“It is only in the markets of the world that money acquires to the full extent the character of the commodity whose bodily form is also the immediate social incarnation of human labor in the abstract. Its real mode of existence in this sphere adequately corresponds to its ideal concept.” (Capital, vol. 1, Part I, Chapter III,  Section 3c)

Robert Brenner (“The Economics of Global Turbulence”, New Left Review #229, May-June 1998) has written a plausible Marxist economic history of the post-Marshall Plan world. This in itself is no mean achievement. It would of course be a trifle demagogic to say that events since the appearance of this piece are the best lead into the flaws of his analysis. I did not foresee them either,  except in the “broken clock that’s right twice a day” sense, and in “economics” (i.e. the critique of political economy, as Marx called it) timing is everything. But this crisis, like every major capitalist crisis in which depression emerges as the “uninvited guest”, brings to the fore the question of international liquidity which is not central enough to Brenner’s piece, nor to most Marxist attempts to analyze the world economy since the creation of the Bretton Woods system, and and its post-1973 demise.

My gut reaction to Brenner’s piece is that I may be the last “debt-deflation” Marxist crisis theorist.  There’s wonderful material here; it saves others, myself included,  the trouble of reading a lot of the mainstream literature of the “dismal science”,  and has lots of useful statistics. Brenner basically gets the chronology right. His analysis of the 1965-1973 outbreak of world crisis perfectly encapsulates (though this is not his intent) the period of “New Left” euphoria, largely predicated in the very same years on the “irrelevance” of “economic issues”.   Brenner shows persuasively how each “recovery” after the end of the postwar boom (71-73, 75-79, 82-90, 92-??) was more superficial than the preceding one. I agree with Brenner’s attacks on the supply siders and “wage push” theorists– as far as they go. But one could very nearly get the impression, reading this piece, that, for Brenner, unlike for Marx (cf. Capital, vol. III, sections IV and V) finance is purely secondary : a “veil”, as it is treated by mainstream economics, not an autonomous destructive force in its own right.   Brenner does make many points I would make, i.e. 1) the history of the unraveling of Bretton Woods, 2) the great ficticious component of post-1979 investment (LBOs, etc.) 3) the rapid increase in FIRE (finance- insurance- real estate) investments 4) the increasing disconnect between the stock market and the real economy, 5) the impact of the fluctuations of the dollar on other countries. But– and this is a major diveregence– Brenner doesn’t draw a systematic link between the process of devalorization in manufacture (“technodepreciation”) through increased productivity,  and the international financial system.

What follows is something between a critique of Brenner’s piece, and a series of criticisms. Something about Brenner’s piece reads like a Marxist version of an OECD report, which winds up inadvertently making things sound better than they really are. Reading it, taking only the case of the U.S., I don’t see devastated ex-industrial regions and cities, armies of homeless people, almost 1% of the population in the prison system, and increasing numbers of working-class families squeaking by with 3-4 “MacJobs”.

As a general introduction, I register my (mild) consternation at the absence–in a critique of “wage push” theories of the crisis– of a discussion of actual Marxian value theory. I agree, as I said, with Brenner’s attacks on the supply siders and the wage push people. But I don’t think it’s enough– though it’s very important, and rare– to show the source of the crisis of accumulation in the technodepreciation process. Our task as Marxists is, after all, to determine the nature of the epoch.  An epoch is defined by what preceded it and what will follow it. To set the stage for an analysis of the post-war boom, Brenner would probably agree that it is possible to see 1914-1945 as one protracted crisis. It broke the logjam that arose in 1870-1914 as the U.S. and Germany arrived at and surpassed Britain’s real economic level. It broke up empires and broke the back of sterling as the international reserve currency. Its “purpose”, in accumulation, was a vast DEVALORIZATION that re-equilibrated the rate of profit opening the way to a boom on a whole new scale, but one in which physical destruction of the productive forces took on a whole new dimension, in contrast to 19th century decennial crises, a kind of “destructive destruction”, to paraphrase Schumpeter.  1945-1975 (or more precisely 1938-1975)) was “apples” to the “oranges” of pre-1914 accumulation, with which it needs to be compared more thoroughly.  The later phase was centered on a gold-exchange standard that in effect already  “globalized” international finance in that all central banks began to accumulate dollars as part of their reserves; it realized, in other words, on a global scale what Britain had achieved within the sterling zone in 1890-1914 (cf. Keynes’ book 1909 on the Indian currency). The nation state was already compromised in the Bretton Woods system. U.S. monetary policy became world monetary policy, something that Britain never achieved.

This brings me to another question mark: Brenner’s use of the U.S., Japan and Germany as separate economic entities. I know very well that he has massive material on the whipsawing of Japan and Germany by U.S. monetary policy. But why take these three “locomotive” countries in isolation instead of seeing them in a framework of WORLD accumulation? (In a piece entitled “The Economics of Global Turbulence”, moreover, almost the entire focus is on “G-7”, i.e. advanced capitalist turbulence.) It is this tacit, unspoken use of the isolated nation state (which indeed still exists) and neglect of the Third World (i.e. the devastation of much of Africa and Latin America since 1973)  that reminds me of an OECD report. Germany and Japan are the hubs of regional blocs; like the U.S., they draw on immigrant labor power from the underdeveloped world (Germany obviously more than Japan, but Japan is getting there), they exploit that labor power  abroad (Germany in Eastern Europe, Japan in Southeast Asia) their own currencies became  minor reserve currencies after 1973, and the new “euro” may become a major one; they both generate significant international investment that is integrated into their own production process; Germany is at the center of the EU and of the process of integrating Eastern Europe into world capitalism. It is also necessary to say something about the military question which is still part of the “package” of U.S. relations with Japan and Europe; the U.S., after all, still gets a lot of economic leverage with Japan and Korea through its military role in the Far East, and from its lynchpin role in NATO.

Brenner criticizes the Malthus/Ricardo theory of the limits of capitalism but doesn’t really present his own. As Luxemburg says,  the rate of profit falls: so what? Does a falling rate of profit mean that the capitalists are going to hand the factory keys over to the working class? In my view, the ultimate limits of capitalism are its inability to VALORIZE the total titles to profit, interest and ground rent  “through” the total profit available on a WORLD scale, at existing rates of exploitation. The latter is supplemented by the vast free inputs that come into the system through primitive accumulation: the incorporation of petty producers into the proletariat (i.e. massive immigration from the Third World), the driving down of wages below reproductive levels for labor power (a big part of the story of the U.S. economy since at least 1957, including the scandal of U.S. schools and health care), the looting of nature, the looting of existing capital plant (e.g. Penn Central up to 1970,  LBO’s in the 1980’s); the non-replacement of infrastructure (requiring $3 trillion or more in the U.S. after 25 years of neglect). To take one flagrant example, the average jetliner in use  by U.S. airlines is over 20 years old!

Brenner doesn’t refer to the closed system/ open system problematic in the transition between vols. 1+2 and vol. 3, that first Luxemburg and then her followers, attempting to solve the “incomplete” nature of vols. 2 and 3,  underscored as fundamental: i.e. the relationship of the U.S., Germany and Japan, and the whole “advanced” sector,  to non-capitalist zones and classes (non-capitalist here means outside the wage-labor system). The social reproduction of labor power , and its collapse in the U.S., is nowhere in Brenner’s analysis. The result is, once again, that things wind up sounding better than they actually are.  A simple example: housing costs, which are never discussed. They took 15% of an average working class household’s income in 1950; today they take 40-50%. One skilled workers’ paycheck in 1960 supported a family of four; today three and four jobs are often necessary in a family of four. Brenner provides material on this, but it’s not made central to what has happened. Nor is the lengthening work week.  I’m suspicious of any claim about U.S. worker real wages that does not take up these issues. Brenner sees real wages as flat since ca. 1965; I’d estimate a 10-20% real fall, starting with the setbacks just mentioned.

In talking about G-7 type economies, finally, (and above all the U.S.), Brenner makes no mention of the distinction between productive and unproductive labor. Adam Smith’s old formulation “a man with many workers will soon be rich, a man with many servants will soon be poor” still holds, once one sees most “service” workers as “servants”, starting with civil servants. Brenner demonstrates very well the further decline of manufacture since 1973, to 15% of hours worked, but does not take up the actual role in accumulation of those “non-manufacture” workers, half or more of whom I would consider unproductive, to mention only the military sector, law enforcement, prison construction and state and corporate bureaucracy.

At bottom, a discussion of value (another remedy for insomnia in most cases) is fundamental in terms of determining the nature of the epoch. My formulation is as follows: the cost of reproducing labor power is the standard of value, the “universal commodity” that makes exchange possible; capital’s fundamental contradiction is its need for living labor power to valorize it and simultaneously its constant tendency, through competition, to expel living labor from production. Hence the co-existence of robotics and MacJobs. Hence the inability of capitalism to seriously develop most of the world. Hence (and perhaps most importantly) its inability to make gains in productivity gains for society as a whole: this is why the U.S. work week has increased from 39 to 47 hours since 1970, the highest irony for those old enough to remember 1960’s “leisure society”  “four-day week” hoopla.  The limits of capitalist accumulation are very elastic, because its ability to recompose for another expansion at a certain point becomes a social and political question; it achieved that recomposition through massive destruction in 1914-1945; it is trying to achieve it again today. Nevertheless, each epochal crisis represents, for the capitalist world (that part directly in the capital-wage labor relationship, a minority of the world’s population in 1914 and still far from 100% today), a crisis of the OBSOLESCENCE of value (in this “manifold”, after the collapse of the “apples” of 1938-1975 to the “oranges” of 1815-1914, or 1870-1914, or whatever); i.e. value, the contemporary cost of reproducing labor power can no longer be the “standard of exchange”. Labor power becomes too productive to be contained in capitalist social relations. Devalorization has to occur to re-equilibrate the system for a new expansion at an acceptable rate of profit. That means ultimately massive destruction of the 1914-1945 type, even if it occurs in dispersed, atomized ways (the Lumpenization of 10-20% of the US population, the boom in prisons, etc.). Since 1965-1973, capitalism has been postponing any massive, abrupt devalorization of the 1929-1933 type with credit pyramids and a “slow crash landing”, grinding down “the total social wage” slowly but surely. And that process is hardly over, as the events of August-September 1998 showed.

Perhaps Brenner disagrees.  But if he goes to go to the trouble of critiquing other viewpoints from a technodepreciation viewpoint, why not go all the way? Brenner makes fairly  uncritical use of mainstream statistics throughout.  Without any distinction between productive and unproductive labor, and without a serious look at the social reproduction of labor power,  and without an awareness of how the vast inflow of foreign capital into the U.S. stock market, bond market and T-bills skews figures for “American” firms, what can  figures on “profits” mean? I understand that the capitalists don’t worry about those things either; they just care about return on investment (ROI). But do we have to use the same figures uncritically? (Nevertheless,  Brenner is right: any way ones measure it, ROI has fallen in manufacture, and Brenner is right to emphasize its centrality.)

Here, in a nutshell, is my theory of crisis, from which the reader can measure my disagreement with Brenner, which may be ultimately more a question of emphasis, but a not unimportant one. Capital, from a Marxian viewpoint,  is the M-C-M’ (money- commodity- expanded money) movement. Capitalists “throw” money into investment in the expectation of having “expanded” money later. But money is not just a veil; total price equals total value only at the beginning and end of a cycle. Along the way there is a constant puffing up of ficticious value which has to be supported by surplus value AND by inputs from outside the “closed system” (capitalists and wage laborers). These are, as indicated, the looting of non-capitalist classes (petty producers, shopkeepers, peasants), the running down of plant (sunk capital,  as Brenner calls it), the non-replacement of infrastructure, the non-reproduction of labor power at current levels of productivity, and the looting of nature (non-replacement of resources and the non-innovation of technology to draw on new resources). What Brenner rightly emphasizes as technodepreciation through increased labor productivity creates a ficticious increment “f” of fixed assets indistinguishable to capitalists (and “economists”) and requiring ,  like all other claims on profit, interest and ground rent, an adequate rate of return.  Over time, this increment “f” becomes a “hot potato” that must be constantly thrown around until it collapses in a general deflation, bringing price back into congruence with current costs of reproduction.  Inside the capitalist production process, through  technodepreciation, this “hot potato” starts up as the capitalization of plant rendered wholly or partially obsolete by the advance of technology. Capitalist “net worth” is a multiplier of the cash flow from any given source of profit, interest or rent, and for long periods of time (once again, Penn Central, or LBO’s) can have little to do with the “real” price-value relationship  To keep this growing balloon of hot air afloat, the system issues credit, which temporarily averts a deflation but which just makes the balloon bigger, as it begins to circulate outside the sphere of production.

The “hot potato” in our world is most clearly identifiable as the “dollar overhang”, the trillions of dollars held around the globe, today’s equivalent of the sterling balances of a century ago, which was volatilized by the fall 1998 world liquidity crisis. It is this free floating sum which must periodically be valorized. It is this “hot potato” which Robert Rubin and Co. have to keep filled with hot air, no matter how many continents have to be destroyed to achieve it. Therefore the international system of loans from New York banks, above all to the Third World and the (soon to be Third World) ex-Soviet bloc and to the “tigers” (above all China) is directly tied to the value of Manhattan real estate (to take one flagrant example, demonstrated in the August-September credit crunch) and is a source of “loot” that helps keep the balloon aloft. It is the movement of this paper which orders the organization of the “real economy”, up to a point, and not the other way around. Brenner’s analysis details many of the manifestations of this process but does not make it the center piece. That is my fundamental criticicism.