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Marxist Economics for Anarchists - Chapter 5
international | economy | opinion / analysis Thursday October 27, 2011 13:21 by Wayne Price - personal opinion drwdprice at aol dot com
The Epoch of Capitalist Decline
This is the 5th chapter of my book, "Marx's Economics for Anarchists: An Anarchist's Introduction to Marx's Critique of Political Economy." This chapter discusses the nature of late capitalism, with the growth of semi-monopolies, imperialism, ecological looting, revival of primitive accumulation, and denial of bourgeois-democratic rights.
The Epoch of Capitalist Decline
Every previous social system had reached an end and the same will be true of capitalism. As previously quoted, Marx held that capitalism will come to a point when “it begins to sense itself as a barrier to development…”.
Capital’s powerful technology has become so vastly productive that it does not fit within the confines of a system based on private ownership, class conflict, competition, and national borders—all of which developed to serve an economy of scarcity. Production for value holds back the production of useful goods for all. Capitalism becomes less competitive; it revives older methods of non-market, statist, support; it returns to primitive accumulation. This has been called “the epoch of capitalist decay,” “decline,” or “parasitism;” the epoch of “monopoly capitalism,” of “imperialism,” of “state monopoly capitalism,” of “finance capitalism,” or of “late capitalism.”
Of all the improvements in productivity, including automation, computers, and nanotechnology, the most significant which capitalism has created is the international working class. This class exists in concentrations in cities and in industries, working collectively and cooperatively (unlike peasants who generally work their own farms and usually want to be prosperous businesspeople). This class, with its hands on the highly productive new technology, could lead all the oppressed to create a new society, without classes, or states, or warfare, or ecological destruction. For over a century and a half, this modern working class has repeatedly struggled, under the banner of various sorts of socialisms, to overthrow capitalism.
Marx and Engels did not live to see the actual epoch of capitalist decline (beginning about 1900 or so). But, analyses were made by various Marxist theorists, including Hilferding, Lenin, Bukharin, Trotsky, and Luxemburg. All of them had important insights, althouigh only Rosa Luxemburg was influential in the development of libertarian Marxist trends. However, I am going to stick as close as possible to the actual theories of Marx and Engels.
That Marx had been correct in describing an epoch of capitalist decline was easily believed from 1914 onward. There was the historically unprecedented First World War. This was followed by the shallow prosperity of the twenties and then by the worldwide, decade-long, Great Depression. There were revolutions and near-revolutions through-out Europe, the Russian being the closest to successful. Other revolutions failed in Germany, Italy, and Eastern Europe. There were big labor struggles in Europe and in the United States, as well as national rebellions, in China and elsewhere. Eventually all the revolutionary struggles were defeated and replaced by totalitarian regimes. In the Soviet Union Stalinism wiped out the last remnants of the Russian revolution (anarchists believe that it was Lenin and Trotsky who first betrayed the revolution by establishing a one-party police state). Fascism came to power in Italy, Germany, Spain, and other countries. Even slavery was revived, as a state measure, under Nazism and Stalinism. Finally the period ended with the destructiveness of World War II. (I will discuss the post-war boom below.)
“Monopoly Capitalism”What was the underlying nature of this epoch of capitalist decline? The political economists took for granted the continuing reality of a competitive capitalism, where many firms competed in a market and took the prices and rate of profit which the market enforced. Marx was one of the first to point out the drive of capitalist enterprises to grow larger and larger. He forsaw the growth of gigantic corporations due to “concentration and centralization.” “Concentration” was the ever increasing scale of accumulation of capital, into larger and larger firms. “Centralization” was the merger of separate capitals, either by amicable unions or by hostile takeovers of one by another.
“This splitting up of the total social capital into many individual capitals or the repulsion of its fractions one from another, is counteracted by their attraction….[There] is concentration of capitals already formed… expropriation of capitalist by capitalist, transformation of many small into few large capitals…. This is…distinct from accumulation and concentration…. Competition and credit [are] the two most powerful levers of centralization” (Capital I, 1906; pp. 686-687).
That this has come to pass is well-known. Just as one example, Frances Moore Lappe writes, “Just four companies control at least three-quarters of the international grain trade; and in the United States, by 2000, just ten corporations — with boards totaling only 138 people—had come to account for half of US food and beverage sales” (2011).
The trend was toward merger of all the capital of one country into one, which would lay the basis for state capitalism. In Capital I, Marx wrote, “This limit would not be reached in any particular society until the entire social capital would be united, either in the hands of one single capitalist, or in those of one single corporation.”
However, this tendency was interfered with by counteracting forces (as usual!). If the mergers were not due to technical needs, then the giant capitals would tend to break up into smaller capitals, as they got bigger, due to internal competitive forces — “the repulsion of its fractions one from another.”
Nor did the growth of huge firms end competition. The huge enterprises still competed with each other. Even if they were monopolies in their fields, they competed with other monopolies (for example, even a firm which monopolized aluminum would compete with the steel monopoly). Giant firms often found it useful to use smaller firms (as the auto producers distribute through dealerships). New inventions arise which can force their way into the political economy (as personal computers did). And there are international firms: for decades no US firm could break into the domination of the auto industry by GM, Ford, and Chrysler. Then giant auto makers from Japan, Korea, and Germany (with backing by their states) were able to successfully compete with the former Big Three.
This development was called by Lenin and others “monopoly capitalism.” It would be more accurate to call it “oligopoly capitalism,” meaning the rule of the few. Even if a small number dominates a field, these semi-monopolies distort the forces of the market in a monopolistic manner (bourgeois economists call this “imperfect competition”). This includes distortion of the law of value (the tendency of commodities to exchange according to the amount of socially necessary labor they embody). But even distorted markets are still markets; even distorted value relations are still value relations.
Marx saw the growth of centralized big business as mostly progressive. He was aware that it caused great suffering for the workers, but he believed that it lay the basis for socialism (communism), the end of classes and poverty.
Anarchists had a more critical attitude toward the growth of big business. They agreed that it made possible someday a cooperative, nonprofit, system of production: socialism. Only some of the economic centralization was due to technically more efficient methods of production (a point which does not contradict Marx’s premises). Often firms merged solely for financial reasons, or in order to increase their power over the workers, or to have better access to markets. Such weak reasons often caused these semi-monopolies to break apart after a while. “Monopoly capitalism” often caused overcentralization, which interfered with efficient production and distribution, and which held back inventiveness (new inventions and new job creation are more likely to occur among smaller firms than larger ones). This view was consistent with the anarchists’ goal of an economy which would be socialized and cooperative while also radically-democratic with a decentralized federalism.
Effects of Oligopoly on the CapitalistsIt is sometimes stated that Marx predicted that the growth of concentrated capital would end the existence of middle layers between the stock-owning bourgeoisie and the working class. This is not true. Marx did expect that small businesspeople, independent professionals, and small farmers would decline in numbers with the growth of big business. But he also predicted that huge firms would result in a split between the ownership of capital and the job of managing the firm. “An industrial army of workmen, under the command of a capitalist, requires, like a real army, officers (managers), and sergeants (foremen, overlookers) ….The work of supervision becomes their established and exclusive function” (Capital I, 1906; p. 364). As capitalist enterprises expand, the capitalists themselves become superfluous, at least to the productive aspects. The managers manage. The capitalists invest in the stockmarket.
This new layer of managers and supervisors has basically two tasks. One is the technical coordination of the various work taking place. This is something which would have to be done in any economic system. Under socialist democracy, it might be done by the workers meeting to plan their work, or the workers might elect a coordinator, or they might take turns. To the extent that the capitalist managers are doing necessary technical work, they are part of the collective labor that produces the commodities.
On the other hand, they are agents of the capitalists and personifications of capital. Their job is to drive the wage slaves to their labors and make sure the workers do not “goof off.” While the supervisors may have interests which clash with the capitalist owners, as far as the workers are concerned they are part of the class enemy.
For Marx, the replacement of family-owned and managed firms by ever-larger stock companies points to the end of capitalism, its last phase. He summarizes, “This is the abolition of the capitalist mode of production within the capitalist mode of production itself….It establishes a monopoly in certain spheres and therefore requires state interference. It reproduces a new financial aristocracy, a new variety of parasites…a whole system of swindling and cheating by means of corporation promotion, stock issuance, and stock speculation….” (Capital III, 1967; p. 438). He thought that the growth of semi-monopolies would result in more state involvement in the economy as well as the growth of finance and speculation (all of which came true).
Effects of Oligopoly on the Working ClassAnother frequent misinterpretation of Marx is his supposed “theory of immiseration” -- that the growth of big business would result in increasing poverty among the working class. This is a misrepresentation of his “general law of capitalist accumulation.” (To repeat: all of Marx’s “laws” are “tendencies,” which work their effects through counteracting tendencies.)
The capitalists constantly push down on the workers’ standard of living and the workers push back. Over time this evolves into a relatively stable value of the commodity labor power. But the capitalists will continue to press the workers, especially when profit rates decline (discussed further below) and when the bosses feel stronger due to increased centralization. As mentioned, increased productivity permits the capitalists to keep or even lower the value of what they pay the workers, while maintaining their standard of living as judged by use-values.
The workers fight back to maintain the standard of living for themselves and their families—and, if possible, to improve it. This is good, but in itself, Marx said, it does not directly challenge capitalist exploitation as such. “Just as little as better clothing, food and treatment…do away with the exploitation of the slave, so little do they set aside that of the wage worker. A rise in the price of labor…only means, in fact, that the length and weight of the golden chain the wage worker has already forged for himself, allow of a relaxation of the tension of it….The condition of [labor power’s] sale, whether more or less favorable to the laborer, include therefore the necessity of its constant re-selling…” (Capital I, 1906; pp. 677-678; my emphasis).
As capitalist accumulation and centralization increase, the workers’ wages may get better for a time or may decrease. Nevertheless, their domination by the ever-increasing power of the capitalists worsens. Meanwhile, increasing productivity (the increasing organic composition of capital) continues to decrease the proportion of human labor which is needed in production. People lose jobs, which expands the reserve army of the unemployed, the pool of unemployed workers. Their poverty and misery does get worse over time, and threatens to pull down the standards of even the organized employed workers.
“In proportion as capital accumulates, the lot of the laborer, be his payment high or low, must grow worse….This law rivets the laborer to capital…” (Capital I , 1906; pp. 708-709; my emphasis).
Oligopoly and the Rate of ProfitHow is the tendency of the rate of profit to fall affected by the tendency toward oligopoly, monopoly, and even complete unification (state capitalism)? Clearly, productivity continues to increase, which raises the organic composition of capital, which should decrease the rate of profit. But does it?
The immediate effect of monopoly/ oligopoly on profit rates is to interfere with the average rate of profit. The giant firms can raise their prices and thereby their profits, without worrying that other capitalists will invest in their field and bring down the prices and profits. Because of their monopoly position, they can keep out other possible competitors (by definition; this is what makes their position a monopoly). Their monopoly (or semi-monopoly) position may be due to ownership of patents or to their huge size. It takes a great deal of capital to break into the US steel or auto industries (which is why it took foreign giants to do it).
Therefore the giant firms may get and keep a disproportionate amount of the surplus value produced in society. Which means that the weaker, smaller, firms are getting proportionately less (the surplus value has to come from somewhere). However, this does not change the total amount of surplus value produced by society’s collective body of workers.
Another effect of concentrated and centralized big businesses is that they produce large amounts of surplus in one place. While the rate of profit may not be high, the lump sum of any one corporation will be large. This does not change the actual rate of profit, but it changes the effects of the declining rate of profit. A large, concentrated, sum of money can be used for further investment in a way that the same sum of money, scattered around in small firms, cannot.
Large firms may also increase profits due to economies of scale in production. However, as anarchists and other decentralists (Borsodi, Schumacher, etc.) have argued, there are also diseconomies of scale which are rarely looked at. For example, a centralized factory which produces all the wickets in the world may produce them much cheaper than would local wicket-making workshops. But the factory would have to import raw materials, machinery, and workers from great distances, and then to ship the finished wickets great distances. Whether the costs of distribution balance the advantages of centralized production has to be determined empirically, but rarely is. (In the 1930s Ralph Borsodi calculated that 2/3 of goods were more cheaply made locally, with small machines, than on a national scale. But technology has changed a great deal since then, and he did not calculate for regional production.)
Also, monopolies and semi-monopolies are under less competitive pressure and therefore may be less inventive and productive. Monopolies tend to stagnation. On the one hand this produces less surplus value. On the other hand, by slowing down growth in productivity, it slows down the growth of the organic composition of capital and therefore of the fall in the rate of profit. How this balances out is an empirical matter. But in the long run, the fall in the rate of profit cannot really be counteracted by other causes of stagnation.
However, the most important effect of the growth of large concentrated firms on profit rates is its effect on the business cycle. If the cycle goes all the way through to the final crash (as it did in 1929), under oligopolistic capitalism the crash will be very bad indeed. The businesses are huge so their fall will be huge. They owe huge debts, from other companies and from the banks. They employ large numbers. They buy and sell from each other as well as from many smaller firms. Their boards of directors overlap. So if any of them fall, the effect on the whole of the economy is enormous. The problem of getting an oligopolistic economy back up on its feet is also enormous. While classical bourgeois economists claim that an economic slump will always cure itself, Keynes argued that this was no longer automatically true. In the age of semi-monopolies, he was right. The Great Depression lasted for ten years, and still had almost 20% of the US workforce unemployed at the end. It took a world war to finally end it (see below).
Therefore the capitalist class and its economists and politicians have determined not to let another Great Depression happen. The corporations and banks are just “too big to fail” (as the slogan goes), or rather, “too big” to be allowed to fail. Governments and central banks will do all they can to prevent another Depression. The usual methods are economic stimuli and subsidies, tax cuts, and monetary maneuvers which decrease interest rates.
Assuming these methods work, for a time at least, they may not completely banish the business cycle and its crashes, but they may modulate them, make them less disasterous. However, this has an unintended consequence. Lesser downturns cannot do their historical task of cleaning up the capitalist economy. Without big crashes, inefficient businesses may not go bankrupt; inefficient parts of monopolistic combinations may stay in business (as opposed to becoming “lean and mean”); the costs of materials will not decline as much; the level of wages will not decline much either; debts will not be written off but will continue to accumulate. As the costs of doing business do not decline, so the rate of profit does not get a boost, counteracting its tendency to fall. The shallowness of the business cycle in the 1950s, , which bourgeois economists were so proud of, was preparing the way for greater disasters.
The Return of Primitive AccumulationIncreasing wealth by non-market, or at least non-value-producing, methods never went away, even at the height of capitalist development. Now it has returned with a vengeance. Since it is no longer “primitive” (or “primary”), other terms are sometimes used; David Harvey (2010) prefers “accumulation by dispossession,” for example. It includes privitization of public industries, privitization of natural resources (such as water), the whole process of de-nationalization of the former “Communist” countries (turning the economy over to traditional capitalists), the stripping of assets from weaker corporations, efforts to patent genetic material, continuing to drive people off the land throughout the world, etc.
This newer primitive accumulation applies above all to the looting of nature. The ruling class acts like the capitalist management of a firm which sells its commodities for the equivalent of variable capital, constant capital, and the average profit. After selling its commodities, it should put aside money from the equivalent of the constant capital to eventually pay for new machinery and buildings when the old ones wear out. But instead, it does not. It counts its equivalent of constant capital as part of its profit, thus creating what seems to be a larger profit than it is really earning. A part of its profits is realliy fictitious. Perhaps it uses some of the constant capital value to buy off the workers with higher pay (counting it as variable capital). The day will come when its machinery will wear out. Then this seemingly prosperous firm will fail because it cannot replace the machines.
The bourgeoisie of the US and the rest of the world should have been putting aside wealth to prepare for a transition from oil, coal, and natural gas to renewable energy. It should have been paying to clean up the environment and preventing global warming. Instead it has been counting its wealth as profit and buying off a layer of the working class with an apparently decent standard of living.
Meanwhile our whole civilization is built on carbon-based fuels (oil, coal, and natural gas). Not only our transportation system, but also our food (which relies on artificial fertilizer and artificial pesticides, made from oil). And there are all the things we use plastics and artificial fibers for (from oil). But these are limited, nonrenewable, materials, which sooner or later will run out—and meanwhile get harder and harder to get to. They pollute our foods, our land, our air, and our water. And they are causing global warming, which will cause a world wide catastrophe.
Sometimes, when gasoline prices go up, liberals claim that the oil companies are deliberately overpricing it. This may be immediately true, but in the long run, it is the opposite of true. Because the oil companies do not include the costs they will eventually need in order to reach hard-to-get oil or to develop new energy sources once current oil sources run low, they are all underpricing the real costs of oil production! (The conservatives claim that to change to renewable energy and an ecologically sustainable economy would be difficult and expensive; the conservatives are correct.)
Nor is this looting of nature just a matter of oil and energy production. The world’s forests (the “lungs of the earth”) are being destroyed. The oceans are being overfished to extinction. Other species are being wiped out. Capitalism treats the world as though it were an inexhaustible mine. Marx and Engels did not forsee all this; they expected a socialist revolution well before humanity got this close to the edge. But their tools help us to understand it.
ImperialismFor reasons known only to himself, Lenin named only the epoch of late capitalism as “imperialism.” Actually capitalist imperialism goes back to the foundations of capitalism, with the British, Spanish, and French empires, among others. (Not to mention the existence of pre-capitalist imperialism, such as the Roman empire or the Chinese empire.)
Marx wrote a fair amount about the imperialism of his time in his political writings and anthropological notebooks—especially about the British rule over India, China, and Ireland, the Dutch rule over Indonesia, the Russian rule over Poland, and the French attempt to conquer Mexico. But he did not write much about its economics.
Marx regarded foreign trade by the industrializing capitalist countries of Western Europe as an essential background to their development. Driven by the need to make profits, the original industrial capitalist regimes went abroad to exploit the labor force, the raw materials, and the consumer markets of poorer nations.
In the Communist Manifesto, Marx declares of the bourgeoisie, “The cheap prices of its commodities are the heavy artillery with which it levels all Chinese walls to the ground….It forces all nations to adopt the mode of production of the bourgeoisie if they do not want to go under; it forces them to introduce so-called civilization at home, i.e. to become bourgeois….It has made…the peasant nations [dependent] on the bourgeois nations, the Orient on the Occident” (in Draper, 1998; pp. 115-117).
The directly capitalist methods were tied up with primitive accumulation, the looting of local peoples of their wealth by force and fraud. Although formal colonialism (the ownership of other countries by the imperial home countries) is mostly over, the looting continues today, through investments, high-interest-rate loans to governments (incliuding by the IMF and the World Bank), unequal trade, control over international patents, etc.
Marx’s attitudes toward early capitalist imperialism was somewhat ambivalent. He saw it as laying the basis for industrialization and modernization in the poorer nations, a way to break them out of (as he saw it) the stagnation of pre-capitalist societies. Yet he was aware of the suffering which capitalist imperialism caused among ordinary people, the destruction of harmless ways of life. He was sympathetic to anti-imperialist rebellions, as in India and China. He came to conside it possible for a pre-capitalist society to go directly to socialism, skipping a “capitalist stage,” provided it was helped by proletarian revolutions in the industrialized countries.
There are various Marxist theories of current imperialism, which I will not review in this introductory text. Suffice it to say, that the giant semi-monopolies of the rich countries dominate the world market, driven by the need to make profits and accumulate value. As such they also dominate the poorer, oppressed, countries, in order to drain them of their wealth. To maintain their power, the capitalists of the imperialist nations can use the military forces of their national states to invade and occupy the weaker countries. Implicitly, they also use them to warn off rival imperialist states. This is most true for the rulers of the United States.
In competition with other imperial states and needing to oppress poorer countries, the great imperialists have repeatedly gone to war with each other and with the oppressed nations. They have developed weapons of such awesome power that they could wipe out civilization and perhaps exterminate life on earth. Only the power of these nuclear and biological weapons kept the US and the USSR from waging a third world war. They did not prevent many smaller wars by the imperialists against oppressed nations. Now that the Cold War is over and the Soviet Union as such is gone, nuclear bombs are more widespread than ever before. They are under the control of more, often unstable, governments, as well as the increasingly deperate imperialist states. This remains an extremely dangerous situation for human survival.
The Permanent RevolutionThe epoch of capitalist decline has a political effect. At its birth, the ideologues of capitalism developed the program of bourgeois-democracy. It was based on the nature of capitalism itself. All people were supposedly equal, free, atoms in the marketplace and therefore they should be free and equal citizens in the state. When buying and selling in the market, people’s race, religion, gender, family background, country of origin, etc. do not matter; all that matters is how much money they have (a quantitive, not a qualitative, difference). Similarly, all citizens should be equal, with one (adult) person, one vote. “An inalienable right to life, liberty, and the pursuit of happiness.” “Liberty, equality, and fraternity” (or “solidarity”). This implied representative governments, land to the peasants, national self-determination, and freedom of speech and association. There should be no oppression or discrimination based on anything but lack of money.
Of course, capitalism has never lived up to its promised program! Every expansion of democratic rights was won by the blood of the people fighting the capitalists. Yet over time, there was an expansion of bourgeois democratic rights and general freedom. The right to vote was expanded in country after country. Absolute monarchies were replaced by either republics or, at least, constitutonal monarchies. Women’s rights were expanded. Slavery was abolished. And so on.
But Marx forsaw that the growth of capitalism would lead to a decline in capitalism’s own democratic program. The problem, as Engels and he came to see it, was that the expansion of capitalism meant the expansion of the working class. The bourgeoise became more afraid of the proletariat than they were of undemocratic, authoritarian, rulers. A successful revolution against the feudal aristocracy would inspire the workers to continue the revolution into one against the bourgeoisie. Increased democracy would be used by the workers to organize themselves against the capitalist class. This would threaten the bourgeoisie.
In their Address of the Central Committee to the Communist League (March 1850), Marx and Engels drew the lessons they had learned from the defeat of the 1848—1850 European revolutions. They concluded that the workers should support the liberals and “democrats” against authoritarian states, but never trust them; they will sell out the struggle for fear of the working class. The workers should organize independently of the bourgeoisie, even of its most liberal wing. The workers should push to go all the way, to workers’ rule and the beginning of socialism, as the only way to achieve even the limited demands of bourgeois democracy. They concluded by saying of the workers, “their battle-cry must be: The Permanent Revolution” [or, “The Revolution in Permanence.”] By “permanent,” what they meant was “uninterrupted,” “going all the way,” “not stopping at any stage.”
In its epoch of decline, capitalism ceases to be a champion of even bourgeois democracy. For democratic rights to be won securely, the working class must lead its allies to overthrow capitalism totally and create a true, full, socialist (communist) democracy (self-ruling system of councils, workers’ management of production, etc.). To win stable, lasting, consistent bourgeois-democratic rights, it is necessary to go beyond capitalism all the way to socialist democracy. Marx and Engels noted the rise of the semi-autonomous bourgeois state, with a bureaucratic-military executive, serving capitalism overall but not directly controlled by the capitalist class. They called this trend “Bonapartism,” after the rule of Napoleon and later of his nephew.
The slogan of “permanent revolution” is often, even usually, linked with Leon Trotsky. It is therefore assumed to be part of the Trotskyist program (a variant of Leninism). Actually, permanent revolution was first raised by Marx and Engels. Trotsky and others picked it up later and elaborated on it. Interestingly, in the period when Trotsky elaborated his version of permanent revolution (the early 1900s), he was not a Leninist but an opponent of Lenin’s view of the party (then holding a position similar to Rosa Luxemburg). He changed his views on this later, but the other Leninists never accepted his (or any other) theory of permanent revolution.
Chapter 6 will cover "The Post-War Boom and Fictitious Capital"
Chapter 4 - Primitive Accumulation at the Origins of Capitalism