On the Ongoing Madness of the Capitalist Mode of Production
It is gratifying when the real madness of capitalism is taken note of, specifically with regard to the crisis since 2007/2008, and a critique of this madness is formulated on the basis of the crisis. Paul Mattick Jr.[1] attempts this in his 2011 book Business as Usual: The Economic Crisis and the Failure of Capitalism.[2]
In this book, Mattick outlines the history of economic crises and argues for a concrete historical examination of capitalism. However, according to Mattick, crises are generally unexplained and misunderstood because most people don’t connect them to the internal history of capitalism and its logic of valorization. This is often because capitalism is perceived as natural, and consequently no consideration is even given to looking at it historically.
Capitalism as Imposition and Crisis
The situation is well known: the so-called financial crisis began with the bursting of the real estate bubble in 2007/2008. Most commentaries were unanimous in their lack of understanding of capitalism. Mainstream economics, mostly of neoclassical provenance, was rightly accused of neither being able to formulate reasonably reliable forecasts nor having plausible explanations for the economic situation at that time.[3] Critics of neoliberalism, deregulation, etc., on the other hand, were as blind to history as the Keynesian Paul Krugman, who “left undiscussed the reasons why Keynesian theory fell into disrepute in the 1970s” (20).
According to Mattick, “clearly there is something wrong with the mainstream approach to understanding current economic affairs. Part of the problem lies in the terms with which commentators attempt to understand the social system in which we live” (25).
To understand the current crisis, Mattick argues, we need to look at the history of capitalism and its historical dynamics. In particular, we should take note of the nature of crises under capitalism, especially in comparison to famine-related crises in pre-modern societies: “Something new emerged when an increasingly money-centered economy gave rise to the Industrial Revolution and the establishment of capitalism in wide enough swathes of territory for it to become the dominant social system: crises of the social system as a whole. Before that, of course, social production and consumption were disrupted by a variety of disturbances: war, plague, bad harvests. But the coming of capitalism brought something new: starvation alongside good harvests and mountains of food […]. Such breakdowns in the normal process of production, distribution and consumption were now due not to natural or political causes but to specifically economic factors: lack of money to purchase needed goods, profits too low to make production worthwhile” (28, emphasis in original).
To the extent that these facts are taken note of at all, it has always been the case that bourgeois economists have sought the causes of crises in extra-economic or extra-societal factors. This includes William Stanley Jevons, who, “starting with a publication in 1875, [tried] to prove a correlation between business ups and downs and the sunspot cycle […].” Marx, on the other hand, was quite different: “Marx argued that capitalism’s basic nature produced a tendency to crisis, which was realized in recurring depressions and would eventually bring the downfall of the system. Marx’s approach differed so fundamentally from the generality of economic theorizing, however, that it proved difficult for others interested in the subject (including most of those who called themselves Marxists) even to understand his ideas, much less find them useful” (32f.).
Some bourgeois economists, however, still managed to recognize what was actually obvious, such as Wesley Mitchell (1874-1948) in his 1927 book on the business cycle, in which he wrote: “In business the useful goods produced by an enterprise are not the ends of endeavor, but the means toward earning profits. […] Economic activity in a money-making world […] depends upon the factors which affect present or prospective profits” (35).
Mattick says it is quite amazing that this insight escapes most economists to this day.
However, Mitchell cannot provide a theoretical explanation for fluctuating profitability. Nor does he address, among other things, the question of what money actually is: “These are questions that even a historically oriented economist like Mitchell did not think to ask, because he took for granted the existence of money […]. Asking them, for an inhabitant of capitalist society, would be like an ancient Egyptian asking why Osiris was in control of the Nile’s ebb and flow and so of the rise and fall of agricultural output. Answering them requires sufficient intellectual distance from the conventions of our own society […] to consider money (and so profit) as historically peculiar social institutions, with particular consequences for the way we live” (39).
Of course, we would add other peculiar social institutions of this kind, such as labor, i.e. man reduced to a container of labor power, bourgeois gender relations, i.e. the double idiocy of kitchen and career, and a thinking that, above all in its practice, can only recognize the world as a substrate for valorization.
Moreover, people forget that “[…] in much of the world, even the very recent past – most people made little or no use of money […]” and “[…] that while money appears in many types of society, capitalism is the only one in which it plays such a central role in the production and distribution of goods and services […]. In such a system, money has a different social significance from that of earlier societies. […] In capitalism, […] this allocation is carried out by finding out what quantities of what goods can be sold, rather than by some social process of deciding in what kinds of production to engage” (40ff.).[4]
Mattick notes that crises are linked to the valorization dynamics of capitalism: On the one hand, it is necessary to achieve maximum “profitability” – because making money is the driving force of capitalist production. On the other hand, in order to prevail in competition, it is necessary to reduce costs, for example by increasing labor productivity, or in other words by reducing the proportion of labor employed relative to the quantity of products it produces. This generally has the effect of increasing the cost of the means of production relative to that of wages, so that the individual commodity becomes cheaper. This process manifests itself in saturated markets, declining investment in the means of production, etc., and rising unemployment (49f.). The misery appears as a lack of demand. This is precisely where Keynesianism comes in. The main idea of Keynesianism was that the state would generate demand through credit (e.g., through large-scale infrastructure projects[5]) in order to revive the valorization dynamics, thereby overcoming the depression and eventually paying off the debt through increased tax revenues. Keynes’ model seemed to be successful, since the Great Depression was overcome (not least by the Second World War, 69f.) and parts of humanity were then able to enjoy an economic miracle (the “golden age” as Mattick calls it). Nevertheless, Keynesian methods continued after the depression proper. The economic miracle was thus hardly self-sustaining: “In reality, crisis management turned into a permanent state-private ‘mixed economy.’ After the mid-1970s, throughout the capitalistically developed countries, national debt, far from being repaid, grew, both absolutely and in relation to GDP. […] By the time Reagan left office the national debt had tripled from $900 billion to $2.8 trillion. […] The United States had a government debt of $16 billion in 1930; today it is $12.5 trillion and climbing” (55, 73-75).[6]
Mattick also describes the genesis of finance-driven capitalism: “The slowdown in productive investment meant that money was increasingly available for other purposes. […] This ‘massive shift toward speculative uses of liquidity […] expressed itself in a strong push to legislative deregulation […].’ Deregulation, that is, was a response to the pressure to speculate; though of course it made risk-taking easier; it was not the cause of increased speculation. Similarly, to explain the rise of debt-financed acquisitions and other modes of speculation as the effect of greed, as is often done today, is doubly silly not only does it leave unexplained the sudden increase of greediness in recent decades, but it also ignores the basic motive of capitalist investment decisions, which must always be guided by the expected maximum profits achievable in a reasonably short term” (60f.).
Mattick also points out that the financial crisis of 2007/2008 should not be seen in isolation from the crisis since the 1970s and its roots in the logic of valorization; nor should the smaller crises since the 1980s. Rather, today’s situation is a “more serious manifestation of the depression that first announced itself dramatically in the mid-1970s, but which governmental economic policy was able hold at bay – in part by displacing it to poor parts of the world, but largely by a historically unprecedented creation of public, private and individual debt, in the rich parts – for 30-odd years” (66).
But what is the fundamental difference between the current crisis and the depression of 1929, other than the skyrocketing national debt?
Unfortunately, Mattick does not elaborate much on this crucial idea. He does mention that since government spending counteracted, rather than overcame the earlier decline in profit rates, “it is not surprising that corporations used the funds available to them less for building new factories to produce more goods than for squeezing more profit out of existing production by investing in labor- and energy-saving equipment while labor costs were lowered by moving plants from high-wage to low-wage areas […]. The results of this included a lasting increase in unemployment in Western Europe and what became the Rust Belt of the US” (58f.).
What is qualitatively new, namely the crisis of the labor society, the microelectronic revolution and its still not fully exploited potentials for rationalization, is not really clearly elaborated here. However, referring to Marx, Mattick does say that the valorization dynamics of capitalism must ultimately lead to its downfall (see above), although here he does not explicitly refer to the “The Fragment on Machines” from the Grundrisse, but only to the tendency of the rate of profit to fall.
Another inaccuracy regarding the ineffectiveness of Keynesian methods is his suggestion that “government-financed production does not produce profit. […] For the government has no money of its own; it pays with tax money or with borrowed funds that will eventually have to be repaid out of taxes. […] Government spending therefore cannot solve the problem of depression […]. It can put off the issue by supplying financial and other business with the money they need to continue operations. It can also alleviate the suffering it causes, at least in the short run, by providing jobs or money to those out of work, or create infrastructure useful for future profitable production. […] The underlying problem in a period of depression can be solved only by the depression itself […], which […] can raise profitability by lowering capital and labor costs, increasing productivity through technological advances, and concentrating capital ownership in larger, more efficient units” (81f.).
On the contrary, I would argue that Keynesian methods are effective precisely when they lead to production on an expanded scale; when state measures of concentration and mobilization lead to a greater absorption of living labor, when the cheapening of commodities leads to an expansion of markets, when there is consequently an expansion of total capital, an increase in the total mass of value in society, whether or not this process is mediated by war. This leads to an increase in tax revenues, so that the loans, which represented an anticipation of the future to come, can still be serviced. The fact that this worked to some extent is known to be due to the massive expansion of Fordist industries. Why are Keynesian measures clearly failing today, even though they were effective in the past?
As already indicated, these methods stopped being effective in the 1970s, since the subsequent microelectronic revolution did not lead to a renewed increase in the absorption of living labor power. Therefore, financially driven capitalism and neoliberal ideology were precisely the historical course through which capitalism, although completely blind to history and increasingly resistant to facts, worked out this contradiction.
The idea that a depression could be solved by a market shakeout (which, after all, was averted by unprecedented amounts of credit) is, according to Mattick, completely false today. Further concentration of capital, further rationalization, etc., would only impair people’s ability to function as exploitable containers of labor power, leading to a mass of superfluous people, or the “accumulation of hundreds of millions of un- or under-employed people in gigantic slums around the world” (65). Mattick’s somewhat imprecise definition of the crisis makes him seem a bit ahistorical, although he is quite clear about the extent of the misery, citing Mike Davis’s Planet of the Slums. Fortunately, he does not fall into a false optimism that overlooks reality, as is often the case with the bourgeois lumpenintelligentsia.
Mattick also writes, contrary to many others, that China and India cannot be the hope for a restored capitalism, because “China’s growth […] remains closely tied to that of the developed countries […]. India, where the majority of the population still consists of poverty-stricken rural workers, is even further from being an independent economic power.[7] Indeed, ‘most of the trade of the Indian and Chinese economies is still in the form of re-exports of finished or semi-finished products or services manufactured by multinational firms which are based in Europe or the US’” (88).
What Should We Do?
So, in view of millions of people living in misery, environmental degradation and anthropogenic climate change, what should we do? What are Mattick’s practical conclusions?
According to Mattick, the traditional left, insofar as it is not already marginalized, can hardly be expected to transcend the horizon of capital. For the traditional left (social democracy and real socialism) have had their day historically, since “traditional workers’ politics had turned out to be not a harbinger of the overthrow of capitalism but an aspect of its development, fulfilling the need for the normalization of a new mode of social relations by way of organizations capable of negotiation and compromise” (97f.).
But the decline of the traditional left is no reason for apathetic acceptance of capitalist madness: for it is precisely in the crisis that the difference between material and monetary wealth, as Karl Marx tried to outline it, can become apparent to many, which could motivate people to act. Mattick also sketches this idea: money may be devalued, factories may be closed, but material wealth is still, so to speak, within reach: “While at present they are still awaiting the promised return of prosperity, at some point the newly homeless millions, like many of their predecessors in the 1930s, may well look at foreclosed, empty houses, unsaleable consumer goods and stockpiled government foodstuffs and see the materials they need to sustain life. The simple taking and use of housing, food and other goods, however, by breaking the rules of an economic system based on the exchange of goods for money, in itself implies a radically new mode of social existence”(106).
The independent appropriation of the means of production may be a first step to get rid of capitalism and thus to find another form of society, even if humanity will have to struggle with the disastrous legacies (environmental destruction, etc.) of capitalism for a long time to come: “Whatever it is called, it will need to begin by abolishing the distinction between those who control and those who perform the work of production, by replacing a social mechanism based on monetary market exchange (including the buying and selling of the ability to work) with some mode of shared social decision-making adequate to a global economic system” (109).
But Mattick is wrong when he writes that the means of production are under the control of certain subjects. It is true that only a capitalist use is foreseen for means of production, real estate, etc., and that this will therefore be defended by all means of violence if the people would presume to wrest them from the valorizing movement of capitalism, as Mattick himself implies: “As in totalitarian states, so also in democratic ones the formation of popular authorities poses an immediate threat to the powers that be, however limited the ambitions of the people concerned.[8] Threats to the economic order will certainly be met with repression, going beyond the military and police violence already mobilized in recent years against antiausterity demonstrators in Athens, striking government workers in South Africa, students in London and elsewhere […]” (107).
Nevertheless, this in principle traditional Marxist formulation suggests that certain subjects would indeed have the power to determine production and its content. The functional logic of the valorization dynamics cannot be traced back to the determination of the will of subjects. This does not mean, however, that no one can be held responsible for anything, since the imperatives of capitalism must be mediated through the subjects so that they can (or rather must) act in accordance with these imperatives. But this does not mean that people are subjects of the overall capitalist event. This is where a subject- and ideology-critical level of critique would come in, which is missing in Mattick (apart from an ideology critique of economics and various views of history).
But a mere appropriation would not be enough: for it is the productive (or rather destructive) legacies of capitalism, and especially the managerial form of their implementation, that need to be criticized and, as a result, not positively occupied. It would be a futile effort to simply appropriate the capitalist “productive forces” in order to continue them on our own (as can be seen in occupied factories[9]). If we are going to transform the mode of production, then we would have to transform the content of production, which of course also means that the production of certain things, like cars, would have to be abolished or reduced.
In its most basic form, by the way, this idea is all that new. The anarchist Erich Mühsam, for example, wrote in 1932: “The childish idea that the revolution has already made the transition to socialism with the occupation of the enterprises by the workers and their simple continuation under their own leadership the revolution is as nonsensical as it is dangerous. Under capitalist conditions, factories of all kind are organized exclusively according to the profit calculations of the entrepreneurs. There is no consideration for the needs of the people, no consideration for the requirements of justice, of reason, for the life and health of workers and consumers. […] An economy which leaves many millions destitute without work, literally starving, and that at the same time burns important foodstuffs, dumps them into the sea, lets them rot in the barns or uses them as fertilizer, such an economy cannot simply be taken over and continued. It must be transformed from the ground up.”[10]
In times of failed states, appropriation occurs anyway, even if in the sense of an economy of plunder. The fact that appropriation takes place, however understandable it may be in the given situation, can also mean that the appropriators see themselves as an ethnic gang, a racist eugenic association or a terrorist religious sect, etc., and consequently exclude other people from their means of production (or what is left of them) and thus continue the competition by other means; in other words, appropriation as a bloody mode of redistribution in the “molecular civil war” (Enzensberger). Mattick’s critique of capitalism, as shown, is almost an exclusively economic one; the subjective moment is left out. He does mention that in crisis situations people are certainly capable of spontaneous solidarity, which gives one some hope. But the fact that they could be just as capable of racism, sexism, anti-Semitism, and anti-Gypsyism, not only in their minds but also in their actions, as a celebrated pogrom, is not further addressed by him. Here at the latest, the omission of the level of ideology and subject critique in a critique of capitalism takes its revenge. Unfortunately, Mattick largely leaves it at the practical conclusions quoted above, without giving them any further thought. An answer to Lenin’s question may be more urgent today than ever, but it should not be demanded by truncating or even abandoning theoretical reflection.
Paul Mattick: Business as Usual: The Economic Crisis and the Failure of Capitalism, London, Reaktion Books 2011.
[1] Paul Mattick Jr, b. 1944, the son of Paul Mattick (1904-1981), teaches philosophy at Adelphi University in New York.
[2] See also the interview about the book that Paul Mattick gave to The Brooklyn Rail magazine in 2011.
[3] On the lack of understanding of the capitalism of neoclassical economic theory, see Claus Peter Ortlieb: “Markt-Märchen – Zur Kritik der neoklassischen akademischen Volkswirtschaftslehre und ihrer Gebrauch mathematischer Modelle,” in EXIT! – Crisis and Critique of Commodity Society No. 1 (2001), 166-183. Online: https://exit-online.org/pdf/exit_komplett/exit1.pdf. Conventional economic theory usually thinks of itself as “ideology-free,” since it uses mathematics, which, given the obviously visible and historically effective success in the natural sciences, is supposed to vouch for objectivity. However, we should rather speak of a methodological misuse of mathematics, see Herbert Auinger: Mißbrauchte Mathematik – Zur Verwendung mathematischer Methoden in den Sozialwissenschaften, Frankfurt 1995. For further details, see: Knut Hüller: Kapital als Fiktion – Wie endloser Verteilungskampf die Profitrate senken und, Finanzkrisen? erzeugt, Hamburg 2015.
[4] See, for example: Robert Kurz: Geld ohne Wert – Grundrisse zu einer Transformation der Kritik der politischen Ökonomie, Berlin 2012 and Hartmut Apel: Verwandtschaft Gott und Geld – zur Organisation archaischer, ägyptischer und antiker Gesellschaft, Frankfurt 1982.
[5] See Wolfgang Schivelbusch: Entfernte Verwandtschaft: Faschismus, Nationalsozialismus, New Deal. 1933-1939, Munich/Vienna 2005.
[6] Currently (March 2016), the U.S. national debt is between $19 and $20 trillion, depending on the source. However, according to various economists, the national debt is much higher: if, for example, you include the ever-increasing cost of Social Security, see http://deutsche-wirtschafts-nachrichten.de/2013/08/09/studie-deckt-auf-usa-haben-verdeckte-schulden-von-70-billionen-dollar/.
[7] More precisely, half of the population works in agriculture, 800 million Indians are considered poor, one third of the population is chronically malnourished, and 92% of the working population works in the informal sector without any insurance. Data in Dominik Müller: Indien – Die größte Demokratie der Welt?, Berlin/Hamburg 2014. Whereby girls are more affected by malnutrition: It is quite common that the boys in a poor family get more than the girls, these are often never allowed to eat their fill, if they try it, they are beaten up, and if the food is not enough, they are left to starve (!), see Georg Blume/Christoph Hein: Indiens verdrängte Wahrheit – Streitschrift gegen ein unmenschliches System, Hamburg 2014.
[8] Already self-organized homeless feeding programs are being opposed by the state, see the material at nationalhomeless.org.
[9] When factories were occupied in Argentina, constraints and the extension of night shifts were also discussed there, see “Occupied Factories in Argentina: Movement against Capital or Self-Management of Capitalist Misery?” in Wildcat No. 70 (2004). An occupation can mean precisely a continuation of competition by other means!
[10] Erich Mühsam: Befreiung der Gesellschaft vom Staat, Berlin 1975, 75.
Originally published in exit! 14 in 2017
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