Tuesday, April 28, 2015

A Simple Question

So today's Financial Times is reporting:
Mr Tsipras ruled out defaulting on a €750m loan repayment to the
International Monetary Fund due on May 12 even though Athens is
struggling this week to pay pensions and subsidies, which he said must
take priority.
So here's a couple of  simple questions for the very important bloggers; tomb robbers; film reviewers; big I international big S socialists; big S socialist big W workers; former, current, and future Trotskyists; "left communists" and left Communists; autonomists; critical theorists; theoretical critics; moron shock-jock wannabees; progressive political economists; progressive economists; radical political economists; ultra-radical political economists; communiste theoristes; supersessionists; pre-mos, po-mos, and no-mos: 

Should Syriza make the loan repayment?   Should any support be provided to Syriza in its attempts to reach agreement with the Troika?

It's not that simple, someone says?  Insert favorite barnyard epithet here: Bollocks   It is exactly, precisely just that simple.  Opposing capitalism is really simple.  It gets complicated once capitalism is overthrown. 

Default on the debt.  No agreement with the Troika.  No support for the Syriza government's attempt to negotiate austerity with a "human face."  Don't sweat the simple stuff. 

April 28, 2015

Monday, April 27, 2015

Different Boy, Same Game

Here's the thing about history: it always, but always, out-goofs me.  I mean I've been known to use hyperbole, satire, spoof, sarcasm, exaggeration, and near-drunk hallucination to illuminate the macabre humor, the grinning madness that is the result of, and circulates with value production, but I'm an amateur, a naïf, when compared to what capitalism and its attenuated attendants come up with, and come up with constantly, and with straight faces...unlike me.   Example, you ask?  Example you get.  There's this gem, this perfect, this flawless, this naïf story:
Got to love it.  And I do.  I do so much that I'm going to reproduce the whole thing right here:
 After a frantic weekend the Greek government sought to break the deadlock in its talks with lenders today by reshuffling its negotiating team.

Yanis Varoufakis, the finance minister who made the global headlines in the aftermath of Syriza’s election victory will take a back seat, while the lesser known economic specialist in the foreign ministry Euclid Tsakalotos will lead the talks.  Though both men are western educated, fluent English speaking economists, their styles – and politics – are different.
Mr Tsakalotos is a classic Marxist of the New Left who, when he addressed a meeting in the British parliament last month, brushed aside calls by left Labour MPs for Greece to ditch the Euro on the grounds that “national” economic programmes do not work. Mr Varoufakis once described himself as an “erratic Marxist”; Mr Tsakalotos comes from that school of Marxism which learned from the 1970s onwards to make compromises with capitalist reality. 
He is not only softer spoken; he is very attached to the idea of Syriza as a reforming left-social government and existentially committed to the Euro. What is more, he is a longstanding member of Syriza, with a surer feel for what the party’s members will accept in the compromise that he’ll have to craft.
But the issue is urgent. Those who’ve seen the books in Greece say the country will be able to pay salaries and pensions this week, but that the cash flow of the government looks bleak in May. By draining the cash reserves of public bodies – local councils for example – Mr Varoufakis has been able to keep Greece afloat, but in a way that saps the resilience of such bodies – councils, hospitals etc – should Greece break decisively with the ECB.
To be clear, Mr Varoufakis remains in charge of the finance ministry, and of the government’s economic strategy. But by placing Mr Tsakalotos – who’s been involved from the start – at the head of the negotiating team, Greek PM Alexis Tsipras is sending the strongest possible signal that he wants a compromise to keep Greece inside the Euro.
A sense of the frustration on the Greek side can be got from a briefing document, originating inside Mr Tsipras’ office, which Channel 4 News has seen.
It speaks of “memorandum inertia”, complaining that Eurogroup negotiators have continually tried to unpick the agreement Mr Varoufakis signed on 20 February.
The briefing note states: “There is no agreement on basic topics of the negotiation between the European Commission and the ECB on the one hand, and the IMF on the other. For that reason they plan to draft an internal document writing down their common points and differences.”
The document claims that the ECB is at odds with the European Commission over the framework of discussions – i.e. it wants the old bailout not the 20 February agreement as the basis; and it claims the European Commission is open to ending repossession of people’s homes, and “does not consider massive layoffs to be an issue”.
In a further concession to its lenders, Greece will facilitate the work of EU and IMF teams in Athens: it had insisted all discussions go via politicians rather than officials and it is this – procedural rather than substantial – spat that lay behind the fractious end to Friday’s Eurogroup meeting in Riga.
In years gone by, it would not have mattered to the international bond markets what sub-genre of Marxist they were dealing with: this news knocked several points off Greek bond yields.
It prompted puzzlement among some journalists, who claimed Mr Varoufakis was already “effectively side-lined” two months ago when Mr Tsipras began negotiating direct with the EU.
This misses a vital point: Mr Tsakalotos has decades of political capital with the inner core of a couple of thousands Syriza activists who will have to take the decision on whether to stomach the compromise Greece will need to do.
He’ll have to face down the party’s left, which on the last count had 41 per cent of the votes for rejecting any deal with the Eurogroup. Given his non-party background, that was always going to be Mr Varoufakis biggest hurdle; now it will be jumped by someone else.
I don't know about you, but my favorite part is the bit about Tsakalatos being a "classic Marxist of the New Left who...comes from that school of Marxism which learned from 1970s onward to make compromises with capitalist reality."

That's classic Marxism, all right.  Not sure what school it is, maybe the London School of Economics or the Wharton School, but no doubt about it being classic Marxism.  I don't know why Mr. Mason limits the school to the classes of post-1970.  After all "compromises" "with capitalist reality"-- preserving and reproducing capitalist property, capitalist values-- is exactly what Marxism has been all about ever since....well, Bernstein for one; Kautsky for another; and Lenin, let's not forget Lenin and Trotsky who, in the "interests of the [Russian] revolution" of course, compromised revolutionaries in Turkey; who more or less, more and less, screwed the pooch as we like to say in the railroad biz, the pooch meaning the task, the task being the overthrow of international capitalism. Germany, anyone?  What leaders of "world revolution" would or could allow a murdering moron like Bela Kun to act as an agent of the "general staff"?  Case closed.

And beyond that?  Puhlease.  There's the Third International beyond Germany.  In China, in Britain, in Spain, in France, everywhere they could get their hands around the neck of the prospects for revolution.  That's classic Marxism too, isn't it? 

Not that the 1970s come up short when it comes to, well when it comes to coming up short.  We have the classic Marxists of the New Left (alma maters unknown) in Allende's Unidad Popular government.  There's a compromise that worked out well for both parties, don't you think?  And the ever classic Communist Party Espagne doing what it does naturally, or historically (same-same) in Spain during the waning of the light that was Generalissimo Franco.  And Portugal, don't forget the classic Marxist of Portugal, Cunhal, classically trained as a lawyer, and functioning as minister without portfolio in the various provisional governments of and around the MFA in the 1970s.  Look at Portugal now, huh?  Thing of beauty, that's what I think.

So we are getting a "classical Marxist" in place of an "erratic Marxist" when it comes to cutting a deal and this is a sign of the "seriousness" of a struggle against austerity, and for compromise?

Meanwhile, the Syriza government cuts a deal to finance overhauling weapons for the military and demands that public institutions, including hospitals and pharmacies, deposit all cash reserves (beyond what 15, 30 days of operating expense coverage?) into the central bank so that......so that the government can negotiate extensions with the Troika, pay its own operating expenses, provide an indeterminate amount of cash for pensions, and make payments to the IMF.  Now that's classic Marxism, isn't it?  Can't you just see and hear the old Moor applauding? 

This must be where my lack of classical training, committed vulgarian that I am, really shows.  I mean if I were facing a throw down with my creditors, and I wanted to protect the meager social services still extant in my charade of a government, I would keep that money out of the hands of the national central bank which is in the network of the European Central Bank and whose actions can be constrained at any moment by instructions from the ECB.

Yes, classic Marxism of the 1970s, available in compact disc format or......8-track tapes. This offer expires soon, so hurry.

 Meet the New Left classic Marxism that smells just like the classic Marxism of the old left, always looking for the next way to fuck to death the prospects for workers' power.   It's moments like these when I have to say "classic Marxism" does not exist.   There is only the critique of capital, which becomes the weapon for its abolition by social revolution.   

April 27, 2015

Saturday, April 25, 2015

Meanwhile (Place Holder)

Defiant political economists,  ex- and still-Stalinists,  current and former Trotskyists, "leftists" of all sorts (all sorts being the sorts that attend the Left Forum and/or the World Social Forum) have linked arms to form the Stieglitz Brigade. Marching ever forward in defense of the Syriza government in Greece, the Stieglitz Brigade demands that the European Commission, ECB, and the IMF, release €7.5 billion in "bailout" funds so that Greece can make the required payments of the debt owed to the European Commission, ECB, and IMF. 

There, in a nutshell is all you need to know about finance, refinance, and the critical role played by defiant political economists, ex- and still-Stalinists, current and former Trotskyists, leftists of all sort in the re-formation and recomposition of capital.  

"Long live the chains!" proclaimed the Spanish guerrillas battling Napoleon's troops.  

"More rope!" chants the Stieglitz Brigade.

Meanwhile all those ex and still and former and current and forum patronizers remained silent after this report surfaced in the Financial Times. The Syriza government has agreed to fund a €500 million program to refurbish five P-3B Orion maritime patrol craft.  

Tsipras, knowing that discretion is the better part of democracy, did not present the deal for discussion to the parliamentary defense committee.

The ministry of defense, headed by Panos Kammenos, leader of Syriza's partner, the ANEL party, defended the deal on "humanitarian grounds," the humanity being, in part, providing money to the state aerospace company and a private defense contractor.  Another part of the humanity is the immigration issue, as the Orion aircraft will extend the range and ability of the Greek navy to intercept vessels carrying immigrants fleeing the wars that the EU, NATO, and the US have inflicted upon the Middle East and Asia, thus preserving the basic humanitarianism of capital's wars.  

The five aircraft will be rechristened the Rwanda, the Somalia, the Haiti, the Bosnia, and the Herzegovina in honor of other great humanitarian missions. 

επόμενο άνθρωποι!

April 25, 2015 

Sunday, April 12, 2015

In No Particular Order...

1.  There was this from Michael Heinrich, arguing that real Marxists are those who declare they aren't Marxists, or at the very least, don't claim to be capital M Marxist.  Marx describes himself as 1. not a Marxist and 2. a "man of science." That, for Heinrich, not only sums it up, but is itself the it.  

Reading Heinrich, and not Marx, one would never guess that there was a specific content to Marx's "science,"  and that "science" was, in a word, history.  Nope, no sirree Bob, no way José, sorry Charlie, es tut mir lied Karl, désolé, Karl.  For Heinrich, the veracity, accuracy of Marx's analysis is not the point.

There is no point.  There are only targets.  And the first target is "the philosophical simplifications that are presented as 'Marxism,' those mixtures of simple materialism, bourgeois ideas of progress, and vulgar Hegelianism which are presented as 'dialectical materialism' and 'historical materialism.' "

I  think Heinrich means "vulgar materialism" not "simple" materialism, but your guess is probably better than mine.  Well, first off, Heinrich is a little bit late to the sing-along, isn't he?  I mean weren't the critical theorists, the Frankfurt School, the grad students and professors of Telos, the New Left Review, the CLR Jamesists, the Debrayists, the Althusserians,  etc. etc. ad nauseum slaying the stuffed dragons of simple materialism and vulgar Hegelianism forty or fifty years before Heinrich issued this epistle?   I could swear I remember something along those lines, right before or right after James, the Frankfurt School, the critical theorists,  Debray ad nauseum  found a home in this or that institution of capital-- you know, like a "nationalist government" here; a "socialist government" there; a tenured position somewhere?  

Heinrich takes on that cream-puff Lukacs, which is not unlike putting a dead fish on your line and then reeling the line in to show your prowess as a fishermen, arguing that whatever the "reasonable concepts of materialism and dialectic" may be, he doubts "one can put together the foundations of an ontology or all-encompassing method from them."

Right on, brother and all power to the people-- all encompassing ontology and all encompassing method are not Marx's pursuits. The specific historical determinants and limitations of capitalism are his pursuits.  

Heinrich states  that "it's not easy for Marxists to determine what 'Marxism' is."  And this difficulty is "Marx's fault," because only a small number of texts were published in his lifetime, all of the fundamental projects remain unfinished."  Yes, indeed.  But...and there's always a but...

Reading this epistle from Heinrich one would never know that Marx's "science" is the science of the critique of capitalism; of the determinations of capitalism that drive it forward, and put it into reverse.  One would never guess that indeed Marx's critique is the critique of that specific, historical condition of labor,  labor power as a commodity, as a value exchanged for values equivalent to, adequate for its reproduction. 

Actually, reading  Heinrich one would never know that Marx was not first and foremost a "man of science," but a revolutionist; that the critique he provides of capital is a critique that establishes the historical necessity, the practicality, for the proletarian socialist revolution.  Marx establishes that necessity, the practicality of that revolution in that his critique is the immanent critique of capital.  It is based on that condition of labor that is the source of value and its accumulation.  It is the granular logic of accumulation embodied in the existence of the commodity and of commodity production that dictates the barriers to accumulation.  It is the determinant of capital that is its negation.  

A target for Heinrich is those who refrain from an "engagement" with Marx's work.  Engagement for Heinrich apparently means reappraising the core of Marx's work, his critique of capital, his establishment of the material necessity for proletarian revolution, on the basis of "doubts" and "revisions" and the unfinished nature of Marx's work itself.

Except.....except in this regard Heinrich has sighted the cross-hairs on his own head, for the engagement with Marx's work is not, cannot be, solely the engagement with Marx's manuscripts.  It must be the engagement with Marx's own pursuit-- the critique of capitalism and the practical necessity of its overthrow.  Is capitalism as Marx described it?  Value production seeking expanded value?  Is that the necessity of capitalism?  Is that necessity predicated upon, and dependent on the reproduction of the means of production constituted as property and embodied by the class of capitalists in opposition to living labor, compelled as wage-labor, and embodied in the class of wage-laborers?  Does that opposition, the reproduction of that opposition propel the necessity for the overthrow of capitalism?

I know my answers to those questions.  I don't know Heinrich's, and I suspect he doesn't know either.  

Short version: there is no "Marxism," no "engagement with Marx" that does not confront capitalism, and the prospects for its overthrow. 

2.  Then there was this from Michael A. Liebowitz,  professor, author, pretty good writer and former adviser to the late Hugo Chavez's government in Venezuela.  Liebowitz gets right to the point, quoting Engels: "Marx was before all else a revolutionary. His real mission in life was to contribute in one way or another to the overthrow of capitalist society and of the forms of government which it had brought into being, to contribute to the liberation of the present-day proletariat." Good point.  

And not just parenthetically, Chavez's government, and "Chavez-type" governments, are forms of government which capitalism has brought into being; forms of government which do not, cannot, amount to the "liberation of the present-day proletariat."

Leibowitz  asks what can be said about Marxists economists?  Are they "revolutionaries whose real mission is to contribute to the overthrow of capitalism?"  The answer to that is "yes," but only if you happen to religiously watch, and believe, Fox News, subscribe to the Cato Institute's newsletter, regularly attend the workshops of the American Enterprise Institute, or associate with the brothers spelled Koch. 

Otherwise, not so much.  I would say, of course, that's because there is no "Marxist economics," economics being to wage-labor, to the commodity of wage-labor, what money is to exchange value-- that is to say, alienation to its dis-embodied max.  

There are other and worthwhile explanations of course, not the least of which is that you can't be a "revolutionary Marxist economist" in a vacuum.  You need a revolutionary working class, or at least sustained and increasing class struggle to make you or me a "revolutionary Marxist."  Without that, we are what we are-- academics, critics of capitalism, railroad operations experts, novelists, painters, translators, day-laborers, farm-workers etc. etc.

Leibowitz proposes, more or less, that a revolutionary Marxist economics must focus upon what Marx "misses" or omits from his critique of capital. Liebowitz claims that Marx's Capital does not really consider capitalism as whole: 
"It does not because it does not develop the side of the workers as subject, subjects who struggle for their own goals. At its core, that goal is what Marx referred to in Capital as 'the worker's own need for development.'  Indeed, the one-sidedness of Capital is most obvious when we recognize that it does not examine the wage struggles (precluded by the assumption of a constant standard of necessity) or the essential requirement of capital (once we relax that assumption) that it divide and separate workers in order to capture relative surplus value.
When we focus upon the side of workers, we recognize that they are more than merely the products and results of capital.  Their specific relation to capital within capitalist relations of production does not exhaust their nature.  They exist within many relations--families, communities and nations--and they interact with other workers.  Through all their activities within these relations, through all their struggles to satisfy their need for development they produce themselves."
Well, yeah.  And yeah, so what?  First, let's be clear, Capital is the critique of political economy; political economy being the ideal and ideological presentation of capitalism.  The three published volumes are subtitled The Process of Capitalist Production, The Process of Capitalist Circulation, The Process of Capitalist Production as a Whole.  The "appendix" fourth volume is the  Theories of Surplus Value.  The emphasis is on the material determinants of capital-- the antagonism in the organization of social production as private property.  That's one.

Secondly, there is a limit to Marx's critique of capital, to his exposition of the immanent critique to capital, and that is that the critique, like capital itself, sets out the basis, the necessity, for the overthrow of capital, but is not in itself that overthrow. We're talking classes, aren't we?  The point being that the exposition has to terminate and give way to the concrete social struggle against capitalism.  The proletariat creates itself as the "subject" of the struggle in the struggle, not before, and not in the texts of economists, political or otherwise.

So Capital at a critical point has to be supplemented and supplanted by organization of the "present-day proletariat" to confront capitalism.  Marx did indeed initiate this "transcendence," taking the logical, logical as meaning historically necessary, step, namely his work in the International Workingmen's Association, which he undertakes at the same time as he is drafting and redrafting and finally proofing Capital.

And not just parenthetically, Chavez's government, and "Chavez-type" governments, are not the supplementing and supplanting of Capital/capital by the combat organization of the proletariat. 

Thirdly, the present-day proletariat as a social force, as a class, as an "agent" is what it is because of its relation to and its existence as the reproduction of capital. The emancipation of labor, the "free association of producers" requires the abolition of class.  What Leibowitz thinks Marx omits, the proletariat in its family, national, community interactions,  is in fact that old "class in itself" existence.  The redefinition of the present-day proletariat as a revolutionary force, that old "class for itself" condition, is a condition of transition where the "proletariat as subject" is doing away with itself.  It is becoming no longer "the present-day proletariat. "

Essentially Leibowitz's appeal is for and to "Marxist economists" to make themselves relevant; to make "significant contributions by focusing upon Marxism's lost core, human development;" by "challenging the assumptions and fallacies of mainstream economics;" to "focus upon the health of the working class rather than exclusively the health of capital by developing the theory and measures of human development, including explicit considerations of the crippling effects of producing under capitalist relations."  Except....what does that mean?  How do we measure the "health" of the "present-day proletariat" under capitalism with a method distinct from the quantitative measures of health already in use?  Is the "health" of the proletariat, is wage-labor any less or more alienated at this point in capitalism in relation to that point in capitalism?

Leibowitz asks "Why, in short, aren't we doing what Marx did in relation to the mainstream economics of his time?" Because that is not the "next step."  What Marx did in relation to capitalism, developing the IMWA, an international organization of the "present-day proletariat" is.

3.  Then there's this, I mean this, without a link:  I read and still read Marx's passages on overproduction with a sense of wanting, wishing, almost willing him to make the connection between overproduction and the tendency of the rate of profit to decline as capital accumulates.  Most of the time I was, and still am, disappointed.  But there's always Chapter 15  Capital, volume 3, "Development of the Law's Internal Contradictions."  Refuting the notion that there can be "overproduction of capital" but not "overproduction of commodities," or that overproduction of capital is distinct from the overproduction of commodities, Marx writes:
It [overproduction of capital] is an overproduction of the means of production only in so far as these function as capital, and hence have to produce an additional value in proportion to their value in proportion to their value that has expanded with their mass; i.e have to valorize their values. 
It is still overproduction, for all that, since the capital is unable to exploit labour at the level exploitation that is required....at a level of exploitation that least increases the mass of profit along with the growing mass of capital applied; that therefore excludes a situation in which the rate of profit falls to the same degree as capital grows, or even falls more quickly than this.
Overproduction of capital never means anything other than overproduction of means of production--means of labour and means of subsistence--that can function as capital, i.e. can be applied to exploiting labour at a given level of exploitation; a given level, because a fall in the level of exploitation below a certain point produces disruption and stagnation in the capitalist production process, crisis, and the destruction of capital...The same causes that have raised the productivity of labour, extended markets, accelerated the accumulation of capital, in terms of both mass and value, increased the mass of commodity products, and lowered the rate of profit, these same causes have produced, and continue to produce a relative surplus population, a surplus population of workers who are not employed by this excess capital on account of the low level of exploitation of labour at which they would have to be employed, or at least on account of the low rate of profit they would yield at the given rate of exploitation.
Not bad, although it is not the low level of exploitation of the living labor at which the additional labor will be employed, but the high level of exploitation which however high is not high enough to offset the decline in the rate of profit due to the expulsion of living labor from the production process.

For labor to be expressed as value it must be compelled to present itself as a commodity for exchange with an equivalent to its cost of reproduction, i.e. as the time necessary for that reproduction.  The labor theory of value is the theory of labor-time as value-creating.  Additional value can only be the result of "new time" absorbed in production.

Now as capital expels living labor from the production process, replacing it with machinery,  the necessary time for reproduction of the wage drops; the surplus time increases.  The increased mass of surplus value must itself be valorized, and again the proportion of living labor is reduced, the overall time for reproduction of the wage equivalent declines.

No "new time" is contributed by surplus value once it is accumulated and embodied in new means of production.  The machinery reproduces its cost by transferring that value incrementally into the production process.

Every capitalist dreams of paying zero wages.  However, paying zero wages means that the working class cannot be reproduced or that there is no necessary labor time-- no, or no longer a need for wage-labor.  In both cases, for capital "new time"expressed as new value ceases to exist.  No additional value is absorbed by the means of production and acts as the conduit for transfer of the accumulated value.  There is no longer valorization.  Maximizing the rate of surplus value in order to offset a decline in the rate of profit must always, sooner and later, lead to destroying the basis for the reproduction of capital.  Devaluation is a "benign" expression of this process, a moment that says that the worst is yet to come.

Marx continues:
Moreover, capital consists of commodities, and hence overproduction of capital involves overproduction of commodities...If it is said that there is no general overproduction, but simply a disproportion between the various branches of production, this again means nothing more than that, within capitalist production, the proportionality of the particular branches of production presents itself as a  process of passing constantly out of and into disproportionality, since the interconnection of production as a whole here forces itself on the agents of production as a blind law, and not a law which...brings the productive process under their common control...If it is said that overproduction is only relative, this is completely correct; but the whole capitalist mode of production is precisely such a relative mode of production, whose barriers are not absolute, but only absolute for it, on its basis... It is because it is only in this specific, capitalist context that the surplus product receives a form in which its proprietor can make it available for consumption as soon as it has been transformed backed into capital for himself. If it is said, finally, that the capitalists have only to exchange their commodities among themselves and consume them, then the whole character of capitalist production is forgotten, and it is forgotten that what is involved is the valorization of capital, not its consumption. 
Even better than good.  What is involved is valorization, not consumption.  Value expanding value at a sufficient rate that can offset the very decline predicated upon its continued accumulation.
But the contradiction in this capitalist mode of production consists precisely in its tendency towards the absolute development of productive forces that come into continuous conflict with the specific conditions of production in which capital moves, and can alone move. 
4. And finally.... this, Greece.  The Syriza government has attempted to make its goal for debt modification a national, patriotic struggle... as if the debt, and debt requirements, impact all Greeks equally; as if debt modification will provide significant relief to those who are impacted disproportionately by the austerity programs.  The debt, bailout, restructuring have not impacted, do not impact all Greeks equally.  These programs impact the working class and agricultural producers disproportionately.  That's their purpose-- see above remarks about driving the working class into a condition where it cannot reproduce itself.

Historically, the struggle for a "Greek nation" has been the cat's paw of the "Great Powers"- the "Protective Powers"--  different combinations at different times of Britain, France, Russia and Germany-- in their attempts to block,  contain, dismember, and profit from the Ottoman Empire and its collapse.

Nationalism really is miserabilism, and the "left" that supports Syriza in this endeavor is not "progressive" enough to even be considered a "left-wing" of capitalism. 

Syriza's cynical play on the national card, demanding reparations from Germany almost exactly equal to the amount of Greece's debt to the troika,  is but another cat's paw, designed to protect capitalism as somehow separate from the accumulated debt; designed to deflect from the condition of labor in Greece which cannot be ameliorated without the emancipation of labor in Europe.

The next, immediate step, in essence the first step,  in Greece remains what it was: immediate repudiation of the sovereign debt.

S. Artesian
April 12, 2015

Wednesday, April 01, 2015

Johnny B Crude

1. Not so long ago, Pollyanna Pangloss, professor of political economy, public policy, and positivist philosophy predicted that the dramatic decline in oil prices would mean good things for capitalism.

Joined by all the little Pollyannas, professor Pangloss opined that the 50 percent decline in prices would bring yet another sunny day in the endless summer of capital's long wave. "Let's grab our boards and.....accumulate," said the professor.

Singing behind the professor's December, 2014,  acapella  rendition of  "Surfin' Safari" (music stolen from Chuck Berry) were the studio artists known as the Fantastic Baggies-- made up of the IMF, the US Federal Reserve, and the European Central Bank.  Declared the Baggies, in unison, "the low oil prices are a shot in the arm."  Mario the Draghi, given a chance to solo, grabbed the mike and crooned that the price drop was "unambiguously positive" for the world economy.

The "theory" was that for consumers-- and we're all consumers, aren't we?-- reduced prices due to expanded production of US "tight" shale oil would mean cheaper gasoline.  Cheaper gasoline would mean more disposable income.  More disposable income essentially would be a wage hike without costing employers anything.  And consumers, that's us, would consume more at... Starbuck's, Ikea, Loew's Cineplex, Amazon.

More consumption would mean more demand and more demand demands more supply and nothing supplies supply like more investment, and pretty soon, well it would be the most perfect of worlds.

For industry, the theory was that reduced oil prices would mean reduced costs of inputs to production, and lower costs means higher profits.

It was enough, almost, to make one stand up, turn towards North Dakota or Texas or both and pledge allegiance to Bakken, Eagle Ford, and the Permian Basin.  In fracking mud we trust.

2. Hasn't exactly worked out according to the theory. It can't work out according to theory, because the theory presumes that price determines consumption; consumption determines production; and production is last of the line in this long train of capital trying to climb the grade of accumulation.

Turns out, that price, in this case the declining price of crude, was the result of overproduction, and that the price deflation is the manifestation of the devaluation of capital that follows from a tendency of the rate of profit to fall as the means of production accumulate as capital.  Consumption, particularly consumption by all us consumers, is derived from profitability.   Overproduction is the acute manifestation of the chronic tendency of capital which is the falling profitability of production.

We have here a case of devalorization.

3. Once upon a time,  after1986 in fact, the mantra being mouthed in Texas went like this:  "Dear Lord, just give me another oil boom, and I promise not to screw it up."  Kind of true to its words, Texas since that bust has reduced its concentration on energy production.  Still the oil and gas sector accounts for 8.7 percent of the state's economic output.  Between 2009 and 2013, the Texas economy grew at an average annual rate of 4.4 percent, twice that of the United States as a whole.

But meet the new United States, same as the old Texas.  While Texas "diversified," oil and gas production for the US as a whole became an "overweighted" sector in the economy.  Fixed assets concentrated in the oil and gas sector at a rate far exceeding that for US industry as a whole. Between 2000 and 2013, the value of fixed assets in the oil and gas sector quintupled, while those in the entire industrial sector (includes manufacturing, utilities, construction, mining) increased 65 percent.  As a portion of the total fixed assets in industry, during these years those in the oil and gas sector tripled to measure 19.1 percent of the total. Since 2009, 70 percent of net new industrial investment (that portion above the amount required to replace investment in fixed assets consumed in production) has been dedicated to the oil and gas sector.

This concentration of investment in production is mirrored in the portion of bank revenues provided by the oil and gas sectors.  In 2014, oil and gas sector investment accounted for 11.8 percent of  Citigroup's banking revenues; for 14.9 percent of Wells Fargo Securities' banking revenue; for 7.4 percent of Bank America's revenues; 6.6 percent of JP Morgan's.

With US production achieving a record gain for a single year in 2014, with stored crude at its highest volume in 20 years, with the terminal at Cushing, Oklahoma literally topped out, with production from shale sources reaching 4.5 million barrels per day, amounting to half of all US production, the resulting deflation in oil price necessarily rebounds in reduced capital spending in this "overweighted" sector, and reduction in revenues to the still distressed banking sector.  Draghi might talk about a shot in the arm, but what counts is what's in the syringe.  In this case,  it's an overdose of heroin, not the jolt of methamphetamine.

The number of US rigs at work has declined by about 25 percent year-over-year.  The number of offshore rigs, laid up or scrapped has reached a 20 year high and now represents one-quarter of the total.   Schlumberger has laid-off 7 percent of its work force.  The oil "majors"-- ExxonMobil, Chevron, Shell, BP, ConocoPhillips, etc-- have reduced capital spending budgets between 12 and 20 percent.

What has not collapsed, however, is production from the shale fields.  In January 2015, US producer the number of new wells drilled was 28 percent the number drilled in June 2014.  Shale production however declined only 8.5 percent.  Greater production has been extracted from existing wells.  Even with budgets for new drilling slashed, the capital costs of drilling and bringing shale wells into production are so much less than in drilling offshore, or standard "vertical" wells, new shale wells can be brought on line to maintain production at high levels.  Nothing engenders more overproduction like overproduction.

4.  Oil, container ships, coal, steel, dry bulk carriers, these are all commodities, all capital, all values, all finished products at one moment, and all inputs, intermediate values to further production at the next moment.  The accumulation of capital becomes the biggest obstacle to the accumulation of capital. 

The "good times" are all in capitalism's past, and they were never there to begin with. 

March 31, 2015