. The Democrats and Biden are notorious supporters of Big Pharma, which is now poised to make huge super-profits off their COVID-19 vaccines. We at the very least should demand that any COVID-19 vaccine be sold as a generic drug at market prices near its actual price of production, making “only” an average rate of profit for its industrial capitalist producers. (7)
Joseph Biden’s slogan — ‘a return to normalcy’
In the U.S. presidential election held 100 years ago in 1920, the victorious Republican candidate Warren G. Harding ran on the same slogan that Biden ran on: a “return to normalcy.” However, Joseph Biden doesn’t mean the same thing that Warren Harding meant by “normalcy.” Harding’s predecessor Democrat Woodrow Wilson believed that World War I presented an opportunity for the U.S. to establish a worldwide empire more all-encompassing than even the British Empire at its height.
However, the ruling U.S. capitalist class as a whole was not yet ready for the dramatic changes that Wilson’s policies envisioned. While centers of U.S. finance capital such as the House of Morgan (8) supported Wilson’s vision of a U.S. world empire, many industrial capitalists, most famously Henry Ford, resisted this. These industrial capitalists knew that they could produce commodities of a given quality at a lower cost price — which ultimately comes down to less human labor — than their European or any other competitors.
From the point of view of these industrial capitalists, the costs of establishing and maintaining a world empire, which includes a huge standing army, a large Navy, and then on the horizon a large air force and the foreign wars that were implied, were not justified. Why do we need to burden ourselves with these faux costs of production that militarism on the scale required by world over-lordship would require when we can beat any conceivable competition through the cheapness of our production alone?
Indeed, one of the reasons the U.S. industrial capitalists were able to produce so cheaply was that unlike the continental European countries the U.S. had largely been able to avoid the expense of large-scale militarism and instead invest their profits in new factories using the most efficient labor-saving production techniques.
The American people soon realized that Wilson’s claim that the U.S. participated in World War I to wage a “war for democracy against autocracy” was a fraud. It became clear that the war had been fought to safeguard the profits of the House of Morgan and other bankers and the armaments manufacturers — called “merchants of death” — that were selling weapons to Britain, France and Russia even before the U.S. formally entered the war. Therefore, the 1920 Republican platform of returning to pre-World War I policies under which the U.S. had risen to global industrial domination was in 1920 extremely popular with the American people.
We now know, of course, that Warren Harding’s “normalcy” didn’t last long. The super-crisis of 1929-33 was its effective death knell. The Democrats under the Wilsonian Franklin D. Roosevelt (9), thanks to the super-crisis, came roaring back into power in the 1932 presidential and congressional elections. Roosevelt as Wilson’s heir was able to make full use of the all-too-real horrors of the regime of Adolf Hitler to overcome the “isolationist” opposition to war and implement Wilson’s policies. Then, under Roosevelt’s successors, the “bi-partisan” foreign policy was born. The modern Party of Order, originally called the “wise men,” which includes both Democrats and Republicans, was also born.
Therefore, when Joseph Biden raises the slogan of “a return to normalcy” in 2020, he doesn’t mean Warren Harding’s normalcy. Rather, he means Woodrow Wilson’s idea of “normalcy” that was soon to be realized by Franklin D. Roosevelt and his successors.
Trump, in contrast, had occasionally struck “isolationist” themes and made a few halfhearted attempts to end U.S. colonial wars in Syria and Afghanistan, though he also threatened to start new ones including against Iran. Just after the Nov. 3 election, it was widely reported that Trump was considering bombing Iran’s nuclear facilities but was talked out of it. So in every case, Trump’s attempts to deviate from the war policies of the Party of Order was vetoed by the Pentagon and the “intelligence” agencies. And unlike the old-time “isolationists,” Trump was always in favor of further enlarging the U.S. military, an endeavor in which he was fully supported by the Party of Order-led “anti-Trump resistance.”
To Joseph Biden, unlike Warren Harding, normalcy means what Biden calls “the international liberal economic order,” aka the U.S. world empire. This world empire requires more than ever an “illiberal” dose of old-fashioned “Prussian-style” militarism combined with British-style naval power now refashioned for the age of ICBMs and air power. If that were not enough, Trump also created a new branch of the U.S. armed forces, the Space Force. War in outer space, long confined to science fiction, may soon become a reality.
For our ancestors who lived during the Harding administration, “normalcy” seemed to have been restored. But this normalcy did not last long. Harding’s normalcy” was the policies that had been followed by the U.S. ruling class between the end of the war of the slave owners’ rebellion — the U.S. Civil War — and World War I.
In this era, the U.S. maintained only relatively small military forces, built a relatively modest — compared to Britain and France — colonial empire, and followed a policy of high tariffs and protectionism. After 1865, the U.S. moved to gradually remove the paper “Greenbacks” from circulation that had been issued by the U.S. Treasury to finance putting down the slave owners’ rebellion. In 1879, the Greenbacks that remained in circulation were made convertible into gold dollar coins. Also, in 1873, the free coinage of silver, much to the dismay of highly indebted farmers and small business people who were hoping to pay off their debts in cheap silver dollars, was ended. Therefore, between 1879 and 1933, the U.S. remained on a gold coin standard, which formed the financial foundation of Harding-style normalcy.
Between 1865 and World War I, the U.S. fought no major wars. It did fight some genocidal “mop up” wars against the Native Americans, a brief war against imperialist Spain in 1898 to obtain Spanish colonies in the Caribbean and the Pacific, and a series of colonial wars, the largest of which was the war against the people of the Philippines. So while there was no actual “peace” in the period between 1865 and 1914, things were as close to it as capitalism ever gets.
However, between April 9, 1865, when Lee surrendered to Grant at Appomattox, and the swearing in of Warren G. Harding as president on March 4, 1921, both the U.S. and world economies changed drastically. This doomed within a few years the attempt of Harding and his Republican successors to return to what they viewed as normalcy.
Similarly, today’s economic conditions are very different from those that prevailed in 1945. Germany and then Japan surrendered to the United States and their capital cities were occupied by U.S. troops. The “order” that Joseph Biden is determined to preserve is based on the decision of the U.S. to open its home and international markets to Germany and Japan in part because its military ruled over the defeated Germans — outside of the Soviet sector, which later became the German Democratic Republic — and Japan.
In exchange, these countries agreed to never again challenge the U.S. either politically or militarily. The imperialist “allies” of the U.S., Great Britain and France, soon found themselves slipping into a relationship that was not that much different than its relationship with its defeated imperialist enemies. In those days, the U.S. was the “factory of the world.” The vast mass of surplus money capital represented by the Fort Knox gold hoard and the idle reserves of the U.S. commercial banking system was tapped to finance the rapid revival of German and West European capitalism in general as well as Japanese capitalism.
China, in contrast, now sometimes called the “factory of the world,” was a war-torn semi-colony in 1945. By 2018, however, 28.4 percent of global industrial production was carried out in China compared to 16.6 percent in the United States. In 1945, China’s industrial production represented a mere rounding error when it came to calculating global industrial production.
Also in 1945, the U.S. ruling class was united in viewing the Soviet Union and the organized workers’ movement as its main enemy, both in the historical and immediate sense. Between 1933 and 1941, the U.S. capitalist ruling class had been divided between “Wilsonian internationalists” and “isolationists” who believed the U.S. should use Nazi Germany and other European fascist countries to destroy the Soviet Union and worry about German economic competition later. Those who held these views were mostly though not entirely Republicans.
In contrast, the Wilsonian internationalists represented by Franklin Roosevelt believed that the Soviet Union could be used as a battering ram to smash Nazi Germany. After the defeat of Nazi Germany, Roosevelt and his supporters believed the U.S. would establish the kind of global political and military domination that could then be used to crush the Soviet Union and the international workers’ movement one way or another.
After 1945, there were no longer disagreements among the Democrats and Republicans on the urgency of crushing the Soviet Union once and for all as the immediate task. There were at most only tactical differences on how to do this. For example, should the U.S. launch a military attack on the USSR or could the Soviet Union be gradually strangled through “containment,” which was the course advocated by George F. Kennan. Out of this situation, the bi-partisan Party of Order formed with Kennan emerging as its most influential strategist.
As we saw above, the U.S. emerged as a major exporter of capital, particularly money capital, which was used to rapidly restore and then expand the industrial production of Western Europe — especially but not only (West) Germany and Japan. In contrast, the U.S. industrial economy, though it also expanded, grew at a slower rate than it had grown before 1929. It was during the post-Great Depression/post-World War II era that the relative industrial decline of the U.S. began.
This decline turned into the de-industrialization after the “Volcker shock” of 1979-82. China became a major importer of capital as a result of both the post-1978 Deng Xiaoping “reforms” and the Volcker shock. Within a few decades, China transitioned from a peasant country into the world’s largest industrial producer in absolute — if not yet in per capita — terms. The destruction of the Soviet Union and its planned economy under the Gorbachev-Yeltsin counterrevolution of 1985-1991 in the meantime removed for the time being the principal proof in practice that the capitalist class is not necessary for modern industrial production. (10)
Trump sees under these changed economic conditions both Europe, especially Germany but not so much Russia, and above all rising China as the main enemies in the economic sense — and thus ultimately in the political and military sense as well under these new conditions of U.S. world domination. Trump, therefore, believes that the system of “alliances” in light of this transformed situation requires drastic changes in policies and the structure of NATO, though it is not completely clear — and very likely Trump isn’t clear in his own mind — exactly what these policies changes should be. However, Trump leans toward the view that the access of the Western Europeans, especially Germans, to the U.S. home market should be more limited than it has been in the post-1945 period.
Joseph Biden, as a Party of Order man, in contrast, believes that the old system of alliances, above all NATO, should be retained and strengthened. Biden thinks that the U.S. should concentrate on what is now its main enemy (after the international working class and its allies) China. After all, when the post-World War II “order” was shaped by the “wise men,” China was never supposed to be an industrial country to begin with. Instead, China was seen as an agricultural nation that would be a market for some of the surplus industrial commodities produced by the industrial countries of the West and Japan.
Faced by the challenge of a newly industrialized China, Biden and his Party of Order believe that it is possible and vital to come to agreements with Japan, Germany and other European countries when it comes to the division of markets and sources of cheap raw materials to save the post-1945 “world liberal order.” As Biden sees it, nothing less than the continued domination of the West headed by the United States over an increasingly industrialized Asia as well as Africa and Latin American is at stake. This is the “normalcy” that Joseph Biden is determined to defend. But just as Warren Harding a hundred years ago seemed at first successful in his “return to normalcy,” only to have it completely unravel in the face of radically changed economic conditions, it is inevitable that Biden’s attempt to restore his very different idea of normalcy, even if it is at first successful, is doomed to collapse in the face of today’s thoroughly transformed economic conditions.
Similarities and differences between Louis Napoleon Bonaparte and Donald John Trump
Many writers including this one have been struck by similarities between the would-be “strongman” U.S. President Donald Trump and the 19th-century French president turned emperor Louis Bonaparte, aka Emperor Napoleon III. Both men were incredibly financially corrupt as well as being gross sexual predators in their personal lives. Both did all they could to annex their respective government treasuries to their private bank accounts. Both men had close ties to organized crime, called by Marx the “lumpen proletariat.” Both Bonaparte and Trump were contemptuous of the law.
However, there are important differences between President Bonaparte/Emperor Napoleon III and Donald Trump. The two men ruled two very different countries with different historical traditions 170 years apart. While Bonaparte ruled France during the age of industrial capitalism based on “free competition,” Trump ruled the U.S. well into the stage of monopoly capitalism where the dominance of finance capital over industrial capital has led to widespread “de-industrialization” in the once industrially preeminent USA.
In December 1851, when President Bonaparte staged his coup, the French Constitution of 1848 was only three years old. It provided for only a single six-year term for the president. Three years of constitutional rule is a far cry from 231 years of constitutional rule. Unlike the present-day U.S. capitalist ruling class, the French capitalist ruling class had little to lose in terms of long-term legitimacy when they allowed the 1848 French Constitution to be torn up. Also, Bonaparte in the French presidential election of 1848, unlike Trump in the 2016 election, won 74 percent of the popular vote. Trump, in contrast, lost the popular vote by almost 3 million in the 2016 election.
France had a long tradition of rule by kings, who were expected to rule for life unless they were overthrown by foreign invasion or revolution. The “Great Napoleon” had intended to rule for life as emperor and failed to do so only because France was invaded and its capital occupied by its British-led enemies. Louis Bonaparte was a member of the Bonaparte family and was Napoleon’s nephew and closest living relative. He was thus first in line for the throne if you accepted the Bonaparte family as the legitimate ruling dynasty of France.
Therefore, many of the people (largely peasants) who voted for Louis Bonaparte in the French presidential election of December 1848 cast ballots to restore what they saw as the legitimate Bonapartist dynasty. From this point of view, the rule of the traditional Bourbon dynasty was seen as being reimposed on France by her enemies. Similarly, the July monarchy of King Louis Phillip, who represented the Orleanist wing of the Bourbon family, was seen as that of a mere usurper. The French peasantry, as Marx explained in his “The 18th Brumaire of Louis Bonaparte,” tended to wrongly credit Napoleon for giving their ancestors the land, which had been gained as a result of the Great French Revolution of 1789-93. They wrongly saw Louis Bonaparte as their champion as well. (11)
The U.S., in contrast, has had a long tradition of presidents ruling for at most two four-year terms. This was long an unwritten part of the U.S. Constitution. It was established by George Washington when he voluntarily left office after two terms. The only president to violate this rule was Franklin D. Roosevelt, who was elected for four terms and died in office during the fourth in April 1945. After Roosevelt, the 22nd Amendment passed in 1951 made the two-term limit official. Since its independence, the U.S. has never been ruled by either a king or an emperor.
But there is another, perhaps more important, difference between Bonaparte and Trump. Bonaparte was elected president during the long global economic upsurge fueled by the age of “free trade” represented by the repeal of the English Corn Laws in 1846 and the gold discoveries in California and Australia in 1848 and 1851, respectively. Trump’s promises of major infrastructure projects and “great health care” for all proved hollow. Trump’s infrastructure program was nothing more than a series of proposed tax cuts for business and road and bridge privatizations, while his “great health care” was nothing more than an attempt to return to the pre-Obama health care system backed with plans to cut Social Security and Medicare.
In contrast, Louis Bonaparte/Napoleon III presided over a huge expansion of French industry and major public works programs that among other things rebuilt Paris, giving birth to the modern city. Even if these achievements had more to do with the rapidly developing industrial capitalism of the time rather than any merits of Bonaparte’s rule, they still acted to bolster his reputation and popularity among the French people. This allowed him to rule France first as the elected president and then as emperor from 1848-1870. All the same, if the nephew was only a caricature of the uncle, Trump turned out to be only a malicious caricature of the nephew.
Therefore, as far as President Trump is concerned, this blog is saying good by and good riddance! This sentiment I am sure is shared by the vast majority of the people of the world.
Economic prospects under Biden
Biden’s chances of realizing his “return to normalcy” program will ultimately depend on the course that both the U.S. and world economy take in the coming years. Here we have to distinguish between the short-term and long-term prospects.
The short-term prospects are heavily tied to the course of the COVID-19 pandemic both in the U.S. and throughout the world. The pandemic has been increasing exponentially since the seasonal cool weather began to arrive in the U.S. and is expected to be given a further boost by the Thanksgiving holiday — or “mourning day,” as it is called by Native American activists. (12) As the year ends, there are mile-long food lines in many areas. Not since the darkest of days of the Great Depression has anything like this been seen in the U.S. At least during the Depression, there wasn’t a pandemic going on leading to hospitals in general and ICU units, in particular, filling up to capacity. In those days, people “only” had to face an economic collapse, hunger, and mass unemployment.
Unless the Democrats, Republicans, and the outgoing Trump administration come to some sort of agreement on a new stimulus program by the end of December, many people are due to lose their unemployment benefits and eviction protection entirely when the new year begins on January 1.
Of late, weekly unemployment claims have again been creeping up. The partial reopening-driven economic recovery from the COVID depression that has been slowing down for months now threatens to reverse entirely. Many economists are predicting a “double-dip recession” in early 2021 for the U.S. economy and perhaps Europe and Japan as well, with unemployment rising once again. Yet Wall Street speculators have been pouring money into stocks pushing them to record highs in terms of U.S. dollars and of late have even been dumping gold, showing (as the financial press artlessly puts it) an increased appetite for risk. In plain language, the financial speculators smell a coming profit bonanza.
Much of Wall Street’s optimism reflects hopes — which may or may not prove to exaggerated or at least premature — that vaccines being developed by the big for-profit drug companies will curtail the pandemic enough in 2021 to allow “consumers” to return to the malls and resume their normal shopping habits. The Wall Street speculators also expect that patent-protected super-profits made by U.S. drug companies will help prop up the U.S. dollar while providing a hefty dividend flow for the owners of their shares. If more working people die of COVID as a result of profiteering by the patent-protected drug companies — and their stockholders — that is a matter of no concern for Wall Street.
Many commentators are expressing amazement at Wall Street’s current bull run. Certainly, they say, Wall Street must crash when the reality of the widespread misery and poverty sinks into the thick skulls of the stock-owning public. While a sudden crash or at least a “correction,” in stock market prices is always possible — I never make predictions about the direction of financial markets on this blog — much of the commentary includes a hidden assumption. That is that the capitalist class and the working class, the two main classes in capitalist society, have common interests. But anybody who has grasped Karl Marx’s theory of surplus value knows that the exact opposite is the case. The current stock market rally is a case in point We will have plenty opportunity to examine the evolution of the U.S. and the world economy and its reflection in the stock market and more importantly in the class struggle in coming posts.
In reality, Wall Street is counting on mass unemployment, the pandemic, and general poverty, hunger, cold, homelessness, and desperation to force workers to return to work at much lower wages. This will raise the ratio of unpaid to paid labor leading to a higher rate of profit as business returns to normal. Then Wall Street expects that dividends will rise and with it stock market prices. In anticipation of the good times they see coming — for the capitalists, that is — stock market speculators have bid up the prices of stocks.
Long-term economic prospects
Let’s for the sake of argument and a certain note of optimism that may or may not be justified assume that the vaccine candidates — hopefully, generic ones and not patent-protected ones — break the back of the COVID-19 pandemic in the months after Biden assumes office. What will be the economic consequences?
There is currently a debate going on in Washington policymaking circles on whether or not a stimulus bill should be passed to ease — or eliminate — the recessionary shock that will be caused if unemployment insurance benefits and eviction protections are allowed to expire on January 1. The Federal Reserve Board as we know has greatly expanded the quantity of dollar-denominated currency it issues. (13) The problem has been that this newly created dollar currency has piled up in the banks — or to some extent in private hoards — as COVID-19 has prevented people from purchasing commodities at a normal level.
Fed chief Jerome Powell and other central bankers have complained that they cannot through monetary policy alone “stimulate the economy” back to normal levels. Now the central bankers say it is up to “fiscal policy” — that is, the government — to borrow and spend or distribute money to people who will spend it to renew the recovery and keep it going. The central bankers are saying to the government — especially the U.S. Congress and the outgoing Trump and incoming Biden administrations — that if you do nothing, exactly what you have been doing since last summer, and the economy sinks into a double-dip recession next year, don’t blame it on us. We have done our part and now the ball is in your court.
The Republican Senate versus the stimulus
Opposition to “government doing its part” is, however, rising in the Republican-dominated U.S. Senate. The exact makeup of the Senate is still undecided as of this writing because it depends on a rare Senate runoff election due to be held in the state of Georgia, where not one but two Senate seats are up for grabs.
Georgia, a Deep South state, was first a slave state and then after Reconstruction a Jim Crow state that except for Reconstruction has always voted for the “white people’s party.” Historically, that party was the Democratic Party but in recent years has been the Republican Party. This year — Reconstruction aside — Georgia for the first time narrowly voted against the white people’s party with Joseph Biden carrying the state. This reflects the rise of a non-white majority in the state plus the increased number of non-racist white people who though still a minority are breaking with the traditional racist attitudes of Southern whites. This is a historic change and could have implications for the other Deep South states that still voted Republican this year.
As a result of this historic change, the Georgia Senate races could go either way. The racist Republican machine is still strong in Georgia, but it has been thrown into disarray because of Trump’s continuing claims that Biden won the election only because of massive fraud. If both Democrats win Georgia, the new Senate will be 50 Democrats and 50 Republicans with Vice President Kamala Harris having the tie-breaking vote. Otherwise, the Senate will be 52 Republicans and 48 Democrats if both Republicans win, or 51 Republicans and 49 Democrats if one Republican and one Democrat win in the runoffs. In that case, in strictly partisan votes Kamala Harris will not have a vote.
This blog in the post-Trump era
Many liberals and some progressives, therefore, see the Georgia vote as a vote of great importance since nothing less is at stake than the control of the powerful upper house of the U.S. Congress. However, in either case, the real balance of power will be held by a few “moderate” Republicans and conservative Democrats who differ little from the Republicans. Republican Senate leader Mitch McConnell is opposing the stimulus for the reasons that I examined in last month’s post. He argues that the U.S. economy is already recovering from the COVID-19 induced collapse and there is little or no need for further Keynesian-style stimulus measures.
Progressives, in contrast, strongly support a massive additional fiscal stimulus. When Trump finally leaves the White House on January 20 and the Biden era dawns, the question of how much Keynesian fiscal stimulus — how large a budget deficit — should be applied will likely dominate U.S. politics.
Recently, progressives and indeed some Marxists have been strongly influenced by Modern Monetary Theory, an extreme form of Keynesian economics. There is no doubt that we have to demand that the incoming Biden administration give desperately needed aid to workers and working people who have been hard hit by the COVID catastrophe in both its medical and economic dimensions. This is true whether or not these measures make any sense from the view of capitalist profit making. It is the interest of the workers and their allies that should always govern our demands!
Many progressives as well as the Monthly Review School of Keynesian-Marxists believe that it is around the question of market demand that the interests of at least a fraction of the capitalists class and the working class can be reconciled. (14) It is obviously in the interests of the working class that the government spend as much as possible on relief and better yet provide desperately needed jobs during times of depression and indeed at all times. This is true for normal cyclical depressions and is doubly true for the current pandemic-depression disaster that has swept the globe but has hit the U.S. harder than almost any other country.
It seems that the question of exactly how much fiscal stimulus there should be will dominate politics during the first months of the Biden administration. The Republicans led by the arch-reactionary Kentucky Senator Mitch McConnell are already warning about the grave dangers that budget deficits perhaps north of $4 trillion a year represent.
In all probability, the new president will support a budget deficit — or stimulus — that will be too large to make McConnell happy but much smaller than one that would satisfy progressives. Supporters of Modern Monetary Theory claim that whatever the budget deficit is it will be too small unless genuine full employment is achieved. This is what makes MMT so attractive to progressives, the Monthly Review School, and people on the left in general.
Modern Monetary Theory claims in direct contradiction to Marx that there is no need to transform capitalism into socialism to solve the problem of the continuing, cyclically varying unemployment, or what Marx called the reserve army of the unemployed. Modern Monetary Theory claims that full employment can be achieved within capitalism as long as the central governments of the “monetarily sovereign countries” are willing to run large enough budget deficits. (See this and following posts on Modern Monetary Theory.)
Not surprisingly, Monthly Review has come out in support of Modern Monetary Theory. Last year, the editors strongly criticized left-wing economic writer Doug Henwood’s criticisms of MMT. Now if you bring up the MR online website, you will find on the right side a hot link entitled “Money on the Left.” If you click on it, you are taken to a series of audios run by supporters of MMT.
Monthly Review’s position on Modern Monetary Theory is no surprise given their Keynesian-Marxism, which attempts to reconcile the views of Keynes and Kalecki with those of Marx. Naturally, the Monthly Review School has never shown much interest in Marx’s theory of money, an integral part of Marx’s overall theory of value. Once you accept Marx’s entire theory of value, the incompatibilities between Marx on one side and Keynes and Kalecki on the other become obvious.
The academic Marxist economist Fred Moseley, professor of economics at Mount Holyoke College in Massachusetts, has noticed that most modern Marxists accept the concept of “non-commodity money” and take at face value the claim that money under the dollar-centered international monetary system that has evolved since the end of the gold-exchange standard in August 1971 has ceased to be a commodity. However, Moseley is aware that nowhere in Marx’s vast writings on commodities, value, surplus value, money, price, and profit can any concept of “non-commodity money” be found. Professor Moseley deserves great credit for pointing this out.
Marx indeed did write about what he called “token money,” which consists of paper or other types of tokens that represent actual money material — such as gold coins — in circulation. And he was well aware of the various types of credit money — that can also replace actual money material in circulation. However, unlike most modern writers, Marx distinguished between state-issued irredeemable into gold legal token money and the various forms of credit money. The amount of money that various forms of token money represent, which often differs from the amount of money, gold or silver coins that the token money claimed to represent, is determined by the actual rate of exchange between the monetary tokens and money material — gold and in Marx’s day and earlier, silver — bullion.
For their part, champions of Modern Monetary Theory are quite aware that their theory of money is not compatible with Marx’s theory of money, an essential part of Marx’s advance beyond Ricardo in value theory.
The so-called neo-Ricardian school, represented by the British economist Ian Steedman in the 1970s, claimed that they had finally refuted Marx’s theory of value and surplus value through the transformation problem. The transformation problem comes down to the question of the non-identity between the rate of profit calculated in terms of labor values and the rate of profit in terms of the use value of the money commodity once values are transformed into prices of production.
A whole slew of Marxists, perhaps most prominently Ernest Mandel (15), attempted to prove that once prices that directly reflect labor values are transformed into prices of production through the equalization of the rate of profit, the rate of profit in terms of labor value and in terms of money material — gold — must somehow be identical. But the problem is that the math shows the two rates of profit are not identical. And math does not lie. The non-identity between the two rates of profit arises from the existence of a class of commodities that play no role in capitalist reproduction. These commodities consist of the luxury goods consumed only by the capitalists and arms “consumed” only by the state.
But does this (in)famous non-identity in profit rates show the concept of labor value is wrong? It does present great difficulties for the Ricardian theory of value and played a big role in what Marx called the disintegration of the Ricardian school. (16) But does the contradiction between the labor value and money rates of profit lead to the disintegration of the Marxist school as well, as Steedman claimed? I have come to the conclusion that it does lead to the “disintegration” of every Marxist school of value theory that fails to grasp Marx’s theory of money. Once you fully understand the role of money in Marx’s value theory, the entire transformation problem disappears. But it disappears only if we fully understand Marx’s theory of value and understand all its advances beyond Ricardo.
As we have seen throughout this blog, the Marxist theory of money has implications when it comes to the ability of Keynesian economics to overcome crises and achieve full employment within the capitalist system. Therefore, when Washington becomes absorbed with the debate between the progressives on one side and Republican reaction represented by Mitch McConnell on the other — with President Joseph Biden somewhere in between, but much closer to McConnell than to the progressives and supporters of the Monthly Review School and MMT — it will be an appropriate occasion to examine these issues in the light of Marxist theory. At that point, we can expect many progressives to complain that President Biden doesn’t understand Modern Monetary Theory. While the relationship of the rate of profit in terms of labor value and in terms of money material is of interest only to people deep into Marxist theory, the limits of Keynesian policies are of interest to everybody.
In 2005, Fred Moseley assembled a series of Marxist and other radical economists to attempt to deal with the question of whether Marx’s economic theory is compatible with any concept of “non-commodity” money. I intend in coming posts to review and critique these contributions and along the way take another look at Anwar Shaikh’s solution to the “transformation problem.” He unlike most Marxists who have dealt with this question accepts the non-equality of the rate of profit in terms of labor value and in terms of money material.
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1 If such a war goes nuclear, the U.S. along with China would face destruction. If the U.S. used all its nuclear capacity to destroy China, the U.S. would be destroyed as well even if China did not retaliate because mother nature would also destroy the U.S. It is virtually impossible for the U.S. to invade China. The U.S. might or might not win a more limited naval and air war against China. But since such a war could always go nuclear, it would be extremely dangerous. If the worst does not happen, the result would likely be indecisive. (back)
2 One of the biggest problems with the “all people’s front strategy” to defeat Trump with Biden is that it disarms potential opposition to ongoing or possibly new wars that Biden will continue, escalate or initiate. There is always the temptation to calculate that since the Biden administration has been a central part of the “all people’s front” to defeat “Trumpist fascism,” to break with Biden over a war will open the door for a return to power of “the fascists.” (back)
3 Trump made a special racist appeal to white suburban voters claiming that a Biden administration would encourage people of color to move into the suburbs, spreading crime and lowering property values. It is a good sign that Trump’s racist appeal largely failed. (back)
4 The ability of U.S. industry to produce planes and tanks at a level far exceeding that of the axis powers, along of course with the participation in WWII of the Soviet Union, played the decisive role in the U.S. victory. U.S. factories that before the war mass-produced automobiles were converted to plane and tank production during the war. If automobile production were to end in the U.S., the ability of the U.S. to produce weapons in a future war would be greatly compromised. (back)
5 The most famous employee of a patent office of all time was a newly minted physicist still unable to get an academic appointment, Albert Einstein. His employment in the Swiss patent office gave Einstein just enough time and income to work out his special theory of relativity that was to revolutionize physics in the 20th century. (back)
6 It appears that severe COVID infections can also cause various types of permanent damage including brain and heart damage. So even where a lack of affordable COVID vaccines does not lead to deaths, it may well lead to permanent disabilities in some recovered victims that would have been avoided if the vaccine had been produced in greater quantities at lower prices. (back)
7 Even selling the vaccine at the price of production may well cause preventable deaths and long-term disabilities. In a socialist economy, COVID vaccines would be produced to vaccinate every person on the planet. Nobody would have to pay individually for the vaccine. Society would still incur a cost because a certain portion of the total labor of society that could have produced other use values would for a certain period be applied to produce and distribute the COVID vaccine. That would still be a cost worth incurring. (back)
8 The main corporate descendant of the House of Morgan is the universal bank J.P. Morgan-Chase that combines the historical Morgan interests with the old John D. Rockefeller’s Standard Oil interests. To an even greater extent than its ancestors the old J.P. Morgan and Company or the Rockefeller Standard Oil group and its associated banks, today’s J.P. Morgan Chase as the largest U.S. bank is at the heart of U.S. imperialism and its world empire. (back)
9 Franklin D. Roosevelt served as assistant secretary of the Navy under Wilson. In the Wilson tradition, President Roosevelt never spoke in favor of African-American civil rights. Instead, his administration retained Wilson’s extension of formal Jim Crow to the federal government, which remained in effect until the Civil Rights Bill of 1948. Roosevelt further extended Jim Crow principles when African-Americans were banned from the administration’s programs designed to help white Americans finance homeownership. (back)
10 Unlike today’s Chinese economy, capitalists played no role in internal Soviet industrial production. On the other hand, also in contrast to the Chinese economy, the Soviet and Soviet bloc economies were sheltered from the global capitalist economy by state monopolies of foreign trade. Trade between the socialist camp led by the Soviet Union and the capitalist countries was minimal, which meant there was relatively little economic competition between the Soviet bloc economies.
The U.S. feared the Soviet Union not as an economic competitor but as living proof that the capitalist class is not necessary for modern industrial production. Today, however, the prominent role of capitalists in the Chinese economy means that it cannot serve as a similar example. Instead, China is an extremely dangerous economic competitor, and the U.S. fears that as time goes on it will also become a dangerous political and military competitor increasingly undermining the post-1945 U.S. world empire. (back)
11 In the 19th century, the ruling houses of Europe saw the Bonaparte family as dangerous usurpers who had come to power only as a result of the Great French Revolution, which had led to the guillotining of what they viewed as the legitimate king of France, Louis XVI. (back)
12 Ironically and tragically, Thanksgiving may lead to many “mourning days” for white families who ignored the advice of the experts but listened instead to Trump, who encouraged them, despite the warnings of experts, to visit their families on Thanksgiving as is traditionally done in the U.S. (back)
13 Unfortunately, the Federal Reserve Bank of St. Louis has decided to suspend its bi-weekly report and charting of the size of the dollar-denominated monetary base, also called high-powered money, which has shed so much light on the evolution of the conjuncture of the U.S. and world economy over the years. This figure can now only be determined indirectly by examining the evolution of the liabilities side of the balance sheet of the Federal Reserve Banks. (back)
14 The Monthly Review School, which along with Modern Monetary Theory dominates progressive economic thinking, believes that budget deficits are in the interests of both the industrial capitalists and the working class up to “full employment.” However, the Monthly Review School believes that the money capitalists’ interests cause them to oppose Keynesian stimulative measures because they tend to lead to somewhat higher rates of inflation, reducing the purchasing power of interest income. Therefore, the implication is that a cross-class alliance should be forged that takes advantage of the common interests of the industrial capitalists and the working class in Keynesian “full employment” to mount a struggle against the money capitalists. This can be achieved through an all-people’s front that unites the working class and the industrial capitalists in a struggle against the money capitalists. (back)
15 Ernest Mandel (1923-1995) was a much respected and influential Belgian Marxist economist. He was the central leader of the Trotskyist Fourth International from the late 1950s until his death in 1995. However, his influence as a Marxist economist extended far beyond the Trotskyist movement. (back)
16 Marx deals with the disintegration of the Ricardian School in his “Theories of Surplus Value,” sometimes called Volume IV of “Capital” that was first edited and then published by Karl Kautsky between 1905 and 1910. (back)
A Critique of Crisis Theory 