ICC internal debate on economics (Part 2): The bases of capitalist accumulation

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The thesis we have titled "Extra-capitalist markets and debt", as its name suggests, considers that the outlets which made it possible to realise the surplus value necessary for capitalist accumulation in the 1950s and 60s were constituted by extra-capitalist markets and credit. During this period, debt gradually took over from the world's remaining extra-capitalist markets as these became inadequate to absorb all the commodities produced under capitalism.

Two questions have been posed about this thesis:

  • Can its validity be verified by an analysis of trade between different economic zones, which represent different levels of integration into capitalist relations of production? Can it also be verified by an analysis of debt during this period? A later article will look at this problem more closely.
  • In what way is this thesis different from the other two? How far is it compatible with them, or not? The present article intends to undertake a critical analysis of the "Keynesian-Fordist state capitalism" thesis, while a later one will undertake to comment on the positions defended under the title "War economy and state capitalism".

As we have already suggested in the text presenting the "Extra-capitalist markets and debt" thesis which appeared in International Review n°133, neither the increase in the purchasing power of the working class, nor state spending - much of which is unproductive, as we can see in the case of the armaments industry - can contribute to enriching global capital. This article will be essentially devoted to this question which we believe reveals a serious ambiguity in the "Keynesian-Fordist state capitalism" thesis, in particular as far as the virtues for the capitalist economy of increasing workers' wages are concerned.

According to the latter, "The system was thus able temporarily to square the circle of increasing the production of profit and markets in parallel, in a world where demand was henceforth largely dominated by that coming from wage labour".[1] What does it mean to increase the production of profit? It means producing commodities and selling them, but to satisfy what demand? That of the workers? The following sentence in the article just cited is equally ambiguous and does not take us much further: "The guaranteed growth in profits, state spending and the rise in real wages, were able to guarantee the final demand so vital if capital were to continue its accumulation".[2] If the growth of profits is guaranteed then so is capitalist accumulation, and in that case it becomes pointless to invoke a rise in wages and state spending to explain how capitalism can continue accumulating!

This vagueness in the formulation of the problem leaves us no option but to interpret the argument, at the risk of making mistakes in the interpretation. Does it in fact mean, as the text as a whole seems to suggest, that final demand is guaranteed by state spending and rising wages which make it possible to increase the profits which are the foundation of capitalist accumulation? If this is the case, then this text presents a real problem since in our view such an idea calls into question the very foundations of the marxist analysis of capitalist accumulation, as we will see. If, on the other hand, our interpretation is incorrect, then it is necessary to show us which demand guarantees the realisation of profit through the sale of commodities.

Capitalists accumulate what is left of the surplus value drawn from the exploitation of workers, after subtraction of unproductive costs. Since an increase in real wages can only be to the detriment of total surplus value, it is therefore also necessarily to the detriment of the share of surplus value destined for accumulation. In practice, an increase in wages comes down to paying the workers a part of the surplus value derived from their exploitation. The problem with this part of surplus value which is paid back to the workers is that, since it is not destined to reproduce labour power (which is already ensured by a "non-increased" wage) it cannot either be a part of enlarged reproduction. In fact, whether the workers use it to buy food, housing, or leisure, it can never be used to increase the means of production (machines, wages for new workers, etc.). This is why increasing wages beyond what is necessary for the reproduction of labour power is - from the capitalist standpoint - nothing other than a pure waste of surplus value which cannot become a part of the accumulation process.

It is true that the bourgeoisie's statistics hide this reality. The calculation of GDP (Gross Domestic Product) cheerfully includes everything relative to unproductive economic activity, whether this be spending on weapons or advertising, the wages of priests and policemen, the consumption of the exploiting class or the wage increases granted to the workers. Like the bourgeoisie's statistics, the "Keynesian-Fordist state capitalism" thesis confuses the "growth of production" measured by the growth in GDP, and the "enrichment of capitalism"; these two terms are far from being equivalent since the "enrichment of capitalism" is founded on the increase of real accumulated surplus value, and excludes surplus value sterilised by unproductive spending. This difference is by no means unimportant, especially in the period under consideration which is characterised by a massive rise in unproductive spending: "The creation by Keynesianism of an internal market capable of providing an immediate solution to finding outlets for massive industrial production gave the illusion of a lasting return to the prosperity of the ascendant phase of capitalism. But since this market was totally disconnected from the needs for the valorisation of capital, its corollary was the sterilisation of a significant portion of capital."[3]

The idea that an increase in workers' wages could, in certain circumstances, be a favourable factor in capitalist accumulation completely contradicts this basic position of marxism (and not only that!) according to which "the aim of capital is not to minister to certain wants, but to produce profit".[4]

And yet - those comrades who defend the "Keynesian-Fordist state capitalism" thesis will reply - this latter is itself based on Marx. Its explanation of the success of state capitalist measures aimed at avoiding over-production is indeed based on Marx's idea that "the mass of the people can never consume more than the average quantity of goods of primary necessity (...) its consumption therefore does not increase at the same rhythm as the increase in labour productivity".[5] Through this formulation of Marx, the thesis sees a way to explaining how the capitalist economy was able to overcome a contradiction: as long as there are gains in productivity sufficient for consumption to increase at the same rhythm as labour productivity, the problem of overproduction can be resolved without preventing accumulation since profits, which are also increasing, are enough to ensure accumulation. During his lifetime, Marx never witnessed an increase in wages at the same rhythm as the productivity of labour, and moreover thought that this was impossible. Nonetheless, this has happened at certain moments in the life of capitalism; however this fact in no way allows us to deduce that it could resolve, even temporarily, the fundamental problem of overproduction that Marx highlighted. Marxism does not reduce this contradiction of overproduction simply to the proportion between increasing wages and increasing productivity. The fact that Keynes saw such a mechanism of sharing out wealth as a means to maintain temporarily a certain level of economic activity in a context of sharply rising labour productivity is one thing. That the "outlets" created in this way make possible a real development of capitalism is something else, and is moreover an illusion.

Here we need to examine more closely the repercussions on the mechanisms of the capitalist economy of such a means of "regulating" the question of overproduction through workers' consumption. It is true that workers' consumption and state spending make it possible to sell the products of an increase in production, but as we have seen this results in a sterilisation of the wealth produced since it is unable to be usefully employed to valorise capital. Indeed the bourgeoisie has tried out similar expedients to contain overproduction: the destruction of agricultural surpluses, especially during the 1970s (when famine was already widespread in the world as a whole) quota systems at the world or even the European level of steel or oil production, etc. In fact, whatever the means used by the bourgeoisie to absorb overproduction or make it disappear, in the end they all come down to a sterilisation of capital.

Paul Mattick,[6] who is quoted in the article on "The origins, dynamics, and limits of Keynesian-Fordist state capitalism",[7] also notes an increase in wages keeping pace with an increase in productivity during the period which concerns us here: "It is undeniable that wages have risen in the modern epoch. But only in the framework of the expansion of capital, which presupposes that the relationship of wages to profits should remain constant in general. Labour productivity should therefore rise with a rapidity which would make it possible both to accumulate capital and to raise the workers' living standards".[8]

But it is unfortunate that the "Keynesian-Fordist state capitalism" thesis goes no further in its use of Mattick's work. For Mattick, as for us, "True prosperity, in contrast, depends on the increase in surplus value for the further expansion of capital".[9] In other words, it does not increase through sales to markets created by increasing wages or state spending: "The whole matter finally comes down to the simple fact that what is consumed cannot be accumulated, so that the growth of ‘public consumption' cannot be a means to transform a stagnating or declining rate of accumulation into a rising one".[10] This particularity of the prosperity of the 1950s and 60s has gone unnoticed by both official bourgeois economics and by the "Keynesian-Fordist state capitalism" thesis: "Since the economists do not distinguish between economy in general and the capitalist economy, it is impossible for them to see that "productive" and "capitalistically productive" means two different things and that public, like private investments are capitalistically productive only if they create surplus value not because they supply material goods or amenities".[11] Consequently, "The additional production made possible by deficit financing does appear as additional demand, but as demand unaccompanied by a corresponding increase in total profits".[12]

It follows from what we have just said that the real prosperity of the 1950s and 60s was not as great as the bourgeoisie likes to pretend, when it proudly shows off the GDP of the major industrialised economies of the time. Mattick's observation in this respect is completely valid: "In America, however, it remained necessary to keep the level of production stable by means of public spending, which led to slow but sure growth of the national debt. The growth of the public debt can also be traced to America's imperialistic policy and, later, to the war in Vietnam in particular. But since unemployment did not fall below 4 percent of the total labor force and production capacity was not fully utilized, it is more than plausible that without the ‘public consumption' of armaments and human slaughter, the number of unemployed would have been much higher than it actually was. And since about half of world production was American, despite the upswing in Western Europe and Japan, one cannot really speak of a complete overcoming of the world crisis, particularly not when the underdeveloped countries are taken into consideration. However brilliant the prosperity was, it was nevertheless confined to no more than a part of world capital and did not result in a general upswing encompassing the world economy".[13] The "Keynesian-Fordist state capitalism" thesis underestimates this reality.

For us, the real source of accumulation is not to be found in the Keynesian measures put into effect during this period,[14] but in the realisation of surplus value through sales both to extra-capitalist markets and on credit. If we have understood it correctly, the "Keynesian-Fordist state capitalism" thesis makes a theoretical mistake on this level which opens the door to the idea of the possibility for capitalism of overcoming the crisis, as long as it is able to continue increasing labour productivity in the same proportion as workers' wages.

At the beginning of this debate, the "Keynesian-Fordist state capitalism" thesis considered itself in continuity with the theoretical framework for understanding capitalism's contradictions, developed by Marx and later enriched by Rosa Luxemburg. In our view however, whether this thesis accepts or rejects Luxemburg's theory makes no difference to its inability to account for the contradictions which undermined capitalist society during the period of the post-war boom. As we can see from the various quotations from Mattick, on which we have based our critique, the debate with this thesis has nothing to do with the more classical opposition between the theory of the necessity of extra-capitalist markets for capitalism's development (defended by Rosa Luxemburg), and the analysis based on the falling rate of profit as sole explanation for the crisis of capitalism (as defended by Paul Mattick).

As for the other question - whether sales on credit can provide a lasting basis for real accumulation - this takes us back to the debate between the falling rate of profit and the saturation of extra-capitalist markets. The answer to this question is to be found in capitalism's ability or otherwise to repay its debts. In fact, the continued increase in debt since the end of the 1950s is a sign that the present open crisis of debt has its roots precisely in the period of "prosperity" of the 1950s and 60s. But this is another debate to which we will return when we consider the verification in real life of the "Extra-capitalist markets and debt" thesis.


[1] "The origins, dynamics, and limits of Keynesian-Fordist state capitalism" in International Review n°135.

[2] Ibid.

[3] International Review n°133, "Internal debate: the causes of the post-1945 economic boom", in the section "Extra-capitalist markets and debt".

[4] Capital Vol. III Part III, "The Law of the Tendency of the Rate of Profit to Fall", Chapter 15 "Exposition of the Internal Contradictions of the Law", Section III, "Excess capital and excess population".

[5] Marx, Théories sur la plus-value (Grundrisse), Editions Sociales tome 2, pp559-560. The translation is ours'. 

[6] Mattick was a member of the Communist Left and a militant in the KAPD during the German revolution. After emigrating to the USA in 1926 he joined the IWW and wrote on many political subjects, including economics. Two of his works are particularly noteworthy: Marx and Keynes - the limits of the mixed economy (1969) and Economic crisis and crisis theory (1974). Fundamentally, Mattick derives the capitalist crisis from the contradiction pointed out by Marx, of the tendency of the rate of profit to fall. He thus disagrees with the Luxemburgist explanation of crises which - while not denying the falling rate of profit - insists essentially on the need for markets outside capitalist relations of production if capitalism is to develop. We should point out Mattick's ability in Economic crisis and crisis theory to summarise brilliantly the contributions to Marx's crisis theory by his successors, from Rosa Luxemburg to Henryk Grossmann, including Tugan-Baranovsky and not forgetting Pannekoek. His disagreements with Luxemburg do not prevent him from explaining the great revolutionary's work on economics in a perfectly objective and intelligible manner.

[7] International Review n°135.

[8] Paul Mattick, Intégration capitaliste et rupture ouvrière, EDI, p151, our translation.

[9] Mattick, Economic Crisis and Crisis Theory, "Splendor and Misery of the Mixed Economy".

[10] ibid.

[11] ibid.

[12] ibid.

[13] ibid.

[14] As Mattick points out, the Keynesian policies which were originally conceived as a means of escaping from the crisis are fundamentally only an aggravating factor: "The compensatory state-induced production thus changes from the means of easing the crisis it originally was to a factor deepening the crisis, as it divests an increasing part of social production of its character as capital, namely its ability to produce additional capital" (ibid.).


General and theoretical questions: