Forum: Capitalism: neither decline, nor progress

Submitted by Anon on 30 September, 2001 - 12:46

Some time in the late 80s various fragments of the Healy/Lambert tradition of catastrophist Trotskyism met in all seriousness in Paris for a conference on the theme “Have the productive forces grown since the War?” Chris Reynolds is correct to reject this kind of dogmatism, which flies in the face of reality and by which capitalism has been in an epoch of continuous decline since 1914. He is also correct to reject attempts to maintain the notion of decline by redefining the term and to insist on an analysis that starts from capitalism as it is rather than from our hopes of its collapse or the recitation of past classic texts.

However, his own ‘New Forces, New Passions’ (WL 63) suffers from some of the things he justly criticises in others. Substituting the concept of capitalism's still-progressive role for that of its decline and Lenin's Development of Capitalism in Russia for Trotsky's Transitional Programme, Chris's analysis is one-sided and fails to take account of contradictory aspects of contemporary capitalism that qualify his picture. He also spends much of his article dealing with the history of the “decline” position and its dangerous political consequences; but that cannot necessarily form a basis for rejecting every such theory. So, while I think he is correct to reject the “decline” position, his own position is equally not a rounded description of capitalism in its current stage.

My own view is that post-war capitalism has been able to maintain dynamism and growth despite downturns — which makes the theory of decline at best confusing, if one uses the word in any meaningful sense. However this occurs only at the cost of introducing new fragility, contradictions and potential instability into the system. Doug Henwood puts this well when he writes: “Marxism has been ill-served by a lot of quasi-Keynesian talk about ‘stagnation’. Growth rates and investment levels may not be what they were during the Golden Age of the first post-World War Two decades, but still, the system has been in many ways both more turbulent and more universalising over the last 20 years than at any time since before World War One."

Modern capitalism is both more turbulent and more universalising. Some symptoms of this mixture are: increased competition, an open international regime allowing the free movement of capital, a shifting international division of labour, and rapid changes in technology and techniques of production. Taken together these things led to an increased speed of change, the need for flexibility, and rapid and continuous restructuring and innovation.

The underlying driving forces of these changes are not themselves new to capitalism, but over the last 20 years have been proceeding at a faster rate and in new forms. They in turn give rise to the development of new working classes around the world to which Chris Reynolds correctly attributes such significance. Let us examine briefly a few of the consequences of this:

Waste and the environmental crisis: Capitalism is becoming more wasteful. In order to maintain a high rate of turnover of capital and maintain markets which might otherwise be saturated, the rate of product innovation must rise and product cycles shorten. This has been made possible by more flexible production processes. Planned obsolescence, the creation of fashions and the constant introduction of marginal changes to designs use more and more resources, not to meet human needs but to try to ensure that the accumulation of capital is uninterrupted. A striking example is the computer industry, where there is typically a gap of less than six months between the introduction of new product ranges yet thousands of perfectly functioning machines are scrapped by businesses each year in order to keep up with what are often minimal changes to hardware and software.

These demands in turn contribute to an environmental crisis, which is a striking confirmation of the contradiction between the private ownership of the means of production and the needs of human survival. Attempts to resolve this crisis by means of market mechanisms (e.g., taxation) are doomed merely to reproduce this contradiction in a new form.

Unproductive expenditure on marketing: One result of faster product innovation and increased competition is that certain types of unproductive expenditure (non-value creating costs here incurred in the process of realising surplus value) have had to grow. The costs of advertising reached $200 billion a year in the US in 1998, four times what it was 20 years before. This is necessary for the large capitalist firm to compete, yet represents a cost which has to be paid for out of its profits.

The role of financial capital: $1.2 trillion worth of foreign exchange transactions take place every day. One week of this is the equivalent of US GDP and one month's worth equals the total world product. Less than 10% of this amount is required to finance trade in goods and services. The remainder is pure speculation, which is about as turbulent as it gets!

Similarly, speculation on a generally rising stock market — ultimately underpinned only by confidence in a bright future and the hope that the state will intervene in the case of major crashes — has come to provide the basis for a whole range of financial commodities — mortgages, pensions, credit, insurance etc. The consequences of a major crash would be to ruin a large section of the population in the advanced economies, who have become dependent on credit and indirectly on speculation for maintenance of their standard of living.

Uneven development and de-industrialisation: Perhaps most importantly for Chris Reynolds' analysis, the development of “new forces” and “new passions” which arrive with the expansion and development of capitalist industry is neither universal nor does it exclude a regression in other sectors of the world economy, which has a negative impact on both the constitution and consciousness of the working class. Rather they are part of the same process of the restructuring of capital flowing across the world in search of profitable outlets. Thus large areas of the globe (e.g., most of Africa, parts of Asia and Latin America) remain left out of the growth of industrial capitalism. Many traditional sectors in industrialised countries are in terminal decline due to their unprofitability and the unwillingness of the state to support them. This last phenomenon — sometimes called “de-industrialisation” — affects such divergent areas as the British coalfields, the US “rust belt”, the eastern half of Germany and most of the Russian economy.

The restructuring of capital is thus accompanied by a restructuring of the working class. Alongside the emergent trade unionism and labour politics of the newly industrialising countries, we see also the destruction of traditional strongholds of industrial concentration, trade unionism and class consciousness. All sorts of phenomena then appear, which serve to undermine tendencies towards social solidarity: work in the semi-legal/drugs economy; self-employment; the growth of neo-fascist and extreme nationalist movements; and, last but not least, the struggle for survival.

This is only one aspect of the social contradictions which have intensified alongside the increasingly open world economy and the growing gap between rich and poor, both within and between different countries. (See the table “A divided world” in WL63.) Many elements of social crisis are growing precisely because capitalism is expanding.
Capitalism does not just therefore “augment the raw materials for socialism” in a linear manner as Chris suggests. Noting these contradictions in passing (“As well as augmenting the raw material for socialism, the development also augments the wealth, power, resources and skill of the ruling class.”), he fails to acknowledge that they have any implications for his overall analysis of capitalist development, asserting instead too broadly that “on none of Lenin's eight points [in The Development of Capitalism in Russia] has development ceased or gone into reverse”. While we may argue about the relative weight of “augmenting” and “reversing” the development of these raw materials, it is necessary at least to recognise that capitalism is at the same time destructive and creative if one is not to fall into an analysis which is incomplete and unbalanced in seeing capitalism just creating the raw materials for socialism.

Paul Hampton (WL64-5) and Hillel Ticktin (WL 66) point to some of the same phenomena I have outlined (de-industrialisation, growth of finance capital, growth of unproductive expenditure) as indicators of capitalist decline. However, these facts do not necessitate accepting their version of the theory of decline. They accept the facts of capitalist growth — though Hillel Ticktin refers to them as “success indicators based on nominal growth” and Paul Hampton sees them as “better associated with the forced adaptation of capitalism [to working class pressure] than its vitality”. Yet they argue that capitalism is in decline because it comes to undermine its own laws of motion, the law of value becoming increasingly meaningless as a social and economic regulator in this period. The driving force behind this is capital's need for the socialisation of production and labour, which has the effect, even in the absence of a working class takeover of the economy, of making capitalism “increasingly a hollow shell waiting for its overthrow". The capitalist class realises this and consciously takes steps to retard or counteract the encroaching socialisation.

There are many problems with this position. Firstly, it seems to see socialisation (concentration and centralisation of capital, the spread of inter-dependent social relations, the development of and the growth of the working class, the “development of non-market forms”) as an almost automatic force in capitalist development resulting from the growth of the productive forces rather than a by-product of the drive of capital to create the best conditions for its accumulation and the expansion of value. What are perfectly sensible actions from the standpoint of capital as a whole, albeit at the cost of increasing social contradictions (e.g., deindustrialisation, restriction of the size of the state sector and the penetration of private capital into areas previously reserved for social production), here become transformed into attempts by capitalists to stave off the detrimental effects of socialisation in hollowing out the hold of the law of value.

This socialisation then results in the growth of forms transitional to socialism which increasingly dominate the economy. Thus according to Hillel Ticktin (‘The Political Economy of Class’, Critique 20-21), “Nationalisation, ‘central planning', large bureaucratic apparatuses are all forms used by capitalism which are inherently non-capitalist.” [My emphasis.] (He says they are not socialist either. But to say they are transitional forms is for his theory a tautology which tells us nothing about their dynamics.) The capitalists fight back to preserve the system from erosion by these forms — though quite why they should if they can augment their wealth by other means is unclear. This only makes sense if these forms are somehow necessarily in conflict with the interests of capital.

We see here the truth of Chris Reynolds's comment that Hillel Ticktin starts from an idealised picture of a pure capitalism. Large bureaucratic apparatuses within large capitalist firms were an essential part of the form of capitalism known as Fordism which dominated between the 1920s and the 1980s. While such apparatuses do require unproductive expenditure (and thus have been broken down as information technology has developed), nothing about them is inherently in contradiction with the needs of capital. State ownership per se does not prevent nationalised firms participating in market relationships or operating according to the law of value, though the fact that it was usually unprofitable sectors that ended up being nationalised has disguised that fact. That the capitalist state, for example in certain European countries in the 60s, has tried to intervene (usually unsuccessfully in the long term) via planning within the framework of capitalism in order to overcome some of the contradictions of capitalism does not make these measures somehow non-capitalist. On this basis all state intervention that does not simply enable the operation of the market is somehow non-capitalist and a transitional form. Yet in all periods of capitalism state intervention has existed and been necessary to ensure as smooth an operation of the system as a whole as possible, though its extent and forms have changed — partly, but only partly, as a result of working class pressure as Paul Hampton notes.

Taking forms such as nationalisation as “inherently non-capitalist" leads us to a position like Ted Grant's whereby “where we have complete statification, quantity changes into quality, capitalism changes into its opposite". (Against the theory of state capitalism, 1949) Hillel Ticktin does not go so far, partly because he sees capital actively trying to fight back against the inevitable tide of socialisation. However, in the absence of its overthrow by the working class, we instead move towards a hollow shell no longer dominated by the process of capital accumulation but rather by transitional forms and arbitrary processes that are no longer those of capitalism. While in Grant's and Kautsky's pre-1914 theories capitalism collapses at this point, with Hillel Ticktin we remain stuck in this state in something that is not quite a new form of society but is not really capitalism either. What then are its dynamics, historical role and laws of functioning?

Does this present a credible picture of the operation of capital today? I would say not. Capitalism is becoming more universalising as Chris Reynolds claims. We are seeing the extension of market forms and the operation of the law of value to new areas of the globe and new areas of human activity. Further, some of the phenomena Hillel Ticktin and Paul Hampton describe do not involve the negation of the law of value in the way that they claim. We shall look at one example: the operation of monopoly and the gap between price and value.

The assumption that the operation of the law of value is increasingly restricted is supposedly demonstrated by the growth of monopoly and an increasingly arbitrary relationship between value and price. Both the existence of monopoly and the divergence between value and price have been characteristic — to varying degrees — of capitalism as a system throughout its history. Marx notes that if the value and price of a commodity are equal, it is by coincidence.

Let us look at one example. The labour costs of a pair of Nike trainers is less than 5% of the final selling price. This discrepancy makes possible the vast salaries paid to Nike bosses and sporting celebrities who give the product their endorsement. The distinct character of the product, jealously guarded and zealously promoted, gives it the features of a monopoly in that it can be sold well above its value (though Nike does face competition — hence the large advertising budget). Where does the surplus come from? What are the mechanisms by which this is possible? Do they indicate that the law of value is no longer operating?

Clearly, one of the major factors here is the super-exploitation of the workforce that produces the shoes in Third World countries. Such production is associated with a number of features of earlier stages of capitalism: the production of absolute surplus value (lengthening of the working day), relatively unsophisticated and low cost technology and, until now, in the absence of effective trade unionism, the reduction of wages to around the minimum required to keep the workforce alive (i.e., the value of labour power without the addition of what Marx calls the “historical element” which arises as the result of working-class bargaining power). Rather than not being regulated by the socially necessary labour time embodied in the commodities, it is precisely the driving down of that quantity in real terms among the producers that permits the existence of massive monopoly profits and such a large divergence of value from price.

The other side of the equation is the need to find a mass market (the goods are not luxuries), which would not be possible from the producers themselves given their restricted purchasing power. Instead the existence of the world market makes it possible to sell the goods in other markets where large sections of the population are able to pay the prices demanded, due both to the existence of a large “historical element” in their wages and the currently easy availability of consumer credit. The size of this market ultimately constrains the size of the monopoly profits generated so that prices can never be totally arbitrary.

The surplus profits are thus created at the expense of both consumers and producers and this set-up is fragile in that it requires a large amount of unproductive expenditure to sustain it. This example shows that, while monopoly profits can only be made at the expense of workers or other capitalists, this need not imply that the law of value ceases to act as an enabler or regulator of economic activity. Thus increasing concentration of capital does not necessarily lead to a shrinking of the operation of the law of value.
The notion that human labour can be reduced by automation throughout the capitalist system to such an extent that labour time ceases to function in such a way is also wrong, though it was noted as a theoretical possibility by Marx, for reasons to do both with the nature of social labour and technology and also with the necessary economic functioning of capitalism as a whole. (This requires a more detailed analysis at another time.)
The Hillel Ticktin-Paul Hampton theory of decline points to some real and significant phenomena but wraps them up in a mechanical theory of a declining law of value, encroaching socialisation and transitional forms. Such a theory of decline ultimately ends up with a teleological view of capitalism advancing towards socialism but never quite getting there.

Before summing up, it is worth pointing to some — perhaps surprising — similarities between the analysis of Paul Hampton and Hillel Ticktin and that of Chris Reynolds. Both believe it is necessary to provide one overall label — progress or decline — for the current stage of capitalism. Both see capitalism as increasing the potential for socialism through socialisation of labour and production. Both see that socialisation as the key feature enabling us to characterise the current phase of capitalism — one sees it as pointing to the progressive tasks it is carrying out, the other to it as the key characteristic of capitalist decline. Labels are then attached as a result of over-general analysis and then become the important thing.

I would question whether such characterisation of “the nature of the epoch” abstracted from an analysis of contemporary capitalism as a totality is of much use today. It is certainly not necessary in order to conclude with Paul that capitalist relations of production form a fetter on the development of the productive forces (even though they are expanding), with Chris that the objective pre-conditions for socialism exist today or with Hillel that the gap between capitalist reality and socialist potential is growing.

Capitalism as a system has always operated in such a way as to develop the productive forces in its own brutal, wasteful and irrational manner, to contain obstacles to its own successful functioning, and to develop new ways of overcoming them which in turn lead to new contradictions. It is possible for capitalism to be both “more universalising and more turbulent”. Yet there is no final crisis towards which capitalism inevitably develops — Lenin remarked long ago that there is no economic crisis with no way out for the bourgeoisie and Marx demonstrated that the devaluation of capital in a crisis cleared the way for renewed development. The question rather is what are the costs for the working class and humanity as a whole and what opportunities capitalist development provides for the development of socialist consciousness. This does not require us to apply questionable generalisations about progress or decline.

Bruce Robinson

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