[Marxism] What is capitalism? Reply to Jurriaan part 1

["Tom O'Lincoln" <suarsos@xxxxxxxxxxxxxxxx>]

Dear Jurriaan

Some time back, you expressed some regret that no one had responded to
your discussion of "what is capitalism". I said I'd do so.  It's taken
me some time to do it, so to refresh memories  I've put your original
post here:
http://redsites.alphalink.com.au/jurriaan.htm

I'm not going to make a big exposition of the theory of state
capitalism, because that's not what the list is for and anyway I don't
have the time. I will concentrate on "what is capitalism" and leave the
implications for the "Russian question" at the margins.

I think you offer an unrealisticlly one-sided portrayal of extreme
free-market capitalism, which you then counterpose to the Soviet
system.  But in reality the two are not that far apart. I will work
through your text below. All quotes from you are in  >>pointy brackets
<<

******

>>Cliff himself explicitly acknowledged that he did NOT base his theory
on any understanding of Marx's theory of capitalism"<<

In the passage you quote, Cliff's not talking about what he "based" his
theory on. He's writing about how he CAME TO  the theory  -  he came to
it from a political, not economic, direction.  Well so did I. I didn't
know any economics in 1967, but I knew the Berlin wall was an obscenity.
Marx similarly came to socialism from a crusading democratic background
and only developed the economic basis later. However Cliff's book does,
in fact, contain detailed economic arguments.

>>Cliff is quite correct in arguing that you cannot have a workers'
state if the workers do not rule, but obviously it does not logically
follow that if the workers do not rule, that therefore capitalism
exists. After all, the workers did not rule in feudalism either, but
that did not mean that capitalism existed.<<

This is true, but if it's not a workers' state and not a capitalist
state, then what do you think it is? I find alternative theories like
"bureaucratic collectivism" very unsatisfactory, but perhaps you can
offer me a better one.

Now let's turn to your discussion of Marx. You complain that we use
"selected quotes from Marx" but also that we
"abandon what Marx meant by capitalism" - but this is a Catch-22. There
is no way to discuss "what Marx meant" without quoting him, and of
course all quotes are "selected".

***

>>[Marx] "distinguished clearly between the existence of capital, and
the existence of the capitalist mode of production" and say that capital
existed in earlier times. No argument with this. Next you say: "Parallel
to the growth of the world market, capitalist production on a
significant scale began to emerge in the 18th century - cottage and
craft industries evolved into manufactories, and then to mechanised
industry."<<

 I have no argument with this, except to stress the important role
played by the state in this process, something Marx emphasizes in the
final chapters of Capital (see below).

>>Involved here was the generalisation of commodity production, such
that not just the outputs but also the inputs of production became
commodities, the prices of which were increasingly governed by the
impersonal laws of the market. The law of value began to regulate the
whole of production, because there was increasingly little else
regulating it.<<

Come now,  the law of value did not at any time, anywhere, "regulate the
whole of production because there was increasingly LITTLE ELSE
regulating it". The state was pivotal in the primitive accumulation
process, as Marx explains:
"The bourgeoisie, at its rise, wants and used the power of the state to
'regulate' wages, i.e. to force them within the limits suitable for
surplus-value-making ? This is an essential element of the so-called
primitive accumulation." (Capital Vol. I, p. 689)

Then the system was spread by imperialist conquest - involving the state
and/or regulated monopolies. Marx writes: "The English East India
Company, as is well known, obtained, besides the political rule in
India, the exclusive monopoly of the te-atrade, as well as of the
Chinese trade in general, and of the transport of good to and from
Europe. But the coasting trade of India and between the islands, as well
as the internal trade of India, were the monopoly of the higher emplyees
of the company." You, of course, are well placed to understand how the
Dutch East India Company (VOC) played a similar role.

Can you tell me ANY country, at any time, where the law of value
operated with "little else regulating it"? In America perhaps, where the
North fought the civil war partly to entrench tariff protection? Or
perhaps the German Zollverein - was that unregulated?

In the mid-19th Century there was a brief and relative opening of
markets, but even so, Herbert Heaton's "Economic History of Europe"
informs me that "At its widest extent competition never covered the
whole field. Business enterprises ranged over a semicircle from monopoly
at one end, through what economics now called duopoly, and past other
stages of 'imperfect competition' to the pure brand in which hosts of
rivals are involved.." (p. 602-3)

You may respond that the law of value had an UNDERLYING role in shaping
the dynamics of all this. In that I would agree. But I think it did
under Stalin, too.

>>This generalisation of commodity production went hand in hand with
evolutions and revolutions in social relations: specifically, the
expansion of the ability to trade freely in means of production and
labour-power within a unified national market, which nationalist
movements sought to accomplish through the removal of obstacles and
restrictions to trade.<<

This is a half-truth. Creating a unified national market required
national customs and tariff barriers which represented the creation of
"restrictions to trade".  Much later, in the post-World War 2 Third
World, it required massive state intervention. In Indonesia, for
example, the Sukarno regime nationalised Dutch companies and put them in
the hands of the army.  Today's economies are regulated in many
different ways - the Australian Tax Act is gigantic.

>>Marx showed how this removal of obstacles involved a process of
"primitive accumulation", whereby mass of people were forcibly separated
from the ability to own and use the land for subsistence."<<

 The mass of people were often separated from the land by coercion,
commonly at the hands of the state. In Australia it took 100 years of
fighting to seize all the land from the Aborigines. Marx says that
primitive accumulation involves a "systematicaly combination, emberacing
the colonies, the national debate,the modern mode of taxation, and the
protections system. These methods depend in part on brute force, eg. the
colonial system. But they all employ the power of the state?" (p. 703)

>>Thus, whereas previously capital accumulated mainly through lending
and commercial trade, increasingly the whole production process itself
was increasingly subordinated to market laws such that the social
reproduction of society became conditional on the accumulation of
private capital. Capitalism proper then refers to a form of society in
which the capitalist mode of production has become the dominant one.<<

Apart from the overemphasis on "market laws" (Marx's focus was more on
production than on exchange) the first sentence is OK as far as it goes
- but it doesn't follow that there can't be FURTHER stages of
development. And in fact there were - for example the extensive state
industrial sectors that emerged in the Third World after World War II.
The second sentence just says capitalism is a system dominated by
capitalism. I guess we can agree on that!

***

You itemise what you think are the "defining characteristics of
capitalism":

>>The dominant mode of production of the means of production and the
means of consumption is production for the market - output is produced
with the intention of sale in an open market; only through sale of
output, can the owner of capital obtain claims to the surplus-product of
human labour, and realise those claims as profit. Equally, the inputs of
production are supplied through the market, as commodities. The prices
of inputs and outputs are governed by the laws of supply and demand.<<

Um, wait a minute. Large portions of industrial output in even the least
regulated economies are for purposes other than "sale in an open
market". Firstly because there is no entirely open market, secondly
because some outputs are sold to other companies within a group at
artificial prices (not "governed by the laws of supply and demand") or
subsidised by nation states through export promotion schemes, thirdly
because some outputs are generated by the state itself. Ditto for inputs
(for example skilled labour is largely generated by state-run education
systems.)  You may object that the law of value determines these things
indirectly, and that's true. I think it was also true for the USSR.

>>Private ownership of the means of production ("private enterprise"),
as de facto private control and/or legally enforced ownership<<

But some capitalist societies have had very large state sectors.
Remember British Steel? And even in the private sector, Engels could
write: "I know of capitalist production as a social form, as an economic
stage: and of capitalist private production as a phenomenon occurring
one way or another within that stage. What does capitalist private
production mean then? Production by a single entrepreneur, and that is
of course becoming more and more an exception. Capitalist production
through limited companies is already no longer private production, but
production for the combined account of many people. And when we move on
to the Trusts, which control and monopolise whole branches, then that
means an end not only to the private production but also to the
planlessness. "

>>with the consequence that investment decisions are made by private
owners of capital who act autonomously from each other<<

Have you never heard of cartels?  Here is what Marx says in the first
volume of Capital: "In any given branch of industry centralisation would
reach its extreme limit if all the individual capitals invested in it
were fused into a single capital. In a given society the limit would be
reached only when the entire social capital was united in the hands of
either a single capitalist or a single capitalist company."

>>because of business secrecy and competitive pressures, [corporations]
cannot co-ordinate their activities according to collective, conscious
planning.<<
Again a half truth. They can certainly plan consciously, and any large
company does so. As Engels said in the passage above, the formation of
trusts "means an end not only to the private production but also to the
planlessness."   Collective planning is harder, but if you look into the
government industry plans of any advanced western industrial society,
you will soon discover elements of collective planning within industry
sectors, led by government. I will be happy to give you some links for
Australia You may say the planning isn't always effective, and I agree.
But then by the 1950s planning was a total shambles in the USSR.

>>the development of production technology is guided by profitability
criteria.<<

Actually many companies develop technology without direct reference to
profitability criteria. Some pour all their revenue back into R&D, and
as a result never become profitable, which is one reason the Australian
state has R&D incentives. It's true that profitability is important "in
the last analysis", but so it was in the USSR.

>>The corrollary of that is wage-labour (employment) by the direct
producers, who are compelled to sell their labour-power because of lack
access to alternative means of subsistence (other than being
self-employed or employers of labour, if they could acquire sufficient
funds) and can obtain means of consumption only through market
transactions.<<

Soviet workers were also compelled to sell their labour power because of
lack of access to alternative means of subsistence. It is true they
sometimes got means of subsistence through non-market mechanisms, but
then western societies have subsidised workplace cafeterias too, schools
hand out milk, and so on.

>>Enterprises are driven by private initiative and set their own output
prices within the framework of the impersonal market forces of supply
and demand, which no particular institution has control over.
Competition occurs between owners of capital for profits; between owners
of capital and workers over wages; and between workers over employment
opportunities.<<

Until relatively recently, the Australian airline Qantas was
state-owned, and not "driven by private initiative". Our largest telco
is still partly state owned and its competitors deeply resent its
semi-monopoly position. For that matter, is Haliburton entirely driven
by "private initiative"? No, actually there is a close link to the Bush
administration. Conversely, enterprises are partly driven by incentives
and penalties put in place by governments. Think of carbon trading.

>>The overall aim of capitalist production, under competitive pressure,
is (a) to maximise net profits (realise a net surplus-profit) through
lowering production costs, increasing sales, monopolisation of markets
and supply, and the privatisation of supply and consumption, and (b) to
accumulate capital, to acquire productive or non-productive assets. The
larger portion of the surplus-product of labor must be reinvested in
production, since output growth and acccumulation of capital are
mutually dependent on each other.<<

I would say that from the point of view of capital as a whole,
profitability is second to accumulation. So it was in the USSR.
Profitability does remain important though, as indeed it was in the
Soviet Union.

>>The preceding five characteristics define the basic class structure of
capitalist society: a class of owners and managers of private capital,
and a class of wage earners, plus various intermediate classes such as
the self-employed and the new middle classes.<<

I don't share this picture of the ruling class because it ignores other
participants who may not own private capital: judges, generals, senior
bureaucrats, top politicians and so on. The longest-standing Australian
Prime Minister, Bob Menzies, didn't have much money at all; I believe
they took up a collection for him when he retired. But to not include
him in the ruling class would make a mockery of the word "rule".  For
this discussion I'm temporarily  posting my (now a bit dated) profile of
the Australian ruling class here at the following address. (From a book
called Class and Class Conflict in Australia, 1996. Unfortunately the
footnotes don't come through and the formatting is uneven, sorry about
that. It's 8 years old and I won't insist on every bit of the argument.)

http://redsites.alphalink.com.au/rulers.htm


***
You continue:

>>by stating that both Western capitalism and the Soviet Union were
state capitalist, Cliff obliterates the enormous differences between
these economic systems - notably, in the one case, the majority of means
of production were privately owned, in the other state-owned.<<

In fact Cliff recognised that there were important diifferences. That's
why his full term for societies like the USSR was "bureaucratic state
capitalism", and I think it's also why he was confused about whether
wage labour existed in the Soviet Union.

>>In 1948, Cliff had announced that the worker in the Soviet Union
differed from a worker in competitive capitalist relations, because the
former had only one employer, i.e. the state."<<

Yes quite true. This shows he did recognise the differences.  You go on
to mention various other views within the SWP:

>>Duncan Hallas, a clever man, however noted this undermined state
capitalism theory, because if labour was not a commodity in the USSR,
then there was no proletariat, and no wage labour/capital relationship
and therefore no capital either, therefore no capitalism of any kind. It
was therefore essential according to Hallas for the party to define work
in the Soviet Union as wage-labour, with which Alex Callinicos agreed.
Thus the theory of state capitalism was doctrinally saved, for the
meantime.<<

Also true. A healthy debate, and Cliff gets corrected. This sounds like
democracy in action, though I don't suppose it will stop you accusing us
of  "mimicking Stalinism" :-)  My own views on this are critical of both
Cliff and Callinicos, and they still got published (ack, more
Stalinism). I turn to them in my second post.




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