Zombie Capitalism Global Crisis and the Relevance of Marx

There is no need to go back in history to decompose into labour values the prices of things which were paid for at the beginning of the production round, in order to understand the impact of creating new value and surplus value on the dynamics of the system. It is no more necessary than it is in physical dynamics to decompose the momentum of an object that strikes another into all the forces that have previously acted on it to create that momentum, going right back to the foundation of the universe with the big bang; or than it is necessary in biology to know the whole history of the evolution of an organism, going right back to the first formation of organic life forms, in order to see what the effect of a genetic change will be in the present.

As Guglielmo Carchedi has pointed out, "If this critique were sound, it would mean the bankruptcy not only of Marx's transformation procedure but also of social science in all its versions" including those that criticise Marx:

This critique, in fact, would have to apply to any social phenomenon inasmuch as it is determined by other phenomena, both present and past. Social sciences, then, would become an endless quest for the starting point of the inquiry. 28

It would never be possible to analyse how some current actions related to the cumulative products of past actions.

Skilled and unskilled labour

The same dynamic character of Marx's model also dispels what has been presented from Bohm-Bawerk onwards as another problem for the labour theory of value. This is how the contribution of skilled labour to value creation is to be measured. Marx seems to see this as easily solved. He writes that:

skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour . . . The different proportions in which the different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the back of the producers and, consequently, appear to be fixed by custom.29

50

Understanding the System: Marx and Beyond

This explanation is fully adequate when the same job is done by a skilled worker and unskilled worker, with the skilled worker doing it much more quickly. An hour of the skilled labour will be worth more than one hour of the average "socially necessary" labour in the system as a whole, while the unskilled labour will be worth less than that.

There is a problem, however, when it comes to skilled labour that cannot be replaced by a greater quantity of unskilled labour. It does not matter how many unskilled labourers a capitalist employs, they will never be able to do the same task as a skilled toolmaker or a systems analyst. How then can the value produced by the second group be measured in terms of hours of labour of the first group? It seems that any attempt to do so must involve an arbitrariness that undermines the basic theory. Bohm-Bawerk argued that when Marx writes that "a social process" explains the measurement, he is taking for granted that which he is trying to explain. For Bohm-Bawerk this proved that it is not the amount of labour in goods which determines their prices, but the way people evaluate them in relation to other goods (their "utility") and that this deals a death blow to the labour theory of value.

However, the problem for the theory evaporates once the law of value is seen as something working through time. The development of technology again and again leads to jobs emerging that can only be carried out by those with particular skills. At first there is no objective measure of the amount of socially necessary labour time needed to produce them, and those in possession of such skills or the goods produced by them can receive payments which bear no obvious relation to labour time. In effect, value flows to those controlling a monopoly of these skills from the rest of the system. But this is only a transitory phase, even if sometimes a long one, as capitalists elsewhere in the system will do their utmost to try to gain control of some of the benefits of the new skills for themselves.

There are two ways they can do this. They can train new groups of workers to acquire the skills. This efectively amounts to using one sort of labour to create new labour power capable of doing the skilled work, so that the final labour is in fact composite labour, made up of the living labour of the immediate workers and a form of dead labour embodied in their labour power as skills. The capitalists can get this extra element in labour power directly by on the job training for workers (as with apprenticeship systems), they

Marx and His Critics

5 1

can leave its provision to the workers themselves (when workers pay to go through courses to get skills qualifications) or they can rely in part on the state providing it through its training courses. But in each case, dead labour is embodied in the enhanced labour power and then transferred into the products of the labour process, as with the dead labour embodied in means and materials of production.30 But this still leaves a question unresolved. Who trains the trainers? Skilled trainers cannot themselves get their skills from unskilled workers. If their skills are monopoly skills and they produce goods that cannot be produced by unskilled workers, however many work together at the job, then those who own those goods will be able to charge monopoly prices that do not reflect labour values, but simply how much people are prepared to pay. This will be true of certain skills and certain goods at any particular point in time. But over time this labour too will be reduced to some objective ratio of other labour. Capitalists elsewhere in the system will actively seek out new technologies that undermine such skill monopolies by enabling the tasks to be done by much less skilled labour. In this way, the reduction of skilled labour to unskilled labour over time is a never ending feature of capitalist accumulation. If enough unskilled labour is trained up to the level of skilled labour needed to produce particular commodities, those commodities will cease to be scarce and their value will fall to the level that reflects the combination of the labour needed to reproduce average labour power and the extra cost of the training. As Carchedi puts it: Due to the introduction of new techniques in the labour process, the level of skills required of an agent is lowered. The value of his or her labour power is then devalued. We can refer to this process as devaluation (of labour power) through dequalification (of skills). It is this process which reduces skilled to unskilled labour and thus (at least as far as the value of labour power is concerned) alters the exchange relations between the commodities of which those different types of labour power are an input. It is this real process which justifies the theoretical reduction of skilled to unskilled labour, or the expression of the former as a multiple of the latter . . . The process of devaluation through dequalification is a constant tendency in capitalist production, due to the constant need

52

Understanding the System: Marx and Beyond

capitalists have to reduce the level of wages. On the other hand, the same techniques create new and qualified positions (the counter-tendency) which, in their turn, are soon subjected to dequalification . . . At any moment in time we can observe both the tendency (the dequalification of certain positions and thus the devaluation of the agents' labour power) and the counter-tendency (the creation of new, qualified positions for which agents with a high value of labour power are needed}.31

Labour may not be reducible to socially necessary labour time instantaneously. But it is so reduced over time through the blind interaction of different capitals with each other. Again the law of value has to be understood as pressurising the individual components to operate in a certain way, not as a formula establishing fixed, fast frozen relations between them.

Marx's basic concepts survive all the criticisms once they are not interpreted through the static framework, ignoring the process of change through time that characterises the neoclassical system.

Marx and His Critics

53

CHAPTER THREE

The Dynamics of the System

Illusions and reality

The history of capitalism in Marx's time and that of his immediate successors was punctuated by economic crises that occurred about once every ten years-there were 15 in the US in the 1 1 0 years between 1810 and 1920. For a few years firms would invest on a large scale, taking on new workers; building new factories and buying new machines would create a demand for the products of industries like construction, steel and coal, which in turn would take on new workers; the new workers would receive wages which in turn enabled them to buy goods. Very fast rates of economic growth led firms to do everything they could to lure people from the countryside-and increasingly from other, poorer countriesinto selling their labour power in the towns. Unemployment would fall to around 2 percent. Then something always seemed to go wrong. Giant firms would suddenly go bust, cancelling the demand for the products of other industries, where firms would also go bust; right across the economy workers-many only recently drawn into industry-would be sacked; their loss of buying power then ensured that the crisis ricocheted from industry to industry; panic would sweep through the capitalist class, while unemployment shot up virtually overnight to 10 percent or higher, where it would stay for months or even years until a new period of rapid growth took off.

The mainstream economics of the time denied that such "crises of overproduction" were endemic to the system, basing their arguments on a populariser and vulgariser of Adam Smith's ideas, Jean-Baptiste Say. His "law" argued that supply and demand must always coincide, since every time someone sold something someone else must have bought it: supply, it was claimed, created its own demand. So John Stuart Mill argued:

55

Each person's means for paying for the production of other people consists in those [commodities] that he himself possesses. All sellers are inevitably by the meaning of the word buyers . . . A general over-supply . . . of all commodities above the demand is . . . f an] impossibility . . . People must spend their . . . savings . . . productively; that is, i n employing labour.1

The founders of the neoclassical school had to accept that in practice the economy experienced a "trade cycle" or "business cycle" of booms and recessions, in which for some reason supply and demand did not always balance as their theory claimed. Their reaction was to blame these things on external factors that somehow led to temporary distortions in an otherwise fundamentally healthy system. So Jevons wrote that the business cycle was a result of sun spots which, he claimed, affected the climate and therefore the productivity of agriculture and the profitability of trade, while Walras saw crises as disturbances caused by the failure of prices to respond to supply and demand, comparable in effect to passing storms on a shallow lake. 2

Some later neoclassical economists did try to develop theories of the business cycle. Anwar Shaikh has summed up their approach:

the system is still viewed as being self-regulating; only now the adjustment is seen as being cyclical rather than smooth . . . In orthodox theory a cycle i s not a crisis . . . Cycles must be viewed as "small fluctuations" . . . which at first approximation one may justifiably neglect . . . Violent or prolonged expansions and contractions arise from external factors . . . Crises, therefore, remain outside the normal process o f capitalist reproduction.3

This view still persists in what is known as "real business cycle theories" . These hold that:

business cycles are the aggregate result of the optimum response of individuals to changes in the economic environment . . . The economic cycle is assumed to have a stochastic [irregular-CH] oscillation around a trend.4

56

Understanding the System: Marx and Beyond

They still do not allow what they see as short-term aberrations to undermine their faith in an unchallengeable system of laws which lay down how any efficient economy must operate.

The possibility of crisis

Karl Marx, by contrast, argued that the possibility of general crises of overproduction was built into the very nature of capitalism. He destroyed the arguments based upon Say's law in a couple of paragraphs in the first volume of Capital. Of course, he acknowledged, every time someone sells an article someone else buys it. But, argued Marx, once money is used to exchange goods through the market, it does not follow that the seller has then immediately to buy something else. Money acts not only as a measure of value in directly exchanging goods, but also as a means of storing value. If someone chooses to save the money they get from selling a good rather than spending it immediately, then there will not be enough money being spent in the system as a whole to buy all the goods that have been produced:

Nothing can be more childish than the dogma that because every sale is a purchase and every purchase a sale, therefore the circulation of commodities necessarily implies equilibrium of sales and purchases. If this means that the number of actual sales is equal to the number of purchases, it is mere tautology. But its real purport is to prove that every seller brings his buyer to market with him. Nothing of the kind. The sale and the purchase constitute . . . an exchange between a commodity-owner and an owner of money, between two persons as opposed to each other as the two poles of a magnet . . .

No one can sell unless some one else purchases. But no one is forthwith bound to purchase, because he has just sold. Circulation bursts through all restrictions as to time, place, and individuals, imposed by direct barter, and this it effects by splitting up, into the antithesis of a sale and a purchase, the direct identity that in barter does exist between the alienation of one's own and the acquisition of some other man's product. If the interval in time between the two complementary phases of the complete metamorphosis of a commodity become too great, if the split between the sale and the purchase become too pronounced, the intimate connexion between them, their oneness, asserts itself by producing-a crisis.5

The Dynamics of the System

57

The inevitability of crisis

These arguments used by Marx in Volume One of Capital "imply the possibility, and no more than the possibility, of crises" .6 But in Volume Three he went further, to argue for the inevitability of crises. He did so by moving beyond the most abstract considerations about the buying and selling of commodities with money to look at the concrete process involved in capitalist production and exchange. As is often remarked, Marx did not provide a single, integrated account of the crisis. Rather he refers to diferent aspects of the crisis in writings that are scattered in different parts of the text.7 But it is not that difficult to construct a coherent account from these.

The starting point is that competitive accumulation means that capitalists are simultaneously trying to increase the output of their goods as much as possible at the same time as trying to maximise profits by holding down wages. But wages constitute a major part of the money available to buy goods. Production tends to move in one direction, the consumption of the masses in the other:

The conditions of direct exploitation, and those of realising it, are not identical. They diverge not only in place and time, but also logically. The first are only limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society. But this last-named is based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce surplus value on an extended scale . . . The more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest . . . 8

Some people have interpreted this passage as meaning that the mere fact that workers are exploited limits the scale of the market and creates crises.9 Such "underconsumptionist" versions of Marxism share some features in common with the form of the mainstream economics that developed in the 1930s under the influence of Keynes. The conclusion seems to be that capitalism can escape crisis if the state intervenes to raise consumption the moment a recession seems likely to develop.

58

Understanding the System: Marx and Beyond

But Marx's own argument does not stop with pointing to the possibility of consumption falling below production. He goes on to insist that the double nature of one set of commodities, those that make up the means of production, as both values and use values, makes that inevitable. A Russian Marxist economist of the late 1920s, Pavel V Maksakovsky, spelt out how this double nature works itself out. 10 As we have seen, the exchange value of goods is determined by the amount of labour required to produce them using the average level of techniques and skill operating in the system as a whole (what Marx refers to as "abstract labour"). But their production involves concrete human labour bringing objects ("use values" ) into physical interaction with each other. The correct relations between different exchange values and different use values must exist for production to take place.

The more industry develops, the more complicated these relations become. Textile machines cannot be produced without steel; steel without iron ore and coal; coal without cutting machinery, winding gear and so on. But the chains of physical interaction depend on chains of buying and selling, in which coal firms sell to steel firms, steel firms to textile firms and textile firms to consumers-that is, to people who get wages or profits to spend from other firms so long as these can sell their goods.

Such long, intertwined chains linking production to final consumption only function if two completely different conditions are fulfilled. The correct physical relations between things that go to produce other things has to exist determined by the law of physics, chemistry and biology. But, at the same time, each act of production has to expand the amount of value (ie the amount of average abstract labour) in the hands of the owners of each particular firm. The physical organisation of the production of use values has somehow to correspond with the capitalist determination of prices by values.

Discrepancies between the two requirements mean that the expansion of production inevitably leads to bottlenecks in the supply of raw materials, causing their prices to rise, cutting into the profits of those capitalists who buy them, and so redistributing surplus value from the capitalists producing finished goods and components to those producing raw materials. It also means that the demand for one vital commodity, labour power, can begin to exceed the supply, leading to upward pressure on wages (at least in money terms, although workers may not see it like this if rising raw material prices cut into the buying power of the expanded wage).

The Dynamics of the System

59