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Friday, January 9, 2015

Relative values (1991)

From the April 1991 issue of the Socialist Standard

The family is under pressure. The 1990 edition of Social Trends details how over a quarter of marriages end in divorce before their fifth year, and how a quarter of all divorces involved at least one partner divorcing for a second time. In 1987 14 percent of dependent children lived in lone parent families.

Trends like these perplex the apologists for capitalism. Politicians and church leaders perceive "family values" to be, like the various other institutions of capitalism, eternally right and natural. They blame a lack of such values for a host of social ills—homelessness, drug abuse, vandalism, crime—instead of adding the broken family to their list as just another victim of capitalism's destructiveness.

Change, however, does not surprised Marxists. Once present-day society is recognised as historical, then the delusion of regarding it as natural vanishes. It was with just such a belief that Engels set out to rock accepted prejudices about the family in The Origin of the Family, Private Property and the State in 1884.

He showed that the monogamous family values of today were determined, in the final analysis, by economic developments and not by factors concerned with individual love, eternal morality and religious values. What Marx did for our understanding of the state, Engels did for the family. Early in his revolutionary career, Marx discovered that "the state is determined by civil society . . . and not civil society by the state". The political constitution is "the constitution of private property" (Critique of Hegel's Philosophy of Law). Engels showed that the present form of the family also is determined by civil society, property-owning society.

"Capitalist production", Engels wrote, "by transforming everything into commodities",
dissolved feudal relations and historical rights, replacing them with purchase and sale, 'free' contract . . . But the closing of contracts presupposes people who can freely dispose of their persons, actions and possessions, and who meet each other on equal terms. To create such a 'free' and 'equal' people was precisely one of the chief tasks of capitalist production.
Which is a continuing process, most recently demonstrated in eastern Europe and South Africa.

Free contract
Marriage, "a contract, a legal affair", feels the same economic effects. The arranged marriage gave way to "freedom of choice"—a freedom often still conflicting with the traditional values of Asian migrants to the developed West. "And on paper, in moral theory as in poetic description, nothing was more unshakably established than that every marriage not based on mutual sex love and on the really free agreement of man and wife was immoral."

Of course, Engels was not  naive enough to think that the old relative freedom of sexual intercourse disappeared with monogamy. Prostitution and adultery provide the safety valves to maintain the monogamous relation intact. "Prostitution", he wrote, "is as much a social institution as any other."

Nevertheless, it is the institution of marriage that is sanctioned by the Christian churches, with the additional civil moral sanction that love marriage is an "inalienable human right". Such hypocrisy demonstrates how morality, taken for granted by many as something quite natural, has, in reality, an economic foundation.

Even though the capitalist ideology of free choice has undermined the churches' teaching that marriage is for life, the monogamous relationship, whether marriage or cohabitation, still dominates the family group. Just over 77 per cent of people living in private households in Great Britain in 1987 lived in families headed by a married couple, a proportion which has fallen only slightly since 1961.

In many ways, it seems that the monogamous family becomes more entrenched as the dual income becomes the only way to service the family debt. Increasingly it takes two breadwinners to provide a home and an acceptable standard of living in which to raise a family. This is emphasised by the way divorcees rush back into marriage, accounting for thirty-six per cent of all marriages in 1988, adding to a shifting state of serial monogamy that is reflected in the growth of the dating agency industry.

At the same time, capitalism's growing demand for more and more women to join the workforce, made more urgent by the need to combat the demographic time-bomb, has made women less dependent on a male breadwinner. In fact, of all the petitions for divorce in 1988, over seventy-three per cent were filed by the wife. Engels predicted something like this, arguing that "the first premise for the emancipation of women is the re-introduction of the female sex into public (as opposed to private domestic) industry".

This is not to say that the freedom to choose a partner or the freedom to divorce under capitalism are wrong. Far from it, but these are limited freedoms. "Full freedom in marriage", Engels stressed, "can only become generally operative when the abolition of capitalist production and of the property relations created by it, has removed all those secondary economic considerations which exert so powerful an influence on the choice of a partner. Then no other motive remains than mutual affection."

Here, in microcosm, we have the goal of socialism in its widest sense, a society in which all our choices will be freed from "secondary economic considerations", where we have achieved, as Engels said elsewhere, an "ascent from the kingdom of necessity to the kingdom of freedom".
John Dunn

Marx and Keynes (1955)

From the November-December 1955 issue of the Western Socialist

Classical economy, whose beginning is usually traced to Adam Smith, found its best expression and also its end in David Ricardo. Ricardo, as Marx wrote, “made the antagonism of class-interest, of wages and profits, of profits and rent, the starting-point of his investigation, naively taking this antagonism for a social law of nature. But by this start the science of bourgeois economy had reached the limits beyond which it could not pass,” for a further critical development could lead only to the recognition of the contradictions and limitations of the capitalist system of production. By doing what could no longer be done by bourgeois economists, Marx felt himself to be the true heir, and the destroyer as well, of bourgeois economy.

The further development of economic theory supported Marx’s opinion. Though bourgeois economy was indeed unable to advance, it was able to change its appearance. Classical economics had emphasized production and the system as a whole. Their followers emphasized exchange and individual enterprise. Although there arose no serious doubt that the capitalist system is natural, reasonable, and inalterable, yet the early confidence of bourgeois economy was slowly destroyed by a growing discrepancy between liberal theory and social reality. The increasing economic difficulties which accompanied the accumulation of capital developed an interest in the business cycle, in the factors that make for prosperity, crisis and depression. The neo-classical school, whose best-known proponent was Alfred Marshall, attempted to transform economy into a practical science, that is, to find ways and means to influence market movements and to increase both the profitability of capital and the general social welfare. But the increasing length and violence of depressions soon changed a new optimism into even deeper despair, and the sterility of bourgeois economics led economists once more to embrace the less-embarrassing security of “pure theory” and the silence of the academies.

In the midst of the Great Depression, bourgeois economic theory was suddenly raised from the dead by the “daring” theories of John Maynard Keynes. His main work, The General Theory of Employment, Interest and Money, was hailed as a “revolution” in economic thought and led to the formation of a school of “Keynesian economics.” While persistent “orthodox” economists opposed this new school as “socialistic” or “illusionary,” so-called socialists attempted to blend Marx with Keynes, or rather, to accept Keynes’ theories as the “Marxism” of our time. Marx’s scepticism with regard to the future of bourgeois economy was now said to indicate only his inability or unwillingness to criticize the classicists constructively. Of Keynes it was said that he made real Alfred Marshall’s aspirations for a reformed and improved capitalism. These endeavors, as well as the great popularity of the “Keynesians,” both generally and in academic circles, and also their insistence upon the practical applicability of their economic reasoning and their apparent political influence, make it both advisable and interesting to investigate their claims and to review the work of their deceased master in the light of the actual development and the recognizable trend of present-day society. This invites a comparison of the Keynesian with the Marxian point of view.

II

Until the publication of the General Theory, Keynes was regarded as an economist of the neo-classical school whose marginal language was also his own. Economic categories were decked out in psychological terms, presumably derived from “human nature.” Individual anticipations and disappointments determine economic life and Keynes even spoke of the money-making and money-loving instincts of individuals as the main motive force of the economic machine. He believed that it is a “psychological law” that individuals tend to consume progressively smaller portions of their income as their incomes increase. When aggregate real income increases, consumption increases, too, of course, but not by so much as income. Assuming that all investment ultimately serves consumption needs and that an increase of income increases consumption by less than income, savings will increase faster than investments. With this, aggregate demand declines and the level of employment falls short of the available labor supply. This happens in a “mature” society because of the already existing large stock of capital, which depresses the marginal efficiency or profitability of capital and therewith expectations with respect to future capital yields. And this, in turn, creates a psychological attitude on the part of the wealth-owners to hold their savings in money-form rather than to invest in enterprise promising little or no reward.

Economic stagnation and large-scale unemployment was at the center of Keynes’ interest. Traditional economic theory was bound to the imaginary conditions of full employment and to Say’s “law of the market” — to the belief, that is, that “supply creates its own demand.” Like Say, Keynes saw in present and future consumption the goal of all economic activity, but, in distinction to the French economist, he no longer held that supply brings forth sufficient demand to maintain full employment. The refutation of “Say’s law” is hailed as the most important aspect of the Keynesian theory, particularly because it defeats this “law” on its own ground by showing that just because of the “fact” that production serves consumption, supply does not create its own demand.

Almost seventy-five years earlier, Marx had already pointed out that only an accelerated capital expansion allows for an increase of employment, that consumption and “consumption” under conditions of capital production are two different things, and that total production can rise only if it provides a greater share of the total for the owners and controllers of capital. The “dull and comical ‘prince de la science’, J.B. Say,” Marx did not find worth overthrowing, even though “his continental admirers have trumpeted him as the man who had unearthed the treasure of the metaphysical balance of purchase and sales” [1]. For Marx, Say’s law of the market was sheer nonsense in view of the growing disequilibrium between the profit needs of capital expansion and the rationally considered productive requirements of men, between the “social demand” in capitalism and the actual social needs; and he pointed out that capital accumulation implies an industrial reserve army.

III

When Keynes at such late hour, approached Marx’s position, it was not in order to point to an inherent contradiction of capital production but to hail the disparity between employment and investment as a great accomplishment. In his view only “a wealthy community will have to discover much ampler opportunities for investment if the saving propensities of its wealthier members are to be compatible with the employment of its poorer members” [2]. However, short of closing the gap between income and consumption it follows from Keynes’ theory that “each time we assure today’s equilibrium by increasing investments we are aggravating the difficulties of securing equilibrium tomorrow” [3]. For the next future, however, he thought these difficulties surmountable through government policies which diminished “liquidity-preference” and increased “effective demand” by controlled inflation, reduced interest-rates and lowered real wages, thus promoting inducements to invest. If these are not sufficient, the government can increase economic activity by public works and deficit-financing. With full employment the criterion, the effectiveness of various interventions into the market-economy can be tested experimentally. Anything that does not lead to full employment is not enough. Because increased employment by way of “pump-priming” may lead to “secondary employment” in additional branches of production, it was assumed that it will lead to such employment. And if all should fail, there is still the possibility of a direct control of investments by government.

It is not necessary to agree with Keynes as to the cause of unemployment to recognize that the policies he suggested to combat it have been the policies of all governments in recent history whether they were aware of his theories or not. They had made their historical debut long before their theoretical expression. All the monetary and fiscal innovations had already been tried: public works, inflation and deficit-financing are as old as government rule and have been employed in many a crisis situation. In modern times, however, they have been regarded as exceptions to the rule, excusable in times of social stress but disastrous as a permanent policy.

IV

For Marx, the inherent contradictions of capital production are not of an “economic” character in the bourgeois sense of the term. He is not concerned with the supply and demand relations of the market but with the effect of the social forces of production upon the capitalist social relations of production, that is, with the results of the increasing productivity of labor upon the production of value and surplus-value. Celebrated as the product of capital itself, bourgeois theory separates growing productivity from its social implications. For Marx, it is the independent variable that determines all the other variables in the system of economic relationships.

The special importance of labor and its increasing productivity in Marx’s scheme of reasoning led to his discovery of a definite developmental trend in capital accumulation, which revealed qualitative changes in the wake of quantitative ones. He could show that the capitalist “equilibrium mechanism” must itself change in the course of capital expansion and that it is the latter which determines and modifies the market forces of supply and demand, since market laws have to assert themselves within a larger frame of a developing “disequilibrium” between the social forces of production and the capitalist relations of production.

The increase of productivity, of surplus-value and the accumulation of capital are all one and the same process. It implies a more rapid growth of capital invested in means of production than that invested in labor power. It involves what Marx called a “rising organic composition of capital.” As profits are calculated on the total invested capital, they must show a tendency to decline as that part of the total which alone yields surplus value becomes relatively smaller. Of course, the process also implies an increasing ability to extract more surplus-value, thus nullifying the “tendency” of profits to decline, and constituting the reason for the process itself. Leaving aside all the intricacies of Marx’s exposition, his abstract scheme of capital expansion shows that apart from competition as the driving force of capital expansion in the market reality, the production and accumulation of surplus-value already finds in the two-fold character of capital production — such as exchange and use value — a limiting element, to be overcome only by the continuous expansion and extension of the capitalist mode of production. In order to forestall a falling rate of profit, accumulation must never rest. More and more surplus-value must be extracted and this involves the steady revolutionizing of production and the continuous extension of its markets. As long as accumulation is possible, the capitalist system prospers. If accumulation comes to a halt crisis and depression set in.

Both Marx and Keynes, then, though for different reason, recognize the capitalist dilemma in a declining rate of capital accumulation. Keynes diagnoses its cause as a lack of incentive to invest. Marx, looking behind the lack of incentive, finds the reason for it in the social character of production as a production of capital. Keynes does not regard crisis and depression as necessary aspects of capital formation; they are such only under laissez-faire conditions, and then only in the sense that the economic equilibrium does not include full employment. For Marx, however, a continuous capital accumulation presupposes periods of crises and depression, for the crisis is the only “equilibrium mechanism” which operates in capitalism with regard to its development. It is in the depression period that the capital structure undergoes those necessary changes which restore lost profitability and enable further capital expansion.

V

Marx’s theory of accumulation anticipated Keynes’ criticism of the neo-classical theory through its criticism of classical theory. In its essentials, then, Keynes’ “revolution” consists in a partial re-statement of some of Marx’s arguments against the capitalist economy and its theory. Keynes did not study Marx, and he did not feel the need for doing so because he identified Marx’s theories with those of the classicists. By opposing the classical theory Keynes thought he was opposing Marx as well. In reality, however, he dealt with neither of these theories but with the neo-classical market theory which had no longer any significant connection with the ideas of Smith and Ricardo. Marx’s critique of classical economy, however, resembles Keynes’ criticism of the neo-classicists, although it cuts deeper than Keynes’ because the classicists had been profounder thinkers than their apologetic emulators, and because Marx was not a bourgeois reformer.

Although Keynes wished to “knock away the Ricardian foundations of Marxism,” in order to do so, he had first of all to post himself on these very foundations. He accepted the theory of value in the Ricardian sense, in which labor as the sole factor of production includes “the personal services of the enterpreneur and his assistants.” Like Marx he dealt in economic aggregates, but while in Marx’s system the analysis in terms of economic aggregates was to lead to the discovery of the basic trend of capital accumulation and to no more, in the Keynesian system it was to serve the formulation of a policy able to support the trend without doing damage to the capitalist relations of production. Expressed in simplest terms, Keynes’ model represents a closed system divided into two departments of production; one producing consumption goods and the other producing capital goods. The total money expenditure in terms of wage-units (based on the working hour) for both consumption and capital goods constitutes total income. When the aggregate demand, that is, the demand for consumption and capital goods, equals total income and implies that total savings equal investments, the system is supposed to be in equilibrium. A decline of aggregate demand, implying a discrepancy between savings and investments, reduces total income and produces unemployment. In order to alter this situation the aggregate demand must be increased to a point where total income implies full employment.

In Marx’s system of economic aggregates constant capital is the property of the capitalist class, variable capital the social equivalent of labor-power, and surplus-value the accumulation and income source of the ruling class. It is here not a question of “social income” and “social output” and their relation to each other, but a question of the capitalist exploitation of labor power.

VI

Until the second world war, Keynes’ theories enjoyed only small verification. He had a perfect alibi, however — either his suggestions were not carried out or they were too meagerly applied. But with the beginning of war production, Keyness was confident that his theory would be fully confirmed. Now it would be seen “what level of total output accompanied by what level of consumption is needed to bring a free, modern community . . . within the sight of the optimum employment of its resources” [4]. War-time policies, however, were quite independent of Keynesian ideology, being neither different from those employed in the First World War, nor different between various governments, some of which did not adhere to the Keynesian “revolution.” All the innovations associated with the commandeered economy of the second world war, such as a money and credit inflation, price controls, labor controls, priorities, forced savings, rationing and so forth had been current in the first debacle despite the then prevailing “orthodox” approach to economics.

If the war economy “proved” the validity of Keynes’ theory, it did so to such a degree that the theory itself had to be put in reverse. Although unsuccessful in increasing the “propensity to consume” during the depression, it was a “brilliant success” in cutting it down during the war. Unable to increase investments up to the point of full employment, it led to labor shortages through the destruction of capital. Although suspended during the war, Keynes’ theories would hold good again with the return to “normalcy.” The war itself only proved to him that technically any economic system could have full employment if it so wished; it fid not occur to him that under present conditions war and preparation for war may be the only way to full employment. It did occur to others; generally, however, the Keynesian spirit is best represented by such adherents of the welfare-state as William Beveridge, who, near the end of the second world war, proposed a full employment program based on the “socialization of demand without the socialization of production” [5]. Built on Keynesian principles and choosing budgetary means for its realization, it was to carry the full employment of war into the conditions of peace.

Fears that large-scale unemployment would return in the wake of the second world war proved to be exaggerated. A clear distinction between war-production and peace-time production no longer existed and no need arose to adopt the Beveridge or any other plan for a fuller utilization of productive resources. Since the inception of the “Keynesian revolution,” then, no real opportunity has arisen to test its practical validity. Yet, government intervention during the depression increased employment to some extent. It may then be said that the theory proved itself in a very general way wherever it was employed, and to the degree in which it was applied. In this sense, however, Keynesianism would be just another name for governmental depression policies, and would exhaust itself in the suggestion that the government should take care of the anticipatory aspects of capital formation wherever private initiative begins to slacken. While production is still production for private gain, its expansion is the government’s responsibility — a logical extension of the credit-system by a shift from private to governmental financial control.

Not only from the Keynesian, but from any realistic point of view, government intervention is now regarded as an inescapable necessity. An increasing amount of “welfare-economics” is advocated by the proponents both of the “welfare-state” and of private enterprise. But even though nobody seems to doubt that government control is here to stay, the question of its character remains controversial. The Keynesians are generally for more government intervention, but as the consistent increase of government regulation and deficit-financing is synonymous with the transformation of the private into a state-capitalism system, it is often opposed as a form of “creeping socialism.” Because Keynesianism may also be regarded as a transitory state towards a completely government-regulated capitalist economy, it has become the theory of social reform within the capitalist system. It stands thus in strictest opposition to Marxism which concerns itself not with social reform but with the abolition of the capitalist system.

1. A Contribution to the Critique of Political economy, Chicago, 1904, p. 123.

2. The General Theory, p. 31.

3. The General Theory, p. 105.

4. J. M. Keynes in The New Republic, July 29, 1940.

5. Full Employment in a Free Society, 1945, p. 29.
Paul Mattick

Orange peel and peppered bread (1987)

From the August 1987 issue of the Socialist Standard

When reaching the age of 70 you tend to look back and reflect on your life. I experienced twice going hungry. First as a boy in 1926 during the General Strike when I would pick up orange peel from the gutter to eat on the way to Stratford Market where I went to look for food. Dustbin raking was futile, turning up mainly fishbones. Also difficult, as others also used this method to exist.

The second time was in 1942 when I had to visit the Relieving Office weekly to pick up a bright blue form which said "Rent 12/6d, Food 10/-, Coal 5/-" - a total of £1.38 to keep a family of four.

The pawnshop had our eiderdown, overcoat, marriage rings and much else besides: this avenue of revenue was now exhausted. What else could I do? We were fed up with pouring hot water on dry beard, peppered for flavour. I would be caught stealing, and this would make matters worse. No fines in those, days, only prison.

In desperation I did some work as a film extra; untraceable, as on the wall of the Relieving Office was 'Mr So and So went to work between . . . and . . . He did not declare his earnings and was sentenced to six months' imprisonment". Therefore you could say I owe the capitalist system between four and five years in prison!

Such experiences make you think hard and give you a deep sense of the real values of life. Your dignity and confidence are, alas, gone for ever. To quote Charles Chaplin "Once you have been very poor no amount of money can retrieve the position". I am still waiting to confirm the latter part!

Food was in shops, not for the hungry but to be sold for a profit to those who could pay. Now, on reflection, I can only smile bitterly and try to help organise the overthrowing of this vile system of capitalism. Relating this story of mine while canvassing for The Socialist Party, somebody said "surely the capitalist system has done something for you. There must be something." The door had nearly closed when I said "Yes, there is something; it made me a socialist -  the only hope in this world of chaos".
Cyril Watkinson