Low-Wage Workers of the World, Unite!

On May 15, 2014, a worldwide strike of McDonald’s workers involved workers in at least 33 countries, both imperialist and oppressed.

While participation in the strike varied, and most workers who participated were out for only an hour or so, this was a historic event all the same. It points the way forward to a far more internationalist future for the workers’ movement. To understand why this is so, we have to examine long-term underlying economic changes making the low-wage movement both possible and necessary.

This post is part of a series that explores the evolution of imperialism and the world capitalist economy in the century that began with the events of August 1914—the start of World War I. Let’s go back, not a full century but rather half a century, to the year 1964. This is the mid-way point between 1914 and the present day.

In 1964, the postwar, post-Depression “Long Boom” (strictly speaking, a series of industrial cycles with strong booms and relatively mild recessions) was underway. Indeed, to all appearances the “boom” was gaining momentum. In 1964, the U.S. and world capitalist economy entered a cyclical boom following a period of stagnation—a pause in the long postwar expansion—that occurred in the wake of the global economic recession of 1957-58.

Over the next couple of years, the Long Boom picked up steam as it was fueled—in addition to purely cyclical forces—by U.S. federal government deficits created by the escalation of the Vietnam War (called the American war by our good friends in Vietnam), further increased by a huge regressive tax cut signed by President Lyndon Johnson in 1964, backed up by the Federal Reserve Board’s then expansionary policies.

This was the heyday of Keynesian economics, and even many Marxists were inclined to see the Long Boom as the new norm of capitalism thanks to the increasing intervention in the economy of the capitalist state. The Johnson administration boasted that the U.S. economy was so strong that the government could follow policies that would provide both “guns and butter.”

Despite these “good times,” it was becoming obvious, even to bourgeois economists, that due to the growth of automation in industrial production, the rate of growth of traditional factory jobs, though still rising in absolute terms in both the imperialist and oppressed capitalist countries, would absorb only a small part of the coming generations of young workers. This was especially true in the United States and Britain, where long-term economic growth was much lower than in Western Europe and Japan. Many social scientists and other observers expressed fears that a permanent crisis of mass unemployment was inevitable.

With few exceptions, however, professional economists insisted there was no danger of a crisis of permanent mass unemployment caused by automation. What was really happening, they claimed, and had been claiming since concerns about the long-term effects of automation on employment first arose in the 1950s, was a shift from an industrial economy where most jobs were “blue collar” jobs in factories, mining, construction, and agriculture to a “post-industrial” economy where most jobs would be white-collar salaried office jobs.

Computerization and the automation linked to it, the economists insisted, was actually creating more jobs than it was destroying. As the role of computers grew dramatically in coming years, economists assured us, huge numbers of highly skilled white-collar workers would be needed to write the software programs that would run on all those computers.

As a result, the traditional blue-collar working class would fade away over the next few decades to be replaced by the highly paid “middle-class” white-collar workforce. Since salaried white-collar workers have little interest in unions, unions were becoming obsolete and had little future. These unfolding developments—along with the “boom” that many viewed as permanent due to government policies inspired by the work of British economist John Maynard Keynes—represented the final refutation of Marx, the economists explained to their university students.

Instead of Marx’s predictions of a society increasingly polarized between a relatively few, extremely rich capitalists, on one hand, and a great mass of low-wage blue-collar workers, on the other, the “free enterprise system” was allegedly evolving toward a society that would be made up overwhelmingly of a high-salaried “middle class” without the extremes of wealth and poverty that had marked the early days of capitalism.

Is Russia Imperialist?

What started out as a small-scale demonstration in Kiev’s Maidan—Independence—Square against the government of Ukrainian President Viktor Yanukovych in late 2013 has escalated into a crisis that in a worst-case scenario could develop into a full-scale shooting war between Russia and the U.S-EU-NATO world empire—“the Empire” for short. As more facts have came out, it has became clear that the demonstrations had a pro-imperialist, pro-Empire character from the beginning. In addition, it is now obvious that the U.S. government has been heavily involved since the beginning.

The one-sided U.S. media coverage of the “pro-Maidan movement,” as the pro-imperialist forces in Ukraine are called; the activities of U.S.-funded NGOs; and the U.S. role in the pro-imperialist “Orange Revolution” of 2004 all point in the same direction. In addition, as the crisis developed it was revealed on the Internet that U.S. diplomats favored right-wing neo-liberal banker Arseniy Yatsenyuk, or “Yats,” as the diplomats affectionately called him. Sure enough, right after the coup that overthrew Yanukovych, “Yats” was named prime minister of the new coup government in Kiev. But there is more.

According to Wikipedia, on April 18, 2014, Burisma Holdings, one of the leading oil and natural gas production companies in Ukraine, announced Hunter Biden’s appointment to its board of directors. “Burisma holds licenses covering the Dnieper-Donets Basin and the Carpathian and Azov-Kuban basins and has considerable reserves and production capability,” the on-line encyclopedia stated.

Hunter Biden, a lawyer, is the son of U.S. Vice President Joseph Biden. According to Wikipedia, Hunter Biden’s résumé includes multiple connections to the financial industry and government: “From 2001 to 2008, Biden was a founding partner of Oldaker, Biden, and Belair, LLP, a national law firm based in New York. He also served as a partner and board member of the mergers and acquisitions firm Eudora Global. Biden was chief executive officer, and later chairman, of the fund of hedge funds PARADIGM Global Advisors…. At MBNA, a major US bank, Biden was employed as a senior vice president.”

Wikipedia further reports: “In addition to holding directorships on the Boards of the U.S. Global Leadership Coalition, The Truman National Security Project and the Center for National Policy, he sits on the Chairman’s Advisory Board for the National Democratic Institute (NDI). The NDI is a project of the National Endowment for Democracy (NED).” The NED is the organization that does what the CIA did covertly 25 years ago.

Money, wage-labor and Marx’s ‘Critique of the Gotha Program’

This August marks the 100-year anniversary of the start of World War I, which forever changed the world. This is the first in a series of posts that will center on the causes and consequences of World War I. The most important consequence was the conquest of political power by the working class of the former Russian Empire. Rosa Luxemburg, along with other Marxists of the time and since, saw that the catastrophe overtaking Europe in 1914 had deep economic roots.

At the beginning of this year—2014—I couldn’t help but wonder if a major new European war could break out on the 100th anniversary of the “Great War,” as it was called, that started in 1914. This seemed extremely unlikely, and indeed history rarely respects anniversaries in this manner. But in light of the crisis in Ukraine, a major new war that would mark the anniversary of the events of August 1914 doesn’t appear as unlikely as it did at the start of the year. Many of the ghosts of the last century seem to be rising from their graves once again.

In the coming months, I will explore the economic roots of the Great War in light of the ideas on crisis theory I have been exploring in this blog. Though the Great War itself was not a crisis of overproduction, it did break out during the 1913-14 global recession and was the greatest crisis by far that capitalist society had experienced up to that time. And we have already seen that the Great War played a crucial role in the development, starting in 1929, of what seemed to be an ordinary cyclical recession into first the super-crisis of 1929-33 and then the Great Depression of the 1930s.

The conquest of political power by the working class of the former Russian Empire began in Petrograd (aka St. Petersburg and Leningrad) with the insurrection of October 25 (old calender) or November 7 (new calender). Here I want to examine the fate of that first serious attempt to build a socialist society in light of Marx’s last—and as we will see perhaps least understood—work “Critique of the Gotha Program.”

Capitalist Anarchy, Climatic Anarchy, Ukraine and New Threats of War and Fascism

The Keystone XL pipeline

President Obama appears to be nearing a decision on approving what is called the Keystone XL pipeline. This proposal by the TransCanada Corporation calls for a pipeline to be built that will, if Obama gives the green light, transport “heavy oil” produced from tar sands in the Canadian province of Alberta to refineries in the U.S. Midwest and along the Gulf Coast.

The U.S. president had indicated that his approval would depend on a State Department report on the proposed pipeline’s effects on the Earth’s climate. Opponents of the pipeline pointed out that the refining of heavy oil releases more carbon dioxide into the atmosphere than the refining of “sweet oil” does.

In late January, the State Department released its report, which claimed that the pipeline would have little if any adverse effect on the climate. The State Department reasoned that even if the pipeline was not built, the Alberta tar sands would be used for oil production anyway. The resulting heavy oil, according to the State Department, would in the absence of the XL pipeline be transported by rail. So, the State Department concluded, there would be little adverse effect from the proposed pipeline project. These conclusions put heavy pressure on Obama to approve the construction.

The Fed Tapers as Yellen Prepares to Take Over, and the Unemployed Get Screwed Over

In what may be its last official action under Ben Bernanke’s leadership, the Federal Reserve announced in December that it would reduce its purchases of U.S. government bonds and mortgage-backed securities from $85 billion to $75 billion a month as of January 2014. This indicates that the Fed hopes to slow down the growth of the dollar monetary base during 2014 from the 39 percent that it grew in 2013.

Considering that before the 1970s the historical growth rates in the monetary base were 2 to 3 percent, and from the 1970s until the mid-2000s they were around 7 percent, a 39 percent rate of growth in the dollar monetary base is viewed by the Fed as unsustainable in the long run.

The bond market reacted to the announcement in the textbook way, with interest rates on the U.S. 10-year government bonds rising to around 3 percent. The last time interest rates on 10-year bonds were this high was just before the Fed put the U.S. housing market on “life support” in 2011.

It seems likely that the latest move was made to smooth the transition from the Bernanke Fed to the Yellen Fed. Janet Yellen, the newly appointed, and confirmed, chair of the Federal Reserve Board of Governors, is considered a “dove.” That is, she is inclined to follow more expansionary monetary policies than Bernanke in order to push the economy in the direction of “full employment.” As defined by bourgeois economists, this is the optimal level of unemployment from the viewpoint of the capitalists – not unemployed workers. With this move, the money capitalists are “assured” that the Fed will be slowing the rate of growth of the U.S. monetary base despite the new Fed chief’s “dovish” views, while relieving Yellen of having to make a “tightening move” as soon as she takes office.

The gold market, as would be expected, dropped back towards the lows of June 2013, falling below $1,200 an ounce at times, while the yield on the 10-year bond rose to cross the 3 percent level on some days. This reflects increased expectations on the part of money capitalists that the rate of growth in the U.S. dollar monetary base will be slowing from now until the end of the current industrial cycle.

Though the prospect of a slowing growth rate in the monetary base and rising long-term interest rates is bearish for the stock market, all things remaining equal, stocks reacted bullishly to the Fed announcement. The stock market was relieved that a stronger tightening move was not announced. The Fed combined its announcement of a reduction in its purchasing of bond and mortgage-backed securities with assurances that it would keep short-term interest rates near zero for several more years, raising hopes on Wall Street that the current extremely weak recovery will finally be able to gain momentum. As a result, the stock market is still looking forward to the expected cyclical boom.

Long-term unemployed get screwed over

On December 26, Congress approved a measure, incorporated into the U.S. budget, that ended unemployment extensions beyond the six months that unemployment benefits usually last in the U.S., which added to Wall Street’s holiday cheer. During recessions, Congress and the U.S. government generally agree to extended unemployment benefits but end the extension when economic recovery takes hold. It has been six years since the recession began – 60 percent of a normal industrial cycle – and the Republicans and the bosses agreed that it was high time to end the unemployment extensions.

Some Democrats dependent on workers’ votes have said that they are for a further extension of emergency unemployment benefits. President Obama claims to oppose the end of the extended benefits but signed the budget agreement all the same. The budget agreement as it stands basically says to the unemployed, it is now time to take any job at any wage you can find. If you still can’t find a job, tough luck.

Change of Guard at the Fed, the Specter of ‘Secular Stagnation,’ and Some Questions of Monetary Theory

Ben Bernanke will not seek a third term as chairperson of the Federal Reserve Board of Governors – “the Fed.” President Obama has nominated, and the U.S. Senate is expected to formally approve, economist Janet Yellen as his successor. The Federal Reserve Board is a government body that controls the operation of the U.S Federal Reserve System.

“The Fed” lies at the heart of the U.S. central banking system, which under the dollar standard is in effect the central bank of the entire world.

A professional central banker

Janet Yellen is currently vice-chairperson of the Federal Reserve Board. She has also served as an economics professor at the University of California at Berkeley and chaired President Bill Clinton’s Council of Economic advisers. She headed the Federal Reserve Bank of San Francisco from 2004 to 2010, one of the 12 Federal Reserve Banks within the Federal Reserve System. If there is such a thing as a professional central banker, Yellen is it.

Yellen will be the first woman to serve as head of the Federal Reserve Board and will hold the most powerful position within the U.S. government ever held by a woman. Yellen’s appointment therefore reflects gains for women’s equality that have been made since the modern women’s liberation movement began around 1969.

Like other social movements that emerged out of the 1960s radicalization, the modern women’s liberation movement began on the radical left. The very name of the movement was inspired by the name of the main resistance organization fighting U.S. imperialism in Vietnam – the National Liberation Front. However, as a veteran bourgeois economist and a long-time major policymaker in the U.S. government, Yellen would not be expected to have much sympathy for the 20th-century revolutions and movements that made her appointment even a remote possibility.

Significantly, Yellen was appointed only after Lawrence Summers, considered like Yellen a major (bourgeois) economist and said to be the favorite of the Obama administration to succeed Bernanke, announced his withdrawal from contention. Summers became notorious when as president of Harvard University he expressed the opinion that women are not well represented in engineering and the sciences because of mental limitations rooted in biology.

Summers was obliged to resign as president of Harvard, and his anti-woman remarks undoubtedly played a role in his failure to win enough support to be appointed Fed chairman. In addition, Summers attacked the African American Professor Cornell West for his work on Black culture and his alleged “grade inflation,” causing West to leave Harvard. This hardly made Summers popular in the African American community. His nomination would therefore have produced serious strains in the Democratic Coalition, so Summers was obliged to withdraw.

Ben Bernanke like Yellen is considered a distinguished (bourgeois) economist. He had devoted his professional life to exploring the causes of the Great Depression, much like Yellen has. Essentially, Bernanke attempted to prove that the Depression was caused by faulty policies of the Federal Reserve System and the government, and not by contradictions inherent in capitalist production – such as, for example, periodic crises of overproduction. Bernanke denied that overproduction was the cause of the Depression.

Like Milton Friedman, Bernanke blamed the Depression on the failure of the Federal Reserve System to prevent a contraction of money and credit. Bernanke put the emphasis on credit, while Friedman put the emphasis on the money supply. Blaming crises on currency and credit, according to Marx, is the most shallow and superficial crisis theory of all.

Michael Heinrich’s ‘New Reading’ of Marx—A Critique, Pt 4

Heinrich on crises—some background

A century ago, a discussion occurred in the Second International about the “disproportionate production” theory of crisis. This theory holds that crises arise because of disproportions between the various branches of industry, especially between what Marx called Department I, which produces the means of production, and Department II, which produces the means of personal consumption.

This led to speculation on the part of some Social Democrats that the growing cartelization of industry would be able to limit and eventually eliminate the crisis-breeding disproportions. This could, these Social Democrats speculated, give birth to a crisis-free capitalism, at least in theory. The revisionist wing of the International, led by such figures as Eduard Bernstein—the original revisionist—put its hopes in just such a development.

Assuming a rising organic composition of capital, Department I will grow faster than Department II. The Ukrainian economist and moderate socialist Mikhail Tugan-Baranovsky (1865-1919), who was influenced by Marxism, claimed there was no limit to the ability of capitalism to develop the productive forces as long as the proper relationship between Department I and Department II is maintained. The more capitalist industry grew and the organic composition of capital rose the more the industrial capitalists would be selling to their fellow industrial capitalists and relatively less “wage-goods” to the workers.

Tugan-Baranovsky held that capitalism would therefore never break down economically. Socialism, if it came at all, would have to come because it is a morally superior system, not because it is an economic necessity. This put Tugan-Baranovsky sharply at odds with the “world-view Marxists” of the time, who stressed that socialism would replace capitalism because socialism becomes an economic necessity once a certain level of economic development is reached.

Michael Heinrich’s ‘New Reading’ of Marx—A Critique, Pt 3

In this month’s post, I will take a look at Heinrich’s views on value, money and price. As regular readers of this blog should realize by now, the theory of value, money and price has big implications for crisis theory.

As we have seen, present-day crisis theory is divided into two main camps. One camp emphasizes the production of surplus value. This school—largely inspired by the work of Polish-born economist Henryk Grossman, and whose most distinguished present-day leader is Professor Andrew Kliman of Pace University—holds that the basic cause of crises is that periodically an insufficient amount of surplus value is produced. The result is a rate of profit too low for the capitalists to maintain a level of investment sufficient to prevent a crisis.

From the viewpoint of this school, a lack of demand is a secondary effect of the crisis but by no means the cause. If the capitalists find a way to increase the production of surplus value sufficiently, investment will rise and demand problems will go away. Heinrich, who claims there is no tendency of the rate of profit to fall, is therefore anathema to this tendency of Marxist thought.

The other main school of crisis theory puts the emphasis on the problem of the realization of surplus value. This tendency is dominated by the Monthly Review school, named after the magazine founded by U.S. Marxist economist Paul Sweezy and now led by Monthly Review editor John Bellamy Foster.

The Monthly Review school roots the tendency toward crises/stagnation not in the production of surplus value like the Grossman-Kliman school but rather in the realization of surplus value. The analysis of this school is based largely on the work of the purely bourgeois English economist John Maynard Keynes, the moderate Polish-born socialist economist Michael Kalecki, and the radical U.S. Marxist economist Paul Sweezy.

Kalecki’s views on markets were similar to those of Keynes. Indeed, it is often said that Kalecki invented “Keynesian theory” independently and prior to Keynes himself—with one exception. Kalecki, like the rest of the Monthly Review school, puts great emphasis on what he called the “degree of monopoly.” In contrast, Keynes completely ignored the problem of monopoly.

Needed, a Marxist law of markets

A real theory of the market is necessary, in my opinion, for a complete theory of crises. Engels indicated in his work “Socialism, Utopian and Scientific” that under capitalism the growth of the market is governed by “quite different laws” than govern the growth of production, and that the laws governing the growth of the market operate “far less energetically” than the laws that govern the growth of production. The result is the crises of overproduction that in the long run keep the growth of production within the limits of the market.

This, however, is not a complete crisis theory, because Engels did not explain exactly what the laws are that govern the growth of the market. Unfortunately, leaving aside hints found in Marx’s writings, Marxists—with the exception of Paul Sweezy—have largely ignored the laws that govern the growth of the market. This, I think, would be a legitimate criticism of what Heinrich calls “world view Marxism.” As a result, the theory of what does govern the growth of the market has been left to the anti-Marxist Keynes, the questionably Marxist Kalecki and the strongly Keynes- and Kalecki-influenced Sweezy.

Michael Heinrich’s ‘New Reading’ of Marx—A Critique, Pt 1

The April 2013 edition of Monthly Review published an article entitled “Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s” by German Marxist Michael Heinrich. This is the same issue that published John Bellamy Foster’s “Marx, Kalecki, and Socialist Strategy,” which I examined the month before last.

Michael Heinrich teaches economics in Berlin and is the managing editor of “PROKLA A Journal for Critical Science.” His “new reading” of Marx apparently dominates the study of Marx in German universities.

The publication of Heinrich’s article brought about a wave of criticisms on the Internet from Marxists such as Michael Roberts who base their crisis theory precisely on Marx’s law of the “tendency of the rate of profit to fall,” or TRPF for short.

Today on the Internet, partisans of two main theories of capitalist crisis—or capitalist stagnation—are struggling with one another. One theory attributes crisis/stagnation to Marx’s law of the TRPF that Marx developed in “Capital” Volume III. The rival theory is associated with the Monthly Review school, which is strongly influenced by John Maynard Keynes and even more by Michael Kalecki. Unlike the supporters of a falling rate of profit theory of crisis, the Monthly Review school, like Kalecki, puts the question of monopoly and monetarily effective demand at the center of its explanation of capitalist crisis/stagnation.

In addition to publishing Heinrich’s attempt to prove that there is in fact no tendency for the rate of profit to fall, Monthly Review Press published an English translation of Heinrich’s “An Introduction to the Three Volumes of Karl Marx’s Capital,” originally published in German under the title (in English) “Critique of Political Economy—an Introduction.”

Is Michael Heinrich a new recruit to the Monthly Review school? In fact, we will see later that the Monthly Review school and Heinrich have radically different views on the questions of capitalist monopoly and imperialism. So at this point, it is more a question of an “alliance” between the Monthly Review school and Heinrich’s “new reading of Marx” trend against the TRPF school, whose leading academic representative today is Andrew Kliman, a professor of economics at Pace University.

The first thing I must say about Heinrich is that it is clear that he knows his Marx at least as well as any writer whose works have been published in English. He is also a remarkably clear writer. This reflects the fact that he has thoroughly mastered his material. This does not mean that Heinrich agrees with Marx on all questions. Indeed, Heinrich is more than willing to express his disagreements with Marx. And as we will see, Heinrich disagrees with Marx on some very important issues.

Bitcoins and Monetary Reform in the Digital Age

Recently, there has been a rising wave of interest in a new Internet-based currency called bitcoins. In one sense, bitcoins are the latest attempt to improve capitalism through monetary reform. But unlike other monetary reform schemes, bitcoins are very 21st century, based as they are on modern computer technology and the Internet.

According to Wikipedia: “Bitcoin (BTC) is a cryptocurrency first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it a peer-to-peer, electronic cash system. Bitcoin creation and transfer is based on an open source cryptographic protocol and is not managed by any central authority. Each bitcoin is subdivided down to eight decimal places, forming 100 million smaller units called satoshis. Bitcoins can be transferred through a computer or smartphone without an intermediate financial institution.”

A short history of monetary reform before the Internet

One monetary reform that was popular among small farmers and small businesspeople in the late 19th-century U.S. was bimetallism. The bimetallists proposed that the U.S. dollar be defined in terms not only of gold but also of silver, at a fixed ratio of 16 to 1. Under this proposed reform, the silver dollar coin would weigh 16 times as much as the gold dollar coin.

The supporters of bimetallism argued that this would, by sharply increasing the money supply, increase demand and thereby raise the prices of agricultural commodities. The increased demand would, the supporters of bimetallism argued, put unemployed workers back to work. In this way, the bimetallists hoped to unite the interests of workers, small farmers and small businesspeople against the rising power of the Wall Street banks.

A basic flaw in this proposal was that while at one time the ratio of 16 to 1 more or less reflected the actual relative labor values of gold and silver bullion, by the late 19th century the value of silver was falling sharply relative to the value of gold. Given a choice of using either silver or gold coins at this ratio, people would have chosen to pay off their debts in cheap silver—which is why bimetallism was so popular among highly indebted small farmers and businesspeople—while using the cheap silver dollars to purchase and hoard the more valuable gold dollars. This effect is known as “Gresham’s Law,” named after the early British economist Sir Thomas Gresham (1519-1579).

Under Gresham’s Law, cheap silver dollars would have driven gold dollars out of circulation, leaving the silver dollar as the standard dollar. This would have had the effect of devaluing the U.S. dollar from the value of the gold dollar down to the value of the silver dollar. Fearing that supporters of bimetallism would win the upper hand in the U.S. government during the 1890s, foreign capitalist investors began to cash in their U.S. dollars for gold leading to a series of runs on the U.S. Treasury’s gold reserve as well as the gold reserves of U.S. commercial banks.

A wave of bank runs and an associated stock market crash that occurred in the northern hemisphere spring of 1893 has gone down in history as the “panic of 1893.” This panic was followed by a prolonged period of depression, mass unemployment and plunging commodity prices. This was the exact opposite of what supporters of bimetallism desired.