Zombie Capitalism Global Crisis and the Relevance of Marx

Marx is saying that if for some reason part of the surplus value available for investment is diverted into some other use, there is less new capital available for firms seeking innovations that will cut their costs, and the trend towards capital-intensive investment will be reduced. The same point was made much more explicitly in the 1960s by Mike Kidron-apparently without knowing that Marx had spelt the argument out.21 He pointed out that Marx's argument about the falling rate of profit:

rested on two assumptions, both realistic: all output flows back into the system as productive inputs through either workers' or capitalists' productive consumption-ideally there are no leakages in the system and no choice other than to allocate total output between what would now be called investment and working class consumption; secondly in a closed system like this the allocation would swing progressively in favour of investment.

If the first assumption, that all outputs flow back into the system, was dropped-in other words, if some of these outputs are lost to the production cycle-then there would be no need for investment to grow more rapidly than the labour employed. The law of the falling rate of profit would not operate. "Leaks" of surplus value from the closed cycle of production/investment/production would offset the tendency of the rate of profit to fall.22

As Kidron put it in a later work:

In Marx the model assumes a closed system in which all output flows back as inputs in the form of investment goods or wage goods. There are no leaks. Yet in principle a leak could insulate the compulsion to grow from its most important consequences . . . In such a case there would be no decline in the average rate of profit, no reason to expect increasingly severe slumps and so on.23

The argument is impeccable, and Kidron goes on to suggest the form these leaks have taken:

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Capitalism has never formed a closed system in practice. Wars and slumps have destroyed immense quantities of output, incorporating huge accumulations of value, and prevented the production of more. Capital exports have diverted and frozen other accumulations for long stretches of time.24

As we saw in Chapter Four, Henryk Grossman had recognised that imperialism in diverting surplus value overseas had temporarily reduced the upward pressures on the organic composition of capital in the domestic economy and the therefore tendency to crisis. He also at least partially anticipated Kidron's point about the effect of military expenditure. He noted that, while wars were enormously destructive of use values, they had the effect of easing the purely economic contradictions of capitalism since they "pulverise values" and "slow down accumulation". By reducing the tendency for accumulation to rise faster than the employed labour force they countered the fall in the rate of profit:

The destructions and devaluations of war are a means of warding off the immanent collapse [of capitalism], of creating a breathing space for the accumulation of capital. . . War and the destruction of capital values bound up with it weaken the breakdown [of capitalism] and necessarily provide a new impetus to the accumulation of capital. . . Militarism is a sphere of unproductive consumption. Instead of being saved, values are pulverised. 25

Military expenditure is a particular form of waste that can appeal to capitalists connected to a particular state. For it enhances their capacity to struggle for control of worldwide surplus value with rival capitalists. It is functional for nationally based complexes of capital in the same way that advertising is for individual firms, even while wasting resources for the system as a whole. It was therefore a characteristic phenomenon of the classical form of imperialism that led to the First World War-and it survives today in the massive arms spending of the United States in particular.

The logic of arms-based economic expansion has escaped many Marxist economists. It is absurd, they argue, to see a deduction by the state from the total surplus value as somehow countering the tendency for surplus value to grow more slowly than total investment costs, and so overcoming the fall in the rate of profit. What they have failed to understand is that this "absurdity" is just part of the greater absurdity of the capitalist system as a whole, of its contradictory nature. They have not seen that engaging in military competition can be just as much a "legitimate" capitalist goal as engaging in economic competition for markets.

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As we saw in the last chapter, one of the greatest followers of Marx, Rosa Luxemburg, could not understand how capitalism could continually expand the value embodied in means of production without producing more goods for consumption. Similarly, these Marxists have not been able to understand how capitalism could possibly benefit from continually expanding the means of destruction. They have been so bemused by the irrationality of what capitalists are doing as to try to deny that this is how the system works.

But such expenditures had enormous implications for capitalism in the latter part of the 20th century. Waste expenditures played a contradictory role. They reduced the amount of surplus value available for productive investment, so counteracting the tendency towards over-rapid accumulation and crisis. But the eventual effect in slowing down accumulation was to create a whole new series of problems for the system, as we will see in Chapter Nine.

Welfare and the supply of labour power

Not all the state expenditures listed earlier fall into the unproductive category as narrowly defined or into the wider category of waste. State-financed research and development (corresponding to category (g) in the list above) that feeds through into aiding accumulation in the wider economy clearly plays a role for those capitals that benefit from it, similar to that of dead labour embodied in means of production. But what of expenditures on health, education and welfare services (equivalent to the expenditures (e) and (f) of individual capitalists) ? Here it is necessary to examine something Marx only discusses in passing-the reproduction of the working class that capitalism needs for exploitation.

The first industrial capitalists of the late 18th and early 1 9th centuries in Britain did not have to worry over much about the supply of labour power. It was available in abundance once "primitive accumulation" had driven sufficient peasants from the land.

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They assumed they could bend former peasants and their children to the discipline of unskilled machine minding, 26 while relying on drawing men trained as artisans into the factories for more skilled work. For these reasons, Marx, who dealt at length with primitive accumulation and the treatment of workers in the factories, virtually ignored the problem for capitalists of getting a labour force with the right physiques and skills. Yet by the time of his death, the spread of capitalist industry to ever newer new sectors of production was making the supply and management of labour power-outside as well as inside the factory-something of increasing concern to those promoting capitalist accumulation.

The individual capitalist aimed to pay the individual worker just enough by the hour, day or week to keep him or her fit and motivated to work. But this did not cater for a number of important things if labour power of the right quantity and quality was going to be available for the capitalist class as a whole over time. It did not take into account the need for workers to learn necessary skills nor did it sustain them through periods of unemployment so as to be able to supply their labour power when the crisis ended. It did not deal with the problem of workers temporarily losing their capacity to be productively exploited through illness or injury. And it did not provide for the upbringing of working class children who would be the next generation of labour power.27

There were various ad hoc attempts to deal with each of these problems through the 19th century. Religious and other charitable funds provided some relief for the unemployed or the sick. Pressure was put on working class women to bear the burden of child rearing through the propagation of ideologies that treated men as the wage earner and men's wages as a "family wage" (even though working class women always worked to some extent and a man's wage was rarely adequate to keep a family).28 Some firms would provide housing under their own control-and sometimes minimal health facilities as well-for their workforces. Groups of skilled workers would run funds to provide for periods of unemployment or sickness. Firms would incorporate into the factory system a version of the apprenticeship system of pre-capitalist artisanship, with youngsters learning a trade by working under skilled workers for five or seven years on minimal wages.

But over time it became clear that the ad hoc methods were inadequate and that the state had to take over many of the tasks from private capitalists and charitable concerns. In Britain it intervened as early as the 1834 Poor Law to ensure that the conditions under which the unemployed or the infirm could get poverty relief were so arduous that those who could work would, however low the pay. In 1 848 it established a Board of Health to act against the spread of diseases in working class areas-which was affecting richer areas too. Over the decades it was cajoled into limiting the working hours of children and barring women from occupations that might damage their capacity to bear and bring up the next generation. In the 1 870s it moved to set up a state system of elementary education and to encourage the building of homes for skilled workers. Then in the first decade of the 20th century it made the first moves to coordinate the various ad hoc measures of the previous 70 years into national structures to provide minimal social insurance benefits for unemployment, old age and sickness. 29 The impetus to do so came from the shock of discovering in the course of recruitment for the Boer War how few of the working class were healthy enough to undertake military service. Ann Rogers has summarised the reaction of the upper and middle class:

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The belief that change was necessary if Britain was to compete successfully with Germany and the United States remained central. Whether the argument was formulated by the Fabians or by Liberal imperialists the concentration was on the damage that poverty was doing to society rather than the misery it caused individual workers . . . The underlying reason for the desire to improve the health of the working class was the need for a healthier labour force in the factories and the army.30

These measures were not simply a result of capitalists getting together and deciding what was rational for their system. They came into being only after recurrent campaigns involving upper class philanthropists with a conservative disdain for the money-grabbing grubbiness of capitalism, middle class moralisers about working class behaviour, political opportunists out to get working class votes, factory inspectors and doctors with professional concerns about people's safety and well-being-and, alongside them and often independently of them, trade union and socialist activists. But such coalitions framed the projects they pursued in terms of what they saw as rational for capitalism. And that meant what was necessary to supply it with pools of suficiently healthy and skilled labour power. This was shown clearly by one feature that characterised the reforms of the early 20th century just as much as it had the charitable efforts of the early 1 9th century. Any benefits were always to be provided in such a way as to coerce into seeking work all those who were fit and able. The principle of "less eligibility" had to apply: getting the benefit must still leave the recipients worse off than the worst paid work. What is more, the benefits were not meant to come from a diversion of value from capital to labour, but by a redistribution of income within the working class through the "the insurance principle". Weekly payments from those able to work were to sustain those unable to do so because of sickness or unemployment.

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The role of the state in the supply, training and reproduction of labour power grew through the 20th century, reaching a peak in the long boom from the mid-1940s through to the mid-1970s, and continuing into the new period of crises which followed. All through this the "welfare state" continued to be tailored to the interests of nationally based capitals, even when the impetus for extending its role came from below, as during the Second World War, when the British Tory politician Quintin Hogg famously declared, "if you do not give the people social reform, they are going to give you social revolution" .31 The British Labour minister of the 1940s Aneurin Bevan argued that public health measures had become part of the system, "but they do not flow from it. In claiming them capitalism proudly displays medals won in battles it has lost". 32 The fact, however, is that those who formulated them-including Bevan-did so in ways that could fit in with the needs of the system.

This has important implications for the labour power that goes into such services-and for the people who supply it. There is a widespread tendency for Marxists-as well as some non-Marxists33-to insist that such labour cannot be productive since it does not produce commodities directly. But that also applies to much labour inside any capitalist enterprise, which is merely a precondition for other labour that produces the final products. It is productive as part of the labour of the "collective worker"34 in the enterprise. A fully trained carpenter or bricklayer can be many times more productive than an unskilled one; a fully trained toolmaker can do jobs an unskilled labourer is incapable of. The labour of those who train them is adding to the capacity of the collective worker to produce value. And they are exploited, since they are paid the value of their labour power, not of the training they provide. There can be a debate over exactly how the skills added by their labour fit into Marx's categories: are they to be equated with plant and equipment as a form of constant capital or as simply enhanced labour power, as variable capital?35 There are also debates between individual firms over the merits of undertaking training programmes. They may gain in the short term, but what is to prevent other firms "poaching" their skilled labour without ever having paid for its training.36 Finally, there are arguments about how to characterise the labour used to train other workers: is it "productive" or "indirectly productive" ? But there should be no doubt about its role in increasing overall potential output and productivity: it is part of the total productive labour of the firm and of the system as a whole. 37

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A big portion of the labour that goes into the educational system plays an identical role in providing the skills capital needs, although in this case the skills are not available simply for individual capitalists, but for all the capitalists operating from within the state that provides it. The training in skills which future workers get from a teacher in an educational institution adds to the amount of socially necessary labour they can produce in an hour in exactly the same way as the training they might get inside an enterprise. And the cost of the training is part of the cost of providing labour power, just as much as the wage that goes into buying the food, clothing and shelter the workers require. Enterprises under modern capitalism require labour power with at least minimal levels of literacy and numeracy. The teachers who provide this have to be considered as part of the collective worker, ultimately working for the complex of nationally based capitals that the state services. Apologists for capitalism recognise this inadvertently when they refer to the provision of education as "adding to social capital" and demand "value added" in schools.

The same general principle applies to health services that cater for actual, potential or future workers. Spending on keeping the workforce fit and able to work is in reality a part of the wage even when it is paid in kind rather than in cash and goes to the workers collectively rather than individually. In Marx's terminology, it is part of "variable capital". This is absolutely clear in countries like the US where healthcare is provided for most workers through insurance schemes provided by their employers. It should be just as clear in countries like Britain where the state provides them on behalf of the nationally based capitals. The popularly used term "social wage" is an accurate description. It is just as accurate when applied to unemployment benefits available only to those who show they are able and willing to work, and to pension schemes dependent on a lifetime of labour. The capitalist wants contented workers to exploit in the same way that a farmer wants contented cows. Workers cannot be expected to labour with any commitment to their work unless there is some sort of promise that they will not starve to death once they reach retirement age. As Marx put it, there is a historically and socially determined element to the cost of reproducing labour power as well as a physiological one.

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But labour power is not an object like other commodities, which are passive as they are bought and sold. It is the living expression of human beings. What from a capitalist point of view is "recuperation of labour power" is for the worker the chance for relaxation, enjoyment and creativity. There is a struggle over the social wage just as over the normal wage, even if both are, to a certain degree, necessary for capital.

The problem is compounded from capital's point of view by the fact that not all welfare provision is in any sense productive. A good portion of it is concerned solely with maintaining the existing relations of exploitation. Studies of the schooling of working class children in the 19th century emphasise the degree to which what was involved was not education in skills so much as inculcating into them discipline and respect for authority.38 Not until late in the 1 9th century did a concern with basic skills for the workforce begin to become a central preoccupation for British capitalism facing foreign competition.39 Today disciplines like economics and sociology are about trying to reproduce bourgeois ideology, while others like accountancy are concerned with the unproductive redistribution of surplus value among members of the capitalist class.

If capital has no choice but to tolerate these unproductive "expenses of production", there are other elements in welfare expenditure it would love to be able to do without and does its utmost to minimise. These go to those who are not needed as labour power (the long-term unemployed without needed skills) or are incapable of providing it (the chronic sick and disabled). It has a similar attitude to provision for the mass of the elderly, but is restrained to some degree by its need to give the impression to currently employed workers that their future is assured. Marx pointed out that there exists, alongside the "reserve army of

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labour", able to enter the active labour force when the system undergoes periodic expansion (and in the meantime exercising a downward pressure on wages), a surplus population in whose survival it has no real interest apart from that of warding off re bellion and preventing a demoralising impact on the employed working class. The history of welfare legislation over the last 180 years has been a history of attempts to separate that provision which is necessary for capital in the same way that wage payments are and that which is unnecessary but forced on it by its need to contain popular discontent. This finds expression in repeated debates among those who would manage national capitalisms over how welfare policy interacts with labour market policy, among mainstream economists about the "natural" or "non-inflationary" level of unemployment, and among sociologists and social work theorists about the "underclass". The division between social expenditures that are in some way productive for capital and those that are non-productive cuts across some of the normal ways of dividing up national budgets. So education is both training for productive labour and also training for unproductive forms of labour (eg in sales promotion or finance) and the inculcation of bourgeois ideological values. Health services and unemployment benefits both keep the workforce fit and ready to provide labour power and are mechanisms for maintaining social cohesion by providing at least minimal provision for the old, the infirm and the long-term unemployed. These ambiguities become important whenever capital finds the costs of state provision begin to cut into profit rates. At such points states come under the same pressure as do big capitals when faced with sudden competition-the pressure to restructure and reorganise their operations so as to accord with the law of value. On the one side this means trying to impose work measurement and payment schemes on welfare sector employees similar to those within the most competitive industrial firms. On the other side it means cuts in welfare provision so as to restrict it as much as possible to servicing labour power that is necessary for capital accumulation-and doing so in such a way that those who provide this labour power are prepared to do so at the wages they are offered. These pressures grow as managing labour power becomes more important for the state. In the process, employees working

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in the welfare, health and educational sectors who could at one stage of capitalist development regard themselves as part of the professional middle class-with salaries and conditions comparable to lawyers or accountants-find themselves subject to a traumatic process of proletarianisation. This, as we shall see, adds to the problems that beset national capitalist states as they attempt to cope with sudden crises. Public expenditures become a central focus for class struggle in a way in which they were not in Marx's time.

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