Month: November 2015

Currently I am nursing a cold and enjoying a post-Thanksgiving retreat in Inverness, on Tomales Bay, at St Columbo’s Retreat Center. And I am sitting in front of a sign that reads “Prayer Changes Things.” The word that catches my eye is “things.” What happens to things when they are no longer taken only as things, when they are inflected through art or poetry or, in this case, prayer? What happens when I bear witness to things changed, when the indigence of the object gives way?

A Kantian will argue that what changes is not the thing, but the Subject, the agent, the ego, the “I.” And this is very close — in fact, identical — to how many Christians have come to view prayer. Prayer changes me and, since I am an agent who can act and change things, therefore prayer changes things.

But, what if prayer changes things? Not because prayer changes me, but because I have come to see and understand that things are not things. Prayer changes things.

Both of my courses at UC Berkeley are careening toward their untimely ends. In the History of Economics (ECON 105), my students have just passed through WWI and are on their way to WWII. In the Economic System of Karl Marx (ECON 164), we have skipped to the end of Capital, Volume III, Chapter 48, where Marx unexpectedly tells us that the shortening of the work day (and not death to the running dog capitalist pigs) is the prerequisite to freedom. Damn and double damn.

In ECON 105, Jacob Viner, Professor to Milton Friedman and one of the founders of the Chicago School, asks Who Paid for the War? His answer is unequivocal. When they invested in war bonds to underwrite US military assistance for Great Britain, the wealthiest citizens in the US anticipated and received huge returns on their investment. US bonds helped create full employment and placed US industry at near full capacity. Near full capacity production and full employment in turn placed upward pressures on wages, which kept far enough ahead of inflated war-time prices, to allow average workers to save and consume. And, yet, as Viner puts it:

The pre-war federal tax system, with import duties and excise taxes on tobacco and liquors as its main sources of revenue, was certainly not progressive; it was possibly even regressive in its incidence. With the greater numbers in the lower economic classes than in the higher, and with the greater expenditure on commodities, relatively to total income, of poor than of rich, the bulk of the revenue came from the poorer classes.

The real danger, Viner notes, is that average working families might expect the wealthy, who earned huge returns on their war-time investments, to pay their fair share for the actual costs of the war, not through bonds, which end up in net returns, but in taxes, which they will never see again. “In the modern democracy, the path of least resistance to the collection of increased revenue leads to the greater taxation of the larger incomes. The only feasible way of keeping such taxation within narrow limits by imposing a great share of the burden on the shoulders of the poor is to distribute the repayment of the war debt over a long period.” This is what Viner recommends and this, in fact, is how the war is funded, through long term taxation of working families.

Based on economic growth over the next decade, this appears to have been a good choice.

Following a slight dip in Gross Domestic Product during the first two years of the war, war-time spending and post-war investing appears to have provided a real boost to the economy. Indeed, following the execution of the Dawes Plan, when JP Morgan loaned Germany funds to pay reparations to France and the United Kingdom, France and the United Kingdom were finally able to repay JP Morgan for the generous loans he advanced to them during the war. As these funds recrossed the Atlantic, they provided quite a boost to US consumption and spending.

But, here’s the rub. Insofar as holders of wealth had made off like bandits during the war, they were sitting on piles of cheap money. Had this wealth been taxed, the results would have been two-fold: first, it would have relieved wage earners the cost of having to settle the US debt, which in turn would have ended up on the consumer goods rather than the financial goods market. Thus, instead of an inflated financial goods market, consumers would have driven the expansion of the consumer goods market. The second result, therefore, would in all likelihood have been a financial goods market more in line with the actual asset base. Had there nevertheless been a recession in 1929, it could not have been nearly so deep nor the consequences so violent as the great depression actually experienced.

It was the depth and violence of this global economic downturn that set the stage for next Fall’s ECON 105 during which we resume our story with the rise of political extremism and — again — world war. Remarkably, JM Keynes had already predicted this Fall’s ECON 105, when, in his 1932 Atlantic Monthly Article, he tellingly wondered why governments appeared unwilling to spend for peace what they will inevitably end up spending on war.

Formerly there was no expenditure out of the proceeds of borrowing that it was thought proper for the State to incur except for war. In the past, therefore, we have not infrequently had to wait for a war to terminate a major depression. I hope that in the future we shall not adhere to this purist financial attitude, and that we shall be ready to spend on the enterprises of peace what the financial maxims of the past would only allow us to spend on the devastations of war.

One way to inflect this cascade of fatalities is through a lens of fairness. It was unfair for Congress to saddle working families with the costs of WWI while rewarding wealth, already enriched by the war, with the liberty to invest their returns on speculative financial markets. But another way to inflect these events is through a lens of care. When we deprive people of the means for thinking clearly and acting responsibly, they will respond as best they can, through the fog of want and ignorance. On the one side a false sense of entitlement and easy money; on the other side genuine ignorance and growing fear. The combination proved toxic, less in the US than in the UK, France, Germany, Spain, Italy and Japan. Yet, even the US, fear and ignorance provoked political extremism, which, but for WWII, would surely have exacted heavy casualties on that generation as well.

Which brings us to ECON 164. Really, Marx, the shortening of the work day? That’s your answer?

The realm of freedom really begins only where labour determined by necessity and external expediency ends; it lies by its very nature beyond the sphere of material production proper. Just as the savage must wrestle with nature to satisfy his needs, to maintain and reproduce his life, so must civilized man, and he must do so in all forms of society and under all possible modes of production. This realm of natural necessity expands with his development, because his needs do too; but the productive forces to satisfy these expand at the same time. Freedom, in this sphere, can consist only in this, that socialized man, the associated producers, govern the human metabolism with nature in a rational way, bringing it under their collective control instead of being dominated by it as a blind power; accomplishing it with the least expenditure of energy and in conditions most worthy and appropriate for their human nature. But this always remains a realm of necessity. The true realm of freedom, the development of human powers as an end in itself, begins beyond it, though it can only flourish with this realm of necessity as its basis. The reduction of the working day is the basic prerequisite.

Not fairness, but dignity. Not fairness, but freedom: the development of human capacities not in order to maximize their utility or expand their margin, but simply because when confronted by truly difficult problems, the reasoning of a Ted Cruz or a Donald Trump, based on or catering to ignorance and fear, falls far short of the ends of which human beings are capable. But, of course, JM Keynes’ earnest questions proved prophetic. No, we were not willing to spend for peace what we would be compelled to spend on war. And anyone who has perused the annual budgets of the last dozen US Presidents must surely have some idea what this ignorance has cost us, not only in dollars, but in lives lost and opportunities squandered.

And so we face about the globe, but specially in those regions reeling from war, poverty, unemployment, hunger and violence, ever new opportunities for investment, not in the instruments of war (whose returns are, it will be admitted, spectacular), but on human beings and their capacities. Such returns are, as Mr Marx points out, impossible to measure precisely because they are themselves the ends to which we have reason to aspire. It seems clear, however, that we will not choose these, but will choose other ends.

Next week we will draw the whole mess to a close, in war, want, and ignorance. And then next semester we will begin again with ECON 161, Transitional Economics, which considers how eastern European, Chinese, and southeast Asian nations have faired in their transition from socialism to capitalism. Can’t wait.

As we near the end of the semester, my Economics 164 students are also nearing the end of Volume I of Karl Marx’s Capital, in which Marx appears to revert to the analysis of capitalism that he had avanced in 1848, in The Communist Manifesto. There, prior to the collossal and swift defeat of revolutions all across Europe, Marx had entertained the hope that the industrial working class would defeat the bourgeoisie and establish socialist forms of social mediation on an international scale. So swift and comprehensive were the defeats of revolutionary movements across Europe that Marx was compelled to admit gaping holes in his understanding of capitalism. These holes grew larger over the coming decade as Europe’s emerging industrial economies enjoyed spectacular growth unimaginable from the vantage point of 1848. Thus Marx’s cautious, meticulous, painstaking approach to capitalism in Volume I.

Up until Chapter 32, “The Historical Tendency of Capitalist Accumulation,” all has appeared relatively smooth sailing, with plenty of ups and downs, expansions and contractions, but no revolutions on the horizon. Then, suddenly, on page 929 of the Penguin edition, Marx discharges the following salvo:

Hand in hand with this centralization, or this expropriation of many capitalists by a few, other developments take place on an ever-increasing scale, such as the growth of the co-operative form of the labour process, the conscious technical application of science, the planned exploitation of the soil, the transformation of the means of labour into forms in which they can only be used in common, the economising of all means of production by their use as the means of production of combined, socialized labour, the entanglement of all peoples in the net of the world market, and, with this, the growth of the international character of the capitalist regime. Along with the constant decrease in the number of capitalist magnates, who usurp and monopolize all the advantages of this process of transformation, the mass of misery, oppression, slavery, degradation and exploitation grows; but with this there also grows the revolt of the working class, a class constantly increasing in numbers, and trained, united and organized by the very mechanism of the capitalist process of production. The monopoly of capital becomes a fetter upon the mode of production which has flourished alongside and under it. The centralization of the means of production and the socialization of labour reach a point at which they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.

There it is. After 928 pages in which he leads readers to believe that capital or, more specifically, value is the Subject of a process in which it continually increases its value and that labour is but a subjectless element within its reproduction, Marx invites readers to recover the subject status and hence the agency of the working class. Has Marx lost his theoretical chops?

Two points, one brief and the other more involved. The first point is that much of the validity of Marx’s analysis would appear to rest not only on the decreasing number and aggregation of wealth at the top of the income hierarchy or the increasing number of those bunched at the bottom of the income hierarchy — both points recently verified by French economist Thomas Piketty — but on the training, solidarity, and organization of those at the bottom of the income hierarchy. Here we must truly wonder about whom Marx was writing; members of the Communist Party? If so, Marx must surely have been aware that, though growing, party membership was still quite small in 1867. So, too, he must have known that it would have been an embarrassingly small number of those party members who would have enjoyed the background and training needed to understand Marx’s Capital, much less to have gained that understanding directly from the “misery, oppression, slavery, degradation and exploitation” they would have experienced personally at its hands. Oppression does not come with a guidebook to explain where it comes from, how it works, or how to mitigate its effects. As Marx’s Capital itself makes clear, grasping how capitalism works is theoretically challenging even for the best-educated, most lucid reader.

My second point revolves around this hackneyed assertion that “the centralization of the means of production and the socialization of labour reach a point at which they become incompatible with their capitalist integument,” an apparent reference to the traditional Marxist contradiction between the “socialized” and therefore forward leaning forces of production and the “privatized” and therefore retrograde “relations of production. First, what is this integument, this shell or covering? Let us suppose for a moment that this integument is the legal, institutional form regulating and enforcing social relations within capitalism. Second, let us suppose that means of production are, as it seems clear, the capital goods and factors that make value production possible. These goods and factors are now concentrated in specific locations, along specific networks and, therefore presumably not in other locations or along other networks. That is to say, from being widely dispersed and broadly distributed among a wide range of facilities, households, and networks, they have now become “centralized” or, if you like, institutionally and organizationally “rationalized.” Third, let us suppose that by the “socialization of labour” Marx understands that labour is now fully integrated into this centralized production process, its regulatory, institutional, and legal formation.

If this is reasonably close to how Marx wants us to read this passage, then we must wonder how this apparent adequacy or suitability of capital concentration to labour socialization gives rise to a lack of fitness, an incompatibility between this concentration and socialization and its legal, institutional, and regulatory shell.

Traditional readings invite us to imagine the formation of a militant, “trained” proletariat rising up and expropriating the expropriators. Yet, so out of step is this explanation with the previous 928 pages, there is good reason for us to hazard another explanation more consistent with those pages. Let us, therefore, propose something like the following. Capital, as conceptualized by Marx, is continuously seeking to cast off the material forms weighing it down, whether these be labour power, cast off through technological innovation, or physical footprint, cast off in the nineteenth century through colonization and, more recently, by digitalization. That is to say, physical concentration of capital and socialization of labour could be conceptualized as twin impedements to the production and reproduction of value. And, yet, insofar as liberating labour from its domination by value and therein casting off this impediment would eliminate its very foundation, there grows a tension between the systemic necessity of socialized labour for the production of value and its obsolescence. If the integument or shell holding the capitalist social formation be the entire regulatory, institutional, and legal framework that makes labour essential to the production of wealth, then bursting this integument asunder would entail some process through which laws, regulations, and institutions were made more adequate to a social formation that no longer required labour for the production of wealth.

Yes, but then what are we to make of those final two auspicious declarations: “The knell of capitalist private property sounds. The expropriators are expropriated.” Clearly they are more than mere cheerleading for our team. Again, however, we need to interpret these calls within the framework of Marx’s overall economic system. And to do so requires, first, that we understand what Marx means by private property. Let us suppose that the increasing obsolescence of labour and of the spatial, geographical concentration of capital reveals a growing tension within capital itself. Capital must leave a footprint. It must own fixed capital. It must rent labour power. And, yet, its very form pushes it to cast off these impediments. What is it then that capital owns? What is its “property”? Or, better, how are we to grasp the nature of “private property” at a point when capital appears eager to disavow its need for a footprint? However, let us now suppose that the tenuous character between wealth production and private ownership of property, including private rental of labour power, makes the regulatory, legal, and institutional integument the only barrier between wealth production independent of private property ownership and its system-dictated maintenance.

Is it significant here that Marx calls it “capitalist private property”? Isn’t all private property capitalist? The answer is “no,” and Marx has spent several chapters identifying social formations in which, though property is privately owned, it is not owned to produce abstract, homogeneous, undifferentiated value. The answer to our question appears, in fact, in the very next chapter, Chapter 33, the final chapter of Volume I, titled “The Modern Theory of Colonization”:

The only thing that interests us is the secret discovered in the New World by the political economy of the Old World, and loudly proclaimed by it: that the capitalist mode of production and accumulation, and therefore capitalist private property as well, have for their fundamental condition the annihilation of that private property which rests on the labour of the individual himself; in other words, the expropriation of the worker (940).

If this is the lens through which we need to read Marx’s sounding of the “knell of capitalist private property,” he is not calling here for the abolition of private property at all, but, to the contrary its restoration to those individuals from whom it was seized. And, with this, we also find a much more satisfying — because consistent with Marx’s economic system — reading of the expropriation of the expropriators. Who is it who stole this property, who turned all material into material for capitalist production and all human action into value-producing labour? And, what will happen with this property upon its restoration to its owners? Presumably it will be privately owned, but no longer for the production of abstract value.

What does this mean? It means that those who interpret this passage as a call for a socialization and centralization of the means of production in the hands of the industrial working class, the so-called “working class state,” have it wrong. Rather is Marx contemplating a contradiction within capitalism that yields changes in the legal, regulatory, and institutional form — the integument — whose effect is to decentralize and disperse private ownership among those whom capital had reduced to mere labour power.