Is capitalism inevitable

RE: Capital (4/6)The decline of capitalism

Warnings about the explosively growing inequality and assumptions about the end of capitalism have long been discussed not only by socialists who have stood still, but among the elites of the world economic summit. Reason enough to read "Das Kapital" again carefully.

Six authors - sociologists, publicists, politicians, philosophers - did this for Deutschlandfunk. Starting from one chapter of the work, they draw lines into the present in "Essay and Discourse" and reflect on the topicality and limits of Marx's theory - not Marxologically, not academically, but to examine its usefulness, and that is entirely subjective, essayistic and interspersed with observations of the present. They direct their gaze to the political possibilities of the present, because, according to Marx, this is what matters: not just interpreting the world, but changing it.

The author Paul Mason asks how long capitalism will be able to prevent its decline. He is an award-winning English television journalist, worked for the BBC for a long time and is now the business editor of Channel 4 News.

Part 5 of the series will follow on December 11, 2016.

The complete manuscript for reading:

As far as an end to capitalism is concerned, Marx's presentation in Capital is open-ended. It is true that in many places he emphasizes the fundamental crisis-prone nature of capitalism; Although he names and examines possible moments of crisis in all three volumes - but also the mechanisms of overcoming them and continued growth.

In Marx's analysis, however, capitalism is getting more and more barriers: because it overcomes the exploitation of nature, because the replacement of human labor by machines and automatons, under conditions of profit maximization, produces unemployment and impoverishment, because in capitalism the ends and means are wrong, because "Production is only production for the self-exploitation of capital", as he writes, and not "means for an ever expanding" prosperity of society. In short: because the relations of production - profit production - bind the productive forces.

The forces of growth weaken

Since the 1960s, the forces of growth in the countries of developed capitalism have increasingly flagged, speculative bubbles and the resulting crises were the result. At the same time we are facing a new phase of industrial development. Production 4.0, Internet of Things, smart houses - these are the keywords with which we are being prepared for the coming wave of automation. Fears of coming unemployment, ongoing crisis of profitability, a surplus of speculative capital - in view of this constellation, the question of the end of capitalism arises not only among the colored left, but also among the business elite. And in the niches of the stagnating mode of production, alternative forms of economic activity emerge, partly as a reaction to the crisis, partly out of discomfort with an ecologically and socially destructive growth economy.

How do economy and technology play together today - which elements of the crisis, but above all which new possibilities for overcoming capitalism are in information technology? That is the theme in Paul Mason's book Post Capitalism. The English publicist, economist and advisor to Labor Party leader Corbyn published it earlier this year. While reading, critics felt a "spark for the imagination".

Rise of information technology

In the fourth part of our series that follows, Paul Mason interprets the rise of information technology in the light of the "law of the tendency of the rate of profit to fall" in the third section of the third volume of Capital: Marx and the Machines.

In 1602 Galileo Galilei wrote a treatise on the functioning of machines. He was inspired by the observation that the engineers of his time often built machines that didn't work, Galileo wanted to find out why that was the case.

His result was: "These foremen were firmly convinced that machines can move and lift large weights with a small amount of force."

On 30 pages of concentrated mathematics, Galileo then demonstrated a fundamental principle of physics: machines do not increase force, but transform it. There are no mysterious physical forces inside machines.

175 years after Galileo, in the second half of the 18th century, the industrial system began to rise. At the time, many economists believed that machines added value. Adam Smith demystified this belief. According to his labor theory of value, machines add no value to the product: They only pass on the value of the work that was necessary to produce it in small portions to the products.

Not only physically, but also economically, there are no mysterious forces at work inside machines.

100 years after Smith, it fell to Karl Marx to answer the question that followed from Smith's insight: What makes industrial societies prosper if it is not machines? As is well known, Marx's answer was work. More precisely: the extra work that is squeezed out of the workers by a military form of organization and the rhythm of the machine.

Demystify the information machine

And today, 150 years after Marx, new types of machines are finding their way into many areas of production and life: computers, software, networks, automata. The prices of these information technologies have fallen exponentially over the past 30 years. This has once again revived the belief in mysterious, value-adding forces inside machines.

150 years after the publication of Capital, we must - at least if we want to follow in the footsteps of Galileo, Smith, and Marx - set ourselves the task of demystifying the information machine. We have to ask: what is the value of information and how does the technological advance affect the dynamics of the capitalist economy?

I want to answer these questions from the perspective of Volume Three of Capital. In it, Karl Marx developed "the law of the tendency of the rate of profit to fall". Its core message is: If it is not machines that add value to products, but only work, then technical progress undermines capitalism at a certain point.

And my guess is that we are rapidly approaching this point with information technology.

Why - that has something to do with this law. And that in turn is based on Marx's theory of surplus value. In it, Marx made a fundamental distinction that applies to the factories of the 18th century as well as to the online shops of the 21st century: Part of the capital employed is the sum of money with which an entrepreneur buys machines, raw materials and energy. These add no value to the products, but only pass on a quantum of their value to them - Marx calls this part "constant capital". The other part is the sum that goes into workers' wages. Their work creates new value - Marx calls this share of capital "variable capital".

And this distinction between constant and variable capital serves Marx to justify the assertion that under capitalist production relations the profitability of capital must fall - at least in the long term.

Why is that?

Driven by competition, entrepreneurs need to reduce unit labor costs. The best way to do this is to use machines that make human work more productive.

But if, according to Marx's theory, an ever larger part of the capital invested is spent on machines - which create no value - and an ever smaller part on labor, then, because labor alone is the real source of profit, logically that Added value and thus the rate of profit. At least according to the trend. And this "tendency of the rate of profit to fall" is a "basic law of capitalism" for Marx.

No simple "law of collapse" in Marx's capital

For the past 150 years, many Marxists have been obsessed with this law - for many it made the collapse of capitalism seem inevitable. But there is no such simple "law of collapse" in capital. For, as Marx explains, the fall in profit rates triggers countermeasures which, as Marx writes, "thwart and nullify" the effect of the fundamental tendency.

I will name just a few of these "countermeasures":

When profits fall, capitalists turn to new markets with higher profits. They lower the cost of labor by cutting wages and recruiting cheap labor abroad. Industrial food production supports this trend because it lowers the cost of living. Entrepreneurs expand their markets through export and imperialism. They undermine competition by building a monopoly. And finally and most effectively: They make the machines that increase productivity cheaper and thus lower the proportion of constant capital in total capital - which in turn increases the rate of surplus value.

The tendency towards declining profits and the countermeasures to stabilize them are permanently interrelated.

Even in the neoliberal era of our day, the interplay between the sinking of profits, the onset and the gradual failure of the counter-tendencies can be studied:

Since the 1960s, after the end of the post-war boom, profits in the developed capitalist economies have gradually declined.

At the beginning of the 1980s, the opposite tendencies were set in motion: The Thatcher era began in England, and the SPD government was replaced by Helmut Kohl in Germany. And the mechanisms described by Marx set in: the share of wages in the economy as a whole sank, ergo the rate of exploitation increased. In order to compensate for the falling wages, private and public debt rose massively in the years that followed, and production relocations abroad enabled systematic global underpayment of wage workers. Globalization resulted in unequal wage levels, which lowered the cost of food, toys and clothing for workers in developed capitalist nations. Labor-intensive and deregulated forms of production experienced a renaissance - this went hand in hand with a weakening of the trade unions. Capital opened up new sources of profit through the privatization of social infrastructures. The financial sector permeated the economy, leaving ordinary retail investors to accept a smaller share of the profit and the banks to keep the lion's share.

With this program, it has been possible since 1982 to restore the profitability of capital for a while - but in the end, after a bloom of speculation and fraud, 2008 was the mother of all financial crises; and now capital is being written off through bankruptcies, negative interest rates and deflation.

This has reached a point at which the profit-stabilizing mechanisms no longer work. Former US Treasury Secretary predict long-term stagnation and central bankers predict the system's downfall.

And in our day - with Brexit and Donald Trump - voters in some western democracies have voted to scrap the model.

Information is a special commodity

So it looks like we're seeing the end of an era. And once again we are witnessing an upheaval in the technical foundations of capitalism. But this time the metamorphosis doesn't seem to be working as well as the Silicon Valley folks would like us to believe. The ultimate reason for this, however, does not lie in the spheres of finance, inflation, consumption and international trade. But in the sphere of technology itself.

Because information technology - the digital machine - differs from all the machines before it.

Unlike the machines from the times of Galileo or Marx, an information machine does something different than a simple transformation of energy or material. It produces information. And information is a special commodity.

The use value of an information machine is that - once it has been put into operation in the form of a silicon chip - it can produce other information goods, i.e. other use values, with the tiniest amounts of energy and material and without additional work.

How will, then, not only Marxists have to ask themselves, how will information technology affect profits, their tendency to fall and the counteracting mechanisms?

First, information corrodes the price system. If the production costs of a commodity go to zero, the price should also tend to zero - at least if the market and competition work. If the work that has to be invested to produce something approaches zero, no new value arises either.

Things that can be copied indefinitely or used simultaneously by an infinite number of people without wearing out will end up costing very little in the end - provided there is a free market.

Not only the costs of the software or IT-supported services have crashed; The costs of broadband networks, storage media and computers have also collapsed in 15 years. Expert systems and 3D printers facilitate the production of prototypes, thus accelerating engineering work and reducing the error rate. That lowers the development costs. Information technology enables a higher capacity utilization of machines and a more sustainable use of material and energy. This in turn leads to lower costs for products, machines and buildings.

New monopoly companies

To give just one example, the price of analyzing the entire DNA genome of a person has fallen from $ 100 million to $ 1,000 in 15 years. And this is just one of many real physical goods whose price has collapsed because of the high amount of information they contain.

The answer of capitalism to this discrepancy between labor value and the price of money - in other words: to this abundance - is of course to create large monopolies with which market prices can be stabilized far above production costs.

So - if one takes the labor theory of value as a basis - in a music track that I download, less socially necessary working time is realized in a spectacular way than the 99 cents that iTunes takes for it: yes, even spectacularly less than the amount that would come up based on the 9.99 euros that Spotify charges for unlimited access.

Monopolies of a magnitude unimaginable even in the United States before 1914 protect corporate intellectual property, keep prices high, and suppress market forces in the IT sector.

In a period of just 15 years, Apple, Google, Samsung, Amazon, Microsoft, Facebook, What'sApp - monopoly companies whose valuation exceeds any possible forecast of future earnings.

Information technology undermines the relationship between working hours and wages

Not only that: These new IT-supported monopolies are inexorably privatizing non-marketable areas of life and turning our free time into profit - as we experience with Uber, Airbnb, Facebook and so on. Completely new types of information goods are emerging in their networks: enormous amounts of data supplied by customers, users of public and private services and citizens, which are now appropriated and exploited by large information monopoly and state authorities.

Information technology, that is the second major impact, enables decentralized production with centralized control. In doing so, it replaces the hierarchical and compulsive organizational models on which capitalist industry has been based for 240 years. At the same time, however, it grinds the boundaries between working hours and leisure time and thus undermines the relationship between working hours and wages. Now we are available to the company during the time that should actually serve our recovery. For Marx this means: increasing the rate of exploitation.

But more powerful than all these methods of increasing the rate of exploitation and lowering labor costs will ultimately be another effect of IT: it will largely replace workers with machines in many production processes - including in information technology itself.

A super poor, politically impotent working class

Technological unemployment has already led to labor-intensive service sectors in which people are paid with minimum wages or even worse: the new precariat of delivery services, pizza service or coffee shops; the women who paint our nails; the migrants without a passport who clean the cars cheaper than the automatic car wash.

In short, everything that not only the anthropologist David Graeber calls "shitty jobs" - millions of jobs that actually no longer need to exist with the state of the art. With this super-exploited new class of servants, with black workers, migrants and the unemployed, a super-poor, politically impotent working class is growing.

Where will this development lead?

In the preparatory work on Capital, Marx conducts a thought experiment. He imagines a machine that costs nothing. What, he asks, would be the consequence?

It would be the same, he says, as if a machine would last forever. It would then produce goods, but reduce the constant share of capital and thus increase the surplus value - "without it costing the capital anything at all".

But there are, Marx continues, two other "machineries", that is, productive forces that cost capital nothing. One is the division of labor - ten cooperating workers create more than ten isolated ones. The other is science: as a scientific company organization and as technological progress.

Marx then imagines an economy in which knowledge has become the most important productive force. A society in which the added value is determined to a large extent both by the results of science and by socially shared knowledge, i.e. the level of education of society as a whole. In such a society, according to Marx, "the creation of wealth would become independent of the hours of work applied to it".

A machine that costs nothing but lasts forever

And then comes the radical conclusion: as Marx writes, knowledge and the density of communication in a society are "only means for capital [...] In fact, however, they are the material conditions for blowing up capitalism".

A machine that does not wear out, increases cooperation, causes hardly any costs and breaks the logic of capitalist exploitation - for Marx in 1857 this was a thought experiment, a metaphor for a completely scientifically based production. Today this is increasingly becoming a reality in many areas.

Driven by the necessity of competition and a falling rate of profit, the capitalists cannot help but promote a technical development which necessarily leads in the direction of the "machine that costs nothing but lasts forever". Even if this machine is only the vanishing point of development, information technology is already dropping the exchange value of some products exponentially and making some completely for free.

This increases the difference between the production costs and the sales price - whether it is about music titles or scientific articles, goods with a high proportion of scientific knowledge, such as patent-protected drugs, or goods that contain a lot of marketing knowledge, such as Sneakers.

This is a fine thing for monopoly capitalists. But at the same time this tendency exacerbates the contradiction between technical productive forces and social relations of production, just as Marx foresaw.

Marx did not include his thoughts on the revolutionary consequences of a "machine that costs nothing" in his capital. Did they seem too bold to him, too anticipatory? Only in one sentence in the first volume, at the end of the chapter about the ever larger and more powerful "machinery" of the capitalist economy, does this thought appear briefly, quote:

"With the concentration of capital and the sole rule of the factory regime [...] the contradictions and antagonisms of the production process in its capitalist form ripen, hence at the same time the educational elements of a new society and the upheaval of the old society."

The "educational elements of a new society and the upheaval of the old society" - for Marx these included not only technology and science, but also the formation of a classic, socialist working class that has learned cooperation and solidarity under the pressure of the factory system. This unionized, highly qualified class-conscious working class is a thing of the past - at least for us. But with the advent of an economy based on information technology, the contradiction between the productive forces and their capitalist form takes on a new shape:

On the one hand, the big capitals strive to submit all of our free time and knowledge, to colonize them economically. They use information technology to intensify, control and cheapen their work, to monopolize their "intellectual property rights" and to exploit consumer data. So now there are tons of cheap machines only for the purpose of forcing people to work to the limits of their physical and mental resilience - but no incentive to automate work tasks so that technically superfluous jobs can disappear.

Spaces in which we can refuse economic rationality

At the same time, however, information technology strengthens the "educational elements of a new society": the rise of sectors of a "non-market economy". First in the realm of information. In networks in which free goods displace commercially produced goods.

Wikipedia is a space that cannot be used commercially. Information networks, dictionaries, operating systems, knowledge banks of all kinds enable the rise of non-market economy forms of production: cooperative banks, cooperatives of producers and consumers, exchange economies, service rings, energy supply companies in bourgeois hands, which are built up with the help of network technologies. Such pioneering companies create spaces in which we can oppose and refuse economic rationality.

Even if we do not yet "hunt in the morning, fish in the afternoon, raise cattle in the evening and criticize after dinner", as the young Marx put it in his utopia, many of us now have so much of this free time - also as a result of automation. that not only are there a whole host of non-commercial cooperative goods, but there are activists in their enforcement.

These first attempts at a cooperative economy and common land production - i.e. the provision of general goods that can be used by everyone - will only last in the long term if the state creates the environment for these new forms of economic activity. If he catches the monopoly again and keeps intelligent networks in energy supply, transport and health care under his control.

Technologically, we are on the way to free goods, immeasurable labor, exponential productivity gains and the comprehensive automation of physical processes. Socially we are prisoners of a world characterized by monopolies, inefficiency, the ruins of a free market dominated by the financial sector and the spread of "bullshit jobs".

Calling the dominant forms of property and organization into question

The essential internal contradiction of modern capitalism is that between the possibility of free, abundant commons and a system of monopolies, banks and governments trying to maintain their control over power and information. In other words: the war between network and hierarchy.

In the twentieth century, many Marxists made the mistake of expecting the eventual decline of capitalism from its crises. This led to a series of false prognoses, behind which the fundamental assertion of Marx, which is made in the third volume of Capital, was forgotten: the assertion that it is ultimately technical progress that promotes the self-destructive tendencies of capitalism. In Marx words: that it is the productive forces that break the old relations of production.

A Marxism for the 21st century should therefore examine how technological change dissolves the price mechanism, continues to loosen the connection between wages and performance and thus calls into question the prevailing forms of property and organization.

The third volume of Capital contains the terms and the pattern for such a theory of an open and complex system with which one can analyze the tendencies and counter-tendencies in information technology: on the one hand, the rise of gigantic monopolies that generate exchange value from nothing, promote technological unemployment and with it the expansion of underpaid work sectors. On the other hand, the emergence of free, cooperative business models outside the market mechanism.

It is still the old tendencies and counter-tendencies that Marx analyzed, but today they are at work at the dawn of a new age. An age of liberated machines, an age in which use values ​​no longer have to be carriers of exchange value, an age in which there will be a dispute on many fronts about who owns the use value of information machines.

Marxists are not afraid of a production process in which machines cost next to nothing and last almost forever. Marxists do not see the mysterious sources of productivity in information machines as the contemporaries of Galileo and Adam Smith saw in machines. But the result of social work. But these perfect machines, the coming of which Marx foresaw, are incompatible with capitalism.