This is a very good, very nicely pedagogic introduction to basic Marxist economics for today's younger readers not versed in the old time (ouch!)1960s studies of his economic theories that were de riguer for leftists then.
Workers Vanguard No. 997
2 March 2012
Karl Marx Was Right!
World Economic Crisis—Workers Must Fight for Power
(Young Spartacus pages)
We reprint below a presentation on Marxist economics given by Tynan Maddalena, editor of Spartacist Canada’s Young Spartacus pages. The presentation was originally given to a 24 September 2011 Trotskyist League of Canada/Spartacus Youth Club day school in Toronto and published in Spartacist Canada No. 171 (Winter 2011/2012).
As the economic crisis that began in 2007-2008 continues around the globe, the post-Cold War myth that capitalism is the final stage in human progress and can continue to grow without limit is shattering before our eyes. In the United States, millions of workers have been thrown into the ranks of the unemployed, millions have lost their homes, hundreds of thousands of immigrants are deported every year, and youth are burdened with huge student debt with dwindling prospects of getting a job. For those who see no future under capitalism, Marx’s analysis is an essential tool to understand the world we live in today—and change it.
Since this presentation was given, populist Occupy Wall Street protests against inequality and austerity spread further around the country. The Occupy organizers have argued that they have no clear political agenda, affiliation or even a fixed set of demands, but in fact they do have a program: liberal reform, especially of the financial sector, and “democratization” of capitalism. But capitalism cannot be fundamentally reformed. There is a fundamental class divide in society between the capitalists—the tiny number of families that own industry and the banks—and the working class, whose labor is the source of the capitalists’ profits.
In this election year, Occupy protesters and others will be told to swallow the poison pill of “lesser evilism,” as attempts will be made to corral them into support for Obama and the capitalist Democratic Party. Posturing as the “friends” of labor and the oppressed, the Democrats are in reality no less committed than the Republicans to the maintenance of capitalist exploitation and pursuit of bloody imperialist wars.
To students and young workers seeking a revolutionary program for the destruction of capitalism, as opposed to seeking only liberal reform, Young Spartacus offers Marxism. The Spartacus Youth Clubs train the next generation of revolutionary socialists—the future cadre of a multiracial workers party built in opposition to all capitalist parties and their sycophants. Led by such a party and armed with a revolutionary program, the working class can vanquish this system of exploitation and war, laying the basis for a global communist society of abundance and human freedom.
* * *
As stock markets crash and the world economy stands on the precipice of a second “Great Recession,” consider that the collapse of 2008-09, the worst global economic crisis since the 1930s, added 130 million people to the ranks of the chronically malnourished and hungry. That brings the total number to over one billion. In so many words, one-seventh of the human race is starving. One-seventh and counting.
Across the European Union, 23 million workers are out of work. In Spain, which was recently rocked by general strikes and enormous protest movements, youth unemployment is over 44 percent. In Greece, hundreds of thousands of jobs are gone, homelessness is through the roof, and many people, especially pensioners, line up at soup kitchens in order to survive.
Every so-called bailout for every financial crisis across the eurozone—from Greece to Ireland to Portugal—brings with it unrelenting attacks on the living standards of the masses, who seethe with discontent. The IMF, the European Central Bank, the governments of Germany, France and the United States all chauvinistically chastise the peoples of these countries in crisis as living beyond their means or lazy. In reality, the financial powers are only bailing out themselves—their own failed banking systems—on the backs of workers and the poor.
Here in North America, we hear a lot of talk about an economic recovery. It is a jobless recovery, a wageless recovery, a fragile recovery, a “still nascent” recovery. At the end of July, the American government revised its statistics: the 2008 recession was deeper than reported, and the “recovery” was even more dubious than reported. As for the Canadian economy, we recently learned that it shrank by 0.4 percent in the second quarter of this year. Scotiabank released a report two weeks ago forecasting another drop in the third quarter which could be as great as 2.5 percent. “Canada could be among the first of the world’s advanced economies to fall into a technical recession,” warned the CBC [Canadian Broadcasting Corporation]. That’s rich. We’ve had a jobless, wageless, fragile, still nascent recovery, but don’t worry, the coming recession is going to be only a “technical” one!
In human terms, one in six Americans is now unemployed, with the average time out of work close to ten months. Forty-five million people are on food stamps, and that has increased more than 30 percent during the two years of this specious recovery. Since the housing bubble burst in the U.S., there have been over seven million home foreclosures. Enforcing them is a brutal act of state repression: the police come to a home, haul the furniture and other possessions onto the street and lock the family out. The bourgeois media would have you believe that the worst was over by 2008. The truth is that 932,000 of those foreclosures came in the first quarter of 2010, and that was an increase of 16 percent over the previous year. And under racist American capitalism, blacks and Latinos, one-third of whose households have no net worth, always suffer disproportionately. In some largely black and Latino neighbourhoods of South Chicago, as well as across the Detroit metropolitan area, one of every 20 households was in foreclosure.
In Canada, well over a quarter million manufacturing jobs have been lost since 2002. This underscores the decades-long deindustrialization of North America, represented in the rusted wreckage of steel mills and the shells of auto plants. As Karl Marx put it: “Thus the forest of uplifted arms demanding work becomes ever thicker, while the arms themselves become ever thinner.”
At the same time, corporate profits have reached record levels. Ed Clark, chief executive officer of the Toronto-Dominion Bank, whose profits recently rose to a staggering $1.45 billion, recently joined billionaire capitalist parasites Warren Buffett and George Soros in advocating higher taxes for the rich. Their only concern, of course, is to better preserve the capitalist system, including by giving it a facelift—though that did not prevent right-wing demagogues from labeling Buffett and Soros “socialists.” As they say, truth is stranger than fiction.
It should come as no surprise that the Conservatives, now with a majority government, are moving rapidly against the unions. The government ended a lockout by Canada Post [the postal service] this spring by legislating wage levels that were even lower than the employer’s final offer. Recently, two different unions at Air Canada were threatened with strikebreaking legislation.
The bailouts of the banks—in some cases to the tune of trillions of dollars—were enacted uniformly by every government in the imperialist West and Japan at the expense of the working class. These measures point to an elementary truth of Marxism-Leninism: that the executive of the modern state is but a committee for deciding the common affairs of the ruling class as a whole. Or look at Export Development Canada’s agreement to lend $1 billion to the Vale mining conglomerate. This came after a year-long strike at Vale’s Sudbury nickel mines, during which the company claimed that funds simply weren’t available to meet the union’s modest demands.
Various reformists and even self-professed Marxists claim that the way forward is to look for “concrete” solutions “in the here and now,” i.e., liberal palliatives. The problem is that any reform wrested from the capitalists today will only be taken away tomorrow—and today the rulers aren’t even offering the pretense of reform. The reformists especially drag out their cant about “real world” solutions when they want to express disdain for the theory and program of revolutionary Marxism, which they dismiss as “abstract.”
In fact, the reformists’ perspective is counterposed to the only road that can end the hunger, poverty and social degradation that are intrinsic to capitalism. Vladimir Lenin, who along with Leon Trotsky led the October Revolution of 1917, warned: “Champions of reforms and improvements will always be fooled by the defenders of the old order until they realise that every old institution, however barbarous and rotten it may appear to be, is kept going by the forces of certain ruling classes” (“The Three Sources and Three Component Parts of Marxism,” 1913). Lenin stressed that “there is only one way of smashing the resistance of those classes, and that is to find, in the very society which surrounds us, the forces which can—and, owing to their social position, must—constitute the power capable of sweeping away the old and creating the new, and to enlighten and organise those forces for the struggle.” As scientific socialists, we fight for workers revolution to establish an international, centrally planned economy based on satisfying human want.
Marxist Theory and the Class Struggle
Lenin called Marxist theory the “granite foundation” of the Bolshevik Party. Without revolutionary theory, he explained, there can be no revolutionary movement. The core of Marxism is the labour theory of value, elaborated by Marx in the first volume of Capital. Not a breeze to read. But when it comes to the theory that all value in a capitalist economy derives solely from, or is indeed synonymous with, labour, whether or not someone wants to learn this hinges to a great extent on their sympathies for the working class. It was Marx’s commitment to the modern industrial proletariat that allowed him to unlock the secret of value that underlies commodity circulation. As we Spartacists say, program generates theory.
Capitalist production developed from commodity circulation. People have always had to come together to produce for their needs. However, as the techniques of production developed and diversified, people no longer produced goods solely for their own groups, but for trade with others through the medium of exchange. Thus Marx called commodities a relationship between people expressed as a relationship between things.
Obviously, there would be no need for someone to trade their product for something they already had. In order to be exchanged, two commodities must have different uses to satisfy different wants. At the same time, they must on some level be equivalent: they must possess equal value, otherwise there would be no basis for each person to voluntarily give up their product for someone else’s. The great discovery of Karl Marx was that the basis for this equivalence is that all commodities are the product of labour, labour in the most abstract and general sense.
Go to an economics lecture at a university and you may learn that people exchange things solely because they have different uses. But why not just get it yourself? The answer is that it has to be produced: it takes work to acquire it. A slightly more sophisticated version of the same bourgeois argument is that you can’t get it yourself because it is scarce. That reflects a certain truth. However, it is a rigid, static view of the truth that is conditioned by the values of the bourgeoisie, which is an idle class. Anyone who works readily understands that all commodities are scarce until they are brought into existence by labour.
It has never been the case that people have produced commodities on a level playing field. Capitalism did not begin with a clean slate, but was built up on the previously existing systems of feudalism and slavery. Large sections of the ruling classes of these societies capitalized their wealth, whereas the slaves remained dispossessed and the peasants were often brutally robbed of what little they had. Through market competition, the larger, more efficient producers drove the smaller, weaker ones out of business, bought out their capital and conquered their share of the market. Those who were amassing the wealth became capitalists—the bourgeoisie. Those who had nothing left to sell but their own sweat and blood were the workers—the proletariat.
It’s often said that workers sell their labour. In fact, they are not permitted to do even that. The prerequisites for labour in an industrial society—machines and factories, the core of which can be scientifically termed the means of production—belong to the capitalist. The worker cannot work without first receiving permission from the capitalist. What the worker actually sells is therefore not his labour, but rather his potential to labour. That is what Marxists call labour power.
Labour power is bought, sold and consumed. It is a commodity, but there is something peculiar about it. The price of any commodity is based roughly on its value, or the amount of labour necessary for its reproduction. What is the value of labour power? The cost of reproducing the ability of the worker to perform his labour. That consists of food, shelter, clothing, some means of relaxation and of acquiring the skills necessary for doing the job. And finally, enough to support a family so that the working class can continue to exist from one generation to the next.
Taken together, the labour required for these measures constitutes the value of labour power. The gist of capitalist exploitation is that the proletariat generates far more value than is required for the production and reproduction of its labour power. In other words, the peculiarity of the commodity of labour power, its unique attribute, is that it is a source of value. The difference between the total value the worker adds to the product and the value of labour power is called surplus value. Exactly how much of the total value goes to the capitalist and how much goes back to the labourer? This is determined by living factors, by a contest of forces—in other words, by the class struggle.
Take Freeport-McMoRan Copper & Gold. Their operation in Indonesia faced a strike last July. Reuters news agency, which is anything but Marxist, made the following calculation: the workers’ wages were $1.50 an hour, the price of gold, $1,500 an ounce; therefore, the gold output lost during the eight-day strike could have covered three times the workers’ annual wages.
To begin to determine the rate of exploitation of these miners—otherwise known as the rate of surplus value—you would need to know the value of the machinery and fuel used up during production and subtract it from the total product. Otherwise, you could not verify the total amount of value the workers add to the product through their labour. However, the fact stands that these gold mines yield 137 times the workers’ annual wages each year, and Indonesian mines are not famous for being high-tech. Since based on our present knowledge we are confined to being somewhat less than scientific, let’s just say that someone is being taken advantage of here, and it’s not the capitalist.
There can be no fair division of the social product between the worker and the capitalist. As Trotsky explained: “The class struggle is nothing else than the struggle for surplus-product. He who owns surplus-product is master of the situation—owns wealth, owns the state, has the key to the church, to the courts, to the sciences and to the arts” (“Marxism in Our Time,” 1939). There can be no such thing as equality, fairness, freedom or democracy between the slaves and the slave masters.
Exploitation and Capitalist Crisis
So what are social classes? Lenin defined them as “large groups of people differing from each other by the place they occupy in a historically determined system of social production, by their relation (in most cases fixed and formulated in law) to the means of production, by their role in the social organisation of labour, and, consequently”—only consequently—“by the dimensions of the share of social wealth of which they dispose and the mode of acquiring it” (“A Great Beginning,” 1919).
Social class does not derive from a state of mind, nor is it even fundamentally a question of the rich and the poor. For example, a skilled unionized worker in a modern factory in an imperialist country may under exceptional cases make over $100,000 per year. Yet because labour productivity is so high, his or her rate of exploitation is likely much higher than that of far more oppressed and impoverished labourers in a semicolonial country. Moreover, a unionized worker in the trades may make as much as or more than a yuppie supervisor in an office. Nevertheless, the worker still has an economic interest in overthrowing his capitalist exploiter, while the supervisor is an accessory to capitalist production and thus bound to it materially and, you could say, spiritually.
Just about anyone can criticize capitalism from the standpoint of reason or morality. Yet Marx criticized capitalism from the standpoint of maximizing labour productivity, which is generally promoted by capitalism’s ideological defenders as its strong point. Marx proved that capitalist production increasingly puts the brakes on historical development, at the same time as it creates its own gravedigger, the proletariat.
Day in and day out, the proletariat continues to produce. It cannot use its own labour to get ahead as a class, because it is only paid what is necessary to allow it to continue producing. Everything necessary to get ahead goes to the capitalists. As Marx put it: “If the silk worm were to spin in order to continue its existence as a caterpillar, it would be a complete wage-worker.”
As capitalism develops, the bourgeoisie amasses more and more capital. Technology advances. Machinery becomes more and more sophisticated and extensive and labour productivity rises. The capitalist devotes an increasingly large ratio of his wealth toward acquiring machinery, and a correspondingly declining ratio toward employing workers. In Marx’s words, the organic composition of capital increases. The effect of this is contradictory. On one hand, the rate of exploitation increases. On the other hand, the rate of profit decreases. That’s the dilemma the capitalist faces. Even if he ratchets up the rate of exploitation, the rate of profit still tends to go down. That is why the capitalist has no future. Let’s take a closer look.
Say you’ve got your engineering degree and you’re looking for a job in your field. Off you go to the Celestica factory at Don Mills and Eglinton to pave the information superhighway, one transistor at a time, for $11.75 an hour on six-month contracts with no benefits. (And your boss can call you a few hours before your shift starts to tell you to stay home without pay.)
So there you are with your co-workers paving the information superhighway with these transistors; array enough together in the right way and you get a flip-flop, an edifice of the binary logic used on a grand scale in computers. It’s nowhere near as glamorous as it sounds in Wired magazine or those trendy post-Marxist academic seminars. Away you work. Eventually, the company replaces the soldering irons that each of you uses with a wave solder machine. A chunk of your co-workers gets laid off. You’re producing way more circuit boards than before, only your wage is the same. Since most of your friends were laid off, the company’s spending on wages has gone way down. The rate of exploitation overall has increased astronomically. Good times for the capitalist, right? Not so fast.
At first, the company will have an advantage over its competitors. Soon, however, that new machinery will become the standard across the industry. Even though the rate of exploitation has gone up, the rate of profit will go down. It all comes back to labour being the sole source of value. One capitalist can sell another capitalist a machine, but that exchange does not increase the total amount of value in the economy. The value just changes hands. It’s only once the capitalist purchases labour power, and consumes it by having the worker do his job, that any new value is added to the economy. The lower the ratio of the capitalist’s wealth that is spent on wage labour, the lower is the ratio of surplus value to his total expenses. More and more of his wealth gets tied up in replacing and maintaining machinery—what Marx evocatively termed “dead labour.”
As I said, the rate of exploitation is going up, but the rate of profit is going down. The capitalist does not resign himself to that fate peacefully, however. He panics and slashes wages like a madman, doing whatever he can to transfer the burden of his decaying system onto the backs of the people he exploits. When that capitalist can no longer produce at a competitive rate of profit, he simply ceases to produce. He throws his workers onto the street. Like Malcolm X said of the slave master, he worked them like dogs and dropped them in the mud. Production is in chaos. The empty factories rust.
Once the slave escapes his master, he is no longer a slave; once the serf gets his plot of land, he is no longer a serf. But even after the proletarian punches his time card for the final time and quits (or loses) his job, he remains a proletarian. The modern slave, the wage slave, is slave to the entire capitalist class. The proletariat cannot escape this exploiting class but must overthrow it in its entirety, worldwide, and in so doing liberate everyone who is oppressed by capitalism.
For a Revolutionary Workers Party!
What has been placed on the agenda is proletarian revolution, even if this seems far off today. We look above all to the legacy of the Russian Revolution. As Trotsky noted about the early years of the Soviet Union:
“Socialism has demonstrated its right to victory, not on the pages of Das Kapital, but in an industrial arena comprising a sixth part of the earth’s surface—not in the language of dialectics, but in the language of steel, cement and electricity. Even if the Soviet Union, as a result of internal difficulties, external blows and the mistakes of its leadership, were to collapse—which we firmly hope will not happen—there would remain as an earnest of the future this indestructible fact, that thanks solely to a proletarian revolution a backward country has achieved in less than ten years successes unexampled in history.”
—The Revolution Betrayed (1936)
We Trotskyists fought against the Stalinist degeneration of the USSR, and against its final counterrevolutionary collapse in 1991-92. Nevertheless, that collapse did occur, and the ideologues of the bourgeoisie have done everything they can to bury the lessons of the October Revolution, which remains our model.
The key political instrument for victory is the revolutionary vanguard party as developed by Lenin. Trotsky explained: “The class, taken by itself, is only material for exploitation. The proletariat assumes an independent role only at that moment when from a social class in itself it becomes a political class for itself. This cannot take place otherwise than through the medium of a party. The party is that historical organ by means of which the class becomes class conscious” (“What Next? Vital Questions for the German Proletariat,” 1932). We seek to win the working class, starting with its most advanced layers, to understand the necessity of sweeping away capitalist rule and establishing what Marx called the dictatorship of the proletariat. That is the only road to communism, a global high-tech society of material abundance where classes, the state and family no longer exist, and where thereby social inequality based on sex is eradicated and the social significance of race, nation and ethnicity abolished.
Where to get started? We come full circle to the question of what to do concretely in the here and now. We can now approach that question scientifically, from the standpoint of the historic interest of the proletariat as a class. We can avoid the pitfall of do-gooder moralism, of becoming, as Lenin warned, “the foolish victims of deception and self-deception in politics,” whether in the form of right-wing religious demagogy or social-democratic opportunism.
The class consciousness of the proletariat and its will to struggle have been greatly undermined by the social-democratic misleadership of the labour movement, exemplified by the New Democratic Party. Three years ago, the now-deceased NDP leader Jack Layton—who, unlike the reformist left, we do not eulogize—called on workers to have the “courage” to “take a pay cut so your friends at the plant can keep their job.” This is one of many reasons why we said “No vote to the NDP” in the May federal election, and we say so again for the upcoming Ontario election.
The NDP is based not merely on a bad set of ideas. It is rooted materially in the trade-union bureaucracy of English Canada. That bureaucracy expresses the interests of a stratum of the working class that Marxists term the labour aristocracy. Where does the labour aristocracy come from? It lives off scraps from the superprofits the capitalists in imperialist countries tear out of the semicolonial countries. Thus, to Marxists, it was no surprise that the NDP voted with both hands for NATO’s war on Libya. The NDP is what Marx’s close collaborator Friedrich Engels called a bourgeois workers party: it may be linked to the organizations of the working class, but it is thoroughly pro-capitalist in its leadership and outlook.
What is needed is something completely different: a class-struggle workers party that understands that the interests of the capitalists and the workers have nothing in common. Such a party would be, in Lenin’s words, a tribune of the people, which understands that the working class can only emancipate itself by ultimately abolishing all forms of oppression.
A revolutionary workers party would intervene into the class struggle as the most historically conscious and advanced element of the proletariat. It would advocate Quebec independence to oppose the dominant Anglo chauvinism and get the stifling national question off the agenda, making way for a higher level of class struggle. It would champion free abortion on demand and fight for the perspective of women’s liberation through socialist revolution, including among the more backward layers of the proletariat. To combat mass unemployment, it would demand the sharing of available work, with no loss of pay, and a massive program of public works.
To unmask the exploitation, robbery and fraud of the capitalist owners and the swindles of the banks, a class-struggle workers party would demand that the capitalists open their books. Raising the call for the expropriation of branches of industry vital for national existence, it would explain that this must be linked to the fight for the seizure of power by the working class, as against the reformist misleaders for whom the call for nationalization is merely a prescription for bailing out bankrupt capitalist enterprises. As Trotsky argued in opposition to the capitalists and their reformist agents in the Transitional Program (1938):
“If capitalism is incapable of satisfying the demands inevitably arising from the calamities generated by itself, then let it perish. ‘Realizability’ or ‘unrealizability’ is in the given instance a question of the relationship of forces, which can be decided only by the struggle. By means of this struggle, no matter what its immediate practical successes may be, the workers will best come to understand the necessity of liquidating capitalist slavery.”
That is the task to which we of the Trotskyist League and the Spartacus Youth Clubs are dedicated. In the trough of the reactionary political period following the destruction of the Soviet Union, it’s a task with few immediate rewards. But let’s be sober and scientific about this—there is an overhead to historical progress. And on the grounds of that necessity, we urge you to join us in that struggle.