Seventeen Contradictions and the End of Capitalism (13 page)

The questions, then, are: when and why does this tension between fixity and motion and between process and thing become heightened into an absolute contradiction, particularly in the form of the excessive power of the rentier class, so as to produce crises? Plainly, this contradiction can be the locus of local stresses and crises. If commodities no longer flow, then the things that facilitate the flows become useless and have to be abandoned and rental returns collapse. The long and painful history of deindustrialisation has left whole cities, like Detroit, bereft of activity and therefore sinks of lost value even as other cities, like Shenzhen or Dhaka, become hubs of activity that demand massive investments in fixed capital coupled with rental extractions and property market booms if they
are to succeed. The history of capital is rife with stories of localised booms and crashes in which the contradiction between fixed and circulating capital, between fixity and motion, is strongly implicated. This is the world where capital as a force of creative destruction becomes most visible in the physical landscape we inhabit. The balance between creativity and destruction is often hard to discern, but the costs imposed on whole populations through deindustrialisation, gyrations in property values and land rents, disinvestment and speculative building all emanate from the underlying and perpetual tension between fixity and motion which periodically and in specific geographical locations heightens to the point of an absolute contradiction and, hence, produces a serious crisis.

So what kind of alternative political ambition can be derived from this analysis? One immediate and obvious target is the abolition of the powers of landed property to extract rents from the fixity they command. The capacity of rentiers to trade legal titles to immobile land and property assets fluidly across spaces, which happened as mortgages bundled into collateralised debt obligations (CDOs) were traded worldwide in recent times, must be curbed. Land, resources and the amortised built environment should be categorised and managed as a common property resource for the populations that use and rely upon them. The people as a whole gain nothing from the escalating land and property prices that have characterised recent times. The connection between financial speculation and investments in physical infrastructures and other forms of fixed capital must likewise be negated, so that financial considerations no longer dictate production and use of physical infrastructures. Finally, the use value aspects of infrastructural provision must come to the fore. This leaves the social order with no option but to explore the field of rational planning practices on the part of political collectivities to ensure that the necessary physical use values can be produced and maintained. In this way, the admittedly always complex relations between processes and things and between fixity and motion can be orchestrated for the common good rather than mobilised for the endless accumulation of capital.

As capital flows, it passes through two major checkpoints where its performance in achieving that quantitative increase which lies at the root of profit is registered. In the labour process or its equivalent, value is added through work. But this value added remains latent rather than actual until it is realised through a sale in the market. The continuous circulation of capital depends upon the successful passage (with success measured as the rate of profit) through the two moments of, first, production in the labour process and, second, realisation in the market. The unity that necessarily prevails between these two moments within the circulation process of capital is, however, a contradictory unity. So what is the main form this contradiction takes?

In the first volume of his epic analysis of capital, Marx assumes away all problems of realisation in the market in order to study how the surplus value that underpins profit is produced. Other things being equal (which, of course, we know they never are), we would expect capital to have a strong incentive to pay workers as little as possible, to work them for as many hours and as intensely as possible, to get them to bear as much of the costs of their own reproduction (through household activities and work) as possible and to keep them as docile and disciplined (by coercion if necessary) in the labour process as possible. To this end, it is mighty convenient (if not essential) for capital to have to hand a vast reservoir of trained but unused labour power – what Marx called an ‘industrial reserve
army’ – in order to keep the aspirations of those employed in check. If such a labour surplus did not exist, then capital would need to create one (hence the significance of the twin forces of technologically induced unemployment and opening up access to new labour supplies, such as those in China, over the last thirty years). It would also be important for capital to prevent if possible all or any forms of collective organisation on the part of the workers and to hold in check by whatever means possible any drive by them to exercise political influence over the state apparatus.

The ultimate outcome of such practices on the part of capital, Marx theorised in Volume 1 of
Capital
, would be the production of increasing wealth for capital at one pole and increasing impoverishment, degradation and loss of dignity and power on the part of the working classes who actually produced the wealth at the other pole.

In the second volume of
Capital
– a volume that is little read even by accomplished leftist scholars – Marx studies the conditions of realisation, while assuming that there are no problems arising in production. A number of uncomfortable though tentative (the volume was never finished) theoretical conclusions are arrived at. If capital does all those things that it must do according to the Volume 1 analysis to ensure the production and appropriation of surplus value, then the aggregate demand exercised by the labour force in the marketplace will tend to be restricted, if not systematically diminished. In addition, if the costs of the social reproduction of the labourers are being forced back into the household, then the labourers will not be buying goods and services in the market. The irony is that the more the labourers take on the cost of reproducing themselves, the less they will have an incentive to go to work for capital. A large unemployed reserve army is, furthermore, not a source of burgeoning aggregate demand (unless propped up by generous state income subsidies), any more than falling wages (including a fall-off in state contributions to the social wage) constitute the basis for an expanding market.

Herein lies a serious contradiction:

The workers are important for the market as buyers of
commodities. But as sellers of their commodity – labour power – capitalist society has the tendency to restrict them to their minimum price. Further contradiction: the periods in which capitalist production exerts all its forces regularly show themselves in periods of overproduction; because the limit to the application of the productive powers is not simply the production of value, but also its realization. However, the sale of commodities, the realization of commodity capital, and thus of surplus value as well, is restricted not by the consumer needs of society in general, but by the consumer needs of a society in which the great majority are always poor and must always remain poor.
¹

Lack of aggregate effective demand in the market (as opposed to the social demand for needed use values on the part of a penurious population) creates a serious barrier to the continuity of capital accumulation. It leads to falling profits. Working-class consumer power is a significant component of that effective demand.

Capitalism as a social formation is perpetually caught in this contradiction. It can either maximise the conditions for the
production
of surplus value, and so threaten the capacity to
realise
surplus value in the market, or keep effective demand strong in the market by empowering workers and threaten the ability to create surplus value in production. In other words, if the economy does well according to the Volume 1 prescriptions it is likely to be in trouble from the standpoint of Volume 2, and vice versa. Capital in the advanced capitalist countries tended towards a demand-management stance consistent with the Volume 2 prescriptions (emphasising the conditions for realisation of value) between 1945 and the mid-1970s but in the process increasingly ran into problems (particularly those of a well-organised and politically powerful working-class movement) in the production of surplus value. After the mid-1970s it therefore shifted (after a fierce battle with labour) towards a supply-side stance more consistent with Volume 1. This emphasised cultivating the conditions for surplus value production (through reducing real wages, crushing working-class organisation and generally disempowering workers).
The neoliberal counter-revolution, as we now call it, from the mid-1970s onwards resolved the pre-eminent problems of surplus value production but it did so at the expense of creating problems of realisation in the marketplace.

This general story is, of course, a gross oversimplification, but it provides a neat illustration of how the contradictory unity of production and realisation has been manifest historically. It is clear in this instance also that the processes of crisis formation and resolution are bound together by the way crises get moved around from production to realisation and back again. There have, interestingly, been parallel shifts in economic policy and theory. For example, Keynesian demand management (broadly consistent with Marx’s Volume 2 analysis) dominated economic thinking in the 1960s, whereas monetarist supply-side theories (broadly consistent with Volume 1 analysis) came to dominate after 1980 or so. I think it important to situate these histories of both ideas and public policies in terms of the underlying contradictory unity of production and realisation as represented by the first two volumes of
Capital
.

The contradiction between production and realisation can, however, be mitigated in a number of ways. To begin with, demand can be increased in the face of falling wages by the expansion of aggregate numbers in the labour force (as happened when China began to mobilise its latent labour surplus after 1980 or so), by the expansion of conspicuous consumption on the part of the bourgeoisie or by the existence and expansion of strata in the population who are not engaged in production but who have considerable purchasing power (state officials, the military, lawyers, doctors, educators and the like). There is an even more significant way that the contradiction might be countered: by resort to credit. There is nothing in principle that prevents credit being supplied to sustain in equal measure both production and realisation of values and surplus values. The clearest example of this is when financiers lend to developers to build speculative tract housing while lending mortgage finance to consumers to purchase that housing. The problem, of course, is that this practice can all too easily produce speculative bubbles of the sort that led into
the crash of 2007–9 primarily in the housing markets of the United States but also in Spain and Ireland. The long history of booms, bubbles and crashes in construction testifies to the importance of phenomena of this sort in capital’s history.

But the interventions of the credit system have plainly also been constructive in certain ways and played a positive role in sustaining capital accumulation through difficult times. As a result, the contradiction between production and realisation is displaced back into the contradiction between the money and the value forms. The contradiction between production and realisation is internalised within the credit system, which on the one hand engages in insane speculative activity (of the sort that animated the housing bubble) while on the other hand salving many of the difficulties of maintaining a steady and continuous flow of capital across the contradictory unity of production and realisation. Restrictions on the credit system exacerbate the latent contradiction between production and realisation, while unchaining and deregulating the credit system unleashes unchecked speculative activity particularly with respect to asset values. The underlying problem is never abolished all the time that the contradictions between use and exchange value and between money and the social labour money represents remain in place. It is out of the interconnections between these different contradictions that financial and commercial crises frequently arise.

There are a number of secondary contradictions that attach to the production–realisation relationship. While it is unquestionable that the value added arises in the act of production and that the amount of value added depends crucially on the exploitation of living labour in the labour process, the continuity of flow makes it possible for the value and surplus value to be realised at a number of different points within the circulation process. The capitalist producer who organises the production of value and surplus value does not necessarily realise that value. If we introduce the figures of the merchant capitalist, the bankers and the financiers, the landlords and property owners, and the taxman, then there are several different locations where the value and the surplus value can be realised. And the
realisation can take two basic forms. By exerting immense pressure on the capitalist producers, the merchant capitalists and the financiers, for example, can reduce the return to the direct producers to the smallest of margins while racking up major profits for themselves. This is how Walmart and Apple operate in China, for example. In this case not only does realisation occur in a different sector, it also occurs across the ocean in another country (creating a geographical transfer of wealth of considerable significance).

The other path to bridge the production–realisation contradiction is to recoup from the labourers any share of the surplus that they have acquired for themselves by charging extortionate prices or imposing fees, rents or taxes upon the working classes so as to diminish their discretionary income and standard of living significantly. This practice can also occur through manipulation of the social wage such that gains made in pension rights, in educational and health care provision and in basic services can be rolled back as part of a political programme of accumulation by dispossession. This is what the current widespread appeal to a politics of austerity on the part of the state is designed to achieve. Capital may lose or concede to workers’ demands at the point of production but regain what has been conceded or lost (and then some) by excessive extractions in the living space. High rents and housing costs, excessive charges by credit card companies, banks and telephone companies, the privatisation of health care and education, the imposition of user fees and fines, all inflict financial burdens on vulnerable populations even when these costs are not inflated by a host of predatory practices, arbitrary and regressive taxes, excessive legal fees and the like.