MARXISM - devalorisation


 For Saturday 12 December 2015, radio 3CR

 Throughout the year we’ve talked each month about capital. And we’ve been doing so in relation to its on-going implosion. Today, I‘d like to tackle that implosion from a different angle. I’d like us to think about a solution.

No solution can suit everybody. What’s good for capital is bad for labour. From the point of view of capital, the solution has to be what Marx calls ‘de-valorisation’. So, what is it that has to be devalorised? i.e. what must lose value? And how?

 Share price

There’s a couple of issues to clear out of the way before we can get down to real de-valorisation. Two months ago, we were talking about the collapse of the share market. The media had reported that $50bn dollars had been wiped off the value of shares. Not quite. $50bn had been wiped off the price of shares.

            Devalorisation is not about the share price. Devalorisation is a drop in the value of physical goods and machines. Of course, any loss of real value can lead to a drop in the share price. However, that outcome is a matter of ‘can’ - not ‘must’. Indeed, the closure of inefficient production can improve a firm’s bottom line. The prospects of a return to profitability should push its share price up. Share prices register shifts in value. They are not value.

The stock-market boom was linked to the general price-bubble and to huge amounts of credit. We began the year by saying yet again why the cliché about a Global ’Financial ’ Crisis is a doubly wrong. First, what blew out after 2007 was not just a financial crisis. And secondly, whatever 2007-8 was, it’s turned out to be very much more than a ‘crisis’.

Yes, there was a financial panic in 2008. There’ve been a few more since. And there’ll be more in the not-too-distant future. But the financial domain was only where the implosion of capital erupted. One side effect was a gush about ‘fictitious’ capital, which not one in a thousand understood, instead treating it as synonym for finance capital.

That location is no accident. The Capitalist Mode of Production has always depended on access to credit. That means that every segment is always in debt. Even the world’s biggest banks ‘borrow’ from each other. Some form of money has to be fed into the circuits of capital every second of every day. If that flow is blocked - for any reason - the entire system seizes up. Once bankers become too afraid to lend, the system freezes. That’s what was happening in October 2008. The capitalist state stepped in to rescue the so-called ‘free’ market. Hence, ‘financial’ is utterly inadequate for explaining what’s still going down.

But we also pointed out that – by definition - no crisis can be permanent. A patient with a chronic condition will suffer successive crises. They are but symptoms – not the underlying disease.

Similar fevers have been breaking out throughout capitalism for seven years. The Economist in mid-November (14th) carried a feature article about three waves of this upheaval:

‘The world is entering a third stage of a rolling debt crisis’, it writes, ‘this time centred on emerging markets.’

The Economist went on to compare the recent doings of global capital with the gangster trilogy, the Godfather. It quotes Michael Corleone from Part III:

‘Just when I thought I was out, they pull me back in.’

It’s not at all Marxist, that is to say, scientific, to describe capitalist as gangsters,

Moreover, the rolling debts are more like Star Wars. And like Star Wars VII, this discussion is headed back to the origins of the implosion.

The bankers’ bank – the Bank of International Settlements – warned in June 2007 of a upheaval like the 1930s depression. Last year, its annual report warned that the steps taken by governments and corporations had done no more than to postpone the day of reckoning. That means that there hasn’t been enough factory closures, aka, de-valorisation. China is the prime case of a government propping up firms, and not only state-owned-ones, ‘creating zombie companies and entire zombie industries’, according to the Economist, p. 24) This year, the Bank seems resigned to the fact that the unthinkable has become the new normal. In short, the global economy is still standing only because the termites are holding hands.

Despite eight years of turmoil, the implosion of global capital is side-lined by the Left in Australia. It’s as if the mighty intellectuals got bored. For instance, only two out of the 104 sessions at the ‘Marxism Today’ programme for 2016 touch on the implosion. If that’s Marxism Today, then Marx wasted his life in writing Capital.

We talked in March about why capital has to keep expanding to survive.

That relentless drive results in excess capacity and over-production. Here’s a stunning example of the source of the implosion. Ten years ago, if all the car plants in North America, ie, Canada, the U.S and Mexico, had been shut down, the rest of the world could have produced more vehicles than there was effective demand for them.

Some car plants closed in the U.S. during 2009. But U.S. capital has shifted the ‘cost’ to its economic and political dominions. Hence, in Australia all three car-makers are to go by 2017.

Australia is unlikely to have any steel making by 2020. The shrinkages at Whyalla – 600 more jobs to go – and by Bluescope at Port Kembla are examples of de-valorisation to deal with global excess capacity. So is Palmer’s Townsville plant.

This is a good time as any to repeat the rule that Warren Buffett applies when deciding to invest.

What matters is not how much money went into the firm. All that matters is how much you can still get out.

Buffet has to be certain that there will be an effective demand for the firm’s products? Has a competitor locked it out by producing better quality goods more cheaply? When that happens, the existing capital stock will be worth no more than can be got for the machines as scrap metal.


The source of the on-going implosion is excess capacity.  That occurs from the inescapable il-logic of capital expansion. Hence, the only solution for capital is to kill off some of that excess. Which means what in practice?

 De-valorise means to lose value. Now we have a further pair of questions to answer. First, how did machines get to be valuable in the first place? Secondly, in what senses do they lose that value?

First question first. How did the value get there? The answer is essential for the expansion of capital. The machines are valuable because they were made by wage-slaves who added value to raw materials and semi-finished goods. In short, surplus-value is present in the machines. That’s why Marx called the machines ‘dead labour’.

They transfer little parcels of that value to each unit of production. The second points to the pain necessary for capital expansion to resume. Before the new machines can transfer any of their deal labour to new commodities, they are themselves commodities. The factory that makes them has to sell them at a profit. Only after that payment can the owners get their hands on any of the surplus-value that their wage-slaves have added. Only after that step can they extract any profit. Some of the profit is for their own living expenses. Some goes to re-invest on a larger scale for survival. It’s that new investment that interests us today.

In a modern capitalist system, the point of disruption from excess capacity is not from the over-production of consumer goods – not unsalable cars, fridges or food. Nowadays, the greater threat is from a seizing up of the effective demand for the machines used to make those consumer goods. In turn, out of that shrinkage comes a seizing up of orders for the machines that wage-slaves use to make the machines that other workers use to make consumer items.

The best kind of de-valorisation happens all the time under capitalism. This form of de-valorisation is essential for capital to expand and hence exist.

It occurs in the best years for capital as well as during the worst. This is where a tiny fraction of the value – dead-labour – present in the machines etc passes to the new commodities. However, this process is really re-valorisation on an expanded scale. Hence, this loss of value from the machines is intrinsic to the expansion of capital.

De-valorisation is not the same as depreciation. The latter is often no more than a accountant’s ploy to swindle stockholders or avoid tax. Even where de-valorisation and depreciation are numerically the same, they are qualitatively distinct.

Here we see one effect of competition. The socially necessary costs of production can be cut by adopting new production process. One firm introduces a new method. It thus gains an advantage over all its rivals. For a while, the front-runner can take super profits by selling its goods at the old price even though its costs are now lower than the average. In time, all the producers will be forced to switch to the new method - or go bust. Many will have to so well before their existing machines have given up all the value – the dead labour – present in them. That ‘value has to be jettisoned. This is part of what Marx means by the ‘constant revolutionizing’ of the means of production. This kind of de-valorisation is essential for the system as a whole though it is also be very bad for individual capitals. Next year, we shall go more deeply into the acceleration of the pace of de-valorisation.


A vitally important political point to end. Capitalism is not “collapsing”. It never will “fall over” of its own accord. What we are going through is another implosion in the expansion of social, ie,  aggregate capital. We are not watching is a “collapse”. What’s happened since 2007 has been confined to the economic sphere. The fate of Greece is proof positive that the agents of capital retain control of the state. The Arab Spring is another proof, should any be needed.

We must never forget what Lenin told us on this question. Capitalism can pull through any and every crisis - so long as it can shift the costs to working people. It can do that for so long as its agents hold state power.

For capital, the only solution is a massive de-valorisation. Its escape can be effected only at horrendous costs to working people. Those sufferings also bring risks of political and social upheaval to the rule of capital.

For labour, therefore, the solution must be to confront the state that enforces those restructurings. We shall have to replace the covert dictatorship of the bourgeoisie with a dictatorship of the proletariat.

 Back next year with more cheery news from the four volumes of Capital.


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