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Mario Cogoy - The Theory of Value and State Spending

Mario Cogoy - The Theory of Value and State Spending

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The Theory of Value and State Spending


The economic boom and the crisis of the labor movement after World War II seemed to be practical refutations of the Marxist theory of capital accumulation and crises. The "economic miracles" in Europe and in Japan were taken as proof of a new and lasting phase of stability and growth of the capitalist world system. Even though this new growth phase was accompanied by deep-going structural changes in capitalism, the economic boom seemed to be striking demonstration that the system was intact. The fact that the free growth of the productive forces had led to the great crisis of the 1930s apparently had produced only one discovery: namely, that some measure of regulation was necessary to get economic activity under way again after stagnation owing to insufficient "effective demand." If left unrestrained, liberal capitalism would sooner or later again lead to stagnation and unemployment; but a capitalism appropriately shored up by state interventions would open the way to a new phase of growth and prosperity. Keynes's General Theory seemed to have furnished the scientific underpinnings for a new economic policy.

But this did not banish the fear of class struggle; the very fact that full employment was a prime consideration of the new economic theory and policy showed that preventative measures were still considered necessary lest the labor struggle flare up anew. However, at bottom there was evidently no better curb on labor activity than a renewed and very swift increase in capital accumulation. Full employment seemed desirable in any case since it would inject a large measure of surplus value into production which the state could then draw on for its doings.

Mario Cogoy, "Werttheorie und Staatsausgaben," pp. 129-98 in Claudia von Braunmuhl et al., Probleme einer materialistischen Staatstheorie (Frankfurt: Suhrkamp, 1973). Translated with permission. An appendix, "Versuch einer werttheoretischen Interpretation des Multiplikatoreffektes," has not been translated for reasons of space, nor have a number of lengthy footnotes debating with other writers of the time.



Thus full employment became an essential element of the growth strategy of capital itself.

Against this background, the theoretical and factual "refutations" of Marx seemed considerably plausible. In particular those interpretations of Marx that centered on the theory of accumulation and crisis saw their relevance fade. The theory of the tendential fall in the rate of profit, which for Marx was' 'the most important law of modern political economy," 1 and the theory of economic crises were more or less explicitly abandoned. Thus the critique of political economy lost its relevance, and was either replaced by a Marxified version of bourgeois economics or reduced to a mere critique of ideology.

This development was not without its consequences. If Marx's program- namely, to derive the anatomy and laws of motion of capitalism, together with the necessity of its historical supersession, from the form of value (the' 'cell form" of bourgeois society") no longer seemed realizable in view of the new phase of rapid capital accumulation, it was necessary to reinterpret the critique of political economy in the light of the new "facts." Habermas, for example, put forth the view that state intervention into the economy and the consequent destruction of the autonomy of the economic subject vis-a-vis the state superstructure made it impossible to develop a general critique of society from a critique of political economy. 3 In his view, the' 'technocratic justification"4 has taken the role of the ideology of equal exchange for the legitimation of class society. Instead of a critique of political economy, it is a critique of "technocratic consciousness" 5 which is needed if the basis of capitalisms' s legitimation is to be undermined. 6

For the Marxist, or as they are also sometimes called, the "neoMarxist" economists, the undeniable practical successes of capital accumulation brought major theoretical problems. Nonetheless, only a few ventured to explain the present forms of capitalist development in terms of the categories of the critique of political economy. The best known of these authors, at least into the mid-1960s, was Ernest Mandel with his Marxist Economic Theory. His interest was first and foremost an apologetic one: he undertook the laborious attempt to demonstrate at any price that the Marxist theory was still valid." Instead of developing the categories of the critique of political economy in such a way that state intervention can be explained on the basis of the laws of accumulation, Mandel wasted his prodigious powers in the futile accumulation of a vast dossier of facts intended to prove that Marxist theory was still the best of all possible theories. Since proofs of the superiority

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of Marx's conception can be found scattered throughout all the academic disciplines down through history, Mandel was forced to range for 800 pages over all areas of knowledge and over the whole of history, from the inhabitants of the island of Tikopia to the computer age. The result was not wholly without merit: Mandel's book was one of the few attempts to accommodate Marx's theory to the new reality and to employ it in a critique of capitalist development after the war; but it was also not without its defects, attributable for the most part to the empirical approach used. The descriptive treatment of his material came increasingly to dominate, the further Mandel progressed in his portrayal of modern capitalism. 8

Another path no less indicative of the theoretical difficulties involved in reconstructing the critique of political economy was taken by the two American economists Baran and Sweezy. The underconsumption approach of their earlier writings-the thesis that capitalism can not dispose of the commodities it produces owing to the characteristic limitations it places on consumption, and so gives rise to a permanent tendency toward overproduction.v=led them to the well-known Keynesian theses of their book Monopoly Capital, which was not without important theoretical implications. 10 This development signified a convergence with the "Keynesian Left" (1. Robinson, A. Hensen, M. Kalecki, J. Steindl) , II with the theory of effective demand, and with an interpretation of Marxian theory that discarded the theory of value and accumulation, retaining only the Marxist analysis of the political structure of capitalism.

Following Franz Petry, Sweezy distinguished between the qualitative and quantitative aspects of value theory in his Theory of Capitalist Development. 12 With respect to the former aspect, he wrote that" qualitative-value theory with its corollary in the doctrine of Commodity Fetishism is the essential first step in the Marxian analysis of capitalism. He who has not understood this has understood little of Marx's critical method." 13 With respect to the quantitative aspect, Sweezy held that the theory of value (as improved by Bortkiewicz) was able to explain prices of production. 14 Monopolistic prices, he held, required some slight changes in the theory, but in the final analysis these changes did not contradict the basic principles of the law of value. 15

Baran and Sweezy took a different tack in Monopoly Capital: Marxian theory was based on a model of competition that applied to England in the 19th century; the theory of value and the concept of surplus value had therefore now lost their theoretical validity and had to be replaced


by other concepts, e.g., surplus or monopoly price.!" With this, the convergence with the Keynesian Left was completed; indeed the latter had acknowledged the quite major merits of Marx despite his theory of value, which in their view was not his especially strong point, and belonged more to the history of metaphysics than to the history of economic science. 17 Even though Baran and Sweezy's rejection of the theory of value differed from that of the Keynesian Left (who rejected it totally, while Sweezy restricted its validity to the era of competitive capitalism), both came to the same conclusion: what had become "obsolete" in Marx could be discarded, leaving the still relevant aspects, in particular the theory of underconsumption, reformulated as the theory of insufficient effective demand. IS

Since for Baran and Sweezy capitalism could be saved from an underconsumption crisis through state spending, Keynesianism fulfilled for them a dual function: the economic achievements of post war capitalism are thereby acknowledged, but at the same time the Marxist thesis of the contradictory character of the capitalist system is reconfirmed, if in a new guise: the contradiction in the structure of capital is recast as a contradiction between state and society. Although state intervention did indeed inaugurate a new phase of economic prosperity, it was held, it paid a high price for this. Quite apart from the persisting insecurity, the latent tendency toward unemployment, and the obvious waste of productive resources, the growth in social wealth was achieved at the expense of the destructive irrationality inherent in capitalism and growing in parallel with it: militarism, racism, the wasting of resources in a world dominated by hunger. The negation of capitalism accordingly had to be seen no longer, as with Marx, as the product of a limitation immanent in capital itself, but as the abstract opposition between rationality and irrationality, between human needs and economic gain.!? The replacement of the material contradiction by a moral one led to the identification of a new revolutionary subject: the third world, youth, blacks.s" It was no coincidence that Baran and Sweezy, along with Marcuse, were the most unequivocally accepted theoreticians of the student movement of the 1960s.

Despite the eclecticism and dogmatism of the positions represented by Baran, Sweezy, and Mandel, these authors were of no minor significance: they were the only ones to attempt to interpret the tendencies of capitalist development after World War II in Marxist terms. The fact that these tendencies were conceptualized by Baran and Sweezy in the categories of bourgeois economics, and were merely dealt with de-

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scriptively by Mandel, points to a further set of circumstances which provided the framework for their theories: namely, the objective crisis situation of the labor movement and the political consequences of a new and apparently lasting phase of capital accumulation.

In other circles, where the critique of political economy and its categories were put to formal use, as in the theory of state monopoly capitalism, the appeal to Marx was filtered through Lenin and the discussion within the Third International. For Paul Boccara, for instance, the resumption of the Marxist theme of surplus capital led to conclusions that are not too remote from the Keynesianism of Baran and Sweezy, although of course they were reformulated in a language forged in the "democratic struggle against monopoly. "21 Like Baran and Sweezy, Boccara held that state intervention represented a new stage in the development of capitalism which could be defined in terms of the existence of monopoly profits guaranteed by the state. But, unlike Baran and Sweezy, Boccara believes that such a guarantee is provided less through a growing effective demand than through public financing of production and state devaluation of a portion of fixed capital. In Boccara's theory, the state appropriation of a portion of social capital and its use for nonprofitable purposes has effects that can be compared with capital devaluation: a portion of capital no longer lays claim to a corresponding portion of the total surplus value, is eliminated from the valorization process, and thus improves the profitability of the remaining capital in private hands. Since according to Boccara the alliance between the state and monopolies subjects society to a secondary exploitation which through taxes and inflation affects other sectors of society in addition to the proletariat (middle classes, wage earners generally, nonmonopolistic industry), society is polarized between a monopolistic oligarchy on the one hand and the great majority of the population on the other. Like Baran and Sweezy, Boccara presumes that the example of the socialist countries can help to shape a consciousness of an alternative. Since for Boccara the state is an objective prefatory stage of socialism because of its socializing thrust, state intervention need only be subjected to democratic and antimonopolistic control to clear the way for socialism.

But when accumulation difficulties raised their heads again in the late 1960s, and the limits of Keynesian economic policy became visible, the possibilities available to the state for combating unemployment by increasing "effective demand" was called into question by actual economic developments. The Keynesian alternative between unem-


ployment on the one hand and full employment with a low rate of inflation on the other seemed no longer to be valid: the simultaneity of inflation and unemployment, which bourgeois economists themselves acknowledged with the buzzword "stagflation," henceforth cashiered the 1950s' prospects of a lasting capitalist prosperity.

But the signs of a new tendency toward crisis remain limited for the time being. It is not yet fully clear whether the crisis of Keynesianism will assume material form or whether it will continue to remain latent as a consequence of a new and perhaps longer period of boom. Under no circumstances, however, can the thesis that the susceptibility of capitalism to crisis can be overcome be maintained as self-evident without further theoretical investigation (as perhaps it might have been in the 1950s). With the end of the period of stability, class conflicts have emerged and grown stronger-signs of a newly developing potential for crisis. In this situation, the project of a reconstruction of the critique of political economy acquires new plausibility, which of course must still be justified.


In the following discussions of Keynes's and Keynesian approaches I will attempt to clarify the effects on accumulation of consumption and in particular of state consumption. State activity will be analyzed only in relation to the circulation sphere, and not in relation to possible changes in the conditions of production. State activities aiming at the production of surplus value are only rationalized and centralized functions of capital itself and can be dealt with appropriately only within the framework of accumulation theory. Therefore the state as agent of Keynesian policy will be investigated in terms of the effects of its spending on income and on the circulation of surplus value.

According to Keynes, the two parts of national income, consumption and savings, increase disproportionally as an economy grows. Consumption increases relatively more slowly than national income. While growing in absolute terms, total consumption therefore diminishes steadily relative to national income, while the rate of savings increases more rapidly than that of the national income, so that savings make up a steadily increasing portion of the latter. This raises the problem of how this relatively growing volume of savings can be invested. If it is invested, total income increases correspondingly; if it is not invested total income diminishes as a result of unmade capital

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investment. But this is not the important aspect of Keynes's approach. Its real merit is its having formulated in theoretical terms the tendency for investment opportunities to diminish and to have recognized in this tendency the problem of late capitalism, so that Keynes sought a solution in state incentives and partly even in state control of capital investments. Keynes believed that capital investment would tend to decline without state support because of the decreasing profitability of capital, since' 'if there is an increased investment in any given type of capital during any period of time, the marginal efficiency of that type of capital will diminish as the investment in it is increased . . . because the prospective yield will fall as the supply of that type of capital is increased .... ' '23 Given that "the only reason why an asset offers a prospect of yielding during its life services having an aggregate value greater than its initial supply price is because it is scarce," 24 it is the degree of scarcity of capital that determines its profitability.

Thus over the long term the profitability of capital declines if capital scarcity decreases. However, Keynes's argument does not explain what it means to say that capital is more or less scarce. In relation to what can one speak of a capital shortage or surplus? Obviously, it is solely in relation to profits, and certainly not in relation to the satisfaction of needs. If we say that capital is no longer scarce this means that the amount of capital is too large for a given volume of profit or profits are too small for a given amount of capital. Keynes's reasoning is therefore circular, in that he explains a decrease in profits by a capital surplus, e.g., ultimately by a decline in profit itself.

However, Keynes did pose the problem correctly, and understood that fluctuations in the national income are to be understood primarily from the standpoint of the demand for capital and not from that of the demand for consumer goods. If income consists of consumption and savings, disruptions of the economic cycle can be expected not from the consumption side of the system but from the capital side, from the difficulties of transforming savings into investments.

Thus it is no advance on Keynes at all to interpret his theory, as Joan Robinson does, as a theory of underconsumption. According to Robinson, the rate of investment depends on the rate of profit, and the latter in turn on the demand for consumer goods. 25 Since the demand for consumer goods is limited in general by the level of wages, there must be some point beyond which the production of consumer goods can grow no further. When this point is reached, the demand for means of production will also decline, so that a crisis will set in owing to


insufficient effective demand.s" But even such an argument as yet explains nothing. Its main thrust is to separate the sphere of production from the sphere of consumption and then to attempt to situate the problem in the latter. In reality, demand in a capitalist society can have no other origin than capital accumulation. 27 Accumulation includes not only the demand for the means of production, but also demand for consumer goods, since the latter is nothing more than a resul t of the sale of labor power and has its origin in the reproduction and accumulation of variable capital. To say that profit is determined by the scale of consumption is to set the problem on its head; under capitalism consumption depends on profit and not profit on consumption. Since demand can only arise from capital expansion, it is always constituted by constant and variable capital.

The relation between consumption and accumulation-or between the demand for consumer goods and that for means of production-is therefore determined by the organic composition of capital, i.e., by the relation between constant and variable capital. If the organic composition increases, accumulation of constant capital must increase more rapidly than consumption. This is only possible when the production sector in which the means of production are produced grows more rapidly than the consumer-goods sector. If on the other hand the organic composition of capital decreases, consumption must grow more rapidly than the accumulation of constant capital. Assuming that over the long term capital accumulation is accompanied by an increase in the organic composition of capital, a slower increase in consumption is not only compatible with capital accumulation but is even its precondition.

Of course a crisis of underconsumption is always possible, but external and incidental to capital accumulation. It occurs when production of means of production does not increase more rapidly than the production of consumer goods as the organic composition of capital increases. This is a special case of the possibility, always implicit in the anarchy of production, of disproportionate growth of the production sectors, but is by no means a necessary cause of crisis. 28

The fact that demand is only the obverse of capital accumulation obviously does not warrant the conclusion that production and consumption, accumulation and demand are directly identical; from this it could be inferred that general economic crises are impossible (Say's law).29 Since capital as a sum of money (M) is transformed into commodities (C) only when a greater sum of money results from this transformation (M' = M + ~ M), it is clear that the demand created by

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capital on the market is contingent on the possibility of M being transformed into M ', In other words, there is always a potential demand for capital large enough to absorb its own production completely. Whether this potential demand is transformed into a real demand depends on the rate of profit, i.e., on the relationship between the total surplus value and total capital advanced. 30 If the rate of profit decreases, the volume of surplus value is no longer sufficient to ensure the valorization of all capitals. 31 Under these circumstances capital will no longer accomplish the transformation M -C because the second part of the metamorphosis of capital, i.e, C-M', is no longer possible. Since the aim of capitalist production is not the simple transformation of money into commodities but the extraction of surplus value, M-C does not take place when C-M' is not possible. In such a case demand indeed declines, but it declines on the capital side, and this is the consequence and not the cause of stagnation in the accumulation process. 32

The general relationship between capitalist production of surplus value and consumption remains unchanged even if elements are taken into account that seemingly lie "outside" the sphere of capital. For example, state demand or the demand of noncapitalist sectors of the economy cannot be regarded as independent sources of demand. State demand is no more than the mobilization of economic resources extracted in one way or other from the rest of the economy. Similarly, the demand of the noncapitalist sector can in no way be seen as a kind of additional demand which should be included in the demand brought forth by capital since this additional demand is not offset by the demand of capital for commodities from the noncapitalist sector. This inference of course relates mainly to state demand. Here again the preced ing analysis applies: any sort of demand, even state demand, is only the obverse of capital accumulation, since state demand (as will be shown in more detail below) can consist only in the transfer of a portion of accumulated surplus value from the private to the public sector. Thus it is difficult to agree with the view of Baran and Sweezy that state demand is a kind of additional demand which makes possible the profitable investment of surplus which would otherwise lie unused. 33

The conceptual separation of capital accumulation from the growth of demand, which constitutes the core of underconsumption theory, implies a second thesis which has always accompanied this theory in its various historical guises. If the tendency to stagnation has its roots in an excess of supply relative to the demand for consumer goods, it is clear that any use of resources that produces income and so demand without


creating a corresponding supply of consumer goods tends to restore the disrupted equilibrium. For example, the production of a machine produces income; however, since the machine is a means of production it also contributes to the creation of new consumer goods; the production of a luxury commodity or armaments, on the other hand, produces only income, without contributing to the production of new consumer goods. This is the basis of the idea, closely linked to underconsumption theory, that unproductive labor has a stabilizing function.

Theories of unproductive labor and unproductive consumption have of course had various roles and meanings in the course of capitalist development. For Malthus, the underconsumption thesis served to justify the "social" function of luxury-goods production and the unproductive consumption of the rural aristocracy. The new Keynesian forms of underconsumption theory provided ideological justification for the state use of unproductive labor. 34 In Baran and Sweezy's version unproductive labor has the function of producing additional outlets for the growing" surplus, " i. e. , it stabilizes the economic situation though at the cost of increasing irrational and destructive waste.

The inversion of the relationship between production and consumption in all theories inspired by the underconsumption approach has its counterpart in the inversion of the relationship between productive and unproductive labor. We have seen that in underconsumption theory the level of profits depends on the level of consumption. In the same way, the productivity of labor (which in capitalist society means the production of profits) is dependent on the fact that a sufficient quantity of unproductive labor realizes this profit. Unproductive labor accordingly seems to be the precondition of the productivity of labor as the production of profits. Again, things are here stood on their heads, because, while the quantity of compatible productive labor does indeed depend on the amount of profits, the amount of profits does not depend on the quantity of unproductive labor.

In what follows I will attempt to sketch out the relationship between the categories of productive and unproductive labor in the reproduction process of the total capital. It will be seen that the concepts of productive and unproductive labor employed in the analysis of the direct production process must be modified for an investigation of the effects of productive and unproductive labor on the valorization of total capital.

Marx distinguishes between productive labor relative to the labor process and productive labor relative to the valorization process. In the

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labor process, labor that leads to a change in the object in accordance with the goal of production is productive. The subjective activity of human labor is materialized in use value. 35 Productive labor is accordingly here labor that is materialized in the production of a use value, in accordance with an intention. This conception of productive labor has continuing validity as Marx's analysis proceeds, as from the standpoint of capitalist production it must, since only use value can be the bearer of value. However, it is not sufficient for the comprehension of productive labor in capitalism, since the aim of capitalist production is not the production of use values but the valorization of capital. Thus from the capitalist standpoint, only labor that creates surplus value is productive.36 The productiveness of labor in a capitalist society is therefore a determination of labor as wage labor. Hence capitalist productiveness is the expression of a production relation, and not of a relation of man to nature. Productiveness accordingly refers not only to concrete but also to abstract labor, just as to the fact that labor is a use value for capital, and indeed the use value of the commodity which capital purchases as a subjective, living element in the production process: namely, labor power. The productiveness of labor is the capitalist expression of the use value of the commodity labor power for capitalof the fact that it contains less value than its application is capable of producing.

Capitalist productiveness of human labor finds expression only in the relationship between wage labor and capital. In this relationship, the laborer exchanges his store of potential living labor for dead accumulated labor. This must happen for this accumulated labor to function as capital, for it to enter into an exchange relation with wage labor to be valorized through the extraction of labor power. Productive labor is thus wage labor considered in relation to capital and not simply to the owner of capital. The capitalist can also spend his income as revenue in exchange for a service. In this case too the capitalist's income enters into an exchange relation with wage labor, but this labor produces no commodity that contains surplus value in its value and can be sold on the market. It produces only a good or a service, and the income spent by the capitalist is accordingly in this case not valorized as capital. The labor for which capital income is exchanged in this case is therefore not productive labor from the capitalist standpoint.

At this level of analysis the distinction between productive and unproductive labor has as yet nothing to do with the use value of the product, or even with the concrete properties of labor. 37 Productive and


unproductive labor are social determinations of labor, and depend on whether labor enters into relation with income as capital or as revenue. The same type of work-Marx gives the production of a piano as an examplew=can be either productive or unproductive labor depending on what happens after the sale of labor power, whether the worker produces a commodity sold at a profit on the market or whether his work is paid for with a part of the income of a capitalist or another person receiving an income without a specified quantity of surplus value being contained in the value of the product. In the latter case the labor does not produce commodity capital which must be transformed into money capital before it enters into the sphere of consumption; rather it enters directly into the sphere of consumption in exchange for a portion of the income of the buyer.

However, in developing the categories of the critique of political economy it turns out that the definition of productive labor developed so far is not sufficient when applied to total capital. The production of surplus value that we have considered so far is a production of surplus value for individual capital. However, the valorization of individual capital is not directly the valorization of total capital as well. The valorization of total capital is subject to a number of additional conditions which must be reconstructed at least in broad outline. The concept of productive labor with regard to total capital must accordingly be derived from a modification of the concept of productive labor as it regards individual capital.

The product of capital is a commodity. A commodity's value is realized on the market as a specific sum of money. This sum contains all the components of the value of the commodity, including both the cost of production and the surplus value. Capital, a constantly expanding value, cannot crystallize into its money form but must continually incorporate living labor as a source of its own self-valorization; it must be continually transformed back from the money form into the commodity form, and present itself on the market as a demand not only for labor power, but also for means of production. The unremitting metamorphosis of capital from the form of commodity capital via money into productive capital (means of production and labor power) is in the final analysis the expression of the contradiction between use value and exchange value already contained in the structure of the commodity, transferred to the level of capital. For capital, a self-valorizing value, its use-value substrate is a matter of indifference. Commodity capital therefore sheds its husk of use value and is transformed into money

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capital, into the abstract form of the universal equivalent. On the other hand, for productive capital use value is not a matter of indifference since it is in fact the use values of labor power and the means of production that are of interest in this case: the use value of labor power insofar as it is labor, the production of value; the use value of the means of production, insofar as it this makes possible the performance of labor. Capital is thus driven, through the internal contradiction between use value and value in the structure of the commodity, into a continual process of transformation from its money form into its productive form, and from the latter into its commodity form, and then again into the money form, the productive form, etc.>? That is, capital requires mul tiplicity: for one capital to be transformed from its commodity form via the money form into its productive form, another capital must be present in a commodity form corresponding to the productive form of the first while the commodity form of the first corresponds to the productive form of the second. Since the productive form of every capital consists of at least two commodities-labor power and means of production-the concept of capital necessarily involves the interaction of at least two capitals: one that produces means of consumption and another that produces means of production. In general, the concept of capital-since both labor power and means of production consist of several commodities-must be exemplified by "many capitals."

Marx investigated this exemplification in his analysis of the reproduction schemas. Using these schemas it is possible to show how the total capital can be accumulated while its parts, the individual capitals, undergo the metamorphoses from commodity capital into productive capital, and thus not only replace the initial productive capital, but also accumulate an additional productive capital. The argument is based on a two-sector scheme, in which all capitals producing means of production are placed in Department I and all capitals producing the means of consumption are placed in Department II. The results of this analysis hold for the general case of many capitals, in which each undergoes its metamorphoses within one of the two departments or in both at the same time (as in the case of commodities-like agricultural productswhich can serve both as means of production and as consumer goods).

The analysis Marx offers in the second volume of Capital is well known; I present its results here in succinct form.

The total production of society takes place in two departments, with means of production produced in the first department and means of consumption in the second. The overall social production can be


represented by the following schemas:

(I) CI + VI + CSI + VSI

(II) CII + VII + CSII + VSlI,40

where CI and CII represent constant capital functioning in Departments 1 and II respectively; VI and VII represent variable capital, i.e., wages in Departments 1 and II respectively; SI and SII represent the capital accumulated for additional means of production in Departments I and II respectively; SI and SII represent additional wages for workers needed to operate those additional means of production.

The metamorphosis of total capital takes place through the sale of all produced commodities on the market. A portion of sales takes place on markets within the individual departments. Thus the means of production produced with capital from Department 1 is purchased in part by other capitalists of the same department who must install new machinery or expand. In this case, capitals from Department 1 will correspond in their commodity form to the productive form of other capitals from the same department. These capitals exchange against means of production at a value equal to CI + CSI. A similar process takes place with VII and VSlI. In this case the metamorphosis takes place in the following way: capitalists in Department II pay their workers wages with which they purchase means of consumption from other capitalists in the same department. These capitalists purchase new labor power with the proceeds; thus VII and VSII are transformed from the commodity form (means of consumption) into the productive form (labor power). Therefore these portions of total capital are also transformed from the commodity form into the productive form in an exchange process on a market within Department II. 41

Thus VI and VSI remain in Department 1 and ClI and VSII remain in Department II. The metamorphosis of these particular capitals from the commodity form into the productive form takes place on a market that comprises both departments. The exchange can be expressed by the equation VI + VSI = ell + CSII. The metamorphosis of the remaining portions of Departments I and II takes place in this exchange. The remaining parts of Department 1 are transformed from their commodity form (means of production) into their productive form (means of consumption), which in turn is used in exchange to purchase labor power). The remaining portions of Department II are transformed in a similar fashion from their commodity form (means of consumption)

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into their productive form (means of production). The following result is thus obtained: total capital has undergone an accumulation cycle; the individual capitals have also gone through an accumulation cycle insofar as they have been transformed from their commodity form into a form in which they can resume the productive cycle." The crucial result, however, is the following: The accumulation of total capital is identical to the sum of the surplus values produced by each individual capital.

But this identity no longer holds if we take into account the new conception of productive labor with respect to total capital. Up to now we have assumed (l) that the labor expended in both departments is productive labor, and (2) that the commodity form of each individual capital corresponds to the elements of the productive form of one or more other individual capitals; in other words, that the commodities produced by each individual capital are transformed without exception into elements of the productive capital of the other capitals. It is evident that the concept of productive labor, if it is to be applied in the analysis of total capital, must be broadened (beyond the definition of productive labor as labor which produces surplus value). In this context, that labor is productive that produces commodities that are transformed into elements of productive capital (means of production or means of subsistence).

Let us assume for a moment that this is not so. Then we would have capitals whose commodity form cannot be transformed into elements of the productive form of another capital, such as luxury goods, weapons, infrastructural goods, etc. What effect would the production of such goods have on the metamorphosis of total capital?"

If the labor expended for the production of such commoditiesluxury goods, weapons, etc.-is wage labor, which enters into relation to capital and produces a commodity for the market, then these commodities must contain surplus value as a portion of their values. This labor is productive labor according to the first conception. The production of such commodities can thus be represented by the general formula C + V + S. We can add a third department to our two-department schema: it will contain commodities that we term "non-reproductive"44 since they are not transformed into elements of productive capital. (They could also be called luxury goods, although luxury goods in the narrow sense represent only a portion of this production. But armaments and infrastructural goods are luxury goods from the standpoint of capitalist society, since they serve neither for the produc-


tion of means of production nor for that of means of subsistence).

The reproduction schema then has the following form:

(I)@]+ VI + ~+ ~

(ll) Co +\Vul+ cSu +lvSul (Ill) Cm + V tu + cSm + vSm.

The metamorphoses of the parts of capital boxed in in the schema causes no difficulties; in accordance with the above analysis of reproduction, they take in a two-department schema in markets within Departments I and II. The remaining portions of Departments I and IT could undergo their metamorphoses analogously to the two-department schema in a market that includes both Department I and Department IT. But how does the capital in Department ill undergo its metamorphosis into productive capital? In this case a metamorphosis is evidently impossible, since if the constant, variable, or accumulated capital of Department ill is transformed from. the commodity form into the productive form through exchange with Departments I and Il, the latter departments can not undergo metamorphosis from· the commodity form into the productive form because they would come into possession of "unreproductive' goods which cannot be transformed into productive capital. Either Departments I and IT undergo metamorphosis or Department ill does, but a simultaneous metamorphosis of all three departments' is impossible. The resolution of this contradiction between value and use value within total capital at the same time renders impossible the identity between the production of surplus value and the accumulation of total capital pictured in the two .. department schema. The contradiction can be resolved only if a distinction between capital and revenue is made within the surplus value produced in Departments I and IT. The portion of surplus value that functions as capital is accumulated and the portion of surplus value that functions as revenue is used not as capital but for the purchase of' 'unreproductive' goods. Thus surplus value now has three parts: one for the accumulation of constant capital, another for the accumulation of variable capital, and a third spent as revenue in exchange for • 'unreproductive ' goods. Then the reproduction schema has the following structure:

(1) @] + ':1 + [cSr \ + vSr + RS[

(m CII + I VII I + cSTI + I vSII I + RSII (ill) ClII + Vra + cSlII + VSTII + /·RSllIl,.

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where RSJ, RSII and RSII are those portions of surplus value that function as revenue rather than as capital. They are not transformed into productive capital but are consumed and eliminated permanently from the production process.

The metamorphosis of total capital can then be resumed. The boxedin parts undergo metamorphosis within the departments. Exchange relations are formed between the other components of total capital, but we shall not investigate them in detail here. 45 What is important in this context is the fact that the constant, variable, and accumulated capitals of Department III are transformed into productive capital by means of an exchange with the means of production and means of subsistence of Departments I and II. A portion of the surplus value produced in Departments I and II, namely RSI + RSII, is thus transformed into "unreproductive" goods instead of into capital. Of course RSm is also not transformed into capital, but this is not relevant here because this portion of the surplus value of Department III is realized within that department itself.:" The exchange through which the commodity capital of the third department is transformed into productive capital can therefore be expressed by the equation: eIII + VIII + CSIII + VSIII = RSI + RSII'

It follows that the accumulation of total capital is no longer identical with the sum of the surplus values produced by each individual capital. The accumulation of total capital is equal to the sum of the total surplus value minus the total value of the production of Department III.

The capital used in Department III is unproductive from the standpoint of total capital because it does not contribute to the accumulation of total capital. It uses wage labor, which produces a specific quantity of surplus value for the capital invested in Department III. Thus for the individual capital of Department III this labor is (capitalistically) productive. For total capital, however, this is not true since the surplus value and capital of Department III can only be realized at the expense of a corresponding portion of the surplus value in Departments I and II. In a fetishistic economy, in which the product of human labor appears as a commodity and the productivity of labor as profit on capital, the production of "unreproductive" goods can appear to be productive from the capitalist standpoint (since capitalists who produce luxury goods or armaments derive profit from this). However, an analysis of the reproduction of total capital shows that this production is in reality unproductive from the capitalist standpoint because the produced surplus value destroys a corresponding portion of the capital accumulation in the other departments. 47 The fact that capital is also accumulated in


Department III must not be allowed to conceal the fact that this accumulation takes place at the cost of Departments I and II. In addition, the capital in Department III must be again replaced at the cost of the surplus value of Departments I and II, so that total accumulation is reduced by the total value of the production of Department III and not merely by the amount of accumulation in it.

Thus what appears as profit to the individual Department III capitalist is in reality a complete loss for the profitability of the system as a whole. The "unreproductive" goods are in fact the only products through which surplus value cannot be transformed into productive capital: they cannot be accumulated as capital. Their metamorphosis takes place through the transformation of a portion of the surplus value of another capital into revenue, i.e., through the negation of its capitalist character. What appears to the individual capitalist as productive labor proves to be unproductive relative to total capital. For total capital, the concept of productive labor must be expanded to account for the mediation of capital in the reproduction process by the exchange relations among the many capitals. 48

The development of a third department is tantamount to the development of a noncapitalist element within the structure of total capital, although the formal structure of capitalism remains unchanged because total social production takes place on capitalist foundations and total social labor is subsumed under capital as wage labor. A portion of surplus value ceases to function as capital and becomes revenue; a part of value ceases to function as a precondition for the accumulation of new value, and production for the accumulation of capital gives way in part to production for consumption.

Production for the valorization of capital has always been accompanied by its opposite, production for unproductive consumption. Surplus value production has always involved the transformation of a portion of surplus value into revenue, and productive labor has therefore always been accompanied by its opposite, unproductive labor or unproductive consumption without labor.:" However, capital as capital must continue to expand, subordinate every type of consumption to itself, and transform every sort of labor into productive labor.

Historically, this took place in the process of primitive accumulation and industrialization. In this process, every form of labor was subsumed under capital and transformed into productive labor. Peasants became the rural and industrial proletariat. The emergent internal market was simply the effect of capitalist expansion; the demand for

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consumer goods was oriented toward the reproduction of labor power and was the expression of an accumulating variable capital. 50 On the other side of the class line, the unproductive consumption of the rural landowners was attacked. The struggle between the industrial bourgeoisie and the rural aristocracy impugned the latter's unproductive consumption in an attempt to eliminate this obstacle to capital accumulation.

An author like Malthus, who used underconsumption theory during this period as an apologist for unproductive consumption, reflected the weakness of capital accumulation, which was not rapid enough to put to work again the workers displaced by the growth of labor productivity under capitalism; this situation required unproductive consumption. The situation is different in a phase of capitalist development in which accumulation has already reached an advanced state. Then overaccumulation and the corresponding tendency for a "reserve army" of the unemployed to form are not effects of an excessively slow process of accumulation, but an expression of the fact that capital has reached the limits of its profitability, so that further accumulation is no longer possible owing to the lack of sufficient surplus value. 51

When underconsumption theory and the fear of unemployment reappear as a consequence of deficient capital accumulation, in an advanced stage of capital accumulation, its context is quite different than that of Malthus: the key point is not the weakness of accumulation due to capital's youth but a tendency toward overaccumulation. Keynes was aware that capital enters into crisis when an expansion of accumulation follows upon an expansion of consumption. Therefore he regarded the expansion of consumption as the lesser evil. He knew quite well that the capitalist solution can only be a new increase in capital accumulation.v In this clarity about the nature of capitalism's problem, Keynes was far superior to his advocates in the Labor party, who viewed an expansion of workers' consumption as the modern method for stabilizing capitalism. 53

Nonetheless, for political reasons Keynes too preferred an expansion of consumption to prevent a systemic crisis of unemployment and a general economic crisis. A capitalist society that saves itself from crisis by its own negation, production for the sake of consumption, is, however, still a capitalism in crisis. This gives rise to a paradox: state intervention, celebrated after the war as a stabilizing factor, demonstrates a crucial aspect of the crisis of capitalism: the stabilization of capitalism through its negation.



It was Paul Mattick's great merit to have used Marx's theory of accumulation to show that the new forms of appearance of present -day capitalism in no way alter the validity of Marx's theory of value. 54 On the contrary, they are the logical consequence of the laws of accumulation. Mattick was able to show that some of the questions frequently arising in the discussion of late capitalism rested on false premises. In particular, the view (shared by Baran and Sweezy ") that free competition was a prerequisite for the validity of the law of value, which was thus no longer valid in a monopolistic market, seems to lose its basis. As Mattick shows, the theory of value is not a theory of relative prices as it is only indirectly an analysis of the logic of empirical market relations. 56 The fact that a monopoly price cannot coincide with value (and that value and price indeed can never coincide) is a self-evident matter which is in no way a "refutation" of the theory of value because for Marx market price phenomena, as well as capital concentration and the monopolization of markets, can only be explained in terms of production relations. Monopoly prices are only understandable on the basis of the law of value, and deviations from a law can only be understood in terms of the law itself. The law of value is an expression of the central structure and historical tendencies of a society whose relations of production are grounded in the division of labor and private property. On the basis of these production relations, the product of human labor appears not in the form of an object of consumption but as capital: the productivity of human labor is therefore expressed in the valorization of capital. The accumulation of the total social capital is the background against which the accumulation of individual capitals, and hence prices, becomes intelligible, i.e., scientifically explainable, as empirical exchange relations.

The theory of accumulation and the theory of unproductive labor enable us to clarify two fundamental aspects of present-day capitalism which any theoretical approach must confront: first, the seeming economic success of capitalism and the absence of serious crisis during the last twenty-five years and, second, the aspects of crisis that are becoming visible beneath this seeming prosperity.

The expansion of state demand has an effect on the reproduction process similar to that of the production of' 'unreproductive" goods. 57 State demand transforms a portion of surplus value into revenue, just as Department III deprived a portion of capital of its function as capital.

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The state takes a certain sum of money from the economy in the two principal forms of taxes and public debt. These funds cannot be accumulated as capital, and reduce the sum of resources available for the valorization of total capital. Of course these resources also serve for the purchase of commodities produced by capitalists, and the capitalists obtain their profit through the sale of these commodities. However, this fact, just like the case of "unproductive" goods, must not seduce us into drawing false conclusions. The surplus value produced in, for instance, the arms industry, is embodied in a portion of the war material, and the sale of this material must lead to the realization of the total value contained in it-not only the surplus value but also the constant and variable capital used in this industry. Not only the surplus value of the arms industry but also the whole value of its product must be realized with a portion of the surplus value appropriated from other industries by the state to pay for the war material. The whole cost of this material must thus be subtracted from the total surplus value and hence represents a corresponding loss for the accumulation of total capital. The size of this loss depends on the absolute dimensions of the department that produces for the state, as well as on the organic composition of capital in this department: the larger the department that produces for the state, the more the surplus value must be extracted from the productive sector to realize the product of the unproductive sector. The greater the organic composition of capital in the unproductive sector, the more surplus value must flow from the productive sector through the process of equalization of profit rates. This results in a general fall in the profit rate and, even more important, a slowed accumulation rate. A slowed accumulation rate in turn means that a portion of capitalist production is directed not toward the valorization of capital but toward consumption. This expansion of the sphere of consumption at the cost of capital formation certainly has positive effects on the excess capacity that accompanies overaccumulation. The portion of capital that cannot be valorized because of the overaccumulation crisis (excess capacity), leading to a corresponding growth in the "reserve army," can be put to use by the state demand. Therefore, total social consumption does not decline, and total demand and total production maintain their levels. But unproductive consumption has then taken the place of capitalist consumption, consumption which has its origins in the various elements of accumulation, and surplus value is destroyed instead of contributing to capital accumulation. Thus the fact that total demand and total production maintain their levels is only a


poor consolation for capital, because the noncapitalist stimulus of demand results in a low rate of capital formation. 58

The rate of capital formation can of course increase only if the general conditions of profitability (the production of surplus value) are fully restored, and certainly not through expansion of state demand. As in all crises of capital accumulation, capitalists must also endeavor in periods of "Keynesian" state intervention to restore the general profitability of capital. But Keynes offers but slender help here. The methods available for increasing the productivity of labor were not born with Keynes's General Theory, but with capital itself: speed-up, rationalization, concentration-in a word, increased extraction of relative surplus value.

The state can of course further this goal by subsidizing the rationalization and restoration of the profitability of capital. But this is no longer "Keynesian" state activity, since it amounts to a support of the typical function of capital, the increase of relative surplus value. Voltaire's bon mot, used by Joan Robinson against Marx, may be directed against Keynes: it is possible to kill a flock of sheep with witchcraft if you give them a strong dose of arsenic at the same time. Similarly, it is possible to save capitalism from crisis with the aid of state demand if at the same time exploitation is intensified.

The positive effects of Keynesianism are thus limited primarily to the employment of otherwise unused capital and labor power. The classical economic crisis, characterized by overproduction and unemployment, can be prevented in this way. This is preferred, not only for political reasons, but also because it helps to keep intact the fundamental ideology of capitalist society-that capitalism can guarantee a continuous expansion of production and consumption. However, from the viewpoint of capital, overproduction and unemployment continue to exist as before, except that they now appear in a new form: in waste production and in unproductive labor. The expansion of production through the "stimulating" effect of state intervention therefore means primarily the realization of that portion of production that would have been lost through the crisis. However, as we have already seen, this , 'expansion" of production is an expansion of consumption and not of capital.

Baran and Sweezy seem to be of the contrary opinion, that expansion of production is tantamount to an expansion of private capital. They believe that the problem is posed in a fundamentally different way in a monopolistic market structure than in competitive capitalism. In their

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view, the classical model, with its assumption of full utilization of resources and subsistence wages, implies that surplus value is the only possible source of financing for government spending. This, they say, no longer applies under monopoly capitalism since when there is a insufficient effective demand, so that resources are not fully utilized, state-financed production represents additional production which is not at the expense of private capital accumulation. 59 Baran and Sweezy even assert at one point that total capital not only does not lose but even gains from the unproductive use of one of its parts. 60 It is a fact that income generated with the aid of state employment of excess capacity will be greater than that which would be generated without this utilization. However, this increase in income must not be confused with the accumulation of private capital. Although Baran and Sweezy are right to say that capacity would be even less utilized without state spending, this in no way alters the fact that it is after all the accumulation of private capital that must provide the resources for this state spending. Thus in the end there is only the choice between excess capacity and the unproductive utilization of this excess capacity by the state. 61 However, this is actually not much of a choice for capital, since both alternatives result in a loss because a portion of capital cannot be used productively under capitalism. Although the first option prevents a decline in income and guarantees the profit of a specific group of capitalists, total capital suffers a loss just as in the case of excess capacity. 62

The assertion of Baran and Sweezy that state spending contributes to an improvement in the general level of profitability, because it offers the opportunity of utilizing otherwise excess capacity, is based on the Keynesian multiplier theory, to which Baran and Sweezy make explicit reference.P According to this theory, the effect of state demand on income is not limited to the size of this demand. Since the income created by this demand is partly spent for consumption, further demand is created. A portion of the income created by this additional demand in turn leads to new demand, etc. These recurrent effects of income creation gradually decline in significance, because only a portion of every created income is subsequently used for consumption. The greater the proportion of total income accounted for by consumption, the greater the multiplier, since the effect of a multiplication of income dwindles the more slowly.v' For example, assuming a "propensity to consume" of Y2 and a state demand for arms with a value of 100, of the income of 100 earned by the sale of arms to the state, 50 is spent for consumption goods. Of this 50, 25 is spent again on consumption, and


so forth. As a result, a state expenditure of 100 produces an increase in income of 200. In the same way, a propensity to consume of 213 would result in income growth of 300. In the first case the multiplier is 2, and in the second case it is 3.64

The illusory character of this argument is clear if we distinguish between commodity circulation and money circulation. If we look at the production of society as a whole, state spending of 100 represents only a sum of money which the state has extracted from the economic system in the form of taxes. In then purchasing arms with this money, the state is only returning to the economy money extracted from it via taxation. But in this process, goods to a value of 100 have been transferred from the economy to the state. For the system, the result is thus a net loss of goods worth 100. This money now serves to circulate commodities within the economy. This circulation has the character described earlier in the discussion of the reproduction schema. However, it is clear that this circulation does not take place because of state spending, but because individual capitals have produced goods which are now circulated by a certain sum of money. The transfer of this sum of money (or a part of it) from one hand to another cannot be regarded as the "creation" of income by state spending. It is really only a transfer of money from one hand into another (money circulation) following the transfer of commodities from one hand to another (commodity circulation). The illusion that income is created by the circulation of money rests on the fetishism of capitalist production relations, for which money circulation appears to be the driving force of commodity circulation. 65

Thus the multiplication of income is nothing more than commodity circulation (transformation of value from the commodity form into the money form and then into the form of productive capital) which takes place after the state has withdrawn commodities from the economy in exchange for money originally collected in the form of taxes. Commodity circulation thus produces no additional profits, but rather realizes the profits remaining after surplus value (in our example, worth 100), embodied in commodities of a corresponding value, has been lost. Profits realized in this way have nothing to do with the money spent by the state. The state has done no more than make available a sum of means of circulation, thereby stimulating circulation.s" Obstacles arising in circulation can more easily be surmounted in this way and the effect of state demand can be reduced to this. Quite to the contrary of the Keynesian illusion, however, the sum total of surplus

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value produced cannot be changed by circulation. State demand can prevent realized profits from declining to below the level of produced profits by exerting a favorable effect on circulation. This avoids a typical aspect of the classical form of crisis, the chain reaction caused by obstacles to circulation, and leading to a profit loss, due to failed realization, higher than that resulting from the declining rate of profit alone. However, total surplus value is not only not increased by this modification of the form of economic crisis but, as I have shown, is actually reduced by a sum equal to state spending. 67 A change in the form of crisis is not sufficient for state spending to be able to remove the causes of crisis, which are rooted in the structure of capital itself.

For the individual capitalists of the arms industry, the value of their production is transformed into money and so again into productive capital, even when they produce for the state. Similarly, capitalists who sell machinery to the arms producers and consumer goods to their workers transform their own products into money and this money again into productive capital. Accordingly, it will seem to each individual capitalist that state demand has "created" his income: for him it is a matter of indifference what is produced-what is decisive are the profits that he earns from it. He will perceive the process of total capital only in the partial form of the taxes he must pay. The fact that not only capitalists but also workers pay taxes does not al ter the fact that the taxes paid by workers are also unpaid labor: they are a part of the total surplus value, appropriated here by the state rather than by capital. For total capital this means that commodities equivalent in value to state demand have been expropriated without the economy receiving any compensation for them. This loss is of course spread among all capitalists: each capital pays-after its produced commodities have been transformed into the money form-a certain sum of money in the form of taxes to the state, and productive capital shrinks accordingly. The crisis appears in its modified form for individual capital as well through this mediation: in the form of taxes instead of that of excess capacity; in other words, excess capacity disappears only because the state has appropriated this capacity without compensation and has put it to use in the arms industry.

If state spending exceeds tax revenues, the state budget shows a deficit. According to the Keynesians, this deficit stimulates further production beyond the effect of tax-financed spending. Deficit spending would thus be the policy of choice, if the economy slows down, to shore up declining demand. By means of such practices the state can


accumulate resources, which otherwise would not be used, and put them into circulation, so that commodities and profits of its suppliers are realized. But just as in the case of taxes, when public debt is used to finance production for the state, an equivalent commodity value is lost to the economy-and this is a total loss. In exchange for these commodities, the state pays an amount of money which in this case is not expropriated but borrowed. The additional demand, including profits realized through this demand, are reflected in an equivalent level of public debt. If the state borrows money, it must pay commensurate interest to the holder of its bonds. The state pays this interest either from its tax revenue or by increasing the public debt. Such debts are in general not repayable, for to repay them the state would have to expropriate a sum equal to the debt as taxes, thereby transforming temporarily lent funds into permanently expropriated funds. However, a debt that cannot be paid back is in fact tantamount to an expropriation; a portion of money capital foregoes transformation into productive capital and is satisfied with a valorization on the basis of a specific interest rate. For a part of money capital, the category of profit is transformed into the category of interest. This de facto appropriation of a portion of money capital is matched by the expropriation of an equivalent value of commodities, just as in the case of financing through taxes. To reduce the burden of the interest that must continue to be paid on the de facto expropriated money capital requires a rather high inflation rate (which reduces the real rate of interest). 68

A system of production financed by the state through public debt or taxes has its limit in the accumulation rate of private capital. Taxation, enabling the state to pay for its expenditures and the interest on its debts, is possible only if capital accumulates rapidly. Debt itself is possible only if the accumulation of money capital is large enough to provide the state with the requisite resources. Far from creating income, deficit spending and the multiplier reflect the success of private surplus value production and capital accumulation. If the latter are insufficient, deficit spending and the multiplier can function only if production for consumption penetrates even more forcefully into the sphere of production for profit.

This is the dilemma of a mixed economy." If the state attempts to prevent the consequences of a decline in the rate of profit by increasing production for unproductive consumption, it thereby restricts the sphere of expansion of private capital. The total level of social consumption can be maintained through these methods, but consumption

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as an aspect of capital accumulation is replaced by consumption without accumulation. For the expansion of state activity to be financed, private capital must restore conditions for profitable accumulation in its own sphere, now restricted by state activity. If it succeeds in doing so, a new period of private capital expansion begins. When this expansion reaches the limits of valorizability, the state is forced again to extend the sphere of its control. What is actually a limitation on valorization immanent to capital appears as an encroachment of the state from without on the business of private capital. The restriction of the sphere of capital by the state at the same time derives from capital itself and calls its further expansion into question. State activity is therefore continually forced to maintain the difficult balance between too much and too little intervention.

A reversal of this process is probably impossible. The rate of formation of private capital is now too low to compensate for a major reduction in state spending through accelerated accumulation. A great leap forward to total control of the total sum of surplus value and its direct productive use by the state would be tantamount to a general expropriation of capital. This could not take place without a social revolution, unless one faction of capital were able to take control of the state, which under present conditions is a totally unrealistic idea. Therefore the market must continue to be the medium in which the accumulation of individual capitals takes place despite its restriction by state activity. There is no other alternative for a mixed economy than the accelerated accumulation of private capital.

Under normal capitalist conditions, conditions of profitability are restored by way of crisis, specifically by the centralization of capital and the devaluation of a part of fixed capital, the rationalization and intensification of the exploitation of labor power, and an attack by capital on the incomes of the noncapitalist classes. 70 Although the state has transformed the form of the open crisis into the modified forms of latent crisis typical of the mixed economy, it must also take over the traditional functions of a classical crisis. Only in this way is it possible for private accumulation, which continues to be the functional basis of the economy, to recover its strength. The restructuring of capital which took place during the classical crisis must therefore be assisted by the state in order to accelerate accumulation.

Thus Keynesian methods have always been accompanied by the classical means of intensified exploitation, centralization of capital and imperialism. These means also have their basis in the valorization of


private capital, limited by the tendential fall of the profit rate. Hence the dual nature of state activity. On the one hand, state expenditures are a negation of capital, because they extend the sphere of consumption beyond the sphere of capital production. The state intervenes in circulation and realizes a portion of the produced goods outside the market mechanism. These products are not commodities, but mere use values, whose costs, however, negatively influence the valorization of total capital. Such use values can only be produced if the accumulation of total capital is not impaired by their production. However, their production is governed by the laws of capital valorization. Therefore, on the other hand, the state can and must attempt to improve the conditions of valorization in the sphere of production, to the benefit of private capital. While Keynes saw the problem of capital mainly from the standpoint of the sphere of circulation, it is clear that production of surplus value in the private sector continues to be the determining factor in the development of the overall system.

For Marx the valorization of private capital meets its limit in the tendency of the rate of profit to fall. Consequently, its continuance means an intensification of the crises thereby produced. The intensification of exploitation must therefore always have priority over the "Keynesian" activity of the state since positive effects on capital accumulation stem only from the production of surplus value and not from the sphere of circulation. However, for Marx, increased exploitation cannot prevent a recurrence of crisis in the long run. Even if the state were able to eliminate some of the contradictions in private appropriation (such as disproportionality) through its control of a portion of surplus value, its activity would still be limited by the fundamentally contradictory character of valorization. It is therefore impossible to see in state economic activity a kind of "preparation for socialism" or a "school of collective economy," as do the theoreticians of state monopoly capitalism and Mandel, who approach each other strikingly on this point. 71 The view that state intervention permits a peaceful transition, free of crisis, to a democratic form of control over monopolies, as claimed by the theoreticians of ' 'democratic state capitalism, " is just as unfounded.P Such conceptions manifest a shared misunderstanding of the necessarily contradictory nature of state intervention, a misunderstanding of the actual crisis at its root, and above all a misunderstanding of the fact that the state (as Mattick's theory shows so well) is not above but is rather governed by the contradictory process of capital accumulation.

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1. Karl Marx, Grundrisse, Foundations of the Critique of Political Economy (New York: Vintage, 1973), p. 748.

2. Karl Marx, Capital, vol. 1 (New York: Vintage, 1977), p. 90.

3. See Jurgen Habermas, Theorie und Praxis (Neuwied, 1963), p. 163: "The 'separation' between state and society typical of the liberal phase of capitalist development has been superseded in the stage of organized capital, giving way to a reciprocal interlocking. Commodity circulation and social labor have such an extreme need of centralized control and administration that bourgeois society, formerly left to private individuals in accordance with the rules of the free market, is forced to allow its commerce to be mediated politically in many areas. However, when bourgeois society is no longer autonomously constituted as that sphere which is both prior to and at the basis of the state, state and society no longer stand to one another in the classic relation of base and superstructure. An approach which methodologically isolates the laws of economic motion of society can claim to describe the vital context of society in its essential categories only so long as politics is dependent on the economic base, and the latter need not be conceived as a function of conflicts settled with political selfconsciousness. " See also Habermas, Technik und Wissenschaft als . 'ldeologie' (Frankfurt, 1968), pp. 75ff.

4. Habermas, Technik und Wissenschaft, p. 90.

5. tu«, p. 88.

6. Ibid., pp. 102-3.

7. Ernest Mandel, Marxist Economic Theory (London: Merlin, 1968), pp. 17-18: , '[W]e quote abundantly from the chief economists, economic historians, ethnologists, anthropologists, sociologists, and psychologists of our times, insofar as they express opinions on phenomena relating to the economic activity, past, present, or future, of human societies .... We seek to show that only Marx's economic teaching makes possible this synthesis of the totality of human knowledge .... Such non-Marxist writers as Joseph Schumpeter and Joan Robinson have voiced their nostalgia for this synthesis. Marxism alone has been able to achieve it."

8. Mandel today makes a similar judgment on his earlier book, criticizing it for its "exaggeratedly descriptive character" and its "too small effort to explain the contemporary history of capitalism by its immanent laws of motion" (E. Mandel, Der Spatkapitalismus [Frankfurt, 1972], p. 7). [This passage is not included in the English translation, Late Capitalism (London: New Left Books, 1975)-Ed.JFor a critique of Mandel's Marxist Economic Theory see Paul Mattick, "Mandel's Economics," in International Socialism 37 (June/July 1969), pp. 35-39.

9. See Paul M. Sweezy, The Theory of Capitalist Development (New York: Oxford University Press, 1942), and Paul A. Baran, "Reflections on Underconsumption," in P. A. Baran, The Longer View red. John O'Neill] (New York: Monthly Review Press, 1969), pp. 185-202.

10. Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York: Monthly Review Press, 1966).

11. "[A]nyone familiar with the work of Kalecki and Steindl will readily recognize that the authors of the present work owe a great deal to them. " Baran and Sweezy, op. cit., p. 56.

12. Franz Petry, Der soziale Gehalt der Marxschen Werttheorie (lena: G. Fischer,


13. Sweezy, Theory, p. 40.

14. Ibid., pp. 54 and 125ff.

15. lbid., p. 272: "It goes almost without saying that the validity of measuring commodities in value terms, that is to say by the yardstick of socially necessary labor


time, is independent of the particular exchange ratios which happen to be established on the market, whether under competitive or monopolistic conditions. " For a critique of Sweezy's interpretation of Marx see Roman Rosdolsky, The Making of Marx's 'Capital' (London: Pluto, 1977), pp. 74ff. and 398ff. See also Paul Mattick, Marx and Keynes (Boston: Porter Sargent, 1969), pp. 33ff.

16. Baran and Sweezy, op. cit., pp. 4-7.

17. Joan Robinson, An Essay on Marxian Economics (London: Macmillan, 1966),

p. 22: "I hope that it will become clear, in the following pages, that no point of substance in Marx's argument depends upon the labor theory of value. Voltaire remarked that it is possible to kill a flock of sheep by witchcraft if you give them plenty of arsenic at the same time. The sheep, in this figure, may well stand for the complacent apologists of capitalism; Marx's penetrating insight and bitter hatred of oppression supply the arsenic, while the labor theory of value provides the incantations."

18. Ibid., pp. 4 and 43ff. I will explore underconsumption theory in more detail in the second part of this essay.

19. Baran and Sweezy, op. cit., p. 341; p. 364: " ... The contradiction between the compulsions of the system and the elementary needs of human nature ... " And see p. 367: "As the world revolution spreads and as the socialist countries show by their example that it is possible to use man's mastery over the forces of nature to build a rational society satisfying the human needs of human beings, more and more Americans are bound to question the necessity of what they now take for granted. And once that happens on a mass scale, the most powerful supports of the present irrational system will crumble and the problem of creating anew will impose itself as a sheer necessity. ' ,

20. Ibid., pp. 363-66.

22. Paul Boccara, "Zum staatsmonopolistischen Kapitalismus," in Sozialistische Politik 11 (June 1971).

23. John Maynard Keynes, The General7heoryofEmployment Interest and Money

(New York: Harcourt, Brace, 1936), p. 136.

24. Ibid., p. 213.

25. Robinson, op. cit., p. 50.

26. Ibid., p. 49.

27. This is a model of a closed system in which capitalist relations pervade all areas of social production. However, an abstract argument in terms of models is permissible here since the underconsumption theory also uses such a model.

28. For a detailed analysis of possible alternative accumulation models and the conditions giving rise to underconsumption crises see Mario Cogoy, "Les theories neo-marxistes, Marx et l'accumulation du capital," in Les Temps Modernes 314-15 (September/October 1972), pp. 403ff ["Neo-Marxist Theory, Marx, and the Accumulation of Capital," above]. Toni Negri calls attention to the tautological character of underconsumption and disproportionality theories in his Zyklus und Krise bei Marx (Berlin: Trikont, 1972). Mandel gives a good critique of underconsumption theories in Marxist Economic Theory, pp. 361ff. However, it is a mystery why Mandel ranks Henryk Grossman among the disproportionality theorists.

29. For a criticism of this identity see, for example, Marx, Grundrisse, pp. 411- 13.

30. This argument is also based on a model, in which it is assumed that an unlimited supply of labor exists, that the use value of commodities corresponds to the requirements of the valorization process, and that no bottlenecks obstruct the circulation process.

31. It is not possible within the limits of this essay to enter in more detail into Marx's accumulation and crisis theory. We therefore assume this theory. It will become

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evident in the course of our argument that we are drawing on Grossman's and Mattick's interpretation of the theory of accumulation.

32. For the concept of consumption in Keynes and Marx, see Mattick, op. cit., pp. llff.

33. Baran and Sweezy, op. cit., chapter 6. This thesis of Baran and Sweezy will be

examined in more detail later on.

34. See Keynes's "digging holes in the ground," op. cit., pp. 311 and 220.

35. Marx, Capital, vol. 1, p. 287.

36. Ibid., pp. 643-44. See Marx, "Results of the Immediate Process of Production" (pp. 948-1084 in Capital, vol. I), pp. 1038ff., and Marx, Theories of Surplus Value, vol. 1 (Moscow: Foreign Languages Publishing House, n.d.), p. 148ff. and 377ff.

37. "The use value of the commodity in which the labor of a productive worker is embodied may be of the most futile kind. The material characteristics are in no way linked with its nature, which on the contrary is only the expression of a definite social relation of production. It is a definition of labor which is derived not from its content or its result but from its particular social form." Marx, Theories, vol. I, p. 154. See Marx, Results, pp. 1044.

38. Marx, Theories, p. 156.

39. "The antimony between use value and exchange value, which can be neglected in the analysis of the production and reproduction of individual capital becomes the focal point in investigating the movement of total capital. " Rudolf Hickel, "Leseanleitung zu den Marxschen Reproduktionschemata," in Marx, Das Kapital, Band II (Frankfurt: Ullstein, 1970), p. 496.

40. This equation disregards capitalists' consumption as well as any use of surplus value other than for accumulation. Thus total surplus value is broken down into accumulation of constant capital and means of subsistence used for the purchase of additional labor power. The difficulties of money circulation also are disregarded. In addition, the schemas are constructed on the basis of values and not prices. This should be said to obviate the risk ofthese schemas being construed as being a direct description of reality. The schemas are valid only under the above-named conditions, but nonetheless they do enable us to depict relations between the different components of accumulation. On the method used in the reproduction schemas see the two essays by Henryk Grossman, "Die Wert-Pre is-Transformation bei Marx und das Krisenproblem" and "Die Goldproduktion im Reproduktionsschema von Marx und Rosa Luxemburg," in H. Grossman, Aufsatze zur Krisentheorie, Archiv sozialistischer Literatur 20 (Frankfurt: Neue Kritik, 1971). See also Rosdolsky, op. cit., pp. 63ff. and 445ff, and Rudolf Hickel, op. cit.

41. "The illusion created by the money-form vanishes immediately if, instead of taking a single capitalist and a single worker, we take the whole capitalist class and the whole working class. The capitalist class is constantly giving to the laboring class drafts, in the form of money, on a portion of the commodities produced by the latter and appropriated by the former. The workers give these drafts back just as constantly to the capitalists, and thereby withdraw from the latter their allotted share of their own product. The transaction is veiled by the commodity-form of the product and the money -forrn of the commodity. " Marx, Capital, vol. 1, p. 713.

42. These conclusions in no way imply that the reproduction schemas represent a system in equilibrium. They are valid only under the above-mentioned conditions. It is clear that the reproduction process of capital is linked to conditions that are methodologically excluded from representation in the reproduction schemas. The difficulties resulting from the tendential decline in the rate of profit are excluded here, insofar as we are primarily analyzing the circulation process. A harmonistic interpretation con-


fuses this analysis. bounded by specific conditions, with the real movement of the capitalist reproduction process. For a critique ofthe harmonistic interpretation see, for example, Hickel, op. cii., pp. 497 and 51l.

43. We are concerned here exclusively with the primary effects of such production on the accumulation of total capital; secondary effects are disregarded. Such secondary effects, such as that well-known in the "spinoff" theory, can be dealt with appropriately only if the function of technology in the valorization process is conceptualized in more precise terms. In the Keynes-oriented theory of state intervention, however, income effects are derived from state-induced production and are presumed to hold independently of the use value of the produced goods and their production technology. For a precise definition of these income effects the secondary effects of this production should therefore initially be disregarded.

44. "Accumulation requires the transformation of a portion of the surplus product must be transformed into capital. But we cannot, except by a miracle, transform into capital anything but such articles as can be employed in the labor process (i.e. means of production), and such further articles as are suitable for the sustenance of the worker (i.e. means of subsistence)." Marx, Capital, vol. 1, pp. 726-27. Marx calls the consumption of such products "unreproductive." See Marx, "Results," p. 1044.

45. Sraffa points out that the exchange relations between individual sectors need not necessarily be in equilibrium in three-sector or multi sector models. Bilateral exchange relations are then replaced by circular exchange relations; see Piero Sraffa, Production of Commodities by Means of Commodities (Cambridge: Cambridge University Press, 1963), p. 4.

46. In the case of production for the state, RS3 are the taxes paid by capitalists in Department III and used for the financing of this department's production. Since in this case taxpayers and producers coincide, the expropriation is obvious.

47. "Productively employed capital is always replaced doubly, as we have seen, in that the positing of a value by a productive capital presupposes a counter-value. The unproductive consumption of capital replaces it on one side, annihilates it on the other." Marx, Grundrisse, pp. 750-51. On counter-values see Grundrisse, pp. 729- 32.

48. A study of the effects of productive and unproductive labor on the accumulation of total capital must be carried out on the analytic level ofthe reproduction process of total capital. On this level, the use value of commodities, disregarded in the analysis of the immediate process of production, again assumes a crucial importance. "Use value as such ... lies outside the sphere of investigation of political economy. It belongs in this sphere only when it is itself a determinate form. " Marx, A Contribution to the Critique of Political Economy (New York: International Publishers, 1970), p.28.

49. Marx, Grundrisse, pp. 401-2n.; "It does not belong here, but can already be recalled here, that the creation of surplus labor on the one side corresponds to the creation of minus-labor, relative idleness (or not-productive labor at best), on the other ... Malthus therefore [is] quite consistent when, along with surplus labor and surplus capital, he raises the demand for surplus idlers, consuming without producing, or the necessity of waste, luxury, lavish spending, etc."

50. Marx, CapitaL, vol. 1, p. 908-9: "With the 'setting free' of a part of the agricultural population, therefore, their former means of nourishment were also set free. They were now transformed into material elements of variable capital. The peasant, expropriated and cast adrift, had to obtain the value of the means of subsistence from his new lord, the industrial capitalist, in the form of wages."

51. This interpretation of Malthus and the reference to structural differences in the population problem in the various historical phases of accumulation derive from Hen-

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ryk Grossman. See his Das Akkumulations- und Zusammenbruchsgesetz des kapitalischen Systems (Leipzig: C.L. Hirschfeld, 1929), pp. 169-70,381,414-15.

52. "It may be convenient at this point to say a word about the important schools of thought which maintain, from various points of view, that the chronic tendency of contemporary societies to under-employment is to be traced to under-consumption;that is to say, to social practices and to a distribution of wealth that result in a propensity to consume which is unduly low.

In existing conditions-or, at least, in the conditions that existed until lately-where the volume of investment is unplanned and uncontrolled, subject to the vagaries of the marginal efficiency of capital as determined by the private judgment of individuals ignorant or speculative, and to a long-term rate of interest which seldom or never falls below a conventional level, these schools of thought are, as guides to practical policy, undoubtedly in the right. For in such conditions there is no other means of raising the average level of employment to a more satisfactory level. If it is impracticable materially to increase investment, obviously there is no other means of securing a higher level of employment than by increasing consumption.

Practically I only differ from these schools of thought in thinking that they may lay a little too much emphasis on increasing consumption at a time when there is still much social advantage to be obtained from increased investment. Theoretically, however, they are open to the criticism of neglecting the fact that there are two ways to expand output. Even if we were to decide that it would be better to increase capital more slowly and to concentrate effort on increasing consumption, we must decide this with open eyes after well considering the alternative. I am myself impressed by the great social advantages of increasing the stock of capital until it ceases to be scarce. But this is a practical judgment, not a theoretical imperative." Keynes, General Theory, pp. 324- 25. One hears quite different tones today in the debate on "zero growth." The American economist Fremont Felix launched a heavy attack against the "clamor of ignoramuses in favor of zero growth (which would in fact plunge mankind into an abyss of famine, pestilence, chaos and war)." Le Monde, 20 January 1973, p. 25.

53. See for example the essay by John Strachey, Has Capitalism Changed? [Shigeto Tsuru ed.] (Tokyo, 1961).

54. See Mattick, op. cit. See the comments by Otto Lorth in Kyklos 25:3 (1972), pp. 658-63 and by Pierre Souyri, "Variations dans le marxisme," in Annates 27:6 (November-December 1972).

55. Baran and Sweezy, op. cit., p. 4: "The Marxian analysis of capitalism still rests in the final analysis on the assumption of a competitive economy."

56. Mattick, op. cit., chap. 3.

57. It should be pointed out that this is a critique of Keynesian state interventionism, and not a substantive and comprehensive portrayal of the functioning of the interventionist state. It is shown that the Keynesian forms of state intervention are limited by the structure of capital itself. When this limit is reached the state must shed its Keynesian trappings and take on new and old forms of intervention. Then the principal tasks of the state become improving the conditions of production, and repression, rather than unproductive expansion of production. It is not our purpose here to provide a theory of these forms. Since, however, the Keynesian illusion is still quite alive, both theoretically and practically, a critique of Keynesianism is a necessary component of a critique of the modern state.

58. Since Mandel does not grasp the place of the production of "unreproductive" goods in the reproduction process of capital, he contradicts himself repeatedly in his interpretation of the economic effects of arms production (see his Late Capitalism, chap. 9). He distinguishes between the effects of arms production on the tendency for the rate of profit to fall and its effect on the use of idle surplus capital (pp. 283ff.). This


distinction is in itself meaningless since surplus capital can only be an expression of a falling rate of profit and hence not an essentially different problem. Therefore it is all the more unintelligible that Mandel comes to the conclusion that arms production does not halt the tendential fall in the rate of profit, because it "has ... been one of the most important solutions to the problem of surplus capital" (pp. 300-301). For Mandel, arms production can result in a profit-yielding mobilization of surplus capital because profits are obtained in this sector just as in other sectors (p. 294). If it were so simple, one could ask why the problem of overproduction of capital exists, since it could be quite simply solved by using idle capital in any way at all, even for the production of arms. However, Mandel forgets that in addition to being produced arms must also be sold. But since no worker eats them and no capitalist uses them as machinery in his factory, the state must expropriate a portion of the surplus value to be able to buy weapons, which Mandel also concedes at one point (see p. 296). Total surplus value is therefore reduced by the cost of arms production. Hence one can hardly agree with Mandel when he writes that "the surplus labor (mass of surplus value) generated by the proletariat in the production of 'luxury goods' or weapons enters into the distribution of the total social surplus value just as much as the surplus labor expended in the production of means of production or consumer goods for the reconstitution of labor power" (p. 288). As regards the fall in the rate of profit, it is Mandel's view that a low organic composition of the armaments industry could eliminate this difficulty (p. 283). This notion is based on the same misunderstanding of the function of "unreproductive" goods in the reproduction process as his treatment of the problem of surplus capital. Since arms production does not participate in the shaping of the general rate of profit in the same sense as the production of means of production or means of subsistence, reducing rather than expanding capitalizable surplus value, a low organic composition of capital in the arms industry can in no way contribute to a rise in the rate of profit, but only slow down the decline in the rate of profit that has already been accelerated by the arms industry. Since the entire arms production must be paid for by the surplus value of other capitals, the average rate of profit must decrease correspondingly. But if the value of arms production contains a smaller portion of constant capital, it is clear that the surplus value extracted from other sectors is used in the lesser measure for replacement of consumed capital and in a larger measure for the payment of wages and the realization of the profits obtained in the arms industry. In this case, the rate of profit will decrease more slowly; not, however, because the low organic composition of capital in the arms industry raises the average rate of profit, but because it keeps the losses in this production lower. It is clear that the capital invested in the arms industry increases the overall social capital while at the same time it decreases the capitalizable sum of surplus value. Mandel's entire argument is based on a fundamental misunderstanding, which appears repeatedly at key places, of the reproduction process of capital.

59. Baran and Sweezy, op. cit., pp. 142-43.

60. Ibid., p. 148.

61. "If the conditions of capital expansion permit only a part of the working population of a country to be employed as productive laborers, i.e., capital-producing laborers, there is only the choice between 'underemployment' and the unproductive (i.e., producing no capital) use of labor by the state." E. Altvater, "Zu einingen Problemen des Staatsinterventionismus," in Probleme des Klassenkampfs 3 (1972) p.34.

62. Baran and Sweezy's conception of the financing of state spending is also advanced by James O'Connor, in a somewhat modified form, in his essay, "The Fiscal Crisis of the State," in Socialist Revolution 1: 1,2 (January-February, March-April 1970): ' 'In a more or less fully employed economy, the private sector is necessarily

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deprived of any resources utilized by the state-that is, there is no potential surplus in a fully employed economy .... For this reason there was a definite limit on the proportion of total product that the state could appropriate without harming incentives to save, invest, and work, and thus indirectly reducing the tax base itself." The question is posed differently under monopoly capitalism: " ... the normal tendency of monopoly capitalism is economic stagnation and unemployment of labor and underutilization of productive capacity. This means that state expenditure should tend not only to raise aggregate demand but also real income and output and, hence, the tax base. Tax revenues should increase when expenditures are raised, even in the event that tax rates remain unchanged. In this sense, state expenditure should be partly self-financing and in terms of the real resources utilized virtually costless. "This self-financing property of state expenditures of course ceases to exist with full employment (Part 2, pp.76-78). The self-financing property is, however, a very remarkable phenomenon: the state sets into motion idle means of production and means of subsistence through its demand. It pays a certain sum of money for the output of the production thus stimulated, and gets a portion of this money back in the form of taxes. The result is that the state receives a portion of its expenditure, in money form, back from those whose production it has "induced." However, since it has purchased a portion of the goods of the latter with this money it is clear that it has expropriated this portion of the purchased goods. It gets the rest of its original expenditures back in the form of taxes from the rest of the economy. This money is received from the economy in exchange for goods which state suppliers have purchased to replace their constant and variable capitals. The result: the economy receives money for its goods, which it then passes on to the state as taxes; in short, it has been expropriated to the tune of the corresponding quantity of goods. The state expropriates this quantity of goods not directly, but transformed into money, after the production process it has induced. Money circulation thus only conceals an expropriation of goods. Of course one can describe state-induced production as costless. One can also say that stealing is costless. But it must be added that it is costless for the thief but not for the victim, even when the victim does not make use of his possessions. However, one interesting point does emerge from O'Connor's argument: If the resources of capital are used for its accumulation, then this means hard times for the financing of state activities. If capital accumulation stagnates and resources remain idle, state activity flourishes thanks to the expropriation of the portion that capital cannot use. State activity and capital accumulation are thus fundamentally inversely related to one another. However, since under capitalist production relations accumulation cannot stop for long, state activity must in principle be financed by the increasing quantity of surplus value in accumulation in the productive sphere. O'Connor's essay contains considerable valuable empirical material on the conflicts between factions of capital as reflected in the budget decisions of the federal government.

63. Baran and Sweezy, op. cit., pp. 143-45.

64. See Keynes, General Theory, pp. 113-25. See also, for example, Alvin H.

Hansen, Business Cycles and National Income (London, 1968), pp. 203-4.

65. "Hence the result of the circulation of commodities, namely the replacement of one commodity by another, appears not to have been mediated by its own change of form, but rather by the function of money as means of circulation. As means of circulation, money circulates commodities, which in and for themselves lack the power of movement, and transfers them from hands in which they are non-use-values into hands in which they are use-values; and this process always takes the opposite direction to the path of the commodities themselves. Money constantly removes commodities from the sphere of circulation, by constantly stepping into their place in circulation, and in this way continually moving away from its own starting point. Hence although the movement of money is merely the expression of the circulation of commodities, the


situation appears to be the reverse of this, namely the circulation of commodities seems to be the result of the movement of money." Marx, Capital, vol. 1, pp. 211-12. 66. For a formalized depiction of the multiplier effect see the Anhang to the original version of this article, pp. 179-98 in Braunrnuhl, et aL., Probleme einer materialistischen Staatstheorie (Frankfurt: Suhrkamp, 1973).

67. For a criticism of the multiplier see also Mattick, Marx and Keynes, pp. 157- 59.

68. On the theory of state debt see ibid., pp. 117-18, 150-63, and 183.

69. See op. cit., chap. 14, and P. Mattick, "Dynamics of the Mixed Economy," in Science and Society 37:3 (Summer 1964).

70. See Grossmann's analysis of the classical crisis, in Grossman, Das Akkumulations- und Zusammenbruchsgesetz, Kapitel 3, Teil l.

71. Boccara calls state intervention an "objective preparation for socialism"(Sozialistische Politik 11 [June 1971], p. 11). For Mandel, nationalizations are "schools of a collective economy;" Marxist Economic Theory, p. 524. This agreement should of course not obscure the differences between the two. For Mandel an essential condition is workers' control, which at the moment does not seem to enjoy too much sympathy among the CGT leadership. In an interview by AFP, Georges Seguy, General Secretary of the CGT, explained: "We think that workers' control is incompatible with the indispensable national planning of a modern economy, and utopian from the social point of view. The idea of elections of managerial personnel by workers can be taken no more seriously than the election of teachers by pupils, officers by soldiers, or, even better, doctors by patients"(Le Monde, 20 February 1973, p. 6). It is a fine example of the socialist division of labor when Seguy explains what Boccara's "objective preparation for socialism" means. Obviously workers, the soldiers in a "modern economy," will have nothing to say concerning concerning the decisions to be made by such as Seguy and Boccara with respect to "indispensible national planning."

72. Boccara, op. cit., p. 15.

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