After coming across David Yaffe while reading Simon Clarke’s book, The State Debate, I figured I would give a paper he wrote with Paul Bullock, “Inflation, the Crisis and the Post-War Boom”, a once over. This paper, written in 1975, attempts to understand the depression of the 1970s through the lens of labor theory. I find it interesting because the authors make this rather bold, and in retrospect, horribly mistaken pronouncement:

“No nation’s currency can displace money of the world, gold, as the final means of international payments.”

The weirdest thing about this Yaffe and Bullock paper, however, is that it already has the explanation for the 40 years persistence of the dollar as “world money” and why, consequently, the writers were wrong:

“As the crisis of overproduction of capital deepens, capital cannot be reproduced since commodities cannot be sold at their prices of production, capacity is underutilised and workers are unemployed.”

The only thing they had to do was remove their blinders and recognize overproduction was now a permanent feature of the world market. If there is overproduction of corn, the state can step in and buy the corn with its inconvertible fiat. This does not imply unequal exchange of a valueless token for a commodity precisely for the reason that the corn, cannot otherwise be sold and, therefore, must have no exchange value at all.Since the corn has no exchange value, it can be purchase with a “money” that has no value. Likewise, if there is overproduction of everything at once, the same can be done — since the paper can be created in any quantity.

Yaffe and Bullock write,

“credit financed expenditure and state deficit financing … enables unemployment to be kept at politically acceptable levels.”

This statement is ambiguous at best. Politically acceptable to whom? And what is meant by the term ‘politically acceptable”? Well, they offer this idea:

“The survival of the capitalist system becomes a political struggle between the ruling class and the working class, as the ruling class attempts to restructure capital towards greater profitability.”

So there is this struggle between the capitalists and the workers, but is this all? What about the competition among capitalists and the competition among workers? Marxism is all about struggle between classes, but ignores competition within classes. And they ignore this latter conflict even though the conflict within classes determines the conflict between classes.

How does this cripple the analysis of the authors? The action of the state is not determined by the class struggle, but by competition within the capitalist class. Keeping employment to “acceptable levels” through credit financed expenditure and state deficit financing may also address the need of the workers to sell their labor power, but it is in no way the preferred policy of the fascist state on this account. Rather, the state chose to address unemployment in this fashion because it addresses the need of the capitalists for constant expansion of absolute surplus value.

To put it in terms our Marxists might just be able to pound into their thick fucking skulls: you can address unemployment either by constant expansion of employment through credit financed expenditure and state deficit financing or by simply reducing hours of labor. The first allows for the increase in absolute surplus value; the second does not. Now why do you think the capitalist state chose the first method? If competition within the working class could have been reduced and their organization and fighting capacity improved, which method of addressing unemployment do you think they might have chosen — falling into debt in order to secure basic subsistence or reducing hours of labor?

Yaffe and Bullock had all the information they needed to understand fascist state economic policy, but they could just not connect the dots: First, they knew the crisis is caused by overproduction; second, they knew this leads to intensified class struggle — although the ignore conflict within classes; third, they know the problem began with “the near continuous crisis conditions of the inter-war period”; fourth, they know Keynes solution to this was to depreciate the currency against gold, or “a policy of ‘price rises”; fifth, they know this entailed, “expansion of production through credit financed expenditure and state deficit financing.”

Finally, they know the theoretical task of the day:

“To show how the central tendency of the rate of profit to fall can express itself as inflation and eventually stagflation”

This theoretical task, they divide into two parts: a. “to examine how the capitalist experiences this tendency and attempts to maintain profitability by increasing prices.” and b. “to consider how these prices set by the individual capitalist can be realised – that is how commodities can be sold – exchanged for money – at these prices.”

Needless to say that when it comes to the second task: FAIL! And sure enough: The collapse of Bretton Woods is presented as the US devaluation of the dollar — not as the dollar replacing gold:

“The higher productivity and, therefore, growing economic power of Japanese and German capital forcibly and belatedly expressed itself in the devaluation of the dollar in 1971.”

Now here is the thing: Yaffe and Bullock already knows Keynes proposed beating a depression by depreciating the currency in the 1930s — so depreciation this has been going on the entire time from the 1930s to 1971, when the Bretton Woods agreement collapsed. The collapse of Bretton Woods, therefore, could not be about devaluing the dollar. Devaluation of the dollar was already a means to fight overproduction — a reaction to overproduction of capital throughout the world market.

This real depreciation of the dollar had lead to collapse of the Bretton Woods agreement, not the reverse; which is to say, the US could no longer maintain the fiction of the official peg of 35 dollars to one ounce of gold. This was already clear through most of the 1960s, when the US and Britain conspired to manipulate the gold market. So, the collapse of the Bretton Woods agreement and the subsequent rapid collapse of the purchasing power of the dollar against gold is not the real story. The story is how, despite this collapse, the dollar remained the world reserve currency.

When the US stopped redeeming its valueless and rapidly depreciating currency for gold, why — in god’s name — did other countries continue to accumulate dollar reserves? Why did they continue to sell crap to the US in return for a currency that was not only valueless in and of itself but collapsing in purchasing power.

Simple: They had no choice. Who else was going to buy their crap? Remember: There was a depression in the 1930s — lots of unsold commodities (i.e., capital in the form of commodities) and massive unemployment. Keynes proposed to fight the depression by depreciating the currency; depreciation ultimately leads to the end of the Bretton Woods agreement. But — and this is the problem — overproduction of capital did not go away: there was still a lot of crap that would be unsold and a lot of people unemployed if the depreciation of the currency did not continue.

The reason why other countries continued to accumulate dollars is that unless they did they could not sell their exports! These countries could sell their exports to the US only so long as the US continued to depreciate the dollars — i.e., exchange valueslees tokens for commodities lacking any exchange value. And, to avoid hyperinflation these dollars had to be sterilized — which meant, the US had to borrow back the very dollars it paid out to purchase the goods it bought from export nations. Thus, when the world market exits the depression of the 1970s, the twin US trade and national deficits exploded.

Yaffe and Bullock had all the information they need to explain this in 1975 but could not connect the dots — although their explanation in 1975 was still light years ahead of Holloway and Picciotto’s in the mid-1980s.

There has to be a reason why so many Marxists — Holloway, Picciotto, Yaffe, Bullock, Caffentzis, etc — of so many different varieties of Marxism all managed to miss what was going on despite their alleged differences. And this reason cannot be because they did not have the analytical tools or empirical information to connect the dots. I personally think the reason why they all missed it was their obsession with the idea of class struggle.

For Marxists the capitalist mode of production may change form, but despite these changes, it goes on forever. In their view, the only interruption of this mostly cyclical reconstitution of capital is the class struggle that finally overthrows capital. So all of their focus is really on the class struggle, not the capitalistic process itself. They care about the mode of production only to the extent it acts as a predictor (a trigger) for an upsurge in the class struggle.

Second, no one has ever really worked out what it means when gold is replaced by inconvertible fiat currency as money. For all Marxist claims about the superiority of labor theory, they sheepishly adopt the bourgeois point of view that anything can be money. Money is the starting and ending point of the entire process of capitalistic self-expansion. What is serving in the role of money, therefore, is extremely important to the character of appropriation of surplus value.

If instead of commodity money, we now have a valueless token controlled by the state serving as money, this has deep implications for the mode of production. And if this valueless token is serving as “world money” the implications are staggering: Essentially, for the entire world market, capitalist self-expansion begins and ends with a token controlled by one fascist state.

Now, just think about what that means for Yaffe and Bullock’s statement:

“No nation’s currency can displace money of the world, gold, as the final means of international payments.”

History refuted Yaffe and Bullock: one national currency actually can and did replace gold as final means of international payments, because overproduction never went away.