The Slump (2017)

Book Review from the September 2017 issue of the Socialist Standard

'The Long Depression'. By Michael Roberts. (Haymarket Books. 2016)

There is a tendency within some flavours of Marxism that has been said to have correctly predicted 6 of the last 3 recessions. The temptation to rely on inevitable crisis and the collapse of capitalism has a silvery allure for some. This book does not join that chorus, but it does seek to make crises of capitalism subject to (at least theoretically) predictable laws.

Roberts positions himself as a heterodox within the already heterodox school of Marxian economists. He sees Marx’s examination of the tendency for the rate of profit to decline as the root cause of recessions and depressions (he defines a depression as: 'countries growing at well below their previous rate of output . . . and below their long term average' and he notes the usual definition of a recession is: “two consecutive quarters in real GDP”).

He sees a potential explanation for Kondratiev long waves in his model:

'Depressions…appear when there is a conjunction of downward phases in cycles of capitalism. Every depression has come when the cycle in clusters of innovation have matured and become “saturated”; when world production and commodity prices enter a downward phase, namely, that inflation is slowing and turns into deflation; and above all, when the cycle of profitability is in its downward phase. The conjunction of these different cycles only happens every sixty to seventy years.'

Following Marx, he defines the rate of profit as the surplus value (S) divided by variable capital, wages (V) plus constant capital, the value of machines, tools and ingredients (C). He notes that the tendency is for the organic composition of capital (the ratio of C/V) to increase: that is for machinery and tools to replace human labour, as capitalists compete to improve the productivity of the labour they employ. This then reduces surplus value, leading to a withdrawal of investment.

'The continual process of an upward cycle in profitability –as the rate of surplus value rises faster than the organic composition, in turn replaced by a downward cycle as the law as such gains ascendancy –explains the cyclical nature of capitalist accumulation'.

The problem with this approach is that it lacks explanatory power for why crises involve stranded capital. In his chapter on the rate of profit, Marx discusses how the falling rate of profit is compatible with ongoing growth in the mass of profits (due to expansion, investment, etc.) This is before he identifies the counteracting tendencies (increasing intensity of exploitation; depressing wages below the value of labour power; cheapening elements of constant capital; relative overpopulation; foreign trade; and the increase of stock capital). Roberts does address these counteracting tendencies, but sees crisis arising out of them temporarily being overwhelmed by the rising organic composition of capital.

If it were a falling rate of profit alone, merger and expansion would be sufficient to escape and renew growth for a while longer.

The Socialist Party has tended towards the view that it is disproportionate investment and expansion of production that causes crises and slumps. There are strict conditions to enable capital expansion, accumulation and reproduction going on, requiring all the different branches of industry to broadly grow together. Since each capital is seeking to grow at the fastest possible pace, driven largely by the expectation of profit, it becomes inevitable that one sector over-invests and has its reproduction choked by relative under-investment either in consumption or in key components.

This view of crisis means they are not governed by an underlying regular process, but by an ever increasingly likelihood of accident and happenstance. Even a state-run economy could not overcome these tendencies, since even if it were possible to plan every commodity exchange in such a way as to provide growth: accidents, happenstance and misjudgement would still mean inevitable crises.

Roberts provides a wealth of empirical data showing long run trends towards a declining general rate of profit. He has debated with Paul Mattick Jr. whether official statistics can meaningfully be mapped onto Marx's categories ( Link -- this is worth reading in itself). We agree that they cannot least because of the level of misrepresentation and manipulation that goes into formulating them.

At the least though, if the measures show distinct trends, that is useful for trying to read the developments of the economy. His tables showing all the US recessions since the mid 19th century provide a salutary reminder of how frequent and endemic they are: indeed, we would agree that they are not just inevitable, but essential to capitalism’s ongoing existence, as they are followed by the clearing of bad investments and creation of new room for growth in the economy.

Where we would certainly agree with Roberts is that the only way within capitalism, ultimately, to exit a crisis is the destruction of the value of capital; and, further, that capitalism will eventually find new scope to grow (although at what human cost in misery?) unless the working class take a conscious political choice to abolish capitalism: that is the only way in which it will collapse.

Pik Smeet

Postcapitalism? (2015)

Book Review from the September 2015 issue of the Socialist Standard

'Postcapitalism. A Guide to Our Future', by Paul Mason. Allen Lane.

In his new book Channel 4 journalist and one-time Trotskyist Paul Mason begins by explaining the periodic growth and contraction of the capitalist economy by Kondratieff wave theory.

Kondratieff waves are named after the Soviet-era Russian economist (shot under Stalin) who imagined a 50-year periodicity in capitalist economic activity, and who then concluded that each economic cycle reflected the advent, adoption, flourishing and demise of its age’s defining technology.

Kondratieff’s waves operate on a timescale midway between the epochal transformations of social systems, based on a change of class ownership and control of the social means of production, and the Marxian economics of nature-imposed social reproduction under the capitalist social system, based upon its characteristic mode of class ownership and control of the social means of production.

Scientifically, one would seek to explain Kondratieff’s apparent wave phenomena in Marxian terms, i.e. in terms of the social system’s essence – capital-- but such attempts have so far failed to convince and this intriguing problem for Marxian theory remains unresolved.

However, for the purposes of Paul Mason’s argument, capitalist society has now started to ride the information technology Kondratieff wave. For him, information technology is the surfboard that took us out to the wave and, once we master it, it will be the surfboard that rescues us from the capitalist depths and carries us to the post-capitalist shore. Our ride will take one Kondratieff period of 50 years.

So what characterises the Kondratieff IT wave which Mason says we are now on?

The IT wave has already established its essential characteristics through the emergence of free Open Source software, free creative commons internet resources, free Wikipedia collaboration, etc. The IT wave’s free goods are premised on the assumption that IT development and IT maintenance require a vanishing amount of human labour, and that consequently IT software products and IT firmware-based technology possess a vanishing marginal cost (i.e. can be replicated for everybody for free). And IT technology will invade everything we produce.

His argument is that this characteristic invariant of the IT wave -- free technology and its technology-based products -- is totally subversive of capitalism, since the indispensable compulsion for a capitalist ruling class to withhold ownership and control of the means of production from the working class, thereby forcing the working class to work on its terms, will no longer serve its capitalist purpose once everything is free. The means of production might just as well be owned by everyone or by no-one.

That, in a nutshell, is his argument. IT will issue us into an Age of Abundance -- the necessary precondition for postcapitalism to succeed. Postcapitalism will be characterised by renewable energy, neutral carbon, zero socially necessary labour time, and zero marginal cost.

So far, so good, up to a point. Some interesting socialist (in our sense) arguments, entertainingly and intelligently told, including a good description of the labour theory of value, a good discussion of the economic calculation pseudo-problem, etc.

But Mason’s argument is tainted by his apology for gradualism and his reformist transitional plan.

If this seems an unnecessarily harsh judgment, judge for yourself from the legislation, and the prevailing capitalist social relations under which it is to be promulgated, that he wants ‘a government that embraced postcapitalism’ to pass while on its IT Kondratieff wave.

Here is his list of some of his transitional reforms outlined in his final chapter as ‘Project Zero’: Suppress market forces for energy. Suppress or ‘socialise’ all monopolies. Pay everyone a basic income. Regulate the rate of profit. Enforce profits to be ploughed back into ‘social justice.’ Make WiFi free to break up the telecom monopolies. Cheapen the cost of basic necessities. Produce more stuff for free. Sell water, energy, housing, transport, healthcare, telecommunications and education at cost price. Shrink (national and personal) debt. Reduce the time for holding patent and intellectual property rights, e.g. 25 years. Increase the use of creative commons copyright. Incentivise investment in renewables. Support local power grids. Elect bank bosses democratically, and scrutinise their financial behaviour. Track down and suppress all off-shore trading. Make it unethical for a chartered accountant to propose a tax avoidance scheme. Issue fiat money to kill neoliberalism. Increase the velocity of circulation of money to ‘tame’ speculation. Set a high inflation rate to stimulate sustainable growth, etc. etc.

His laudable aim is to promote the transition to a non-market economy of abundance where goods and services are free, but his long transition period turns out to be a fantasy hybrid world, an illusory economy in which markets, profits and banks exist alongside a growing non-market, non-profit, non-money-based sector.

The Marxian answer to his gradualist project and its reform agenda is that, while capitalist social relationships exist, his reforms have no chance of succeeding. And once a socialist majority consciously abolishes capitalist social relations of ownership and control of the social means production, his reform agenda becomes redundant, unnecessary and meaningless.

TWC.