Friday, February 12, 2016

Would Capitalism necessarily be destroyed if Human Labour fell towards Zero?

In a word: no.

Why? Because an economy with more and more automation based on private enterprise and private capitalist production could still sell its output and obtain money profits, if a government managed the demand-side of the economy by providing a guaranteed income (with, say, taxes on consumption, property, and ownership of financial and real assets and returns from those assets, with the shortfall covered by central bank money creation). As long as the balance of payments functioned successfully, a type of capitalism could continue.

That is, such an economy would still be a variety or type of capitalism: it would not be a command economy or the type of socialism envisaged by Marx.

Any Marxist response to this depends on Marx’s definition of capitalism. If one wants to define capitalism merely as a system of private production based on employment of free human wage labourers, then of course capitalism would cease once employment of free human labour ceased.

But this is just playing with words: setting up a narrow analytic definition of capitalism (true by definition), and ignoring other obvious real world aspects of capitalist systems of production.

If capitalism is to be defined in any empirically-defensible sense, it would need to use the following criteria:
Capitalism is a system of production as follows:
(1) where the vast majority of all capital goods are owned privately and where there is a high degree of private property (in land, houses, private possessions, etc.) and rights to private property;

(2) where the vast majority of all decisions on investment and production of commodities are made by private agents (though this does not exclude certain public goods);

(3) where there exists a class of free human beings who work for a wage, either from the private or public sector (though mostly in the private sector).
Now if (3) fell and fell or even ceased to happen in an economy where production is increasingly done by machines, then it would still leave us with criteria (1) and (2).

The new system of nearly fully or fully automated production would in essence still be a type of capitalism, because it would still have traits (1) and (2), which clearly lie at the heart of what capitalism is.

In short, it would not be a system where all business is owned by the state or where the state plans all economic activity, and there is no necessary reason why a capitalist mode of production must end even if human wage labour falls towards zero.

A Marxist agrees with me on the Labour Theory of Value and Fiat Money!

Well, sort of agrees in the post that can be read here:
Jehu, “Reply to LK: How Labor Theory of Value destroys Fiat ‘Money’,” The Real Movement, June 12, 2015.
My original post is here.

We must remember that for Marx money is a special commodity that itself must have a labour value so it can function as a universal medium of exchange and numéraire. That is the basis by which money can exchange for other produced commodities under the law of value in volume 1 of Capital. But fiat money utterly destroys this basis of Marx’s labour theory of value and his theory of exchange value in volume 1.

It would follow that the trendy modern Marxist idea of the MELT is entirely intellectually bankrupt too, under Marx’s dogmatic metallist theory of money.

In the post above, the Marxist author agrees that modern fiat money has destroyed the ability of money to properly reflect Marx’s labour values. How, then, could Marx’s theory still be right? The answer: modern currency is not really money at all! In addition, prices and labour values diverge as in volume 3, but now fiat money has destroyed even any relation between values and prices of production even as postulated in volume 3 of Capital, since this is (apparently) the trajectory of capitalism as supposedly prophesied by Marx.

What is the worth of this argument? It is refreshingly honest at the very least. But there is a strange fallacy of equivocation in the argument. The words “money” and “currency” are given different meanings: money means a produced commodity with the labour value used as a unit of account and “currency” merely a token symbol for the money commodity.

But actually the basic concept of money does not at all require either the metallist or Marxist mythology that it must be a produced commodity.

The basic definition of money is something which fulfils these three functions:
(1) a medium of exchange;

(2) a unit of account, and

(3) store of purchasing power.
The very idea that money must of necessity be a produced commodity was a delusion and error of economic theory. If fiat money is impossible, then our modern economies would have collapsed decades ago when money was severed from gold in the 1930s for domestic economic transactions, and certainly since the end of Bretton Woods (a system in which gold only had a role in the international payments system anyway).

Marx was fundamentally wrong about money and modern fiat money certainly explodes the law of value in volume 1 of Capital.