The System

Ecocide on the East Side: the Environmental Crisis in Eastern Europe

Yuppies In Moscow!?

Crisis in Ukraine

Runaway Planetary Warming

On Terrorism and the State

Clean, Sober and Obedient

In the Wake of the Exxon Valdez: World Capitalism and Global Ecocide

The Sick Planet

Occupy Needs To Target And Destroy The Ruling Money Fetish

The Global Fascist Terror State

Michael Hudson and Webster Tarpley Disseminate Disinformation

The Modern American Left Doesn't Get Capitalism

The Crisis of Value

9/11 In Context: the Strategy of Tension Gone Global

Retort's Response: Intellectual Dishonesty

Left Denial on 9/11 Turns Irrational

9/11 In Context: Plans and Counterplans

Established Left as Ideology Police

Henry the Great on September 11

9/11: A Desperate Provocation by US Capitalism

After Genoa: Reform or Revolution?

Socially-Responsible Investing: An Oxymoron


The Modern American Left Doesn't Get Capitalism

by Jack Straw


In the midst of the biggest global economic crisis since at least the 1930s, the vast majority of what passes for “the left” in the US in 2010 is proving itself extremely incapable of comprehending the reasons for this crisis as well as any possible trajectories out of it. Much of this is tied to a complete unwillingness by most contemporary American leftists to meaningfully engage with Marx’s critique of capitalism. In fact, many of them have taken to embracing notions coming straight out of orthodox capitalist theory, notions which have repeatedly been proven false. This is a clear recipe for failure of any possibility of transforming this exploitative society and simultaneously avoiding an ecological disaster.


This article will not deal in detail with the dominant left notion that what is currently a “correct” strategy is to call for greater government regulation of business and even state ownership, as well as greater spending by the government on social programs. Nor will i tackle the left’s efforts to promote the “green economy,” “green jobs,” “green energy”; this is a strategy whose mantra is that shifting the economic activity towards supposedly more environmentally friendly practices will solve both the economic crisis and the growing threat of environmental catastrophe. I will restrict this piece to examining the failure of leftists to even understand how the present system functions.


A good place to start is a new article by someone who considers himself a Marxist, John Bellamy Foster (“Why Ecological Revolution?”, in Monthly Review, January 1, 2010).[1] Foster makes good points about the insufficiency of the mainstream approaches to the global ecological crisis, including the critique put forth by “greens.” But then he makes a really bad presentation of Marx's idea of surplus value. “Any attempt to explain where surplus value or profits comes from must penetrate beneath the exchange process and enter the realm of labor and production. Here, [Foster is referring to Capital, Volume 1 and The Grundrisse] Marx argues that value added in the working day can be divided into two parts: (1) the part that reproduces the value of labor power (i.e., the wages of the workers) and thus constitutes necessary labor; and (2) the labor expended in the remaining part of the working day, which can be regarded as surplus labor, and which generates surplus value (or gross profits) for the capitalist. Profits are thus to be regarded as residual, consisting of what is left over after wages are paid out — something that every businessperson instinctively understands. The ratio of surplus (i.e., unpaid) labor to necessary (paid) labor in the working day is, for Marx, the rate of exploitation.”


Foster thus says profit is the difference between what a capitalist earns from sales and the costs presented by wages, which he falsely equates with labor power, as well as materials and machinery expenses. This explanation of profit is exactly the idea that Marx thoroughly rejected, and which even the classical political economists disproved, but which has been assumed by "economics" since its inception in the late 19th Century, as we will see. Yet Foster asserts that this "explanation" of profit is something every businessperson "instinctively understands," as if the illusions of capitalists are reality.


Political economy was a field of study whose name, from “economicos,” which in Greek means “household management,” implied the management of a nation as if it were a large household. While political economy took capitalist society for granted, it considered everything about it as being the subject of legitimate inquiry, including relations between social classes and how the social product is divided. Adam Smith, David Ricardo and other political economists of the late 18th and early 19th centuries explained that if you take a group of people, and have each sell their product to the others at a price 10% over their cost, what any of them realizes as a seller he/she loses as a buyer. Even if some realize a bigger profit while others lose, all that results is a redistribution of existing wealth, hence zero net growth for the group (or society, to take a larger perspective). The political economists sought a genuine explanation for profit, which is one reason they developed the concept of value, distinct from price, and took it to be the amount of human labor, in terms of time, required to produce a commodity. But their analyses failed to explain all sorts of things, including the source of profit; they admitted that this matter remained a mystery to them. The task of fully explaining the process fell to Marx and his critique of political economy.


Marx saw value as being not the direct labor expended in producing a commodity, a good or service produced for exchange, but the socially necessary abstract labor time. Abstract labor time means that different forms of concrete labor, i.e., actual physical labor, are all equated through the exchange process. “Socially necessary” means the average amount of such abstract labor required to produce a given commodity under existing conditions of production. Knowing this quantity would be a hard task, requiring knowledge of all existing conditions under which a particular commodity is produced. Even if it were possible to gather all the relevant information and perform the calculation in a few seconds the result would already be obsolete due to rapidly changing conditions around the world. Thus, value is a reference point around which price tends to fluctuate. It is not something visible to simple observation, but nevertheless it is an essential quality of a commodity.


Labor power, the ability of people to perform productive work of all sorts, became a commodity under capitalism. This turn of events resulted from the process known as The Enclosures in capital’s birthplace, England, which began in the late medieval period. Large landowners seized land which was held by no one (the commons) as well as small estates, expelled the large majority of residents, and turned the parcels into operations primarily involving husbandry for market consumption (e.g., sheep for wool). A few peasants were left over, employed as wage laborers, and the operations sought to make a profit, expand production, and rationalize it. This was agrarian capitalism, the first time in which capital entered the production process. This was also the first time it was involved in a self-sustaining accumulation process. This was an advance from mercantilism, under which merchants bought goods in one place, sold in another location, and thus depended upon market vagaries for an uncertain success at making money.


A primary result of the Enclosures was the creation of a large population made up of those who became dependent upon the sale of their labor power in return for a wage with which they could obtain survival needs, because they had been forcibly separated from the means of producing those needs. They provided the work force for the industries which increasingly arose, at first to supply the needs of agrarian capitalists, but increasingly to provide survival needs for the dispossessed. An excellent article by Ellen Meiksins-Wood, “The Agrarian Origins of Capitalism”, in the June/July 1998 issue of Monthly Review,[2] describes this process well.


As Marx demonstrated for the first time, when a wage worker sells his/her labor power, what they get in return is enough money to buy survival needs, meaning enough to reproduce themselves as workers capable of performing their tasks as wage workers. What the capitalist who buys their labor power gets, however, is complete control over disposition over their work time, and over the product which results from it. The difference in time between how much they work and the time required to produce the equivalence of their survival needs is a surplus which accrues to the capitalist free of charge. This is surplus value, the source of profit.


Each enterprise does not simply realize the surplus value it produces. Surplus value is created on a global scale by way of the difference between all the time worked by people involved in the production of goods and services and the socially necessary labor time to produce those goods and services necessary to reproduce their labor power. After surplus value is produced globally, it is then realized by the separate enterprises via their market activity, as each enterprise strives to sell its product in the market in such a manner as to secure a profit.


There is thus a huge difference between what happens in the world of value production, which is not visible in the market, as price only approximates value (and does so less and less well as capitalism develops), and the market, in which only prices of commodities are visible, not values. This is a point that Marx repeated many a time, but that even lots of "Marxists" seem to miss, perhaps in their attempt to "simplify" the explanation. In fact, a big part of the dynamic of capital accumulation is that enterprises that produce little surplus value (those which rely upon machines far more than human labor), or even none at all (e.g., banks, which simply function to facilitate the process of circulation, i.e., change in ownership of commodities) obtain the largest chunks of the surplus value. At the same time, the firms which do produce it, relatively small labor-intensive firms, often realize none, as their unit costs are too high to make their products competitive enough to be sold in a sufficient quantity.


Foster, all too typical of even many self-described "Marxists," thus manages to create horrible confusion concerning the origin of profit. Capitalists and other participants in the market only see the world of prices, since the processes of value production and its redistribution during market interactions are invisible to them. In fact, the so-called science of "economics", which emerged in the late 19th century out of the ruins of political economy, did not (and does not) even recognize the existence of value, seeing prices and visible market interactions as the only processes which exist.


This elimination of value from economic theory had two reasons. One was a desire on the part of capitalists sponsoring the academics who came up with the theories, to do away with any understandings which shed light on the exploitative and dispossessive nature of capitalism. The political economists by their own admission failed to explain the source of profit. The valid analyses they did make could only logically lead to Marx’s critique. After Marx there was no way left of using the theory of value to come up with an explanation of profit, and of capitalism as a whole, which was not devastatingly critical of that system.


More importantly, capitalists found the concept of value useless. They confronted prices on the market, and felt that “abstractions” like value were downright useless for their purposes. They wanted to know how they could make the operations of their enterprises more efficient so they could increase their profits. Thus, all the important findings of even the pro-capitalist political economists such as Smith were discarded. All that survived were their calls for a “free market” and justifications for capitalism as “human nature”, while Marx was completely shunned and vilified as a promoter of class warfare for its own sake.


Other contemporary leftists however do even worse than Foster, who at least tries to relate to Marx’s critique of capitalism. Most have shunned Marx out of a belief that his ideas were the basis of societies such as the Soviet Union, supposedly examples of failed socialist experiments. On Pacifica affiliate radio station KPFA's “Saturday Morning Talkies” program on November 14, 2009, Kevin Danaher of Global Exchange excoriated capitalism, only to promote "green capitalism" as viable and as the future. He used as an example a "hip" businessman who sells organic liquid manure, and who has cut his costs by using recycled soda bottles as containers for the liquid. Danaher thus implies that the businessman's innovative cost-cutting is the source of his profit, an example of "enterprise." Thus, profit for Danaher is simply a matter of businesses making more in revenues than their costs, and enough businesses doing so means overall growth. It’s as if profit is something which can be explained at the level of a single enterprise, rather than a systemic process happening at the global level. This is a common notion amongst advocates of “green capitalism”, who see a change coming via more and more businesses engaging in “green” practices and eventually displacing the “bad” versions of enterprises.


Danaher was again interviewed on KPFA’s “Flashpoints” show on January 8, 2010, along with a couple of other people, this time about the Copenhagen climate summit. He was enthusiastic about his recent visit to Cuba, where urban farmers raise organic produce and sell it in city markets. He called this "social enterprise", contending that everything is controlled, with no one using the operation to become a millionaire. Therefore, he regards this situation as a living example of his ideal, since money becomes “subordinate to social justice.” The American writer Lincoln Steffens went to Stalin's Soviet Union and said "I've seen the future and it works." Indeed it did, in labor camps. Today, Danaher sees the future in Cuba (he of course leaves out all those tourist dollars which feed the government). This is one more example of just how clueless American "progressives" are. Danaher believes that these farmers are making a profit by selling their produce at a price which more than makes up for their costs, and provide good food. Hence, he contends that this is a case of the market working for the benefit of the people, where everyone wins. He also likes Obama's program of paying people to retrofit buildings in urban areas, saving energy while creating "green jobs". Where the money to fund such programs comes from, he asks not.


However, there are instances of leftists getting behind even worse notions and “understandings.” On January 28, 2009, "Flashpoints" had on Catherine Austin Fitts, former undersecretary of housing and urban development under the first Bush, and an avowed “libertarian” (i.e., supporter of laissez faire “free market” capitalism) who nevertheless has acquired a recent popularity in left circles due to her opposition to the status-quo. Fitts asserted "capitalism is a system in which capital flows to the most productive," and noted capital flows to speculators at present. She used that as proof that the present system is not "real capitalism", where our salvation lies.


This leads to the question of what capitalism is, and what “productive” means. Capital is a sum of money or its equivalent in equipment and raw materials, whose intended use is the production of goods or services for sale on the market, with the goal being profit and hence a larger capital. This is the process known as capital accumulation. Machinery, land, etc., used to produce items for direct consumption, without an intermediary market transaction, are not capital. Thus, more than anything, capital is an historically particular relation between people and the means of producing their material needs, and not something which characterized every society that has ever been or ever will be.


Capitalism is then a society in which capital is the dominant social relation, and indeed becomes the exclusive social relation. Since the goal of capital is the production of profit, what “productive” really means in the context of capitalism is “profitable.” Capital tends to flow towards endeavors which produce the highest profit rates. When high profit rates are impossible in the production sphere, capital will flow into speculation, where the rewards are higher. This is increasingly the case as capitalism develops. Speculative bubbles are a symptom of crisis, not the cause. Capitalism is its own disease; it is a social form of cancer.


Fitts, like many others, blames “deregulation” over the past few decades, especially the repeal in 1999 of the New Deal-era Glass-Steagle Act which prohibited banks from engaging in speculative activities, for the current crisis. But in reality, that repeal and the other deregulation actions merely enabled the speculative bubble to be expanded well beyond what would have previously been possible, and did not create the speculation itself. People often forget that the ability to expand the speculation to new levels in fact delayed the outbreak of the acute phase of the crisis (which would have otherwise reached irresolvable levels in 2000, or even earlier), even though this meant the eventual inevitable bursting of the bubble had far worse consequences once it happened.


On January 26, 2009, well-known author David Korten was on Pacifica’s program “Democracy Now,” discussing the crisis, and expressed a strong affinity with Adam Smith's free market as a basis for a truly progressive solution. Quoting Korten: "I mean, basically, we need to realize we’ve been told that there are only two economic models. One is the capitalist model, and the other is the communist or socialist model. One, the capitalists own everything, and the other, the government runs everything. The real alternative is, in fact, a real market economy that looks a whole lot more like what Adam Smith had in mind, which is -— which looks more like a farmers’ market. And I think –- you know, we talk about Wall Street and Main Street, and really the solution is to rebuild a new economy based on Main Street, which means local businesses and people who are rooted in their community and working within a framework of community values and a set of public rules that enforce basic conditions of market efficiency."[3]


Korten either misunderstands or misrepresents the alternative to capitalism. Socialism is a word whose origin is “society,” and means the social control of the means of production. Communism originates with “community,” and thus means community control of these means. Socialism or communism do not mean "the government runs everything,” as this amounts to identifying society or community with the state. Admittedly, this is what the words have come to mean thanks to decades of Stalinist and Social Democratic misappropriation of the terms, with the happy complicity of capital's propagandists. Such a definition accepts capitalist social relations, i.e., relating to means of production as sums of money that are used to make commodities for sale on the market to make a profit . Thus, the only question becomes who owns the capital.


Additionally, Adam Smith did not just have in mind a farmers' market. To begin with, how could there be a farmers' market without shoppers who have money to spend, money they have earned in the economy at large? Even the farmers have to engage in such activities to be able to bring their product to the market. Besides, Adam Smith's concept of a “market” did not deal with the reasons why people in general had to go to markets to buy what they need. This was not at all the case till only shortly before his time. Smith did not deal with the process of formation of capitalism and the working class, i.e., the people who worked for a wage to produce the goods present in the market. This was the process of the Enclosures mentioned above. Korten imagines some market with rules that make its operation a smooth and fair process, when in fact the market depends upon dispossession and also upon exploitation of human labor in the production process.


Michael Perelman of Cal State Chico discussed Smith and his ideas and obfuscation of the historical reality in his book The Invention of Capitalism. An interesting review of the book can be found at the web article “Mass Murder and Slavery.”[4] The author of the review writes:


“The name ‘Adam Smith’ still has meaning and authority for contemporary political economists -- whose job, it should be clear, is justifying the unjustifiable -- because Smith was, as Perelman says, a ‘great master of capitalist apologetics’ and uniquely committed to ‘obfuscating all information that might cast doubt on his ideology.’ In particular, Smith made sure his readers had no relevant information about the relentless campaign in Great Britain to 1) destroy subsistence farming and ‘self-provisioning’ or self-sufficient households in the rural areas; 2) de-populate these areas and use them for animal husbandry and livestock production, not farming; and 3) put the former inhabitants of these areas to work in commodity-producing factories located in the major city centers. (Taken together, these merciless reorganizations of what Marx called ‘the social division of labor’ constitute the conditions necessary for the invention of capitalism.) As a result of his deliberate omissions, Smith's ‘charming obfuscations’ -- unlike the more realistic, intellectually honest and insightful works by Steuart, Wakefield and others -- have long been extremely useful to those who must promulgate the myth that capitalism is the happy product of a ‘natural’ evolution, and not the ghastly, man-made monstrosity that it really is.”


Then, unnecessarily, the author detours into a critique of Perelman and Marx regarding the term "primitive accumulation.” He or she correctly criticizes Perelman for presenting Lenin, Stalin and Mao and their positions in a positive light, and correctly slams Perelman over his making excuses for their policies, which amounted to a new Enclosures. But then the reviewer goes totally overboard, and damns Marx and "Marxism" as an apologist and an apology for mass murder and slavery just like Adam Smith and his book The Wealth of Nations, taking Perelman’s word that these three figures were "Marxists" at face value. This to me demonstrates zero familiarity with Marx's own work and the huge gap between it and the thoughts and deeds of these people.


Another person who has gained popularity in left circles is economist Michael Hudson of the University of Missouri, Kansas City. One article which is quite illustrative of his thinking is “The Recovery Plan from Hell,” from February 11, 2009.[5] Yes, he does reveal the utter depravity of the then-current recovery plan, yet another giveaway to Wall Street. But the kicker comes in his alternatives. Hudson recommends a debt write down without specifying how that could take place given the size of overall debt. He also calls for a land tax, an idea revealed as nonsense 130 years ago, well-criticized in a letter Marx wrote to Friedrich Adolph Sorge on June 20, 1881.[6] Yet Hudson still promotes it, and asserts "This would achieve the kind of free markets that Adam Smith, John Stuart Mill and Alfred Marshall described." I analyzed Smith above. Mill is pretty vacant. Marshall however deserves a special place in hell. He was one of the original founders of the supposed field of knowledge known as economics, in distinction to political economy, as mentioned above.


To repeat: the practitioners of political economy, like Smith and David Ricardo, while defenders of the ruling order who left out some essential historical details such as the Enclosures, nevertheless had room in their analyses for competing class interests, indeed social classes, as well as for notions like the value which underlies the price relations of the market. They understood the impossibility of explaining profit on a society-wide scale as revenue minus cost, as well as the fact that human labor is the basis of the entire structure. In Marshall's main book, Principles of Economics, however, everyone simply became consumers and producers. Market relations were taken as they are, with nothing underlying them. The labor theory of value was discarded, and human production and consumption became a closed cycle, separated from the earth’s environmental processes. This book marked the birth of modern economics, which Paul Mattick described as "a sophisticated apology for the status quo masquerading as a science." For all his good critiques of current policies, Hudson’s promotion of Marshall’s work shows that Hudson is just another apologist for capitalism and the theory which legitimates it.


Marshall more than anyone else has aided the operation of capitalism. He shredded political economy, an actual science. Out of the fragments he created a supposed science which uses much math and whose main assumptions about human behavior are based upon an outdated mechanistic physics of the 19th century. In this model, humans are totally atomized creatures who care only about maximizing their self-interest. This “science” has made smart people feel stupid because they can't grasp "economics" and all the complex math. It has made stupid people feel smart if they can memorize equations and recite memorized passages from texts like drones. They can even get a Nobel Prize. And it eliminated Marx's analysis from most perspectives, under the rationale that Marx wasn't "rigorous" with equations. Meanwhile it has contaminated many a would be radical critic with econometric garbage and an inability to really understand the social relations which underlie capitalism.[7] On February 13, 2009, “Democracy Now” had a debate on Obama's bank rescue plan, featuring Obama shill Robert Kuttner debating ... Michael Hudson. There's a reason he's in such debates: he presents a safe "alternative.”


In another article, “Debt Deflation Arrives,”[8] Hudson analyzes the acclaimed jump in Americans' savings rate, and shows the increase in savings is not due to them setting aside more money for savings. Instead, this is accounted for by money not spent buying goods and services being used to pay off debts. Hudson then demonstrates the limits of his analysis by asserting that the "real" economy is being sacrificed to keep the financial sector going. However the growth in capital invested in the financial sphere is simply the result of decreasing profitability in the "real" economy. This is due to the tendential fall in the profit rate which results from the accumulation process itself. As capitalism develops, increasingly capital is accumulated in means of production, due to individual capitalists substituting machines for human labor where possible, or trying to get human workers to perform like machines where it isn’t possible to replace them outright. Each capitalist does this to cut unit cost through greater productivity. But in the process, more and more human workers, the source of surplus value, are expelled from the production process. The geese which lay the golden eggs are thus killed, but individual capitalists have little choice if they wish to stay competitive n the marketplace.


Hudson thus looks back fondly to the immediate post WWII days, when everything was supposedly nice and progressive, and production was the focus of economic activity in the US. Never mind that this period featured the reconstruction of the world market with the US as the dominant power, a process which involved the US living off the rest of the world. Indeed, at the end of the war, the US was the only industrial nation which emerged with its productive apparatus undamaged. Never mind also the role of the military-industrial complex and massive credit/debt expansion in the post War "miracle,” or the foreign military interventions, or the ugly social and ecological consequences of consumerism. Hudson laments that the US cannot "compete in global markets as an industrial producer with so high a financial overhead,” demonstrating he wants the US to be "competitive" again in industrial production. It is as if global markets aren't already "saturated.” A global overproduction crisis is the way the profitability crisis appears, the way the markets sense it. Hudson’s lamentation of the shift in the US from production towards services and finance is quite common not only in the left but across the American political spectrum. Many politicians call for a return to the days when Americans were engaged in production, not at all understanding why the shift has occurred, blaming it on lack of foresight or on conspiracies to deplete America’s wealth and power.


There are few people on the contemporary American left with as much stature as Noam Chomsky. He is on record as rejecting Marx’s analysis, and indeed has even asserted that Marx didn’t have a crisis theory, i.e., never developed a coherent one. On June 25, 2009, “Flashpoints” featured Noam Chomsky speaking on "The Crisis.” It was largely a rambling, disjointed delivery. Somewhere between minute 35 and minute 40, however, he got onto the "economic crisis." He explained it as neo-liberals in the mid '70s changing the policies which had prevailed since the end of World War II, a structure created by British economist John Maynard Keynes and American State Department honcho Harry Dexter White. (White was a member of the Council on Foreign Relations, the behind-the-curtain real government. Chomsky didn't mention this; he is known for rejecting notions of elite planning and invisible government as “conspiracy trash.”) This structure supposedly rested upon "regulation of capital and social democratic state welfare policies.”


Chomsky called the post-War period "The Golden Age of Capitalism,” and contended it brought unprecedented prosperity whose benefits were shared in a relatively egalitarian fashion. He approvingly called the prevailing policies "state capitalism" due to the state's prominent role in stimulating research. Once the neo-liberals took over, he asserted, everything turned bad for everyone except big finance, including for sectors of capital engaged in production. So it appears that neo-liberals simply changed good policies to benefit finance capital, out of nothing more than greed, one supposes, and thus we got the crisis. But in fact global capitalism had developed problems by the mid '60s, and was in a really bad crisis by the early '70s. This crisis involved not only a massive rise in unemployment but high inflation as well, a situation known as “stagflation.” Never mind the reality of the postwar era (see discussion of Hudson above). Chomsky says it was the golden age. Berkeley lefties will now walk around and tell you the same thing. Flashpoints host Nora Barrows-Friedman was all glowing at the end about him. Here's how the word "crisis" loses its meaning.


There was more of the Chomsky speech on “Flashpoints” the following day. At about the 50 minute mark, he got into his solution for the ravaging of the US productive apparatus: takeover and transfer of management to the workers, who will continue operating the enterprises as enterprises but under workers' control, i.e., "worker-managed" capitalism. Earlier in his speech he noted how manufacturing profits have suffered compared to profits of financial enterprises, and concluded the former was caused by the latter. As someone who not only denies that capitalism has an inherent crisis tendency but also that Marx had a crisis theory, he thus fails to understand the movement of capital to financial speculation as a result of decreasing profit in production due to the very process of capital accumulation, as explained above. His phony solution will produce nothing except self-exploitation, as widespread experience with "worker-managed" capitalism has demonstrated over the years. Louis Uchitelle, a New York Times writer who displays a class war perspective, i.e., that classes have inherently conflicting interests, but from the perspective of the capitalist class, presented a thorough analysis of worker-owned enterprises in the paper’s July 7, 1996 edition. He demonstrated how they generally act just like any other enterprise, doing what’s necessary to secure the enterprise’s profitability.


Now consider “The Trouble With Money” by KPFA News staffer, Kellia Ramares, from July 14, 2009.[9] Like so much of what comes out of the current left, this is well-intentioned, but it is so fundamentally wrong that it is a teeth-gnasher:


“Long ago, certain cultures decided that these metals were valuable and could be used to transact business. Cultures that did not have access to these metals used something else: shells, feathers, rocks, etc. to facilitate exchange. The decree of some ancient king to use gold and silver as currency is just as much a fiat as the decision of the US Government to use Federal Reserve Notes. We just don't consider gold and silver as fiat currency because the decision to use them as currency was made millennia ago. The value of gold and silver is a fundamental assumption, part of our ‘racial memory’ that we do not question. But there is nothing in the natural order of the world that decrees that these metals are valuable. It is only an ancient consensus, still honored, that makes them so. Thomas Nast, the great 19th century American political cartoonist, and a ‘hard money’ enthusiast, was right when he drew a picture saying that Congress could declare soft soap to be the currency. Indeed, if Ancient Greece and Rome had made such declarations, I wonder what we would be washing ourselves with today.”


It's as if people just needed something to act as money, and grabbed for what was close at hand. Gold? Silver? Shells? Whatever! This notion is entirely wrong. The "need" for money arose amongst traders thousands of years ago, as they wanted something that could be readily used as an exchange medium, since they engaged in many exchanges, unlike the vast majority of people who rarely if ever exchanged anything, and then only involving barter of surpluses. The fact that items were being treated as exchangeable demonstrated a certain commonality to them, that being their status as products of human labor. And what determined the average ratios of exchange was the quantity of abstract human energy embedded in the items, i.e., how much labor time it takes to make an item on average, how much to make the tools involved, the training of the human worker, etc.


Those commodities which became money served as means of exchange on the same basis. Thus, if a say an ounce of gold had as much abstract energy as a table or as four chairs, it could buy a table or four chairs. Why gold? More than anything else, it is stable, won't wear down, it is dense (hence compact amounts can serve for exchange purposes), has few immediate practical direct applications (besides use in jewelry), and is common enough to obtain yet rare enough to be special. It is these physical characteristics of gold, and to a lesser extent silver, that have led them to be used as material money far more than anything else.


Thomas Nast's comment on soft soap was a joke, but Ramares seems to take it at face value. Try being paid for something with soft soap, and then find yourself the next day with half the amount gone, flaked off. That's why sand or water likewise didn't have a long usage period as money. She goes on to state that there is no problem with money, only with interest. Apparently she has zero understanding of why people exchange items for equivalents instead of freely sharing them, and that commodity exchange was not at all a common activity engaged by everyone till only a few centuries ago. Instead, she makes exchange out to be human nature, like Adam Smith had. The problem though isn't with money, but with exchange itself, and interest-free money does nothing about that. The article is one more ball of confusion thrown out there by a writer who is unclear on the concept. It will only serve to further confound an already bewildered populace.


Lastly, movie maker Michael Moore, who appeared on “Democracy Now” on September 24, 2009 discussing his new movie, “Capitalism.” He demonstrated he knew all the bad stuff that has happened. At the end, he was asked about the fact that he seemed to provide no alternative. He responded that he wasn't an economist, he had no idea what the solution is, though he thought that capitalism, "designed in the 16th century”, and socialism, "designed in the 19th century,” were no longer sufficient for the 21st century. "We need something new for our time, that is fair to the little guy,” he said, and proceeded to boost worker-owned capitalist enterprises. As mentioned above, their actual record is pretty much the same as any other such enterprise. Workers implement self-inflicted pay cuts, speedups, even layoffs, to keep "their" enterprise competitive in the face of market forces. Self-managed capital equals capital-managed self.


Capitalism cannot be reformed, cannot be made “green” and made to function on behalf of social justice or environmental sustainability. It is a social system which requires ever more growth for growth’s sake, as this is what accumulation is. It can only function via the mass dispossession of people, their separation from the means of producing survival needs and their subsequent exploitation for surplus value, as well as the destruction of the natural world, the turning of living matter into dead commodities. Human survival, indeed the survival of the ability of the planet to support life itself, depends upon the elimination of capitalism and the adoption of new ways of relating to one another and to the means by which we produce our survival needs.


Notes

[1] http://www.monthlyreview.org/100101foster.php

[2] http://www.monthlyreview.org/798wood.htm

[3] http://www.democracynow.org/2009/1/26/david_korten_agenda_for_a_new

[4] http://www.notbored.org/perelman.html

[5] http://informationclearinghouse.info/article21969.htm

[6] http://www.marxists.org/archive/marx/works/1881/letters/81_06_20.htm

[7] Here is an interesting article from someone who was not snowed, Paul Mattick. “Marxism and Marginal Utility Theory” came out in April 1939.

[8] http://www.counterpunch.org/hudson06302009.html

[9] http://carolynbaker.net/site/content/view/1189/1/


Posted February 11, 2010



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