The Nightmare of Crisis

Capitalism in Place:
Photos and Essays by a Marxist Tourist

THE NIGHTMARE OF CRISIS

If Marx and the mainstream can agree on something so fundamental as productivity, why are they at dagger points whenever the subject of capitalism comes up? Are the differences that separate them overblown? Is this more akin to a squabble within the family than a war to the knife and knife to the hilt?

The differences are not overblown, as we can see by asking a simple question: is the productivity imperative good or bad for capitalism as a whole and for those who live under its laws of motion? You won't be surprised to learn that the mainstream answers with an emphatic good on both counts.

Nor will you be surprised to learn that Marx begs to differ.

For Marx capital is a mode of production cross-hatched with internal contradictions and crisis tendencies, as might be surmised from the title of what Harvey calls "the most dangerous book I have ever written," Seventeen Contradictions and the End of Capitalism. Published in 2014, Harvey's intervention was nothing if not timely. It appeared five years after the end of the worst economic downturn since the Great Depression and six years ahead of the financial meltdown and global recession triggered by the COVID-19 pandemic.

The multiple contradictions identified by Harvey have not gone away since the Great Lockdown of 2020-21. On the contrary, they have grown in intensity, thanks above all to the environmental catastrophe that is engulfing the planet, powered by capital's addiction to fossil fuel.

Has crisis become the new normal of 21st-century life? If so, is such a normal sustainable? How much instability and uncertainty can the institutional foundations of everyday life withstand before they start to crack? Are they cracking right now? Does wave after wave of crisis signal that capital as a mode of production and capitalism as a social formation are reaching the day of reckoning? If the end is approaching for these conjoined totalities, will it come as a big bang, a series of dying gasps or a slow transition into something else? Is it possible to imagine a moment when a critical mass of humanity concludes that enough is enough and demands an economic system that is not pre-programmed to inflict periodic doses of devastation on a global population that now approaches 10 billion?

The nature of capitalist crisis raises all manner of urgent, even existential, questions about where we and the planet are heading.

The Austrian economist Joseph Schumpeter, no particular friend of Marxism, coined the term "creative destruction" in order to highlight how capital creates new wealth, new material technology and new organizational forms by destroying old ones. If the history of capitalism is a "perennial gale of creative destruction," as Schumpeter declared in Capitalism, Socialism, and Democracy (1942), then crisis is the moment when the wind is at its strongest and most terrifying. To his credit Schumpeter did not ignore the suffering inherent in the process of creative destruction, in contrast with most mainstream defenders of the free market. But he did join the mainstream in insisting that any short-term suffering that might accompany economic progress was outweighed by the long-term material bounty produced by capitalism.

The destructive side of any crisis is plain to see. Crisis is the pot in which capital's contradictions are brought to a furious boil, producing laid-off workers, broken families, shorter life expectancies, higher addiction rates, bankruptcies, foreclosures, repossessions, idle production capacity, moldering inventory and, not least important, deepening alienation, unhappiness and loss of meaning. To be sure, much of the material damage will be repaired once the crisis has passed. But a lot of the psychic damage will remain. Every crisis leaves behind a legacy of personal and collective trauma, the stuff of nightmares.

Even so, crisis has a creative side, a silver lining, if we can call it that. The destructive gale unleashed by a crisis restores conditions for future accumulation, creating new opportunities for profitable investment as productive assets such as labor power—the most productive asset of all—come on the market at fire-sale prices. Savvy investors will pick up the pieces and reassemble them in such a way as to open up a new round of accumulation. Some who have weathered the storm of crisis will enjoy smooth sailing and a steady wind when prosperity returns; others will drift with the tide until the next storm.

Anchoring Marx and Harvey's radical critique of bourgeois political economy, as well as Schumpeter's no-pain-no-gain defense of free-market entrepreneurship, is the contention that crisis is not an act of God or nature, both of which originate outside of human society. Nor is it an accident or a one-off event revealing little if anything about the underlying structures of society. For Marx, Harvey and Schumpeter crisis is a necessary feature of the accumulation process. Crises just don't happen; they must happen if capital is to innovate and reproduce itself on an expanded scale.

Edvard Munch's image "The Scream," which Allyson and I saw on our visit to Milan's Palazzo Real museum, has achieved iconic status because it symbolized "the anxiety of the human condition," to quote the Wikipedia entry. This may be so, but it is worth noting that Munch created the first version of the image in 1893, the same year that a financial panic erupted in the US, spread to Europe and plunged Munch and his world in a brutal economic depression which lasted five years. In my opinion, the jury is out on whether anxiety lies at the heart of the human condition, but there can be no doubt that it lies at the heart of our crisis-prone mode of production, even if the couple I photographed hamming it up in the museum's giftshop with a face-in-the-hole version of "The Scream" seem blissfully free of anxiety.

What, then, are the specific mechanisms through which capitalist crises unfold? A powerful answer can be found in Marx's Capital and Harvey's The Limits to Capital, which together offer a theory of crisis formation grounded in the contradiction between the material forces and social relations of the capitalism.

This contradiction begins (but does not end) with Marx's famous law of the tendency of the rate of profit to fall in the primary circuit of production. To understand the law and how it operates let's return to the concept of relative surplus value and pick up the story where we left off in the last section.

What happens at the level of capital-in-general when individual capitalists compete for excess profit by incorporating labor-saving technology into their production methods? The short answer is that labor-saving technology removes living labor from production and replaces it with the "dead" labor congealed in machinery, raw materials and other means of production. Or to restate this in Marx's technical terminology, capitalists in pursuit of relative surplus value shift production's center of gravity from "variable" capital (v) to "constant" capital (c).

Herein lies the rub: since living labor is the source of surplus value (s), and surplus value is the source of profit, the declining share of living labor in production will have a deadening effect on the rate of profit (r), which Marx calculates as surplus value divided by the sum of variable and constant capital [r=s/(c+v)]. The fall in the rate of profit can be countered if the rate of exploitation (v/s) increases faster than the organic composition of capital (c/v). But this is unlikely to happen over the long haul because squeezing more and more absolute surplus value out of workers by extending the working day and/or intensifying the work process is not as easy as adopting new labor-saving technologies which are, in principle, without limit.

This is a textbook example of the contradiction between the material forces and social relations of capitalist production. In their eagerness to garner extra surplus value, individual capitalists engage in profit-maximizing behaviors that run counter not only to the collective interests of the capitalist class as a whole but also to the reproduction requirements of capital accumulation. The coercive laws of competition to which capitalists are subject and which drive technological change bleed profit out of the system, thereby threatening the social reproduction of the class that owns the means of production and appropriates surplus value.

No profit, no surplus value; no surplus value, no capitalist class. It's as simple as that.

Or is it? Before concluding that capitalists in their quest for relative surplus value have signed capital's death certificate, we should take note of the language Marx uses in discussing the rate of profit. His law is a tendency not a teleology. There are many "counter-tendencies" at play beyond increasing the rate of exploitation relative to the organic composition of capital. These are spelled out in the third volume of Capital.

What is more, the falling rate of profit tells only half of the story; the other half is the rising mass of profit. Harvey insists that a fully developed crisis theory must take both sides of the law of profit into account.

To do so requires that we accept Harvey's claim that capital is a totality encompassing production, realization, exchange, distribution, consumption and circulation. He notes that many Marxists assign primacy to the sphere of production over all other spheres, on the grounds that this is where value originates and where the class struggle appears in its purest form.

Harvey reminds us that however central the production of value might be, it is but one moment in the totality of "value in motion." Emphasizing this moment to the exclusion of all the others, or casting it in the role of the deus ex machina of the accumulation process, can easily result in the kind of mechanical materialism which runs counter to Marx and Harvey's dialectical method. Harvey urges us to see the sphere of production not in isolation but in co-constitutive relation to both the sphere of exchange, where value is realized, and the sphere of circulation, where it is distributed.

Because crisis tendencies can gain traction in any of these spheres as value moves through the industrial circuit, we need to keep an eye out for the bottlenecks that can form virtually anywhere in the circulation process.

With this insight in mind, let's revisit Diagram 1. At first glance, it resembles a well-designed transportation system like the German Autobahn, in which value flows smoothly and efficiently, beginning at the red rectangle of production and ending there as well.

But this would be a misreading of the diagram. Harvey wants to show that the potential for disruption lurks in all those junctures where value changes material form from money to commodity and back to money. From this standpoint his flow chart looks more like Midtown Manhattan at rush hour.

As a case in point, consider how slowdowns in the sphere of exchange, which is the site of value realization, can quickly cascade throughout the system, disrupting the flow of value and creating the potential for a full-blown crisis. While Marx and Harvey are adamant that value is created in the production process, they also stress that the magnitude of this value is not set in stone. It remains latent—hibernating, as it were—until the commodity finds a buyer in the market. Only when the commodity is exchanged for money is its value awakened or "realized," as Marx puts it. If a buyer never turns up for whatever reason, the commodity's value ceases to exist; it has died in its sleep.

I am reminded of the nightmarish scene from director Stanley Kubrick's 2001: A Space Odyssey, in which the HAL 9000 computer running the Discovery One spaceship goes bonkers and decides to cut off life support systems to three crew members who have been kept in a state of suspended animation until they reach their destination of Jupiter. We watch in horror as HAL's monitor flashes "Computer Malfunction" and the vital signs of the crew members tucked snugly into their coffin-like sleeping chambers begin to flatline, one by one, until only a single message remains on the screen, "Life Functions Terminated."

The unrealized value in an unsold commodity suffers a similar fate. Devaluation is capital's way of terminating the life functions of value. When devaluation occurs on a large enough scale, we have a crisis. Indeed, the best definition of a capitalist crisis is a system-wide devaluation of capital and labor.

Harvey's theory of crisis formation pivots on the concept of overaccumulation, which he defines as "surplus capital and surplus labor existing side by side with seemingly no way to put them back together." It goes without saying that surplus should be understood as relative to the needs of capital not people.

Harvey often refers to overaccumulation as the "surplus capital absorption problem." Whatever we choose to call it, this tendency has been at the center of crisis formation in recent decades.

Since the recession of 1973-75 capitalist class interests have coalesced around a political project called neoliberalism which seeks to restore conditions of accumulation, increase the rate of profit, strengthen capitalist class power, break the back of organized labor, dismantle the demand-management regime of postwar Fordist-Keynesianism and sweep away regulatory impediments to the free movement of capital. This neoliberal counter-revolution has gone from victory to victory over the last forty years, as it attested by the growth in the inequality of wealth and income, the declining share of labor compensation in gross domestic product and the hollowing out of the state's managerial and welfare functions.

These trends have heightened overaccumulation tendencies by exacerbating the problem of effective demand as working-class purchasing power in the advanced capitalist countries of the Global North fails to keep pace with the growing supply of inexpensive consumer goods imported from China and elsewhere in the Global South. While this problem has given rise to the proliferation of new forms of consumer credit and the spectacular growth of personal debt, financialization has simply shifted the epicenter of crisis tendencies from the spheres of production and exchange to the sphere of distribution, where finance capital has emerged as a major political-economic force on the global stage.

As Harvey likes to say, capital doesn't solve its inherent contradictions, it just moves them around.

Given the sharpening contradictions of capital in the era of neoliberalism, it seems likely that the sheer mass of surplus capital sloshing through the global economy will lead to massive and successive waves of devaluation by means of overaccumulation crises along the lines of those we witnessed in 2007-2009 and 2020-2021.

A nightmare scenario for sure. It makes you want to scream!

Capitalism in Place: Photos and Essays by a Marxist Tourist

THE NIGHTMARE OF CRISIS

Capitalism in Place:
Photos and Essays by a Marxist Tourist