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Decline – An Answer to Ken Tarbuck

Hillel H. Ticktin

From New Interventions, Vol.5 No.2, 1994

Ken Tarbuck has taken considerable trouble to criticise my argument on decline, and I have to thank him for the invitation to reply. I would expect his critique to stay substantially the same if he had read the latest version of my argument, as it has appeared in Critique No.26. The argument there is considerably more complex but the underlying assumptions remain the same and I have only summarised points made there as required to answer Ken.

Summary of the Argument
I can agree with Ken that my theory is not identical with that of Lenin or Trotsky and that competition may be greater on some definitions. The fundamental underlying argument is that the socialisation of labour necessarily leads to a decline in value production and hence to some of the surface phenomena we witness, including a widening gap between value and price.

In turn, this leads to the bourgeoisie turning to finance capital as a more secure and immediate method of raising surplus-value. In fact money cannot make money and the shift away from industry leads to the decline of productive capital and ultimately of finance capital itself. Under certain circumstances, such as the last war, finance capital is compelled to give way to productive capital, if only to restore the fortunes of finance capital, but inevitably finance capital is forced to re-assert itself. Finally, the objective decline shows itself in the consciousness of the epoch, leading ultimately to the perception of the working class that socialism is attainable and the perception of the ruling class that it is under dire threat of extinction. Hence there are three overarching aspects of decline interacting with each other: the socialisation of production, the growth of parasitic forms of capital and the subjective understanding of these processes.

In the end, these aspects of decline are the basis of the progressive failure of the mediations between the poles of the contradictions of capitalism. The result, in the absence of social revolution, is an increasing level of disintegration of both categories and of social relations. The form of finance capital is one expression of that disintegration. Wars, national antagonisms etc are others. Disintegration is not revolution. At one and the same time it preserves the old system and drives it further into the transitional process. At the same time only the overthrow of the old order can end the disintegrative process.

The Nature of the Socialisation of Production and its Effects
The forms of the socialisation of production include the following: the growth of monopoly and giant firms which play a crucial role in the economy, the growth of needs based sectors such as health, education and arms production, the increasing role of government in the economy whether directly through nationalisation or through indirect instruments of control such as control over price/profits/borrowing, the control over the money supply. The objective features involved are well known. The long lead times for the implementation of technology, the enormous and growing costs of research, the increasing automation of production combined with its increasing complexity and integration of all aspects of the division of labour all lead to an increasing concentration and centralisation of the economy. The rising organic composition is now obvious as it was not before 1973.

In view of the discussion around monopoly I will define it immediately but discuss it in more detail below. My understanding of monopoly here is that it represents control over price held by a number of firms. Monopoly is not therefore dependent on the existence of only one or two firms. We can illustrate the point with the following example. The European Commission recently tried to stop the fixing of plastic prices within the EC and failed to impose penalties on the firms. There were some 14 firms involved. The effect of decreased competition is that there is a wider gap between value and price.

A consequence of the decline of value is that there is an increased role for organisation or bureaucracy in modem society. Put differently, the future society is already exercising its influence in compelling the economy to use organisational instruments as well as value. Large enterprises like General Motors, IBM, etc are compelled to use managerial forms of control. The needs based industries such as health and education are necessarily based on managerial forms. Even today with university departments having to make a profit and trust hospitals also forced to make profits there are more managers than there have ever been. Indeed the very attempt to introduce value into the non-value sectors has led to an enormous growth in the number of managers and bureaucracies.

The reason is twofold. Profit has become less of an unambiguous and immediately obvious goal. Firms necessarily have to consider a whole battery of indicators. A firm may make huge amounts of surplus-value and yet go bankrupt because it has borrowed money at a very high rate of interest in a country where the currency has been revalued. A firm may also go bankrupt because although it is making huge levels of surplus-value per unit. Its profits are contingent on a minimum level of sales. If a firm does not have the correct depreciation rates it may also go out of business etc, etc. Direct and indirect taxation rates can ruin a business. The point is quite simply that any manager then looks at rates of depreciation, rates of interest, tax rates and sales volume and other indicators before he looks at the net profit. At a time when the relationship was immediate and clear there was no problem.

That is not the case today. Within a firm the relationship between the different sectors cannot easily be based on market prices either. Those firms that have tried marketising their internal sectors have made the obvious discovery that they lose economies based on centralisation of common activities and the co-ordination of the different parts of the firm. The second problem that arises is in the needs-based sector, where it is clear that the sector is not reducible to a market form without destroying its essential content. As a result doctors and teachers find that they cannot carry out their basic duties and the less scrupulous then simply adopt the money form at the expense of the health or education of their patients or students. The result is less the introduction of a market than the introduction of a muddle. If universities close down loss-making departments they may destroy much of their fundamental research, which by its nature may only show results after many years.

Attempts to roll the clock back with the use of market forms in production, as argued by Ken, do not prove his point. Within production there have been all kinds of managerial gimmicks to use market instruments to control the section of the firm and workers in that section. Nonetheless, in all cases we are talking of managerial controllers using limited market instruments to achieve their ends. This is not the same as the market and its basis, the law of value. The various forms invented have usually been discarded as they outlive their usefulness. In the society as a whole the move back to the market associated with monetarism has moved in parallel to the use of market instruments within the firm. At best one can argue that the Conservative government in the UK has forced the use of market instruments in various sectors of the economy for their own purposes. In all cases, however, the government has remained in control. Instead of using direct government investment in nationalised industries they use the interest rate, the value of the pound and direct pressure on firms as well as investment on the infrastructure. The privatised utilities remain subject to control over their prices and so profits, and even over their investments, as in the case of BT.

Lenin and Trotsky on Decline and the Question of Consciousness
Ken is correct to point out that that the theory I have developed is not identical with that put forward by Lenin or Trotsky. Lenin in particular does argue that capitalism is in a process of decay and instances such things as lack of innovation and the use of Scottish farmland for leisure pursuits. Trotsky does talk of the inevitability of socialism, the theory of absolute immiseration, etc. Both Lenin and Trotsky and indeed most Marxists saw capitalism on its last legs in the period immediately before, during and after the First World War. Thus even a non-Marxist like Webb produced his work on the decay of capitalism. For Lenin, imperialism was itself a phase of decline. Capitalism could no longer invest internally and hence it had to conquer other countries to maintain itself. Trotsky, interestingly, did not argue the same way, as he saw imperialism as a result of the expansion of the forces of production.

But both agreed on the importance of finance capitalism. This Lenin saw as parasitic. In Marxist terms there can be no question that the dominance of finance capital is a movement away from productive capital. To that degree, decline is a necessary concomitant. In this respect, I fully agree with Lenin and Trotsky. Where my argument is different is that it is trying to produce a more general argument on decline, which encompasses the case of imperialism as one feature rather than the main feature. I am not certain that my argument is in conflict with either Lenin or Trotsky but it is certainly more extensive.

Only an idiot would claim that they were the last word on the subject. On the other hand, the question as to their correctness still remains open. The fact that capitalism still exists and has developed the forces of production to unheard-of heights seems to contradict any thesis of decline. On the other hand, capitalism was indeed overthrown in a number of countries at that time. Capitalism did have the appearance of decline.

My argument is that Lenin and Trotsky were talking of a terminal crisis of a system in decline. Since capitalism can go through many such terminal crises before it succumbs, they were not wrong. Capitalism will continue until the world goes socialist and hence it is possible to imagine many cases where parts of the world overthrow capitalism and are overthrown in turn by capitalism. The essential aspect of a terminal crisis which ensures that it is a terminal crisis is the formation of the workers as a class. That requires both objective and subjective criteria. What do we call this period? Trotsky himself spoke of capitalist equilibrium and capitalist epochs. One Bolshevik had actually argued to Natalya Trotsky already in the mid-twenties that they had failed and thrown the world back many years. That is the point. Capitalism can be in decline, reach a terminal crisis, but defeat the other side and then establish an equilibrium heavily weighted towards itself. Only in a period of decline would capitalism have to defend itself in that manner. The forms of that decline leave little doubt as to its nature.

Lenin's peculiar genius lay in his attempt to provide a focus for working class consciousness. Capitalism can only be overthrown as a conscious decision by the working class. In other words, Lenin and Trotsky observed both the rise of anti-capitalist consciousness and aspects of decay of the capitalist system. Part of the reason for that decay lies in the need of the system to repress.

In its decline, a system has to systematically repress those who want to overthrow it. Because of their increasing strength, the forms of repression become increasingly brutal. The first such mass repression was that of the Paris Commune. Imperialism served not just to raise the rate of profit but also to contain the working class, in its brutal conquest and exploitation of the third world. The First World War fits into the same category of using totally inhuman means to maintain the system. After Lenin we have brutal repression of the left and working class in the developed countries. Stalinism, Fascism and World War II were all required. Hundreds of millions died in this process. We can interpret this process as part of the necessary brutality of capitalism or of any state, but it is a poor interpretation of the unprecedented scale of brutality in this century. Capitalism comes into being dripping with blood from head to foot but it is going out pouring with blood.

Lenin's argument is not a simple one of immediate catastrophe. He argues that capitalism has had to extract surplus-value outside of its immediate homeland in order to survive. It was doing so by direct force in the countries of the third world. Now it is true that most of the export of capital did not go to the third world but that does not alter the point. Accumulation had reached a point where it moved from production to circulation, from direct investment in productive capital and labour into money capital. Whereas formerly it was interested in extracting surplus-value from workers, now it was only interested in money making more money. If that could be done by the ruthless exploitation of relatively more backward countries, as in the liquidation of several million in the Congo in order to obtain rubber, so be it. The fact that capitalism had begun this way only seemed to prove the point. Capitalism was in its second childhood. Its historical mission had been to develop the forces of production and here it was reverting to an earlier stage both in terms of the use of force and through the replacement of accumulation by usury.

Looked at another way, the point is that the bourgeoisie understood it could be overthrown at the time of the Paris Commune. It was overthrown in the Russian Revolution and it then understood that it might disappear altogether. It had therefore to take the strongest repressive measures as well as make the most intelligent concessions in order to maintain itself. At the same time the working class derived considerable strength from its success in that period. The workers were able to grasp the reality of the alternative to capitalism. This heightened consciousness of both contending classes meant that the capitalist system became ever more subjective in its operation. At the level of consciousness, we are talking of an epoch of decline because both contending classes are consciously fighting for power. The system has become so moribund that its beneficiaries have to consciously re-fashion it in order to maintain it. At the same time, the dispossessed are able to understand their own oppression and the means of removing it. As a result, ideas play a role quite different from that in earlier epochs of capitalism. At the present time, the bourgeoisie are doing their utmost to ensure that the socialist alternative appears both Utopian and remote.

The Russian Revolution marks the era of transition from capitalism to socialism. This period may last a very long time but that does not alter the point. In this period we may witness may kinds of historical abortions like Stalinism or it may be the last.

The Question of Objective Decline and Decay
There is every reason to assume that capitalism will continue to develop the forces of production until it is overthrown. Its vitality is not to be measured by its growth rate at any time. To put it differently, there is a difference between growth rate and the accumulation of capital.. It is a well known fact that the sun will vastly expand before it is extinguished. Its rapid growth will be an expression of its decline. The exact physics are of no importance. The point is that the dynamics of capitalism do not lie in growth of GNP.

Furthermore, Marx's argument does lead to the view that socialism is inevitable in the sense that it is necessary for the further development of mankind and if mankind is to continue socialism is therefore necessary. That does not mean that the working class cannot be defeated or that the world may not wander in the wilderness for a long time. Marxists are not Utopians or ethical socialists. They argue that socialism will come about because capitalism itself is changing and being transformed. Logically one might even argue that if the capitalist class wins every victory against the working class, capitalism will be so transformed that ultimately the capitalist class itself will yield. The problem is that such an eventuality may take centuries before it occurs. In the meantime, millions will die unnecessarily and millions more will suffer. It is even possible that between then and now the world will go through even worse barbarities than it has seen this century.

Ken Tarbuck has implicitly replied that any system which could provide for a welfare state, full or fuller employment and a rising standard of living cannot be in decline. Why is it that the rate of growth appears to be higher today than a century ago? The answer lies in the change in the system itself. If capital is to survive it must provide for a higher standard of living, and it must provide for full employment or at least a high level of employment in the metropolitan countries. What has this to do with the self-expansion of capital? The housing, education, unemployment benefit, health facilities etc have all to be paid out of taxes which come in part out of the profits of the capitalist class. What is worse, the workers have to be paid more than if there were a true reserve army of labour without benefits. In turn, such benefits strengthen the workers making it easier for them to demand higher wages. In principle, profits must be lower than if these concessions did not exist. The obvious reply is that the enormous market so generated has counteracted the negative effects. Indeed it has done so, but at the cost of undermining the system itself, by strengthening the working class, by increasing the degree of conscious control over production, whether at the centre or within the firm.

The whole issue rests on the question of the nature of the epoch. I am arguing that it is an epoch of decline and transition, marked by the defeat of the European working class after the Russian revolution of 1917. It is a highly complex age. All transition periods are complex. The complexity of a transition period rests on the fact that it is a compound of 3 systems, the old system, the declining features of the old system and thirdly the emerging forms of the new system. The more advanced this period, the more difficult it becomes to untangle its different features. Nonetheless we can distinguish certain crucial features of the period. Firstly, that there is a direct conflict between the demands of the working class and those of the capitalist class. The working class wants to regulate production in its interests, and so in the interests of humanity, whereas the capitalist class wants to continue to extract surplus-value from the workers. This demand on the part of the working class is not a Utopian demand but one rooted in the necessities of production itself. Hence the age is one in which the capitalist class finds that it must organise production.

Nevertheless, because it is capital and not the workers, the only way that it can organise production is within a global context of finance capital. Finance capital is abstract capital, or circulating capital torn from its roots in production, able to survey the totality of capital itself. Hence the management of capital in an era of finance capital is a degenerate form of management. Even industrial capital is subject to the rule of finance capital. The industrial capitalist adopts a short term attitude to profits and so adopts a more cautious attitude to investment in productive capital itself. Since finance capital is abstract capital it is able to understand the nature of the tasks of capital in the epoch and it dictates the needs of the capitalist class.

The finance capitalist adopts a barbaric attitude to investment, in that anything which expands his capital is acceptable. The conquest of nations, their robbery, war and the sale of narcotics all become integral parts of finance capital. At the same time, finance capital, being abstract capital, is able to see its limitations and so organise its own defence.

Decline and the Question of Theory
Marxism does require a theory of decline. Ken at this point accuses me of the two crimes of sectarianism and arrogance in so far as I argue that decline is a necessary feature of Marxism.

I would not want to retract the statement that since Marxist method is dialectical, Marxism sees motion in terms of birth, development and decline/decay followed by supersession. This, to me, is elementary Marxism and I assumed that Ken Tarbuck agreed with it. I did not make the statement ’in order to wrap the flag of orthodoxy around myself’, as Ken put it, but to point to the problem for any Marxist who does not have a theory of decline. At the time I assumed that Ken did have such a theory but that he had put the date of decline into the future. After his printed reply I am no longer clear whether that is the case.

As is well known, Marx specifically quotes and endorses an extract from a review of Capital which ends with these words: ’The scientific value of such an inquiry lies in the disclosing of the special laws that regulate the origin, existence, development, death of a given social organism and its replacement by another and higher one.’1 He goes on to say that this is nothing other than his dialectical method. Trotsky says much the same thing in another context: ’But to establish capitalism's age and its general condition – to establish whether it is still developing or whether it has matured or whether it is still in decline – one must diagnose the character of the cycles. In much the same manner the state of the human organism can be diagnosed by whether the breathing is regular or spasmodic, deep or superficial, and so on.’2

It is not necessary to quote Marx, Trotsky, or for that matter Hegel, to see that Marxism involves the understanding of the laws of birth, development and decline of the capitalist system. After all, we need only to look at his dialectical method itself. That involves an understanding of contradiction. The opposites in the contradiction transform each other to the point where the entity itself is transcended, when the process begins all over again. Vigorous growth is succeeded by decline and decay. That is the fate of all entities. The only question is that of time. In some cases the time-scale runs into billions of years and in others it is just a few minutes. When Marx sought the laws of motion of capital he sought for the laws which allowed capitalism to function but which also inevitably led to its decline and supersession.

What is decay as opposed to decline? It is the particular form whereby an entity ceases to exist. Thus finance capital is a decadent form of capital because it cannot expand itself but must destroy its host, productive capital. The system of payments to producers to take land or productive capital out of use is also a decadent form of capital because it stands opposed to the expansion of capital itself.

What is the alternative? We can argue that capitalism will not decline but suddenly terminate. We can also argue that capitalism will never decline but gradually transform itself. We might take the view that capitalism is eternal or that it will only be superseded because mankind has decided for unknown reasons to replace it. None of these suggestions can be defended with any plausibility. Everything works until it stops working, but there are always causes for its termination. Deeper examination reveals that there was an ongoing process leading to that breakdown. It is that process that we are examining. A transformative process is only possible if the old order is ceasing to operate in its former fashion. Even the smoothest transition assumes that the old system has changed.

Tarbuck rails against the organic analogy, which Marx and Trotsky use, unnecessarily. It is clear that it is only an analogy. Yet Ken will be hard put to discover any entity that does not have the same life-cycle, whether atoms, the universe or society. This point is not particularly Marxist or even Hegelian. It is Aristotelian. Thus it is odd that Ken should even have raised it in the issue of his journal which spends so much time supporting Scott Meikle's book which is openly Aristotelian and supportive of this precise point.

How does Ken see social movement then? What does he see as a law of motion? Does it appear in a straight line? Do we simply move onwards and upwards with occasional lapses? Or is there no movement at all?

Ken is on stronger ground when he tries to argue that the world is not in decline at the present time. By implication the time of decline is yet to come. That is always possible and my argument may yet prove to be wrong on empirical grounds. I do not think so, but the matter is worthy of very serious discussion. That it seems to me ought to be the real discussion. In fact there are two discussions going on at the same time. The first is the nature of social change and the second is whether the present is a time of decline. Before engaging in that part of the discussion it is necessary to make a number of distinctions.

Catastrophism, Decline and Terminal Crisis
Ken's implication that my distinction between terminal crisis and decline is unreal fails to grasp what has been said. Everyone must make such a distinction, if they have a category of decline. Societies do not just change into different forms. They undergo powerful forces impelling that change and the forces express themselves with such vigour that the society is compelled to move either forward or backward. Whatever the reason for that change, there is a crisis. On the other hand, a system may decline over a long period of time before it is finally overthrown. There is no catastrophism in this at all. Nor is it correct to attribute catastrophism to Lenin or Trotsky. On the contrary, Trotsky had a clear and well-expressed view on change. Trotsky specifically spoke of workers being demoralised by depressions. In effect, at one point, he took the same view as de Tocqueville that revolutions occur when the society is pulling out of a downturn.

I have not argued that capitalism will automatically come to an end or that the world will undergo a catastrophic crisis in order to change. I do not believe either proposition to be correct. Nor do I see how Ken can deduce these views from a category of decline. It would be equally possible to deduce a theory of gradual change from a category of decline based on my assumptions. After all I argue that the decline of capitalism is intimately connected with its transformation. Capitalism is in decline because its basic law – the law of value – is being progressively negated. In fact I think both deductions are false but one has as much ground as the other. For the record I think I have to make clear that I do not believe capitalism will be overthrown just because of a major slump or because the majority are suffering a declining standard of living. In fact, it is clear to me that these features have served to prevent a move to socialism rather than the reverse.

Nonetheless a Marxist must have a theory of change. It is interesting to note that one reason for this discussion is the limited discussion on this theme. There is an overarching theory of change given by dialectics, but no Marxist has worked out the exact nature of the movement from capitalism to socialism.

On the other hand, Ken has no theory of change at all, apart from the hope that the proletariat will take up socialism. The move to socialism is not a move in the realm of ideas alone or even primarily in ideas. The whole point of Marxism is to show the increasing and necessary defectiveness of capitalism for humanity but most particularly for the proletariat and the way out of it. Society needs socialism if it is to be efficient and ultimately if it is to survive. That is because the old forms can no longer function as they used to. They may be capable of producing bigger and better machines but the superiority of socialism lies in its ability to harness those machines in a way which would fully release their potentiality.

Modern Forms of Decline and Decay
Two things are thereby occurring. Firstly, there is an increasing gap between what society is capable of producing and what it is producing with the existing means of production. Mass unemployment reaching almost societal proportions in the third world, the destruction of goods which cannot be sold, the removal of land from production because it is too productive, the increase in the production of useless products from arms to trivia, the increasing proportion of the economy devoted to parasitic forms like finance, advertising etc are well known aspects of the modem economy. They have all been described in detail for decades and contrasted with the poverty and even starvation or semi-starvation of the majority of the world. There is no need to go further into this discussion because it is so well known. From this point of view the period 1940-1973 is an exceptional period of growth.

Secondly, there is an increasing antagonism between value and planning. Although Ken has not mentioned this aspect except indirectly, it is clear that we differ on this point. The anarcho-Marxism of some Italian schools argues that planning is a form of capitalism. Hence they and their followers argue that the USSR was capitalist and that socialism is the highest form of capitalism.3 Bukharin argued on the contrary that planning would gradually evolve into socialism in partnership with the market. Trotsky and Preobrazhensky saw the market as the enemy which had to be fought. It would have to be gradually phased out. Both Bukharin and Preobrazhensky agreed that there could be no market under socialism but they differed on the extent to which plan and market could co-exist in the pre-socialist transition phase. I am arguing that we are in a global transition in which the forms of proto-planning or pseudo-planning which I have preferred to call organisational forms stand in conflict with the market.

It is not a question of the two forms being contradictory and so interpenetrating each other to form something new. The two sides are in direct conflict. One or other must win. We cannot both have planning based on direct democracy with human needs as the sole criterion for production and also production for profit with its attendant alienation, abstract labour and domination over the individual. The ’planning’ of the factory to which Marx referred has been vastly extended today both within the firm and between firms. It does not matter whether the firms are nationalised or not. The imperative given by the socialisation of production and hence the increasing integration and globalisation of production is towards greater and greater conscious decision making by those who control production. Whether that is done by direct command or through indirect forms has its own importance but it is of secondary interest.

The denationalisation of the British utilities companies operating in the spheres of water, gas, electricity and the phone has not led to less ’planning’ of these areas. One may argue the reverse indeed. Their prices are scrutinised and effectively controlled by an outside body, which is in the end a political body. Many workers have been laid off but that is another matter. I would argue that the over-employment characteristic of government-controlled industries is an exemplification of lack of control and even chaos. It is a pragmatic political response. Trotsky long ago criticised these forms as a sham form of the reduction of unemployment.4 ’We will face the need to dismiss male and female workers.... There can be no doubt that the disguising of unemployment represents the worst, least real, and the most costly form of social security’ (my translation). In what sense is the market now in greater control than before? Prices and profits are externally controlled. The industries are monopoly suppliers. Attempts to introduce competition are palliative rather than real. To have genuine competition there would have to be a large number of suppliers of the goods or services involved. That is impossible. Previously these industries also operated on a profit and loss basis, but one with a different political imperative.

The Question Of Monopoly
The point is that the same situation obtains in most important spheres of production. Agriculture in Europe is largely controlled from Brussels. Chemicals are dominated in Europe by a few giant firms which have an effective and extra-legal cartel. The fact that cartels may be fought or outlawed by governments does not mean that they do not exist. Few people believe that Rockefeller lost control of Standard Oil when it was divided up. The South African firm Anglo-American gave a mining company to the Afrikaners over twenty years ago and is now doing the same for blacks, but everyone knows that the dominant power remains with Anglo-American.

It is true that firms may be reduced in size and replaced by others though even this is exaggerated. Prudential Insurance in the UK owns 3 per cent of all the shares on the London Stock Exchange. Wallenberg owns over 30% of the shares on the Swedish stock exchange and Deutsche Bank in Germany has controlling stakes in a large number of the most important German firms. Rockefeller interests run right throughout the United States economy. The only challenge comes from the increasing globalisation of the national economies. Yet this is clearly only a temporary phase before the world is divided in the same way as the individual countries were – among a few giant firms. There are two tendencies. One is for the whole economy to be divided up among a few finance capitalist interests and the other is for production to be increasingly monopolised. The number of indigenous car firms in every country has been reduced to very small numbers. In the United States there are effectively just two indigenous firms. In Japan there are more but there are in fact probably only three which will survive.

The Case of IBM
Ken has taken IBM as an exemplar of the decline of monopoly, as it was once responsible for 70 per cent of the world computer sales, but it is now in financial trouble. Yet it still dominates the industry. Its sales are a still a multiple of those of any other firm. It is worth analysing the problems of IBM to show the incorrectness of the view that competition is the order of the day. IBM held a monopoly within mainframe production. It was not the only producer and it could not compete at he level of the specialised super-computer. At most points in its existence there were other producers. A number of points need to be noted however.

Firstly, IBM was very largely in the producer goods sector. As a result, like other producer goods firms, it could charge very high prices for its goods. The reason why enterprises selling producer goods to other producer goods firms can charge prices with little relation to costs is not difficult to discern. Businesses can write off costs against tax but they can also raise their prices to the consumer goods firms, which in turn can write off these costs against tax and simply raise their prices to the final consumer. Because the costs to the consumer goods firms are similar for all such firms there is no question of competitive advantage.

IBM, however, was in a special position within such producer goods enterprises in that it was supplying a component so essential to the operations of the firms that it could take advantage of that situation. It did so. It ensured that its software was unique and that the customer had to update with IBM itself. This was not just a monopoly but a super-monopoly which was using its position to gouge its victims. It really did not matter whether other firms could supply superior hardware as the customer was stuck with IBM software. The costs of changing to another supplier firm were therefore often enormous.

The super-profits made by IBM were used to extend its marketing operations in order to ensure its continued dominance. Its failure was inevitable in that it became essentially a financial operation which was parasitic on the industry. Once it was called upon to compete in consumer goods industry it failed, because it could not build in those huge margins of profit.

Nonetheless it is instructive to view the modem computer industry. Insofar as computers are not being used as wordprocessors or games but for the conduct of enterprises, IBM still remains a major force, if not the major force in the industry. Its attempts to engineer its own dominance have consistently failed in the consumer goods section. Nonetheless, there is no other firm which has such an integrated production mechanism for computers. It produces its own chips, boards etc, unlike its competitors which essentially buy in many or all of their components. The problem is that the consumer software is no longer under their control and software is now driven by ease of use, something which IBM took care to avoid in its years of dominance. Hence it cannot regain control as the computer standard is determined by an existing base of consumers.

Nonetheless, in the producer goods sector IBM is in a much better situation. The assembly computer firms like Dell, Gateway etc cannot really compete in service for industry. IBM has the engineers and programmers to deal with most eventualities. Apple is not much better because it is also based more on ease of use rather than on performance. It is therefore not surprising that it was largely confined to schools, professionals, small businesses and the niche markets of DTP, painting etc. The other more serious computer professionals like Sun, Hewlett Packard etc constitute a bigger problem for IBM but even there they are limited. They are more orientated to business but none of them have the world wide sweep of IBM or the computer range provided by IBM. The consequence is that IBM must remain the company of choice for the internal workings of large multi-nationals.

The conclusion to be drawn is as follows. Firstly, IBM is an atypical multi-national in that it had a genuine single firm control over the industry for a period of time. There are few industries like that. Secondly, IBM was atypical in that its dominance permitted it to develop into a spedes of financial operation which virtually held its customers to ransom. Such control could not last under any conditions. Thirdly, IBM remains the premier monopoly supplier of computers in the market. Anyone who doubts that can simply look at its high prices, its quality of service and its lead in the market and its world sales which are over 65 billion dollars per year.

As regards monopoly and computers it is be noted that the entire chain of computer manufacturing is dependent at crucial points on a small number of suppliers. Intel supplies the processor for 90 per cent of the micro computers produced. Its only real challenger was Motorola, which had a superior chip but lost out to Intel because IBM chose Intel. Even today the relatively small firms producing compatible chips like Cyrix and AMD are little more than fleas on the big dog. 60 per cent of the epoxy glue required for the chips is produced by one Sumitomo factory which burned down in July 1993, so causing a world-wide shortage of chips. These two examples could be multiplied throughout the chain of production. It shows that a single supplier is rare but many suppliers of the same product are just as rare. It is more usual for there to be a small number of producers or suppliers, who are in collusion, whether tacitly or by agreement. The agreement does not have to be one which excludes price competition. It might simply ban competition below certain limits.5 The forms of modem competition have been extensively described. The point is simply that value governs price more and more indirectly under modem conditions.

The Decline of Value
This is a crucial point. I am arguing that if we take Marx's famous discussion of the logical end point of capitalism being one in which there are only machines and no workers6 then we can project various stages in that movement towards that end. The particular end may never come under capitalism. Instead, however, we may witness a gradual movement towards it. Under those circumstances, either value gradually expels itself from the economy in a direct manner or prices come to be relatively independent of value. In effect prices in general rise above value and are then paid for at the point of consumption either by the government or by the worker. We can argue that the surplus-value is extracted at the point of consumption or that the surplus-value is extracted by paying the worker far below the potential value of his labour-power.

That last statement is obscure. The worker is normally paid the value of his labour-power which is equal to the cost of production and reproduction of the worker. If, however, the real cost of production of the commodities he requires declines, substantially, he can either have a much higher standard of living with the same pay in value terms or the capitalist can increase his surplus-value through the rising productivity. If, however, there are many fewer workers so that a decline in relative pay, while maintaining or increasing real income, is not enough to maintain profit overall, then the capitalist class must raise prices in general above value in an inflationary economy. In a non-inflationary economy the capitalist class will cut wages. Then, however, it has the problem of realisation. In a modern Keynesian economy realisation is taken care of through deficit financing, when required.

In order to pursue this line of thought, I will pose the question in its extreme case, where machines make machines and hence the worker is largely expelled from production. In that case there is little or no value in the economy.

If there is no value in the economy but the worker must pay for his production and reproduction then his exploitation is of a different form than that through value. The capitalist class is directly allocating itself a particular share of the surplus product by assigning arbitrary prices to the commodities. The commodities would then be sold to workers whose incomes came either from the government or from charities. (In such a case the income of the government or the charities could come from taxes or gifts from the capitalist class.) Workers' incomes in turn would be arbitrary, dependent on their relative political strength. It is possible to imagine the majority working in the unproductive sector and the rest being in education, on pension or unemployed. In that case, most workers' incomes would be dependent on the government and hence the size of their incomes would become a political decision. Only in the case of those workers who were engaged in the exchange sector would the situation be different.

The point is that workers would not be paid the value of their labour-power and they would not sell their labour-power under those circumstances. The government would accept an obligation to employ workers and pay them according to rates achieved in a bargaining process. Health, education and other services may be provided free or they may not. If they are not given free then workers would have to pay arbitrary sums to maintain them. If commodities do not have value then the commodity labour-power also has no value. In this context it means that workers would be engaged in concrete, not abstract labour and hence their exploitation would be arbitrary. There would be no clear division between labour time given to the employer and labour time used for subsistence purposes since the line would be arbitrary. In so far as the government could be said to be controlled by workers then they would be working for themselves and they could not be said to alienate their labour. If, on the other hand, the government was controlled by this tenuous ruling class, then workers could be said to be exploited depending on the relative power of workers and exploiters. In short, the point is that workers could be said to sell their labour-power in so far as they gave up control over it for a period of time in order to perform a service or obtain a product under the control of the employer. On the other hand, the worker could be said not to have sold it as a commodity in so far as they were not paid the value of their labour and they could not be controlled in production itself.

Such a situation could not last very long. At least under contemporary capitalism the capitalist class does actually own or control capital. It has several functions. In the first place, small to medium size businessmen can wholly or partially manage their own businesses. In the second place, big capitalists raise the necessary capital for their own expansion, whether by takeover or internal enlargement. In the third place, it enforces an external market discipline on the internal life of the firm through the need for a particular rate of profit. In the case of a firm where real costs did not exist, these functions become either meaningless or worse, a charade. Put differently, in the absence of value both abstract labour and commodity fetishism cease to exist and hence the very form of control needed to maintain capitalism perishes. There is only an external husk.

I am in fact arguing that the world is moving closer to this ultimate situation, where value ceases to exist. It may never reach it under capitalism but the approach to that situation has enormous consequences. Looked at from another angle we are only talking of the increasing socialisation of production. The closer we approach socialism the more features from the future influence the present. The future forms are always in the womb of the old society, but since in the case of socialism its forms cannot come into being, proto forms come into being. Nationalisation is an essential prerequisite of socialism but nationalisation in itself is not socialist. On the other hand nationalisation is not capitalist either. The organisation of the micro and macro economy is not socialist but neither is it capitalist.

The Question of Money and Labour-Power
Ken places great store on a theory of money and of the sale of labour-power at the present time and he is right to do so. The illustration in the last section provides the basis of my argument.

In short I argue that money at the present time is nationalised money and thereby it is money and not money. Labour-power is both sold and not sold. In other words both are in decline as categories.

Money comes into being perfects itself and then declines like all other categories. For centuries money served as an imperfect means of circulation, and means of accumulation. It was not a universal equivalent. As long as value had not established itself there could be no measure of value and hence no form of true accumulation and hence no world form of money. For Marx money is only truly money when it becomes world money. Today it is self-evident that the sphere of money has been severely limited in a number of ways. Even now the former Stalinist countries do not have money. The whole apparatus of the world bourgeoisie is bent on restoring money in those countries and curiously failing to do so. But it is not just in those countries that money is not world money.

It must not be forgotten that before 1931 gold was world money. The world was on a gold standard. It could be argued that we are moving in that direction under the influence of the United Stales and the IMF. That would be a naive understanding of the present time. Apart from a brief spell when Reagan was president, few politicians talk of the restoration of gold. The dollar is no longer as acceptable as it was. The Deutschmark is looking tarnished. Sterling is now a Joke. No ruling class is prepared to give up power ever is own central bank and so the emission of money. The attempt to move to a European Union with a single currency looks dubious today, but even if a European currency were established it would not alter the fundamentally divided and organised form of money.

Modem money can also not function properly as a measure of value because value itself is undermined. The immediate effect is that of inflation so rendering paper money difficult to use as a store of value and even as a measure of value and medium of circulation. Modern capitalists are constantly forced to reinvest in order to avoid the dissipation of their holdings. The result is the expansion of finance capital – often into bizarre forms like holdings of Great Masters. When savings must take the form of paintings we know that the currency is defective.

The form of finance capital itself is the money form torn apart from production, when ’capital is the direct unity of product and money’.7 The disruption of this unity is nothing other than the disintegration of capital itself and so of the capitalist system. A crucial aspect of the decline of the system, as mentioned above, is precisely its disintegration both in its categories and in actual life. The system functions less and less well as the forms of mediation which bridge this disintegration progressively fail.8 The fact that the system functions less well as a system does not mean that the standard of living drops in the metropolitan countries or that the means of production may not be developed. Rather it signifies that the system must use forms alien to itself in order to survive so necessarily changing itself and making its own overthrow systematically easier over time. In the instance of money we have an independent spontaneous form which becomes more and more a conscious form of control over capitalism.

As regards the sale of labour-power, that too is limited. Workers in developed countries receive both unemployment or social security benefits and the advantages of a small or absent reserve army of labour. As a result, workers have greater control over their labour-power. Trade unions, pro-labour laws, and workers' struggles in general have resulted in a situation where the workers sells his labour-power but the price and value of labour-power may diverge for long periods. The capitalist often does not have the right to direct labour as he prefers but must consult the workers interest. This does not necessarily imply that the worker is well off but only that the sale of labour-power is more restricted than in the heyday of capitalism. It is not enough to say that workers must sell their labour-power. It makes even less sense to talk of the third world, where workers often sell their labour-power below its value, as if it is real capitalism, because there is a massive reserve army of labour there.

Behind the change in the value of labour-power lies the decline in the reserve army of labour in the developed countries and the parallel decline in commodity fetishism. The real control over the worker is exercised by these two forces. Both are far less powerful than they were. As a result, the worker today has to be controlled by the forces of the state or by an explicit ideology such as racism or nationalism. The classic economic forms, in other words, have been replaced by political forms. Put differently, the domination over the worker has become more explicitly political than it ever has been precisely because the control over the workers' labour-power is taking a less economic form. It is no accident that we have witnessed this century a series of dictatorial capitalist forms which place the worker under direct compulsion to work. Fascism and various other kinds of authoritarian rule have tried to raise production through direct force.

If value is in decline it must follow that is basis – abstract labour – is in decline. As there is a shift towards service industries and needs-based industries it is obvious that work cannot be measured and controlled in the same way as manual work, in spite of attempts to do so. Even in the old industries their mechanisation leads to the replacement of the old workforce by machines and skilled workers whose time is less controllable. On the other hand, every attempt is made to control the worker in the old way. The problem is that on the one hand their work is controlled but on the other the controls are more limited and there are more differences between industries and firms as a result. In other words, the two tendencies, that of reduction to abstract labour and of individualisation, are in conflict. The worker is reduced to the level of an abstract labour but in important ways he is less or more than an abstract labourer. This is no more than the very basis of the conflict between value and proto-planning or organisation.

I have only tried to take up a few of the points raised by Ken in order to show that, in my view, there is a decline not just of capitalism but of all categories. I have tried to argue that just as other societies have declined so must capitalism. Furthermore, it seems to me that decline has been with us for at least a century. The debate is a useful one because it enables the clarification of ideas, which is only possible in this case because we share the same basic assumptions.


1. Karl Marx, Afterword to the second German edition, Capital, Vol.1, Moscow 1961, p.19.

2. Leon Trotsky, The First FiveYears of the Communist International, Vol.1, New Park, 1973, p.257.

3. Geoffrey Kay, Development and Underdevelopment: A Marxist Analysis, Macmillan, 1975, p.85.

4. L.D. Trotsky, Dvenadsatyi S'ezd RKP(B), Stenograficheski Otchet, Izd. Politicheskoi Literatury, Moskva, 1968, pp.324-5.

5. ’"The vulnerability illustrated by the Sumitomo Chemical explosion is that a disproportionate share of the world capacity [of certain key materials] may be produced at a single site", says Sam Harrell, chief of strategy at Sematech, a US Chip consortium in Austin, Texas. Some chokepoints, such as Sumitomo Chemical's dominance of the epoxy resin supply, resulted when leading manufacturers invested so heavily in research and development as to discourage competitors. Others arose naturally from the economics of manufacturing a relatively small volume of a complicated product. Still others emerged after leading companies locked out competition by vigorously protecting their intellectual property. Some observers, however, see chokepoints as almost inevitable in the electronics industry. They note that demand for some products is so small there's room for only one supplier. "In a lot of cases, this kind of concentration turns out to be efficient", says G. Dan Hutcheson of VLSI Research Inc. in San José, California. Others note the expense of creating additional sources. "What do you do, recommend that [Sumtomo Chemical] diversify production and raise costs?" asks Peter Wolff, an analyst at Kidder, Peabody and Co. in Tokyo. "It's a lot cheaper if we ask them to install sprinklers." Whether the concentration of facilities producing critical items is viewed as risky or efficient, such chokepoints are in fact now strewn across almost every stage of computer manufacturing. A snag at any one could derail production, force up prices or seriously delay new products.’ Source: Wall Street Journal, 31 August 1993.

6. ’The increase in the productive force of labour and the greatest possible negation of necessary labour is the necessary tendency of capital’: Karl Marx, Grundrisse, Penguin, 1973, p.693.

7. Ibid., p.332.

8. See my article on this point in Critique No.26, where I define decline in these terms.