In my previous post I showed that unemployment in the capitalist mode of production has its genesis in employment. Unemployment is not the result of a lack of means to employ the unemployed, but results from the fact that the steady improvement of the productive power of labor displaces an ever larger portion of the working class from all possibility of being employed productively.

In the mode of production, to be employed productively means the worker is employed directly for production of value and surplus value. It has to be understood that capitalism is not the production of useful objects in general, but useful objects only insofar as these objects also contain surplus value, i.e., profit.

With development of the productive forces — of machinery, technology, science and the division of labor — an ever larger mass of useful commodities can be produced in the same period of time. On the other hand, a given mass of commodities can be produced with a diminishing expenditure of human labor.

The capitalist is not concerned with the ever growing mass of useful objects that can be produced, but with the diminishing expenditure of human labor necessary for production. This human labor alone is the source of the profits that is the sole aim of capitalist production.

Capitalism, therefore, presents the paradox that as material wealth increases conditions for realization of surplus value diminishes. The very improvement in the productive forces that allow creation of historically unprecedented masses of material wealth, is expressed in the increasingly difficult conditions for the production of value and of surplus value.

But the motive of capitalist production is the production of value and surplus value, of profit. The production of material wealth is subordinated to the capitalistic necessity that this material wealth contain value, and exists as wealth for the capitalist only insofar as it contains values. Labor that produces material wealth that has no value is, for the capitalist, unproductive labor — no matter how useful the product may be.

However the capitalist has no idea of the value contained in his commodities; thus, like every other seller of commodities, he can only find out how much value he has produced by trying to sell

his commodities in the market. If he cannot sell all of his commodities, the unsold portion is only then revealed to contain no value.

Although unproductive labor appears to have its genesis with unsold commodities, in fact, the unsold commodities are already themselves the product of unproductive labor. This is labor that produces an object that has no exchange value at all — that cannot be sold for hard cash. Despite this, however, empirically, unproductive labor appears first as a mass of unsold commodities and not as an expenditure of labor that produces no value.

The bourgeois simpletons take this appearance for reality and declare there is “insufficient demand” for the commodities and by “demand”, they only mean “money demand”, i.e., a customer with the cash in hand to purchase the commodity.

When this situation first arose in the Great Depression Keynes suggested that the problem of “insufficient demand” could be remedied by advancing excess capital to the state on credit. Keynes argued businesses would not expand their production operations until profits began recovering and output increased:

“Thus the first step has to be taken on the initiative of public authority; and it probably has to be on a large scale and organised with determination, if it is to be sufficient to break the vicious circle and to stem the progressive deterioration, as firm after firm throws up the sponge and ceases to produce at a loss in the seemingly vain hope that perseverance will be rewarded.”

Now you have to mark what Keynes is arguing for in this passage: The unsold commodities piling up in warehouses in every country was the product of labor already expended unproductively on their production. Keynes simply argued that the costs of this unproductive labor already laid out by the capitalists for labor that produced no surplus value and thus already lost could be transferred to the state sector by means of loans advanced to the state for this purpose.

The state would absorb an ever increasing mass of unproductive labor time by taking on an ever increasing mass of debt from private capitals.

In this way, the overproduction of private capitals would be facilitated and subsidized by the steady accumulation of public debt. The state would pay interest on the public debt, adding to the mass of profits and thus offsetting the falling rate of profit. Thus, the “privatization of profits and the socialization of losses”, that was so evident in the financial crisis of 2008, had its genesis in Keynes’s scheme for escaping the Great Depression.

So far as I know, no labor theorist has ever actually described how this nasty little scheme works: By extending credit to the fascist state, private capitals are able to dump their unsellable commodities on the public, while ensuring a steady stream of lucrative interest payments from the fascist state.

And here the role of the state cannot be overestimated: in a credit transaction the buyer himself stands in place of his money. As Anitra Nelson explains, in labor theory the buyer himself and his reputation is the means of payment: The validity of a transaction, therefore, rests on the ability of the individual to make good on his IOU and in this regard, the state, the issuer of the currency, has no equal as guarantor of its debts. While debt increases exponentially with chronic or absolute overproduction, in the final analysis the only debt that matters is that of the fascist state.

Debt increases not because of the lack of sufficient means (cash) to purchase the commodities, but because the commodities themselves have no exchange value and, therefore, cannot be sold unless the means to buy them are advanced to the buyer by the seller. On the other hand, real (i.e., commodity) money falls out of circulation because exchange relations cause it to be exchanged below its value.

These two appear side by side: a mass of ‘commodities’ lacking any exchange value and withdrawal of a mass of commodity money into hoards. The resultant “credit crisis” produces the breakdown of production based on exchange value, forcing the state to step in and substitute its own valueless tokens in place of money.

So, is there a limit to this silly ponzi scheme? I will look at this next.