On The Continuing Relevance of Mattick's Critique of Marcuse

Int.JournalofPoliticalEconomy,vol. 29, no. 4, Winter199£-2000,pp. 56-S8.
© 2001 M.E. Sharpe,Inc. All rightsreserved.

ISSN 0891-1916 /2001 $9.50 + 0.00.
Rakesh Bhandari
On theContinuing Relevanceof
Mattick'sCritiqueofMarcuse
Paul Mattick's work still awaits a working-classmovementwhich will

findin it a historicalunderstandingof a phase in capitalisthistory("the
mixed economy" of thepostwarera) thatwill allow theworkingclass to
make sense of thenewness and distinctivenessof itsrevolutionaryaspi-
rations.Paul Mattickrealized thatthismovementmay nevercome, that
his message in a bottlemay remainforeverlost at sea: "Marx says some-
wherethatthe 'proletariatis revolutionary, or it is nothing.'Presentlyit
is nothing,and it may well be thatit will continueto be nothing.But
thereis no certainty."1 Mattickunderstoodthattheworkingclass could
no longer have faithin technocraticpromises to stabilize society and
would have to reclaim its own centralityin any real attemptto change
society at its base- somethingwhich no anti-imperialist movementon
behalfof peasant revolutions,minoritystruggle, or studentupsurgehas
even the latentpower to do. It was not,however,on a sanguineestimate
of therevolutionaryspiritof theworkingclass in affluentWesternsoci-
eties thatMattickfocusedhis analysis. Rather,he pinpointedthe weak-
estpartofthefoundationofthecapitaliststructure on whichthataffluence
depended.
remainsclearestin his
efforts
The criticalnatureofMattick'stheoretical
treatment ofthephilosopherHerbertMarcuse,whose gripon theNew Left
forsomeoneofmylatergeneration
is difficult to comprehend.Atthispoint,
it is appositeto underlinethatMarxisttheoryhas historicallydeveloped
-
throughcritiqueof othersocialistcurrents2 fromMarx's anti-Proudhon
RakeshBhandariis CommissionerforCurriculum Materials,Cali-

andInstructional
forniaStateBoard ofEducation.He is a specialiston theoriesofrace and ethnicity.
56
This content downloaded on Thu, 10 Jan 2013 04:50:10 AM

All use subject to JSTOR Terms and Conditions
WINTER 1999-2000 57
toEngels'santi-Dühring toHenryk Grossmann's critiques ofFritzSteinberg,

OttoBauer,andRudolfHilferding. Mattick's workstandsinthistradition.
He initially
published hiscritique ofHerbert Marcuse'sOneDimensional
Man: StudiesintheIdeologyofAdvancedIndustrial Societyas "Limitsto
Integration"inthe 1967 festschriftfor Marcuse.3 It was lateramplified and
as
published Critique ofMarcuse: One Dimensional Man in Class Society
in 1972.Intheintervening years,Mattick's1969magnum opus,Marxand
Keynes:TheLimits ofthe MixedEconomy, waspublished. Hiscritique largely
wentwithout replyin theUnited States then,and is even todayonlysuper-
referenced,
ficially ifatall,inthesecondary literature onthephilosopher of
theNew Leftbyhisdisciples.
Yet Mattick'sMarxismretainsa livelycharacter, allowingone not
only to make sense of capitalism's recent history but also to see insharp
reliefthe most pressingoutstanding economic problemsof today.In
brief,Mattickendeavored to showthatthecontradictions ofcapitalism
werenotovercome,as Marcusebelieved,bymeansoftechnology (au-
tomation, cybernetics, capital-saving or
innovations) politicalmanage-
ment of the economy (monetarypolicy or government-ordered
spending - whatMarcusecalled"wasteproduction"). ForMattick, capi-
talismsimplycouldnotovercomeitshistoric tendency to base itself on
an ever-relativelynarrower base ofproductive laboron whoseincreas-
ingexploitation theexpansionofcapitalcontinues todepend.Evenwith
theexponential growthin theproductivity of labor,capitalhad found
itselfunabletomaintain valuerelations conducivetoaccumulation with-
outdepressionand war.Mattickargued,forexample,thatdepressions
had allowedfortherestructuring ofcapitalbyaccelerating theacquisi-
tionofcheapenedassetsfrombankrupted firms, whichcheckedupward
pressureon thevalue composition of capital.Moreover,a depression
enabledgreatleaps forward in therateof exploitation due to thetor-
menting presenceof a vastlyexpandedreservearmyof labor.War,on
theotherhand,destroyed notonlythevalueofrivalenterprises butma-
chinery in its physicalform,playing into ever fewer hands sufficient
marketroomforthesurviving capitalto recoverprofitability through
large-scaleinvestments thatenabledadvancesin laborproductivity.
(How) has capitalismchanged?
Matticknoted,however,thatthe"last greatdepressionon an interna-

tionalscale, whichled to the SecondWorldWar,lastedtoo long and

58 INTERNATIONALJOURNALOF POLITICAL ECONOMY
penetratedthe social fabrictoo deeply to be stillacceptable as a neces-

saryevil forregainingtheblessings of prosperity."War could no longer
be countenanced,of course,because itthreatenedthe destructionof so-
cietyitself.This led Mattick(and Mattickalone) to graspthefundamen-
tal contradictionofpostwarcapitalism:"There is no futureforcapitalism
in war and depression.Yet thereare no otherways to effectthe large
scale structuralchanges which the continuousexpansion of capital pro-
ductiondemands."4
Marcuse foundno reason to believe thata capitalisteconomy could
any longer founderon a shortageof surplus value, thus necessitating
such structuralchange, now thatnew capital-savingtechnologies had
become available and the stabilizingpotentialitiesof governmentinter-
ventionhad been discovered throughthe experienceof depressionand
war. Marcuse acknowledged that"the economy can only functionbe-
cause of the director indirectinterventionof the State in vital sectors,"
but he did not considerthe theoreticalproblem of whethersuch inter-
ventionwould confrontany limits.He simplygrantedthe statea "sup-
porting,stimulating,even controlling"role; moreover,he argued that
stateintervention had become a permanentfeatureof the capitalistsys-
tem due to thepressuresof the cold war.5Althoughtheabsolute rule of
exchange value (pursuedby individualentrepreneurs throughcommod-
ityproductionby means of wage labor) was threatened by the postwar
consensus thatthe statehad to demand thata certain quantityand com-
positionof use values be produced,capitalistsocietyhad no alternative
but to accept the partial dissolution of bourgeois ideology, since the
communistsystemstood readyto exploitany capitalistdescentintode-
pression. Marcuse concluded thatgovernmenthad to ensurea "perma-
nent mobilization" of economic activity by means of the wartime
mobilizationof fiscal policy. Mattickcommented:
To maintaintheexistingcapitaliststructure as well as in
internationally,
each capitalistnationseparately,
thatis,to maintainthe full
employment
ofproductive nowrequiresan increasing
resources, quantityofnon-prof-
in the of
itableproduction; Marcuse'swords, "squandering technical, ma-
terial,andintellectual
power forthe of
purpose permanent mobilization."
To do so,andatthesametimetomaintain so-calledaffluency, productiv-
itymustbe continuously increasedto securethenecessaryprofitability
of therelatively diminishingprofit-producing partof theeconomy.Ac-
cordingtoMarcuse,thisis precisely what moderntechnology is accom-
plishing;itallowsforbothan unimaginable amountofwasteproduction

WINTER 1999-2000 59
and an "affluency,"which, with the exception of a minorityof

unemployables,welds all social classes to thesystemand createsone
man.6
dimensional
Here Mattickunderscoredthatan expansion of governmentspending
("waste production")depended on accelerated productivityand there-
withon profitgrowthin the privatesector.In his Critique ofMarcuse,
Mattick attemptedto demonstrateprecisely why this was so and why
Marcuse was wrongto believe thattechnologycould develop undercapi-
talist relations of productionso as to make possible such accelerated
productivityand profitgrowth.Mattick had the foresightto focus on
waste productionundercapitalism - its forms,its stimulativeeffects,and
-
its sustainability as thekeyproblem:
The questionis then,can capitalismevolveintosomething otherthanit

is; can thegenerallawsofcapitalistdevelopment be setasidebytechno-
logicalandpoliticalmeans,whichattendto boththeprofit needsofpri-
vatecapitalandthegeneralwelfareby thesimpleexpediencyofwaste-
production? It is truethatthisis exactlywhathas happened.Yet to see
thisprocessas a permanent and ever-widening social practiceis to as-
sumethatcapitalism cantransform itselfintoanothersystem, inwhich-
to speakinMarxianterms - itis no longerexchangevaluebutuse value
thatrules.Such a changewould implya changein property relations
as
based, they are, on theproduction and of
distribution exchange values.
In otherwords,itwouldrequirea social revolution.7
There are many thinkerstoday who would claim thatthe economic

possibilitiesfora reformablecapitalismhave onlybeen expanded in the
last threedecades, despitetheturbulenceof many of those years.It was
believed thenand it can still be arguedtoday thatMattick's "orthodox
Marxism" offersa false diagnosis of thecontradictionsand possibilities
of an advanced capitalism.The followingthreepropositionscould be
submittedto Mattickat the presenttime:
1. thatmorethaneven Marcuse realized,capital-savingtechnologiesdo

allow the existingstock to be replaced with everless labor expendi-
ture,enabling directlabor to produce at high rates of profitever-
largermasses of excess surplusvalue thatcan only be investedifthe
governmentcreates sufficienteffectivedemand by itself,ordering
productionand redistributing income to the poorer classes with a
higherpropensityto consume;8

2. thatgovernmentdeficitspendingfinancedmainlyby the issue of in-

terest-bearingbonds- themixed economy- has neverfaced anyreal
economic, opposed to simplypolitical,limits,since interestpay-
as
ments on the national debt, even possibly shrinkingtoday as a per-
centageof a growinggrossdomesticproduct,have remainedfarbelow
any feasiblemaximumlimit,givenon the one hand the government's
latenttaxingpower,and on theotherhandthecontinuing possibilitiesof
furtherexpenditure reductionsifinterestpaymentswere to riseprecipi-
touslyas a percentageof government spendingin anygivenyear.9Most
surprisingly,growing tax revenues in today's buoyanteconomy seem
notonlytomakeanysuchcutsunnecessaryto ensurethesolvencyofthe
statebut also to justifyeithernew sizable expendituresor tax cuts to
dissipatea contractionary budgetsurplus(!);10and
3. thatexpansionarymonetarypolicy(throughreserverequirements, open
marketoperations,and discountrates)need notyieldregressiveincome
and destabilizinginflation(assumingsome kindof wage
redistribution
and pricecontrols),butratheronlyallow fora controlleddevaluationof
publicandprivatedebtat theexpenseofrichcreditors(assumingcapital
controls)and a salubriouscheckon any liquiditypreference.11
Ifitis indeedstillpossiblethrough politicalwillto stabilizethecapitalist
economy on a clear the
growthpath, working-class revolutionon behalfof
whichMatticktheorizedlacksanymaterialgrounding. Marcusewouldturn
outto have been correctin basinghis ideas on RudolfHilferding'sthesisof
an "organizedcapitalism"managed and stabilizedthroughan administra-
tive-bureaucratic apparatuswhich leftistswould thenhave an interestin
conqueringand deployingfortheirown ends.Atpresent,Marcuse's critical
theoryof the oppressivenessof integration has been almost completely
eclipsedby effortsto ensuresuch integration throughrehabilitation of the
fiscalandmonetary afterneoliberalideologicalvictories.Doug-
instruments
las Kellnermay indeedbe rightto underlinetheimportanceof Marcuse's
attempt to maketheideal of integration itselftheobjectof a criticaltheory
refashionedforan advanced industrialcapitalism.12
If Mattick's critiqueseems outdatedto criticaltheorists,his analysis
of the limitsof the mixed economy probablyappears to social demo-
cratsas no less a dagger at the heartof Keynesian self-confidencethan
Milton Friedman's theoryof the naturalrate of unemployment;or the
claim thatmultipliersare small or nonexistent;or Friedrichvon Hayek's
argument,thatuncontrolledcreditcreationwould eventuallycreate a

WINTER 1999-2000 61
needto eliminatecreditinflation withbrutallevelsofunemployment.13

Yetunlikesuchcritics, Matticksurelydidnotthink thatcapitalist
econo-
miescouldbe morecyclicallystablethanKeyneshad supposed.To use
a Marcuseanphrase,it is a testament to the "closingof thepolitical
universe"thatanycritiqueof Keynesianassumptions on whichleftist
alternatives continue to be based be
may comprehensible onlyas yet
moreneoliberalideology.Indeed,I have yetto locatea consideredre-
sponseby a Keynesianto Mattick'stheoryof thelimitsof themixed
economy.Of course,themarginalization ofMattickby academiccriti-
cal theorists and respectableleftistpolíticosalikemostprobablyonly
reflectsthedormancy oftheworkingclassuponwhoseascendanceand
the
independence recovery ofMattick'sworkultimately reliesto break
the
through conspiracy of silenceithas met.
I turnfirsttoMattick'scritiqueoftheMarcuseanidea aboutthepos-
sibilitiesof technology; thenI examinetheKeynesianassumptions of
Marcuse'stheory ofintegration, at
noting length Mattick'scritiqueand
itspresentvitality. I concludewithsome discussionof theAmerican
situation today.
Technologicalpossibilitiesand capital-savinginnovations
The Frankfort Schooldevelopeda wide-ranging critiqueoftechnology,
whichitunderstood inthemostcomprehensive sense.Undertherubric
of technology critique,theFrankfort School came to studytopicsas
diverseas theundermining ofhumanautonomy bythedevelopment of
instrumental reason;theorganization ofthepopulationbythetechnol-
ogy of reason
statistical for thepurposesof administration and social
and
control; technological violationsof language inthename ofseman-
ticclarity.14
Although Mattickmaywellhaveagreed(ornot)withsome
of thiscriticismof technology, broadlydefined,he certainly did not
agree thatscienceor technology had or could become forcesthatsome-
how developedtheirown logic undercapitalism:in Marcuse'sview,
Mattickpointedout,"itis notcapitalism'sclasscharacter whichhinders
technicaldevelopment, itis technology ratherwhichsecuresthecontin-
ued existenceofcapitalism."15
Marcuseclaimed that modemtechnology hadoverthrown valuerelations:
Technological changeseemsto canceltheMarxiannotionofthe"or-
ganiccomposition ofcapital"andwithitthetheory ofthecreationof
surplusvalue.According toMarx,themachine valuebut
nevercreates

merelytransfers itownvaluetotheproduct, whilesurplusvalueremains

theresultof humanlaborpower,and through it,pastlabor(dead labor)
preservesitselfand determines livinglabor.Now automation seemsto
alterqualitativelytherelationbetweendead and livinglabor;it tends
towardsthepointwhereproductivity is determined "by themachines,
and notbytheindividualoutput."16
Marcuse's beliefthattherewere no limitsto the government-ordered
waste productionby whichtheworkingclass had been integrated intoad-
vanced industrialsocietydependedon thethesisthatrisingcapitalor ma-
chineproductivity wouldyielda surfeit of surplusvalue thatthestatecould
borrowor tax to financeitsfiscalpolicy while honoringdebtobligations.
Since Mattick'stheoryof thelimitsof themixed economydependson the
refutationofthisthesis,I shallspendsome timehereon it.It is strikingthat
Marcuse implicitlymakes sense of Marx's own theoryof a profitratede-
clinebroughtaboutbyupwardpressureontheorganiccompositionofcapital
in the same mannerthata bourgeois economistwould- assumingthat
Marx's basic idea mustbe thatthemarginalphysicalproductivity ofcapital
or itsindex in theoutput/capitalratiowill tendto decreaseovertime.
Yet Marx's theoryof the fallingrate of profitis clearlybuilton the
risingmachine productivitythatMarcuse takes to be a new featureof
capitalistdevelopmentthatwould renderMarx's theoryinvalid forad-
vanced capitalism.Keynes also balked at ascribinga decliningmarginal
productivityto capital and insteadunderstooddecliningprofitability to
result fromthe diminishingavailability of capital. Yet as Mattick ar-
gued, neithertheproductivity nor the scarcityof capital served well as
the pivot of a theoryof the originsof profit,and both served as apolo-
gies forthe factof exploitation.17In the termsof bourgeois economics,
Marx does the impossible: he develops a theoryof the decline in the
profitrateon theveryassumptionof "a relationshipbetweenthecapital
stock and outputthatcan be termeda historicallyincreasingmarginal
productivity of capital,"althoughof course he does himselfaccept such
a concept.18Marcuse could not have failed to recognize themany such
passages in thethirdvolume of Marx's Capital:
Ifthecirculating partoftheconstant
capital(rawmaterial, etc.)steadily
growsinmasstogether withtheproductivityoflabor,thisis notthecase
forthefixedcapital- buildings,
machinery,lightingandheatinginstalla-
tions,and so on. Even thoughthesebecomedearerin absolutetermsas
thephysicalmassofproduction grows,theybecomerelatively cheaper.
If fiveworkersproducetentimesas manycommodities as before,this

WINTER 1999-2000 63
Even
does notmeanthattheoutlayon fixedcapitalincreasesten-fold.
capitalgrowswiththedevel-
thoughthevalueofthisportionofconstant
itis farfromgrowingin thesameratio.19
opmentofproductivity,
In orderto demonstratehow thegeneralrateof profitcould fall even
as entrepreneurs are individuallysuccessful in raisingthe productivity
of their"capital," Marx, as Mattick explains, had to work at a "very
highlevel of abstraction"to bringto lightthe"basic social relationships
behind the capitalisteconomic categories" that,althoughnot affecting
capitalistbehavior,determine"theboundariesof capitalistproduction."
In all of Mattick's writingsthereis carefulattentionto the kind of ab-
stractionat workin Marx's theory - not only abstractionfromeveryday
bourgeois categories in orderto disclose the workingsof total capital
but also abstractionfromimportantfeaturesof the capitalistsystemin
orderto focus on featuresthatare explanatorilyrelevantto the system's
development.In thiscontext,Mattickremindedreaders,whose under-
standingof Marx's work he assumed, thatthe means by which indi-
vidual entrepreneursraised output/capitalratios and reduced overall
-
(indirectand direct) labor unit costs and thus enjoyed an immediate
-
gain in profitability constitutesthe same mechanismby which the ra-
tio of constantto variablecapital in theeconomy as a whole is increased
and the general rate of profit,which exists independentlyof each indi-
And thisin turncan onlymotivateeach
vidual capitalist,is depressed.20
businessmanto further diminishtotalunitlabor costs throughmore sub-
stitutionof indirectfordirectlabor- theprocedurethatremains,in ap-
parentviolation of the labor theoryof value, the most effectiveway to
increase individualcapital profitability.Matticknoted thatit is "forthis
reason thatthedisplacementof labor by capital cannotbe haltedwithin
the competitivecapital formationprocess, even though it undermines
thevery structureof capitalistsociety."21
Let us retracethe argument.Marx arguedthatalthoughsuch mecha-
nization remainedamong the best ways for an individual capitalistto
profitand remain solvent,it would have the effectof increasingthe
value of machineryrelativeto its valorizationbase- thatis, to themass
of directlabor which it could absorb. No matterhow much the rate of
exploitationincreased over time,this upward pressure on the organic
compositionof capital would begin to reduce the average rateof profit
in the systemas a whole, since directlabor expended is alone newly
added value. As a resultof the depressionof the profitrate,Marx sug-
gestedthatat some pointthemass of profitwould no longerbe adequate

forcontinued accumulation. In a systemofpositivefeedback, thiswould

onlyencourageeach individualcapitalistto reduceunitcostsevenfur-
therby theverymechanization thathad effectedthedepressionof the
average rateof profitin thefirstplace.
In short,mechanization worksat crosspurposes.On theone hand,
themachineis usefulto thecapitalistbecause it allowshimto reduce
unitvalues by substituting a lessersumof indirectlaborfora greater
sumofpaid directlabor on a perunitbasis.On theotherhand,thema-
chineis usefulin thatit allowsfortheabsorption of laborand surplus
laboror (in otherwords)production ofnewlyaddedvalue.
However,theless directlaboremployedrelativeto totalcapital-
thatis,themoreunitvaluesarereduced - themoredifficult itbecomes
forthecapitalist toabsorbsurpluslabor.ForMarx,thecentralstructural
contradiction was thatuse valueandunitvalue,orthegrowth in mate-
rialwealthand therateofprofit, wouldtendto movein inversedirec-
tions.Mattickarguedthatcapitalismcouldnotsimplyescapefromthis
structuralcontradiction,whichwouldgenerate contradictions inthepro-
ductionprocessitself, making the Marcusean ofthe
integration working
class impossible.
Economistsargue,however, thatMarx'sintuition hereproveswrong:
itis impossibleforlabor-saving technologicalchangetoreducetherate
of profitin thesystemas a whole.As a resultof thereduction in unit
valuesof outputsbytheuse ofmachinery, the unitvalues ofthe inputs
andthusthecostsoftheotherfirms whichuse thoseoutputsshouldfall;
andthisreduction in costsshouldthenincreasetheirrateofprofit.22
This leads to whatis calledtheOkishioTheorem.Marx'stheoryis
testedin termsofmatrixalgebracalculationswhichshowaccordingto
theFrobeniusPerronTheoremthatoncethelabor-saving technological
changeworksitswaythrough thesystemas a whole,therewillbe a new
uniqueprofitrate(assumingtherealwage does changein theprocess)
anditwillbe higherin mostcases.
AlthoughsomeMarxistsquestionthetheorem'srelevance,sinceit
assumesthattherealwage remainsconstantin thecourseof capitalist
development, otherMarxistsunderline thattheOkishioTheoremis an
exerciseincomparative itcomparesthesystem
statics:23 beforethetech-
nical changeto thesame systemafterthetechnicalchange - one sta-
tionarystatecomparedto another state.It seemstobe a form
stationary
ofceterisparibusreasoning - thatis,whathappenstothesystem, ceteris
paribus, afterthe introduction of this But
technicalchange. theproblem

WINTER 1999-2000 65
hereis thatthesystemdoesnotwait,doesnotholditselfconstant foras

longas ittakesthetechnicalchangetoworkitswaythrough thesystem
untila new stationary stateis realized.This confusesthelogicaltime
implicitinthisformofceterisparibusreasoning withthehistorical time
in whichtherealeconomyis located.
This confusionis mostevidentin theassumption thatthereare no
truetime-subscripted variablesin thenew equilibrium statedescribed
bythismethod.Thatis,theinputsandoutputsareassumedto be equal
inpriceandvalueinthenewequilibrium - itis assumedthatthere
state
are stationary values.As AndrewKlimanhas sharplyobservedabout
thenew equilibriumstate,theinputswhichenterintothecapitalist's
costsas production is undertaken are assumedto be as low in priceas
theoutputswhichresultfromthetechnicalchange.24
But in thereal economy,technicalchangeis continuous, pricesare
notstationary, andthereis disruption tothesystem beforeanyoneinno-
vationworksitswaythrough alongthewayto a new stationary statein
whichinputand outputpricesare stationary. Andifone allowsforthis
muchreality, therateof profitcan indeedfallfromongoingtechnical
change,thoughof coursetheprofitratewill notfall as precipitously
fromupwardpressureon thetechnicalcomposition ofcapitalifthereis
a continuous depreciation of unitvalues. The Okishio Theoremis thus
in Marxistestimation based on assumptions utterlyforeign notonlyto
Marx'svisionofthedynamics ofcapitalaccumulation butalso toreality.
One couldadd hereas wellthata stableoutput/capital ratiodoes not
implyany attenuation of thetendency forminimum capitalrequirements
forenterprises to rise; capitalistproduction continuestherefore to be
haunted bythethreat ofan insufficient massofsurplusvaluesincevalue
remainslockedup forlongerperiodsin everlargermassesofmachin-
ery.Atanyrate,Marcusewas simplywrongtobelievethatMarx'stheory
offallingprofitability had to be revisedbecauseitrestedon a Malthu-
sian-likeassumption of fallingoutput/capital ratios(Marx's theoryis
forcefully based on a of unit
theory declining values) insteadof rising
and
(indirect direct) labor productivity.25
Thereare two further clarificationsof Marx's argument to make.
Not onlydid Marcuseincorrectly assumethatMarx had notrealized
thatmachinesin theinvestment sectorwouldbe ofprogressively supe-
riordesign,allowinga smallerproportion oftheworkforce tokeepa given
stockof capitalintact - thereproduction costsofmachinery wouldde-
clinelikeeveryothercommodity, especiallyafterkinksin initialmodels

wereremoved - he paidno attention to Marx'sconceptofmoraldepre-

ciationin thereal-time flowof capitalistproduction. Althoughcheap-
enedmachinery (relativeto itsoutput) may seem todo awaywithscarcity
of surplusvalue vis-à-visaccumulation requirements, thisis actually
onlythecase iftheseimprovements are introduced entirely in thecon-
jectural course of of
replacement plant and equipment carried out to
makeup fornormalwear.If not,it will be remembered thatto avoid
"moraldepreciation," capitalistsare forcedto quickenamortization of
machinesbrought intoexistence underless-productive conditions. Marx
thennotedthatthiswouldencouragea resortto longerhoursand mul-
tipleshiftstoensureamortization, makingtheworking dayoftheequip-
menttwiceto thricethatoftheaveragewage earner.
This in turnrequiresreal wage increasessufficient to compensate
forthegrowingintensity ofproduction andtheeducationaltimeneeded
forworkersto learnhow to designand operatenewervintagesofma-
chinery.Although real-time capitalistdynamicsinvalidatetheassump-
tionofa constant realwageonwhichotherrefutations ofMarx'stheory
ofdeclining such
profitability, as theOkishio Theorem, depend,26 itdoes
underscore, as Mattickwroteelsewhere,thattherateof surplusvalue
muststillbe "largeenoughto coverboththenew investments and the
devaluation oftheexisting capital."27 Just as thisdual task ofthe preser-
vationand expansionof capitalfellon labor,Mattickarguedthaton
productivelaboralso fellthedoubletaskof maintaining thegovern-
ment-ordered production outside total capital and valorizing thecapital
thathad beeninvested.Onlybythepropermaintenance oftherelation
betweensurplusand necessarylaborwithinthe abode of production
could"technology" or "themixedeconomy"appearto have stabilized
capitalismandintegrated theworkingclass.
Mattickalso challengedMarcuse'sbeliefthattechnology and sci-
ence had becomeautonomousforcesin capitalistsocietythatwould
ensurethelatter 's reproduction, thoughraisingtheproblemof how to
manageworkers'freetimeas worktimewas eliminated. Mattickunder-
stoodthisutopiaoftheendofworkto be impossible,noton technical
groundsbutunderthevalue relationsof a bourgeoissociety.For one
thing,theassimilation ofnewlabor-saving meansofproduction would
have to slow downprogressively as capitalistssucceededin continu-
ouslyreducingthenumberof productive workers, foras a resultthey
wouldalso reducethe"unpaidlabor-time relativeto themass of accu-
mulatedcapitalwhichcouldonlymakeitmoredifficult tocontinuethe

WINTER 1999-2000 67
capitalformation process,whichis onlythe accumulationof unpaid

labor-time transformed intoprofit-yieldingmeansofproduction."28
Thereis,ofcourse,a relatedreasonwhycapitalist relations
fetter
the
of
adoption labor-saving technology thatmaybe of increasingimpor-
tanceas reducedtelecommunication and transportationcostsfacilitate
theglobalizationof production. Since machinery is onlyadoptedif it
costsless thanthelaborpoweritreplaces(as thisis whatcapitalpays
for,nottotallabortime),itfollowsthatitmaywell notpayto buyma-
chinery wherethevalue oflaborpoweris low.29 Fromthisperspective,
it is possiblethattheglobalizationof production maywell encourage
technological if
regress.Only surplus valueand thewage formareabol-
ishedcan thetotallaborbasis forcalculationson theadoptionof ma-
chinerybe greatlyaugmentedand the advances in mechanization
correspondfullyto thetechnicalknowledgeof humankind. Marcuse
hadfailedtograspthattechnological andscientific development hasno
independent meaningwithregardtothecapitalist system. Working time
cannotsimplybe reducedundercapitalistrelationseveniftechnology
allows forit.As Mattickobserves,onlytheworkerscan unleashtheir
fullproductive power:"theproletarianrevolutionwouldbe thegreatest
ofproductive forcesbydestroying relationsofproduction.
thecapitalist
Historyis thehistory ofclass struggle,nottechnology."30
I now turnto thequestionof the abilityof theKeynesianstateto
attenuate class struggle.
The viabilityoftheKeynesianproject
An apparently newattempt is madeto "control," to"correct," andto "steer"

theexistingeconomicsystem.Suchmeasuresserveattheutmosttoweaken
temporarily orevenmerelyto disguisesomeofthemostobstructive results
ofcapitalistic
production. ... In to
trying escape from theperiodicalcrises
whichthreaten moreandmoretheexistenceofbourgeoissociety,and in a
desperateattempt to overcometheexistingacutecrisisofthewholecapital-
ist system,thebourgeoisieis compelled,by continually freshand deeper
"interference"withtheinnerlaws of itsownmodeofproduction, and con-
tinuallygreaterchanges in itsown social and to pre-
politicalorganization,
pare moreviolentand more universal and
crises, atthe same time,todiminish
themeansofovercoming future crises.
KarlKorsch,193831
By 1967 Mattickhad already developed a conceptuallyinnovativecri-

tiqueof Keynesianism, despitetheprestigeit enjoyedduringthatde-

cade of economicstability as a successfulpositiveandpolicyscience.
Matticknotonlypredicted theshattering of theeconomicstabilization
thenachievedthrough a combination oftax,fiscal,andmonetary means,
he anticipatedthepossibilitythatprivatecapitalwould even have to
mounta counterattack againsttheexpansionary Keynesianstate,whose
growing debtburden would eventually proveincompatible withcontin-
ued accumulation due tothetaxesthemounting debtwouldrequirefor
itsretirementortheeverlargerclaimson savingsneededtorollthedebt
over.Andindeed,although government intervention hadonlya fewyears
earlierbeenconsidered theperfect instrument toensurethattheeconomy
remainedat a highGDP equilibrium, theonsetof recessionand mass
unemployment - coupledwithunprecedentedly highgovernment defi-
cits- had criticaleyesturnedon themixedeconomybythemid-1970s.
WhatmakesMattick'soriginalanalysisof continuing relevanceis
the centralityeven todayof the questionof the futureof the mixed
economy.Through theMaastricht criteria,Europehas attempted tolimit
deficitsof membernationsto 3 percentof GDP, whiledebtis notal-
lowedto exceed60 percentof GDP. In Japana seriouscrisishas been
avertedby massivedeficitsthathave led to therun-upof suchan omi-
nousnationaldebtthatsocietyseemsto livein fearofa dayofreckon-
ingwhenthegovernment will imposea draconiantax regimeor print
moneyto inflate awaythedebt(alongwiththeincomeofpensioners)or
both.In theUnitedStatesa bipartisan consensushas emergedthatany
budgetsurplus should be used for tax rebates,ifnotdebtretirement, but
explosive new government are
expenditures not consideredbyany "re-
sponsible"politicians.The limitsofthemixedeconomyremainat the
centerofpoliticalcontroversy.
Buttherejectionofan expansivegovernment sectorhas oftenbeen
understood to stemnot fromany objectiveeconomiclimitbutrather
fromthesuccessofneoliberalism and thehegemonyof financialfrac-
tionsofthecapitalist class mostinterested in a completeneutralization
ofinflationary For
pressure. example, it can be arguedthatinflationary
macroeconomic policymay be welcomed byproductive capitalin order
towardoffanythreat ofexcesscapacityas longas thestateandunions
can containwage demandsin thecontextofrisingcapacityutilization.
Rentiers,however, cannotwithstand inflation. Today'sLeftKeynesians
therefore hold out the possibility - earlierentertained by the fascist
-
Oswald Mosley,who was directlyinspiredby Keynes of a political

WINTER 1999-2000 69
allianceof industrialists and workers, theformer providing themoney

andthelatterthevotesfora fiscallyliberalpartydefinedin opposition
to rentiers and financialinterests. Of course,a LeftKeynesianmaybe
skepticalofsuchan allianceifhe does notthinkwage demandscan be
contained ina fullemployment economy. ButthesesameLeftKeynesians
point to the ever-present threat of underconsumption, as workersare
alwayspaid less thanthevalue theycreate.It followsfromtheirown
premisethatindustrialists shouldcall forstrongsupportof effective
demandthrough fiscalexpansion.Industrialists shouldbe attracted to a
programthatmayaimat a littleless thanfullemployment. On thepre-
mises of theLeftKeynesians,it is difficult to see whysuch a party
wouldnotbe abletoprevail - andindeedhasnotprevailed - easilyover
a partyin the serviceof onlythenarrowest fraction of the capitalist
class.32
It is not surprising therefore thatLeftKeynesiansemphasizethat
government officialsand the publicare in thegripof bad economic
ideas.Yettotheextent thatthecapitalist classas a wholecomestoreject
evenmilddebt-financed expansionary macroeconomic policy,theleft
Keynesianprogram simply devolves into support for "responsible" trade
unionismwithno full-employment macroeconomic policy in As
return.
of thiswriting, it seems that the American Left is now attempting to
replacethelatter withsupport forneomercantilist tradepolicyas a means
towardfullemployment. Thiscanindeedleadtoa newalliancebetween
workersand capitalistsat theexpenseof provoking mutuallydestruc-
tive retaliatory responsesin an ever-more-fractured global political
economy.
Faithintheefficacy andnecessityofKeynesianism didnotdie eas-
ily,even afterthe onset of stagflation inthe 1970s, and this doctrinestill
retainsitsholdonthepoliticalimagination ofa Leftthreatening tosettle
intosimpletradenationalism. Led by RobertEisner,thedefenders of
themixedeconomyhave waged an econometric battleto salvagethe
stimulative effectsofdeficits. Eisnerarguedthatskepticism aboutdefi-
citsderivedfromtheirassociationwithdownturns, thoughitwas down-
turnsthatreducedrevenueandcreatedtheneedformoreexpenditures,
andthus,deficits. Eisnerattempted to showthatdownturns themselves
hadresulted froma reduction intherealsizeofdeficits inthefirst place.33
Correcting thenfortheeffect ofthedownturn on thedeficit, Eisnerar-
gued,thestimulative effectofthedeficiton moderneconomieswould
be thrownintorelief.Yet,as Daniel Shaviroargues,Eisnerhad "more

troubleexplaining whythe1980s,whichhadhigherdeficitsthaneither
of thetwoprecedingdecadesevenon an inflation-adjusted, high-em-
ployment basis,shouldhavefeatured higherunemployment and slower
growth thanthe1960s."34
Of course,Eisnerwouldhave called attention to theeffectsof re-
strictivemonetary policy.Eisner in factwelcomed the inflationthathad
derivedfromloosermonetary policy.Indeed,againstall those who scare-
mongeredaboutrisingnationaldebt,Eisnerattempted to showthatin-
flationyielded such debt depreciationthatthe debt owed to the
government was mademuchless onerousso as to rendernominaldefi-
citsa de factoaccrualofrealsurpluses. All thissuggestedtoEisnerthat
fiscalpolicythroughout the 1970s remainedcontractionary and thus
possibly an effectivecause of recession, but the source of thisinflation,
hardlyneutralin itsclass distributional remainedunclear.
effects,
Mattickunderstood thisinflation as necessarily "connected withgov-
ernment inducedproduction by way of deficitfinancing."35orderto
In
debt
preventgovernment issues, with which the mixedeconomywas
beingfinanced,fromraisinginterest rates,the U.S. FederalReserve
Bankresponded withopen-market operations toincreasethemoneystock
and prevent(or at leastdampen)therisein rates.36 For Mattick,such
monetary accommodation could onlyproduceinflationary pressures,
and indeeddid culminatein thegreatinflation of the late 1960s and
1970s.Real interestrateshadremainedlow intothelate 1970sin order
to sustainthegrowthof themixedeconomy,buttheFederalReserve
Bank finallyabandonedits policyof accommodating federaldebtis-
sues as inflationsoared while unemployment remainedhigh. The
Keynesianproject was in shambles, just as Mattick had predicted.
His explanationforinflationary pressure- unlike thatof themon-
etarists- was notbased simplyon thegrowthofthemoneystock;nor
was itbasedon theabsurdidea thattheeconomyhadbeenoperating at
a levelabove fullemployment. Because hisexplanation requiresme to
jump ahead of the story,I can be
only suggestive here. As the state
financedits fiscalpolicyby borrowing idle moneyon theeasy terms
allowedby theactionof theFederalReserve,thislatentsurplusvalue
couldnotbe accumulated. Itscapitalization wouldhaveputupwardpres-
sureontheorganiccomposition ofcapital.Itwouldseem,then,thatthe
state'sconsumption of surplusvalue sloweddownthecapitalization of
production and thusactuallycountered therisingtendencyof the or-
ganiccomposition.

WINTER 1999-2000 71
Alongtheselines,thetheorists ofthepermanent wareconomyactu-

allyargued that state of
consumption surplus valuehad beena propfor
profitability. But Mattick argued thatthe state could onlyreducethe
profitrateas it borrowedidle moneycapitalto orderfromindustrial
unitsthatwereallowedto sharein theaveragerateof profitwithout,
however,contributing tothepool ofsurplusvalueoutofwhichthedebt
incurred by thestatewouldbe retired. Althoughthegovernment thus
checkeda demandproblemthrough fiscalexpansion,realizationofthe
commodity product did notand does notipsofactoensuretheprofitable
of
expansion capital. Toward that end,totalcapitalattempted to pre-
serveprofitability in theshorttermby distributing thecostsfromthe
mixedeconomy'spulverization ofsurplusvalue overthepopulationat
largeintheformofpriceincreases.37 TheKeynesianpseudo-solution to
inadequate effective demand thus the
onlycompounded underlying prob-
lem of insufficient profitability:thiscrisissolution,like crisisitself,
was markedby thedestruction of surplusvalue as capital,althoughit
manifested itselfin rising,notfalling,prices.
Moreover,thegreater theneedofthegovernment to borrowto sus-
taingrowingexpenditures and interest payments, themoreit is faced
withthefactthatidlemoneycapitalis a givenfinite magnitude andthat
thewholeprocesscan thusonlybe continued an
through arbitrary pro-
liferationofpapermoney,untilthewholeprocesseruptsintorunaway
inflation.38The value of gold couldthenonlybecomegreaterthanthe
value of this(fiat)currency, whichfinallyled theU.S. government to
suspendconvertibility and break up the Bretton Woods arrangements.
Fusingtheanalysisofpowerpoliticswitheconomics,Mattickempha-
sizedthepoliticalmachinations thattheUnitedStatesdeployedinorder
to forceothergovernments to acceptupwardréévaluations oftheircur-
renciesas a wayofdisplacingontothemthebalanceofpayment prob-
lemsfromtheinflationary macroeconomic policyoftheworld'sgreatest
capitalistpower39 - the possible descentof which into insolvency,
unilateralism, andmilitarism no otherstatewas willing(or allowed)to
tolerate.40
Yetpowerpoliticsdidnothing torestore ofglobalcapi-
a profitability
tal sufficient foreach stateto achievea rateof accumulationstrong
enough for filli
employment. Although theydidallowtheUnitedStates
to runan inflationary courselongerthananticipated, thesemachina-
tionsremainedpowerfulindicators of thedisintegration of theglobal
capitalisteconomy.Mattickhereprovedincredibly prescient:

The UnitedStateswas able to forcetherevaluationof othercurrencies

and to make arrangements thatwouldhave allowed exchangeratesto
fluctuateovera widerrange.However,theneteffectofall thiswas only
a reapportionmentofworldtrade,withone nation'sgainbeinganother
nation'sloss.Thevolumeoftheworldeconomyandprofitability remained
as theywere.The generalview now is thatthepresentmonetary crisis
will be withtheU.S. forsome time,withtemporary measuresapplied
hereandthereuntila newworldmonetary systemcan be fashionedthat
will bettermeettheneedsof thecapitalistworldeconomythandid the
former one.41
Almost twenty-five yearsafterthiswas written,we remainwithouta

bettersystem.Meanwhile,themonetaryinstabilityproducedby theU.S.
sabotage of BrettonWoods has createdboth the need forand specula-
tive opportunityin derivativesand foreignexchange marketsthathave
come to dominatecontemporarycapitalism.The volume of foreignex-
change tradingin the late 1990s was approximately$1.5 trillionper
day; by contrast,in 1997 the global volume of exports averaged $25
billion per day. Valued in 1997 at $360 trillion,internationalfinancial
transactionswere farlargerthantheworthoftheentireglobal economy.42
The consequences of monetaryinstabilityare now plain foreveryone
to see. The sudden appreciationof the dollar against the yen between
1995 and 1998 played a major role in theAsian crisis as stabilized cur-
rencies were knocked offtheirdollar pegs, which sufficientlyaggra-
vated the real burdensof these countries'debt to set offfinancialpanic.
In fearof such unanticipatedmovements,we now endurethefranticand
manic deploymentof overaccumulatedcapital by internationalinves-
tors in search of high profits,which has given rise to a logic of global
financialvulnerability:fromriskyspeculation,to monetary(credit)ex-
pansion, to sharp rises in the price of sought-afterassets, to a sudden
and unexpectedfallin theprices of those assets,to a rushintomoneyor
qualityinvestments.It is not uncommonforthe threemajor currencies
to varyin value by as much as 30 to 40 percentover periods as shortas
one or two years.The resultinguncertaintiesin relativecosts and com-
parative advantage have weakened accumulationand encouraged pro-
tectionism,resultingin aggressivelyplayed zero-sum games in which
Japan,Europe, and the United States are now permanentlyengaged.
I now turnto the question of why the U.S. government,accom-
modated by Federal Reserve policy until 1979, did not stabilize capi-
talist society by way of supposed multiplierand accelerator effects.

WINTER 1999-2000 73
InthenextsectionI presenta briefideaofwhattheKeynesianrevo-

lutionwas supposedtobe,inordertosetthestagefora summary of
I shallconcludewitha briefnoteon theAmeri-
Mattick'scritique.
canmacroeconomic situation.
The Keynesianidea
As Keyneshimselfacknowledged, histheoryhad itsrootsinthemulti-

plieridea,introduced byRichard Kahn: since"the wage goodsindustry
is drivenby activityin thecapitalgoods industry, increasesin invest-
mentresultin a morethanone-for-one increasein employment in the
wagegoodsindustry."43 Keynes'sidea was thatitwouldnotmatter who
was doingtheinvestment; ifprivatebusinesswas depressedandunwill-
ing,government coulddojust as well.Thatis,through deficitspending
thegovernment couldcarryoutinvestment thatwouldthrough thismul-
tipliereffectboost effectivedemand. This would improve the economic
expectations ofprivatebusinessmen who,optimistic aboutthemarginal
of
efficiency capital, would then themselves make new investments and
so raiseemployment levelsandGDP beyondthefillipprovidedbygov-
ernment wasteproduction itself.
A critiqueofKeynesianism mustalso clarify, beyondtheseindirect
stimulative effects,the nature of government waste production itself.
For example,in buildinga road,thegovernment is obviouslynotem-
ploying means of production with which labor can produceadditional
commodity productembodying surplus valueto be realized through the
market. Ofcourse,theroadmayallowa future stream of income through
tolls,butthisincomeis notderivedfromadditionalcommodity output
butfroma de factotax,requiredto retirethedebtundertaken forroad
construction. To concentrate on government-ordered production itself,I
abstract fromtheincreasedcommodity that
production may be enabled
by a betterpublicinfrastructure system.But thisis notsimplyan ana-
lyticaldistinction;forexampleinJapantoday,lavishgovernment waste
production in the form of bridges sparselypopulatedislands,con-
to
creteliningsforrivers,androadsto nowheremanifestly has littleposi-
tiveeffecton commodity circulation and capitalturnover.
Mattick'scritiquefocuseson thefetishistic definition ofinvestment
from theKeynesianstandpoint, as givenforexamplebyPaul Samuelson:
"The importance ofinvestment consistsin thefactthatit involvesdis-
bursalof incometo thefactorsofproduction whilenotat thesamenot

bringingto the marketgoods, which mustbe currentlysold."44Export

surplus and inventorybuildups have a similar function,according to
this view, as does the governmentdeficit.Eisner, forinstance,stresses
thatfutureoutputneed not be marketablegoods at all or even goods to
which it makes any sense to assign a marketvalue. He is willing to
countgoods and servicesthatare simplyuseful(such as roads) as invest-
mentsin "publiccapital,"whichshouldthusbe amortized,notexpensed-
thereby furtherreducingtherealdeficitandthrough
suchsimplebookkeeping
tricksmakingthe mixed economyappear more sustainable.Eisner basi-
cally urgesthat"social consumption"shouldbe thoughtof as investment,
thuscreatingtheillusionthatpublic spendingis self-financing.
Yet even understoodas investment,governmentspending was to
stimulateprivateinvestment.Hence it could not interfere withthemar-
ketsin whichprivatecapitalwas alreadyor potentiallyoperative.It must
be noncompetitive,as Mattickexplained:
Ifthegoalofthesetransactions
is thestabilization
ofthemarketeconomy,
government inducedproduction mustbe non-competitive. Ifthegovern-
mentwouldpurchaseconsumption goods and durablegoodsin orderto
give themaway,itwould,to ¿e extentof itspurchases,reducethepri-
vatemarket demandforthesecommodities. Ifitwouldproduceeitherof
thesecommodities in government-owned enterprisesandofferthemfor
sale,itwouldincreasethedifficulties
ofitsprivatecompetitors
byreduc-
ingtheirsharesofa limitedmarketdemand.Government purchases,and
theproductiontheyentail,mustfalloutofthemarketsystem;itmustbe
supplementaryto market production.45
Keynes, of course,did notshyaway fromtheformsof waste produc-

tionthatwould be feasibleundertheserestrictiveconditions.Indeed, he
made fantasticargumentsin the formof zreductio ad absurdum:
IftheTreasury wereto fillold bottleswithbanknotes, burythemat suit-

able depthsin disusedcoal mineswhicharethenfilledup to thesurface
withtownrubbish, and leave it to privateenterpriseon well triedprin-
ciples of laissez faireto dig notesup again . . . thereneedbe no more
unemployment and,withthehelpoftherepercussions, therealincomeof
thecommunity, and its capitalwealthalso, wouldprobablybe greater
thanitactuallyis. Itwould,indeed,be moresensibletobuildhousesand
thelike;butiftherearepoliticalandpracticaldifficulties in theway of
this,theabovewouldbe betterthannothing.
Indeed,Keynesarguedthatgreatperiodsofprosperity
in economichis-

WINTER 1999-2000 75
tory,fromtheancientEgyptiansto theMiddle Ages, derivedfroma now

extravaganceinpublicinvestment
anachronistic effects:
thathad multiplier
AncientEgyptwas doublyfortunate,anddoubtlessowedtothisitsfabled
namelypyramidbuildingas
wealth,in thatit possessedtwoactivities,
ofwhich,sincethey
well as thesearchforthepreciousmetals,thefruits
couldnotservetheneedsofmanbybeingconsumed,didnotstalewith
abundance. TheMiddleAgesbuiltcathedrals, andsangdirges.Twopyra-
mids,twomassesforthedead,are twiceas good as one,butnotso two
railwaysfromLondontoNew York."46
Applyingthisprincipleto moderneconomies, Alvin Hansen wrote:
Thedevelopment ofa publicpark,swimming pool,playground, orconcert
hallmakespossiblea flowofrealincomenolessthantheerection ofa radio
.
factory. . . Public
expendituresmay also be ... incomecreating thesense
in
thatthey tend to
currently expand income and employment. . . . Indeed,
whenprivate businessoutlaysdecline,thegovernment aloneis ina position
togo forward andsustaintheincomethrough increasedexpenditures."47
Withinthis frameworkit becomes impossible, Mattick argued, "to
see that'productive'and 'capitalisticallyproductive'mean two differ-
ent things,and thatpublic like privateinvestmentsare capitalistically
productiveonly if theycreate surplusvalue, not because they supply
materialgoods or amenities."48Mattickdid not deny thatsuch income
creation,boosted by a multipliereffect,could help realize commodity
capital alreadyproducedbutunsold due to insufficienteffectivedemand
resultingfroma reduced rate of accumulation (since a slowdown in
accumulationof additionalconstantand variable capital means a reduc-
tion in thepaymentof the"factorincomes" withwhich commodityout-
put is realized). In one of his pithiest formulations,Mattick noted:
"Because notenoughhas been produced,capital cannotexpand at a rate
which would allow forthe fullrealizationof what has been produced.
The relativescarcityof surpluslabor in theproductionprocess appears
as an absolute abundance of commoditiesin the circulationprocess and
the overproductionof capital."49These surpluscommoditiescan indeed
be sopped up by the income froma governmentpolicy of fiscal expan-
sion. Realization difficultiescan be overcome, however, only by the
growthof governmentdebt, the retirementof which depends on the
private sector achieving a surge of profitabilitysuch as only a long-
lastingand severe depressioncan make possible. Of course, such a de-
pression would have to be enduredwithoutfurthercontributionto the

crisis,theKeynesianprogram
debt.By deferring thecon-
onlyheightens
ofcapitalaccumulation
tradictions in thelongrun.
It was in 1967,in a critiqueof Marcuse,thatMattickpublisheda
versionoftheargument he woulddevelopoverthenextfifteen years:
Thegovernment increaseseffective demandthrough purchasesfrompri-
vate industry, eitherfinancedwithtax moneyor by borrowings on the
capitalmarket. Insofar as it finances itsexpenditures with tax money,it
merely transfers money made in the private sector to the publicsector,
whichmaychangethecharacter of production to someextentbutdoes
notnecessarily enlargeit.Ifthegovernment borrowsmoneyinthecapi-
talmarket, itcan increaseproduction through itspurchases.Capitalex-
istseitherinliquidform, i.e. as money,orinfixedform, thatis,as means
and materialsofproduction. The moneyborrowedby government puts
productive resources towork.Theseresources areprivate property, which,
in orderto function as capital,mustbe reproduced andenlarged.Depre-
ciationchargesandprofits gained in thecourse of government-contracted
production are"realized"outofmoneyborrowed bythegovernment, but
thismoney,too,is privateproperty - on loantothegovernment at a cer-
tainrateof interest. Production is thusincreased,theexpenseof which
as
pilesup government indebtedness.
To pay offitsdebtsand theinterest on them,thegovernment has to
use taxmoney,ormakenewborrowings. The expenseofadditional, gov-
ernment contracted production is thuscarriedby privatecapital,even
thoughitis distributed overthewholeofsocietyand overa longperiod
oftime.In otherwords,theproducts whichthegovernment "purchases"
arenotreallypurchased, butgivento thegovernment free,forthegov-
ernment hasnothing togiveinreturn butitscreditstanding, whichinturn
has no otherbase thanthegovernment taxingpower and its abilityto
increasethesupplyofcreditmoney.
We willnotenterhereintotheintricacies ofthisrather complexpro-
cess, forhowever the credit is
expansion brought aboutandhoweveritis
dealtwithin thecourseof expandinggovernment-induced production,
one thingis clear,namely,thatthenationaldebt,and theinterest on it,
cannotbe honoredsave as a reduction ofcurrent andfuture incomegen-
eratedin theprivatesectoroftheeconomy.. . .
Becausegovernment inducedproduction is itselfa signof a declining
rateof capitalformation in thetraditional sense,itcannotbe expectedto
serveas thevehicleofprivate capitalexpansion effective enoughtoassure
conditions offullemployment andgeneralprosperity. Itrather turnsintoan
obstacletosuchexpansion, as thedemandsofgovernment ontheeconomy,
andoldandnewclaimsonthegovernment, divert an increasing partofthe

WINTER 1999-2000 77
newlyproduced fromitscapitalization
profit toprivateaccount.
Ofcourse,claimson thegovernment,whichmakeup thenationaldebt,
canbe repudiated, madevia government
and"profits" inducedproduction
arethusrevealedforwhattheyactuallyare,namely,imaginaryprofits.50
It should be obvious how incorrectitwas forDouglas Kellnerto dis-
miss Marcuse's criticsfor"arguingthathe had surrenderedtheMarxian
theoryof capitalist crisis, its emphasis on contradictionsand class
struggles,and its attemptto find disintegratingfactorswithinsociety
and social forcesthatwould be able to overthrowcapitalism and con-
structsocialism. The orthodoxMarxian strategyof critiquetended ei-
therto quote classical Marxian doctrineagainst Marcuse, or to present
social facts and tendencies which put in question Marcuse's tenden-
cies."51This was, at any rate,not the strategyof Mattick's critique,of
whose conceptualinnovativenessKellnerevincesno understanding. Most
of
striking all, Mattick understood debt-financed state spending to be no
different in principlethanthe destructionof capital associated withde-
pressions,even thoughthisstate-mediated devalorizationof capitalpara-
doxically manifesteditselfas a growthin effectivedemand and profits:
The moneycapitalutilizedbythegovernment is notinvestedas capital
and so preservedbut disappears into "public consumption."If the
statedebtis everpaid off- whichmaywell nothappen- it can only
be paid out of new surplusvalue freshlycreatedin production.And
thiswould in no way alterthefactthatthesurplusvalue represented
in thenationaldebthas vanishedwithouta traceinsteadof addingits
volumeto theaccumulationof capital. It followsthatthestate'suse
of increasedpublic spendingto fightcrisisends by consumingcapi-
tal. This consumptionof capital appears as a growthof production
and employment, butdue to itsunprofitable character,it is no longer
capitalistproductionand reallyamountsto a hiddenformof expro-
priationby thestate.The stateuses themoneyof one groupof capi-
taliststo buy theproductionof anothergroup,withtheintentionof
satisfying bothgroupsby assuringforone theintereston and forthe
othertheprofitability of itscapital.But theincomesthatappearhere
as interestand profitcan onlybe paid out of thetotalsocial surplus
value actuallyproduced,even ifthereckoningcan be deferred. As a
result,fromthestandpointof thesystemas a whole theproceedsof
state-inducedproductionmustcountas a deductionfromthe total
profitand therefore as a diminutionof the surplusvalue needed for
accumulation.Since thecrisisresultsfroma shortageofsurplusvalue,
it can hardlybe overcomeby increasingthisshortage.52

AlthoughMattick argued thatthe issuance of governmentdebt al-

lows overaccumulatedcapitalto functiononlyas ifitwere capital (while
in fact destroyingit), Mario Cogoy clarifiedthatgovernment-ordered
productionmeans "unreproductivegoods" in thatalthoughtheyrepre-
sent surplusvalue fortheirindividualproducers,theyconstitutea loss
for total capital, in whose expanded reproductionas wage or capital
goods theseunreproductivegoods do notenterand to whichtheyconse-
quentlydo nottransfer theirown value, thussimplyextinguished.These
unreproductivegoods are paid forout of revenue,entailinga deduction
via taxes or governmentborrowingfromthe total surplusvalue gener-
ated in the privateeconomy.53In this way, Cogoy, followingMattick,
showed thatthe mixed economy would findits limitsin the contradic-
tions of productionand structureof capital.
Yet thismay not seem satisfactory. If governmentspendingamounts
simplyto theorderingofunreproductive goods,thenitseemsimpossibleto
distinguishbetweenweapons and worldwidetroopdeployments,on the
one hand,and on theother,researchlaboratoriesand dual use technologies
(such as theinternet) which,even ifexpenditures, have nonethelesshelped
capitalistprofitabilityby encouragingcapital-savinginnovationand reduc-
ing the costs of unproductive labor(e.g., throughon-linebuying).And the
reductioninmilitary spendinghas alreadyhad a dramaticeffecton theU.S.
economy. While the Reagan-initiated policy of steppingup expenditures
whilereducingtaxes tookpublic debtfrom25 percentof GNP in 1981 to
50.1 percentin 1993, militaryexpenditures have droppedsteadily,from6
percent of GNP in themid-1980s to about 3 percentby thelate 1990s. As
JosephJohnWallisputsit, "The peace dividend eventuallyexperiencedin
thelate 1990s ended up beingroughlyequal to annual intereston thena-
tionaldebt."54If post-cold war cuts allow fora reductionof government
expenditure - in the year 2000 at its lowest pointin relationto GDP in
thirty -
years capitalistprofitability mayno longerface anythreatfromthe
mixed economy.Unlike Marcuse and the theoristsof a permanentwar
economy,Mattickwould surelynothave dismissedthepossibilitythattrim-
mingthemixedeconomy,especiallyitsmilitarysector,could aid capitalist
profitabilityby allowingforlowertaxesand borrowingcosts,whichwould
stimulateaccumulation.In fact,thisis exactlywhatMattickthoughtcapi-
talismwould have to do. What he wantedto emphasizeis exactlythis-
thatsuch limitswould have to be imposed on the mixed economy,thus
deprivingcapitalismof themechanismby whichit had avoided a down-
wardspiralfromrecessionto depression.

WINTER 1999-2000 79
This raises the questionof the supposed indirecteffectsof the

Keynesianstimulus. Accordingto thetheory, big deficits,adjustedfor
theeffectsof recessionand inflation, can raisethelevel of economic
activitysufficiently foritto remainstableas a percentage ofGDP over
thecourseof thebusinesscycle,despitethedebt.The argument pro-
ceedsfromtheassumption thata slowdowninaccumulation resultsfrom
a so-calleddecliningmarginalefficiency of capital,a subjectivecon-
ceptofwhich"thestateof confidence" is a keypart.55 Confidencecan
be improvedif"animalspirits"arerevivedby expectations ofbuoyant
demand, undermined at themoment by low demand, to be bolstered by
aggressivefiscalpolicy,thereby reversing theviciousdownwardspiral
of privateinvestorpessimismand retrenchment. For example,Darity
and Galbraithobservethat"In thestagnationist state,capitalistsare
gloomy, the rateof effective demand is low, and strongly expansionary
fiscaland monetary policiesare bothsufficient and necessaryto boost
raiseprofits
spirits, andrestorefullemployment."56 Thissubjectiveex-
planation for thefalloff in investment feeds the illusion- quicklydissi-
pating in the of
Japan early 2000 as the mind-boggling public debt
exceeds600 trillion yen($5.5 trillion), alreadyconsiderably morethan
totaleconomicoutputand almosttwicetheU.S. level in relationto its
GDP57 - thataggressivedemand-side policies can solve whatis con-
ceived of as a collective action problemamonguncertain privateinves-
torsand signala switchin investment behavior,culminating in a high
GDP equilibrium whichwouldmakethedebtmanageable.
Actualchangesintheobjectiveconditions ofproduction, usuallyef-
fectedin the downturn of the business cycle, such as the devaluation
and centralization of capital,are thought unnecessary to reviveaccu-
mulation.Keynes'sargument turnsouttobe thereductioad absurdum
of thesubjectivist turnof bourgeoiseconomics;as WilliamJ.Blake
noted,Eugen Böhm-Bawerk would nothave recognizedhis spotted
grandchild. Mattickputthepointsharply:"Whatever theobjectiverea-
sons fordepressions,as long as economistsconsiderthemunascer-
tainable,theyhavenothingto workon butthepsychology oftheclass
theyrepresent."58
One could arguethattheparadoxicalmaintenance of effective de-
mandthrough thedestruction ofcapitalprevents thedriving tothewall
ofbackwardenterprises thatin thecourseoftheclassiccrisiscycleal-
lows thesurviving centralized capitalto bolsteritsprofitability and so
theinvestment rate.In anycase, it wouldhave come as no surpriseto

Mattickthatinthe1990sprofitability has enjoyeda spike,dueinpartto

lower interestrates,as governments, facingthe limitsof the mixed
and
economy enjoying the end of the cold war,have competedless for
capital(thoughone of theeffectsof thenarrowing outletof relatively
safegovernment securities wastheglobalflowofsurpluscapital,bloated
by theU.S. FederalReserveBank's expansionary monetary policyin
responseto theAsia crisis,intoriskiercorporate bonds and an already
overheated stockmarket thatbecamea substitute stimulus oftheeconomy
through theso-calledwealtheffect).
Mattickwouldalso nothavebeensurprised thateveninthewake of
-
a U.S. budgetsurplus itselfresulting mostlyfromrelatively highmar-
ginaltax rateson massive equity gains and thus precariously depending
on continued advancesonWallStreet59 - all seriouspoliticalcandidates
muststillinsisttheywill neveragainengagein debt-financed expan-
sionaryfiscalpolicy.WithinMattick'sframework, italso hardlyis sur-
prising that Europe finds itself,under the stringentMaastricht
convergence criteria,
struggling toreducedeficits andcontaindebt.Nor
wouldeithertheneedfororineffectiveness ofJapan'swildfiscalpolicy
have struckhimas mysterious. Mattickindeedpredicted thatthestate,
needing to shed itscommitment to the unproductive expansion ofpro-
duction(in theformof military or
expenditures otherwise), would re-
sumeitsclassicfunctions - thatis,improving
as a class state conditions
of production fortherespectivenationalcapitalsand carrying outre-
pression.60 The limits of the mixed economy have seeminglybeen
reached,leaving no floor for a severe economic downturn duringwhich
onlytheslaughterous destruction of rivalcapitalwill pointa way out,
bringing againtonaught all visionsofan organized globaltrading system.
Kellneris notwrongto characterize Mattickas an orthodox Marxist,
as histheoreticalworkservedthepurposeofclarifying theinternational
workers' struggleto abolish capital,wagelabor, and the state.
InMattick's
hand,orthodox Marxismprovesitselfmoreadequatetothedynamics of
advancedcapitalismthanMarcuse'scriticaltheory.However,by ne-
glectingthatit was througha basic theoretical advancethatMattick
recognized thelimits of the mixed economy, Kellner wronglyargues
thatMattickcouldhave and did citeactualtendenciesthatcalled into
questionMarcuse'stheoryofintegration. How couldhe havein 1967?
Marcusetheorizedduringthe 1960s,a periodof highoutputgrowth,
highproductivity growth, andlowjob creation(thoughlow unemploy-
ment).It was onlyinthe1970sand 1980sthat - as Mattickpredicted -

WINTER 1999-2000 81
therewas a collapseofproductivity growth, so thathighratesofoutput

growth were sustained onlyby drawing millions of new workersinto
thelabor forcein an explosionof low and very-lowwage jobs. The
boomof the 1990shas continued to be marredby low ratesof output
low growth, lowjob creation
and - thoughall these
growth, productivity
indicators showedupwardmovement inthelate 1990sduetoa "trickle-
down,"consumption-based impetusfromtheexplosionin thevalue of
stockmarket portfolios,whichmotivated considerable personalborrow-
ing at low margins for furtherspeculation, though it was routinelyac-
knowledged inthefinancial pressthat are
equities already inno relation
to actualprofits. At present, thebankingsystem,sittingatopmassive
nonperforming assets,is also doublyleveragedto the stockmarket,
through both the supplyof venturecapitalin searchof initialpublic
offerings andprofits fromequityunderwriting, assetmanagement, and
otherstock-related fees.61Withsuchmounting fragilityin an economy
witha speculativebase,itis appositetonotethattherewerefivereces-
sionsbetween1970and 1992,whiletherewerenoneinthe1960s,when
Marcuseheldswayas philosopher-king oftheLeft.
The Americanmacroeconomicsituation
One important facetof'theAmericanKeynesianstate,I believe,remains

developedin Mattick'swork,thoughhe recognizedand
insufficiently
analyzedtheproblemthatI shalldiscussin closing.Simplyput,unlike
manyThirdWorldor otherdebtornationswithobligationsin foreign
currencies(frequently theU.S. dollar),theU.S. government itselfhas
greaterroomformoneycreation ormonetization ofinterest-bearingdebt
because its debtis all owed in dollars,foreclosing threatof default.
the
Moreover,despite run-up in theU.S. currentaccount deficit,for-
eignershave continued to show an enormous in
interest accumulating
dollarsthroughforeigndirectand portfolioinvestments and by their
currentaccountsurpluses vis-à-vistheUnitedStates.Also,alreadyhav-
ing builtup substantialholdingsin dollardenominated assets,foreign-
ersarethemselves forced to interveneto maintainthe dollarintheface
of exogenousshocksor evendepreciations, therootcause ofwhichis
theU.S. government's inflationarymonetary policy.Havingthetopcur-
rency thusgivesthe United States formacroeconomic
capabilities stabi-
lization"without far
tears," exceeding what othergovernments do.
can
ofthedollarderivesfromitsroleas theworldreserve
The attraction

currency; thepricingofoil in dollars;62 thestability and safetyofassets

ina relatively prosperous especiallyhighlyliquideconomy;andthe
and
of
willingness manygovernments to defendthedollar,giventheenor-
mous staketheyalreadyhave in dollar-denominated assetsand their
desireto preventtheeconomicinsolvencyoftheUnitedStates,which
could lead to a closingof itsmarketto less-favored allies and there-
trenchment ofthemilitary forcesofthelonesuperpower. As a result,the
UnitedStateshas been able to runup massivecurrent accountdeficits
only to itself the
organize depreciation of the dollar and so itsforeign
debt,usually denominated in dollars - yet without loss of continuing
capitalinflow.So longas thereis no acceptablealternative and dollar
holdersmaintainconfidencein thegreenback, theUnitedStateswill
continueto enjoytheprivilegesofseigniorage. BothU.S. stateandpri-
vate capitalcan offerfairlylow returns despitetheiralreadyheavily
indebted position,andthusprolong a debt-powered prosperity.Atpresent,
forexample,a record$4.2 trillionin debtoutstanding had been accu-
mulatedbynonfinancial corporations through thethirdquarter of 1999;
thedebtload has increaseda staggering 60 percent inthepastfiveyears
alone.63
It can onlybe explainedto someextentin explicitly politicalterms
why there have not been inflationary pressures and a wholesale loss of
confidence inthedollaras theFederalReserveBankhas allowedexplo-
sive moneycreationby maintaining a low federalfundsrateand by
sellingTreasury bonds to enable the bankingsystemto meetreserve
requirements as lines of credit are accessed. A seeminglyinflationary
dollarsurpluscontinuesto be "invested"by foreigners andAmericans
alikein thedollar-denominated assetsthathave thusenjoyedan infla-
tionthathas onlyfueledmorespeculation. Even nonfinancial corpora-
tionshaveloadedup on debttobuybacktheirownstockintax-friendly
deals.All thisseemsto makea massivesell-off of dollar-denominated
assetsevermorelikely,no matterhow artificially delayed,due to the
exerciseofAmericanpolitical-economic power. Given theglobalstruc-
turaldependenceon theU.S. market, a real downturn could well cast
theworldintotheturbulent seas of a protracted depression. Although
greatercapacityformoneycreationby theworldreservecenterin the
shortrunmaystimulate profits, or at leasttheillusionthereof, it in no
way signifiesimprovement in the conditions of production alone
that
enablestheconversion ofmoneyintocapital,thesinequa nonofpros-
perityin a capitalisteconomy.

WINTER 1999-2000 83
It is possiblethatthemanipulation of thedollarand theinflowof

capitalmay have allowed U.S. capitalover thelasttwenty-five yearsto
rationalizeproduction, to dominatethemostprofitable partsofleading
newindustries, andtocarryouttheresearchanddevelopment necessary
forcomfortable leadsinmicroprocessors, software, biotechnology, com-
puters, medical instruments, aircraft,etc.64This may stillnot allow a
fullrecoveryof immediatepostwarprofitlevels,buthigherabsolute
profits maybe sufficient to maintaintheU.S. worldposition(even ifa
greaterpercentage of the smallerGDPs of Japanor theEU statesis
spent on research and investment).
The endofthecoldwarhas doubtlessstrengthened therelativeposi-
tionof theUnitedStates.The specterof so-calledcommunism having
faded,theUnitedStateshas moreaggressively openedthemarketsof
its allies and,as alreadymentioned, scaled back its militaryexpendi-
tures.Therecanbe littledoubt,however, thatthisrelativeleadhas ledto
"irrational exuberance"on Wall Street,sharedbyAmericansand for-
eigners alike.At somepointtheremustbe sufficient exportsto pay for
theforeigndebttheUnitedStateshas undertaken. Thiswilldependon
thestrength of investment demandabroad,especiallyas theweightof
capitalgoodsin U.S. exportshas grown.To theextentthatthisinvest-
mentabroadhas been undermined by thedrainingof profitsintothe
UnitedStates,whether tobuyinputsfromAmericantechnological mo-
nopoliesor simplyto takea positionin theU.S. economy,theUnited
Stateswillnotbe abletogenerate sufficientexportswithout ever-steeper
depreciations of its dollar,anticipation of which can onlyinducerepa-
triation of foreign capital,howeverlimitedby politicalfactors.It may
turnoutthateventhenAmericanexportswillnotbe thatstimulated, if
theyprove not to be as sensitiveto relativecurrency value as to the
strength of investment demand.Whether we speakofan unsustainable
current accountdeficitor a contractionary surplus,idle capacityin ex-
cess of globalmarketdemand,or an insufficiently strongrateof accu-
mulationinothercountries forhighemployment andabsorption oftheir
shareof globalexports, therootof all theseproblemslies in theshort-
age ofsurplusvalueinthesystemas a whole.As itsdeficits mount,the
UnitedStateswillsurelycontinuetourge,ifnotcoerce,itsallies(Japan
inparticular) toundertake theveryexpansionary policythatithas itself
foregone on the grounds thata shortage surplusvaluecannotbe over-
of
-
come as Mattickrecognizedalmostthirty-five yearsago- bypolicies
thatonlyaggravate theunderlying problem.

Notes
1. Paul Mattick,Critiqueof Marcuse: One DimensionalMan in Class Society

(New York:Herderand Herder,1972), 91.
2. See Hal Draper,Marx*s TheoryofRevolution:Critiqueof OtherSocialisms
(New York:MonthlyReview Press,1990).
3. Paul Mattick,"The Limitsof Integration," in The CriticalSpirit:Essays in
Honor of HerbertMarcuse, ed. KurtWolffand BarringtonMoore, Jr.,374-400
(Boston:Beacon Press,1967).
4. Mattick,CritiqueofMarcuse,40.
5. HerbertMarcuse,One DimensionalMan: StudiesintheIdeologyofAdvanced
CapitalistSociety(Boston: Beacon Press, 1964), chap. 2. See also Doug Kellner,
HerbertMarcuse and the Crisis of Marxism(Berkeley:Universityof California
Press,1984), 232ff,formanyofMarcuse's strongest formulations aboutthestabili-
zationof theeconomythroughgovernment intervention.
6. Mattick, Critique of Marcuse, 40-41. Mattick clearly understoodthat
Marcuse's theoryremaineda criticalone: "In this,Marcuse thinks,men are sell-
ing theprospectsof a trulyhuman,self-determined, futureforthemess of a pot-
tage of today's high living standards.How much more worthwhilewould their
lives be, and how muchtheirstandardof living,ifwaste-production wereentirely
eliminatedand social productionwererationallygearedto thereal needs of men."
For Marcuse, waste productionincludednotonlyarmamentsand such forwhich
thegovernment had irrationallycreatedan effectivedemand,butalso varietiesof
consumergoods forwhichadvertising had stimulated desire.Mattickconcentrated,
as shall I, on theformertypeof waste productionbecause it did notrepresenta
formof capital,as thelatterdoes. The importanceof thisdistinctionis developed
below.
7. Mattick,CritiqueofMarcuse.Emphasisadded.
8. Government spendingandredistribution are thekeysto avoidingthedestruc-
tionof the surplusaccruedfromoversavingthatwould put the economyintoan
underemployment equilibrium.The Left-Keynesian vision,and theparliamentary
strategy based on it,basicallyreduces to thisidea. See, forexample,theworkby
ThomasPalley,assistantdirectorof publicpolicyof theAFL-CIO, PlentyofNoth-
ing: The Destructionof theAmericanDream and the Case for Structural
Keynesianism(Princeton:PrincetonUniversity Press, 1998), whichrepresents the
Left-Keynesian perspectivethathereis subjectedto critique.Palley adds a case for
protectionism to ensurethatwages remainhighand thatany Keynesianstimulus
and redistributiondo notleak outof thenationaleconomy.
9. For thetworeasonsgiven,OliverBlanchardhas arguedthattheU.S. govern-
menthas retainedsubstantial powertoraise,in anygivenyear,a budgetsurplusthat
wouldnotundermine economicactivity.On thatbasis,he has arguedthatmorethan
doublingtheReagan-eradebtthathad accumulatedby 1988 from$2 trillionto $5
trillionwould not have threatenedthe solvencyof the government. See William
Darityand JamesGalbraith,Macroeconomics(Boston: HoughtonMifflin,1994),
342-43. The sustainability of largerdeficitsand debt- thatthereare no pressing
limitsto the mixedeconomy- is arguedby RobertEisnerin The Misunderstood
Economy:WhatCountsand How to CountIt(Cambridge:HarvardUniversity Press,
1994); and by Darityand Galbraith,Macroeconomics.

WINTER 1999-2000 85
10.See PaulDavidsonandJamesGalbraith, "TheDangersofDebtReduction,"

WallStreet Journal, March3, 1999,A18.
11.JamesGalbraith, CreatedUnequal:TheCrisisinAmerican Pay(NewYork:
FreePress,1998)includes a substantialdefenseofexpansionary monetary policyas
wellas reforms toconstrain anyinflationary pressure.
12.It is difficult
toimaginethatMattick wouldhavehadmuchinterest in the
explosion of criticismof neoliberalism, sincehe would have understood its emer-
genceas a signofthelimitsofreformist policymaking andtheneedtooverthrow
thecapitalsocialrelation,ratherthantoreinstate Keynesian policy,theexpressed or
implicitgoal ofcriticsof neoliberalism from Waiden Bello at theThird World Insti-
tutetoFrance'sleadingsociologist, PierreBourdieu.
13.Foran excellent resumeoftheproblems withwhichbourgeois economics
hascharged theKeynesian project,see RobertSkidelsky, "Theconditions forthe
reinstatement ofKeynesian policy,"ofwhichhe supports onlya minimalist type
sincethe"stagflation" ofthe1970sdiscredited moreaggressive programs (in The
ImpactofKeyneson Economicsin the20thCentury, ed. LuigiL. Pasinetti and
Bertram Schefold, 36-52[Cheltenham, UK: EdwardElgar,1999]).
14.Forrecent explorationsofthesethemes, seeEricL. Krakauer, TheDisposi-
tionoftheSubject:Reading Adorno 'sDialecticofTechnology (Evanston, IL: North-
western University Press,1999); and MoishePostone,Time,Laborand Social
Domination: ReinterpretationofMarx'sCriticalTheory (Cambridge: Cambridge
University Press,1993).
15.Mattick, Critique ofMarcuse, 25.
16.Marcuseis quoting Serge Mallet herein OneDimensional Man,28.
17.PaulMattick, MarxandKeynes:TheLimits oftheMixedEconomy (Boston:
PorterSargent, 1969),110.
18. ShaneMage, The 'Law oftheFallingTendency oftheRateofProfit':Its
PlaceintheMarxian TheoreticalSystem andRelevance totheU.S. Economy" (Ph.D.
dissertation,Columbia University, 1963),119.
19.KarlMarx,Capital,vol.3 (NewYork:Vintage, 1981),369.
20. Although Marxnotedthata theory ofthedeclining profit rateremained the
ponsasinorum ofclassicaleconomics, heconsidered hissolution tobequitesimple.
Ofcoursethisbecomesimpossible toappreciate withinthestraightjacket oflinear
algebra.In hisFrontiers ofPoliticalEconomy (London:Verso,1991),Guglielmo
Carchedi hasworked upexcellent,simple, andelegant modelstodemonstrate Marx's
basicinsight. Myunderstanding is verymuchindebted tohim.
21. Mattick, Critique ofMarcuse, 31-32.
22.Eveniftechnical changehasnotaffected theorganic composition ofcapital
orremained on a Harrodneutral path,therateofprofit maystillfallduetorising
circulation andR&D costs,privately andstate-financed, whichrepresent unpro-
ductiveexpenditures deducted fromtotalsurplusvalue.See Prabhat Patnaik, Ac-
cumulation andStabilityUnderCapitalism (Oxford: Oxford UniversityPress,1998).
Therecognition oftheimportance oftheseconsiderations is duetoFredMoseley,
TheFallingRateofProfit inthePostwarUnitedStatesEconomy (NewYork:St.
Martin's Press,1992).
23.DuncanFoleycriticizes theunrealistic assumption ofa constant realwagein
his Understanding Capital:Marx'sEconomicTheory (Cambridge: HarvardUni-
versityPress,1986),139.PhillipevanParijshaspresented anelegantpresentation

oftheOkishiocritiqueofthetheoryofthetendencytowarda fallingrateofprofit in
MarxismRecycled(Cambridge:CambridgeUniversity Press,1993),37-69.
24. See the chaptersby AndrewKliman and Alan Freemanin Marx and Non-
EquilibriumEconomics,ed. GuglielmoCarchediand Alan Freeman(Brookfíeld,
VT: EdwardElgar,1996).
25. See Patnaik,Accumulationand Stabilityunder Capitalism; and Moseley,
TheFalling Rate ofProfitin thePostwarUnitedStatesEconomy.
26. Foley, Understanding Capital; and van Parijs,MarxismRecycled.
27. Paul Mattick,Marxism: Last Refugeof theBourgeoisie? (Armonk,NY:
M.E. Sharpe, 1983), 72.
28. Mattick,CritiqueofMarcuset29-30.
29. See the discussionin WilliamJ.Blake, Marxian Economic Theoryand Its
Criticism(New York:CordonPress,1939),213ff.;andRomanRosdolsky,TheMak-
ing ofMarx 's Capital (London: PlutoPress,1977), chap. 32.
30. Mattick,Marxism:Last RefugeoftheBourgeoisie? 102.
3 1. Karl Korsch,Karl Marx (New York:Russell and Russell,' 193811963), 146.
32. Palley,PlentyofNothinz 117-1 9.
33. Eisner,TheMisunderstoodEconomy.
34. Daniel Shaviro,Do DeficitsMatter?(Chicago: University ofChicago Press,
1997), 110. (Emphasisadded.)
35. Mattick,CritiqueofMarcuse,21.
36. 1thankAllinCottrellfortheclarification ofFederalReserveBank's policyof
accommodatingfederaldebtissues untiltheVolckershocksofthelate 1970s.
37. Paul Mattick,Economics,Politicsand theAge of Inflation(Armonk,NY:
M. E. Sharpe,1977), 34.
38. Ibid.. 33.
39. Ibid., 76.
40. Here MattickanticipatedtheanalysisoftheleadingAmericanacademic stu-
dentofinternational politicaleconomy,RobertGilpin,fromwhomI quoteat length
in orderto underlinethe fusionof economics and politics thatMattickhimself
emphasized:
America'scold warallies,fearingthata collapse ofthedollarwouldforcethe
U.S. to withdrawits forcesfromoverseas and to retreatintopoliticalisola-
tion,agreedtoholdovervalueddollars.Also, suchexport-oriented economies
as West Germanyand, at a laterdate, Japanwished to keep access to the
lucrativeAmericanmarket.Throughout thepostwarera theU.S. alwayshad
one primary partnerhelpingitto defendthedollarandhencetheU.S. interna-
tionalposition.In theearlypostwarperiod,theAmericanpositionand sup-
portforthedollarwerebased on cooperationwiththeBritish;this"special
relationship"begunbetweentheFirstand Second WorldWarshad been so-
lidifiedby wartimeexperience.The Anglo-Saxonsworkedtogether to frame
theBrettonWoods Systemand reestablishtheliberalinternational economy.
By thelate 1960s,however,therelativedeclineoftheBritisheconomyforced
GreatBritainto pull away fromitsclose partnership withtheU.S.
WestGermanythenreplacedGreatBritainas theforemost economicpart-
nerof theU.S. and as themainsupporterof thedollar.Throughout theViet-
namWarand intothe 1970s, theGermanssupportedAmericanhegemonyby
holdingdollarsandbuyingAmericangovernment securities.Inflationaryand

WINTER 1999-2000 87
otherconsequencesof thisnew special relationshipweakenedit in themid-

1970s and eventuallyled to a fracturein the late 1970s whenthe Germans
refusedto supportPresidentCarter'seconomic policies; the Germansthen
joined theFrenchto sponsortheEuropeanMonetarySystem.Creationofthis
"zone of stability"in WestEurope was thefirstofmanyefforts to isolatethe
Europeaneconomiesfromthewild fluctuations ofthedollar.
In the 1980s,theGermanswerereplacedby theJapanesewhen,through
theirinvestments in the U.S., the Japaneseprovidedfinancialbacking for
Reagan's economic and militarypolicies. In the 1990s, sporadicinformal
cooperationamongAmerican,German,andJapanesecentralbankssupported
theinternational roleofthedollar.This cooperationcontinuedlargelydue to
fearofwhatwouldhappento theinternational economicandpoliticalsystem
ifthemonetarysystemwereto breakdown.
RobertGilpin,TheChallengeof Global Capitalism: The WorldEconomyin the
21st Century(Princeton:PrincetonUniversityPress,2000), 61-62; see also 120-
21,222-25).
41. Mattick,Economics,Politicsand theAge ofInflation,11.
42. Gilpin,The Challengeof Global Capitalism,140.
43. Darityand Galbraith, Macroeconomics,34, 38.
44. Quoted in ShigetoTsuru,InstitutionalEconomics Revisited(Cambridge:
CambridgeUniversity Press,1993), 31.
45. Mattick,CritiqueofMarcuse, 17.
46. JohnMaynardKeynes, The General Theoryof Employment, Interestand
Money(New York: Harcourt,Brace, 1936), 129, 131.
47. QuotedinPaulMattick, EconomicCrisis{Armock, NY: M.E.Shaipe,1981),128.
48. Ibid., 128.
49. Mattick,Marx and Keynes,79.
50. Mattick,"The LimitsofIntegration."
51. Kellner,HerbertMarcuse,270.
52. Mattick,EconomicCrisis, 150.
53. Mario Cogoy,"The TheoryofValueand StateSpending,"International Jour-
nal ofPoliticalEconomy17,no. 2 (1987): 92.
54. JohnJosephWallis,"AmericanGovernment FinanceintheLong Run, 1790-
1990,"JournalofEconomicPerspectives14,no 1 (winter2000): 78.
55. "The stateofconfidence... is a matterto whichpracticalmenalwayspaythe
closestand mostanxiousattention. But economistshavenotanalyzeditcarefully and
havebeen content, ithas notbeen
as a rule,to discussitin generalterms.In particular
made clear thatitsrelevanceto economicproblemscomes in throughits important
influenceon thescheduleofthemarginalefficiency ofcapital.Therearenottwosepa-
ratefactorsaffecting therateofinvestment, namely,thescheduleofthemarginaleffi-
ciencyof capitaland thestateof confidence.The stateof confidenceis relevantbe-
cause itis one ofthemajorfactorsdetermining theformer, whichis thesamethingas
theinvestment demand-schedule." Keynes, The GeneralTheory,148-49.
56. Darityand Galbraith,Macroeconomics,404. It shouldbe notedthatDarity
and Galbraithalso develop a new politicaltheoryof the businesscycle which is
based on the idea thatrecessionsare needed to signal and coordinateinvestment
decisionsina waythatprevents thebreakdownofco-respective competition through
competitivegreenfield investments.

57. PeterLanders,"Moody's MightCut GovernmentDebt-RatingforJapan,"

WallStreetJournal,February17, 2000, A2, and "JapanSets Last Push to Stimulate
Economy,"WallStreetJow/tîo/, November10, 1999,A17.
58. Mattick,Marx andKevnes, 17.
59. Louis Uchitelle,"A SurplusBuilton BricksofIncomeInequality,"New York
Times,February28, 1999, section3, p. 4. See also Anna Bernasek,"How theBud-
get SurplusMay GetWashedAway,"Fortune,September6, 1999,40.
60. In numerouswritings, Bob Jessopsuggestsa transition fromtheKeynesian
welfarestateto theSchumpterian workfarestatewithoutmentioningthatMattick
and Cogoy had predictedsuch a transformation at the heightof confidencein
Keynesiantechniques.See Bob Jessop,"Postfordism andtheState,"inPost-Fordism:
A Reader, ed. Ash Amin,25 1-79 (London: Basil Blackwell, 1994).
6 1. For example,see GarySilverman'sreport,"EarningsShow Banks' Reliance
on Stock Market,"Financial Times,January19, 2000, 15: "A consumerbanking
powerhouseservingone ofevery3 households,Bank ofAmericasaid itsnetinterest
incomefell2 percentduringthequarterto $4.5 bn,while itsnonperforming assets
rose as a percentageof the total.By contrast,the noninterest income at the bank
soared 35 percentto $3.6 bn and banks officialspredictedthatfees fromequity
underwriting and M&A growthwould continueto powerearningsgrowth."
62. David Spirodrawsouttheimplicationofthiswell: "So longas OPEC oil was
pricedinU.S. dollars,and so longas OPEC investedthedollarsinU.S. government
instruments, theU.S. government enjoyeda double loan. The firstpartof theloan
was foroil. The government didnothave toproducegoods andservicesin exchange
fortheoil untilOPEC used thedollarsforgoods and services.Obviously,thisstrat-
egy couldnotworkifdollarswerenota meansof exchangeforoil. The secondpart
oftheloan was fromall othereconomiesthathad topay dollarsforoil butcould not
printcurrency. Those economieshad to tradetheirgoods and servicesfordollarsin
orderto pay OPEC. Again,so long as OPEC held thedollarsratherthanspending
them,theUnitedStatesreceiveda loan. It was, therefore, importantto keep OPEC
oil pricedin dollarsat thesame timethatgovernment officialscontinuedto recruit
Arab funds."TheHiddenHand ofAmericanHegemony:PetrodollarRecyclingand
InternationalMarkets(Ithaca: CornellUniversityPress, 1999), 121-22.
63. GregoryZuckerman,"U.S. Boom: Livingon BorrowedDime?" WallStreet
Journal,December3, 1999,Cl.
64. See, forexample,David Moweryand RichardNelson,eds.,SourcesofIndus-
trialLeadership:StudiesofSevenIndustries (Cambridge:CambridgeUniversity Press,
1999); andF. M. Scherer, NewPerspectiveson EconomicGrowthand Technological
Innovation(Washington, DC: BrookingsInstitute
Press,1999).


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Int.JournalofPoliticalEconomy,vol. 29, no. 4, Winter199£-2000,pp. 56-S8.

© 2001 M.E. Sharpe,Inc. All rightsreserved.

Paul Mattick's work still awaits a working-classmovementwhich will

RakeshBhandariis CommissionerforCurriculum Materials,Cali-

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toEngels'santi-Dühring toHenryk Grossmann's critiques ofFritzSteinberg,

(How) has capitalismchanged?

Matticknoted,however,thatthe"last greatdepressionon an interna-

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penetratedthe social fabrictoo deeply to be stillacceptable as a neces-

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and an "affluency,"which, with the exception of a minorityof

The questionis then,can capitalismevolveintosomething otherthanit

There are many thinkerstoday who would claim thatthe economic

1. thatmorethaneven Marcuse realized,capital-savingtechnologiesdo

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2. thatgovernmentdeficitspendingfinancedmainlyby the issue of in-

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needto eliminatecreditinflation withbrutallevelsofunemployment.13

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merelytransfers itownvaluetotheproduct, whilesurplusvalueremains

This content downloaded on Thu, 10 Jan 2013 04:50:10 AM

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forcontinued accumulation. In a systemofpositivefeedback, thiswould

This content downloaded on Thu, 10 Jan 2013 04:50:10 AM

hereis thatthesystemdoesnotwait,doesnotholditselfconstant foras

This content downloaded on Thu, 10 Jan 2013 04:50:10 AM

wereremoved - he paidno attention to Marx'sconceptofmoraldepre-

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capitalformation process,whichis onlythe accumulationof unpaid

An apparently newattempt is madeto "control," to"correct," andto "steer"

By 1967 Mattickhad already developed a conceptuallyinnovativecri-

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tiqueof Keynesianism, despitetheprestigeit enjoyedduringthatde-

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allianceof industrialists and workers, theformer providing themoney

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Alongtheselines,thetheorists ofthepermanent wareconomyactu-

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The UnitedStateswas able to forcetherevaluationof othercurrencies

Almost twenty-five yearsafterthiswas written,we remainwithouta

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InthenextsectionI presenta briefideaofwhattheKeynesianrevo-

As Keyneshimselfacknowledged, histheoryhad itsrootsinthemulti-

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bringingto the marketgoods, which mustbe currentlysold."44Export

Keynes, of course,did notshyaway fromtheformsof waste produc-

IftheTreasury wereto fillold bottleswithbanknotes, burythemat suit-

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tory,fromtheancientEgyptiansto theMiddle Ages, derivedfroma now

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AlthoughMattick argued thatthe issuance of governmentdebt al-

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This raises the questionof the supposed indirecteffectsof the

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Mattickthatinthe1990sprofitability has enjoyeda spike,dueinpartto

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therewas a collapseofproductivity growth, so thathighratesofoutput

One important facetof'theAmericanKeynesianstate,I believe,remains

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