The Evasions and Sophistry of the ICC

Introduction

It is no secret that one of the factors in the formation of the Communist Workers’ Organisation in 1975 was the failure of the precursors of the International Communist Current (ICC) to take seriously, let alone address, the issues we raised about the real cause of capitalist crises. Even after the formation of the ICC, the CWO comrades were dismissed as “the political economists of the communist movement”, demonstrating that this whole issue was still not taken seriously by them. However, our understanding of how capitalism functions, and the perspectives we base on this are critical to any organisation which claims to make a revolutionary contribution to the future emancipation of the working class. As the “emancipation of the workers will be the task of the workers themselves” (Marx), an objective understanding of the real movement of capitalist society, and where the working class stands in relation to it, is absolutely essential. This is the method on which the CWO has operated (however erroneous or successful we may have been in applying that method).

For the ICC such an approach is “vulgar materialism” but the consequences for the ICC of this cavalier attitude have been, over time, organisationally devastating and the basis of many of their splits (although neither the ICC nor their various splitters recognise this). Instead of basing their perspectives on the real movement of capital (by which we mean the use of the Marxist understanding of the law of value), the ICC have sought to develop subjective perspectives based on little more than guesswork.

People today may have forgotten some of the ICC’s bigger blunders in this respect. The ICC’s very formation was based on the perspective of Revolution Internationale (subsequently the French section and most intellectually dominant section of the ICC) that the “crisis is here”. From this they deduced that the revolution would automatically follow and had an almost messianic view that the only thing holding back the working class was the propaganda (in ICC speak “mystifications”) of the bourgeoisie. This led to their second split of the activists who followed Chenier out of the organisation in the early 1980s. Partly this was due to the exposure of the weaknesses in their previous perspectives. In the late 1970s they argued that, as the crisis was forcing the capitalists to attack living standards and the class struggle was therefore rising, the bourgeoisie needed, in electoral terms, to have the “left in opposition” in order to bring them to power when the class struggle became more intense. We argued that this was a nonsense and that the bourgeoisie needed the most suitable government in power to better carry out the attacks whether it was of the left or the right (depending on the phase the crisis and the class struggle had reached in each state). When the French elected Mitterand’s Socialists to power the ICC magisterially replied that the French bourgeoisie “had made a mistake” (an even grosser remark when you remember that the ICC were also claiming at the time that it was only “the Machiavellianism of the bourgeoisie” that blocked the road to the rise of revolutionary consciousness!). This piece of political punditry having failed it was now replaced by the prediction that the 1980s would be “ the years of truth”. By this the ICC seemed to mean that the great historical issue to the crisis, “war or revolution” would be settled by the end of the decade. Just to underline this, the ICC constantly spoke of a period of rising “waves of struggle” pointing towards revolution. We replied that if there were waves they were on a receding tide of class struggle. By the end of the 1980s the whole perspective was beginning to look a bit sorry but salvation was on the way with the collapse of the USSR.

This became the ICC get-out clause. As no clear “truth” had emerged from the 1980s, and as the USSR had now collapsed, the ICC could now argue that “the end of history”, as the bourgeoisie at the time liked to refer to it, had led to a stalemate. Neither the proletariat nor the bourgeoisie had succeeded in imposing its vision on society. What we were left with was “chaos and decomposition”. From this it was a short step to announcing that it was useless to try to understand the rationale of the capitalist system as it was simply fundamentally irrational. Now, a system which produces a situation in which half the world lives on a pound a day at one pole, whilst a minuscule minority control billions of dollars worth of capital which they cannot spend or even invest to help satisfy the needs of humanity, at the other, is by any objective standards, irrational. But this does not mean it does not have laws, and it was the aim of the short CWO article “The Economic Role of War in Capitalism’s Decadent Phase” in Revolutionary Perspectives 37 to reassert this fundamental Marxist axiom. After all, if capitalism cannot be understood through an analysis of the law of value what remains of Marxist theory? What seems worse is that the ICC seem to have abandoned the view that the proletariat can ever revive, and that therefore the outcome of the historic fate of humanity is already decided. The challenge the article posed was for the ICC to explain to us theoretically how they had arrived at this argument.

In reply the ICC have so far failed even to address the question. We say “so far” because the ICC have chosen, in the person of their latest economic “expert” C. McL., to evade the issue by making a long and convoluted attack in their International Review Nos.127 and 128 on the law of the tendency of the rate of profit to fall as the main law to explain capitalist crises. This has taken nearly 30 pages already but they have yet to get to the point. A third part, yet to be published, will also, it seems, avoid the issue, as it promises to show how the IBRP (sic - the text in question is not an IBRP text) only offers “a pale emasculated” version of Marx’s theory of the crisis. We wonder when they will get around to addressing the original question and explain how they have arrived at their position of abandoning the working class as the force for revolutionary change? In the meantime therefore we can only reply to what the ICC have already published, which means readers will have to bear with us and accept that this reply will be in two parts.

The ICC at Last Discovers that Capitalist Contradictions are Internal to the System

In reply to our demand for an explanation of the ICC’s theory they have gone in for various tricks which anyone familiar with ICC polemics will recognise. These range from argumentum ad hominem (e.g. Mattick, who they claim “inspired” the CWO - but more on that later - was a councilist, and therefore his economic texts are intrinsically false) to claiming that the ICC defends Marxist orthodoxy whilst those who defend a view based on value analysis are somehow one-sided or “mono-causal” in their explanation of how capitalism operates. It will be noticeable too that the ICC “reply” to the theoretical issues (in the first part of their article) contains no quotes from our press so that it is easy for them to present our positions in such a distorted way that they can be dismissed. In the final analysis the ICC also fails to make clear that the markets position which Marx alludes to, and that which Rosa Luxemburg defends (which they claim to support but in actual fact don’t in real terms) are totally different. Such polemical excesses are easy to get away with in the airy world of organisational polemic but on the harder terrain of materialist analysis they can be exposed by anyone willing to study Marx carefully. It will be the task of this first part of our reply to deal with the sorry case the ICC puts up in this respect.

Most of the arguments in the first part of the ICC’s non-reply are familiar to anyone who has had the misfortune to be part of this debate for the last thirty five years since they are simply repetitions of articles published in the 1970s. The ICC’s nominal economic theoretical basis, though, goes back further than that. It is largely taken from Mitchell (Jehan), one of the most significant figures in the international communist left which published Bilan in the 1930s. (1) He was fundamentally a Luxemburgist in thinking that the crisis of capitalism derived from its inability to find markets inside the capitalist system (i.e. the wage labour-capital relationship) and that the problem was that there were no new extra-capitalist markets left by the end of the previous century. That said, he was not uncritical of some of Luxemburg’s ideas and resolutely opposed the idea that arms production provided a substitute market which could allow capitalism to get out of the Depression. He strongly and correctly argued that the arms race of the late 1930s prefigured imperialist war. Sadly, he was one of its victims: deported to Buchenwald, he tragically died shortly after liberation in 1945, depriving the communist left of an authoritative voice. Nevertheless, his economic opinions had a great impact on Marc Chirik, most significant member of the Gauche Communiste de France after 1945 and the architect of the ICC in the 1970s. As he told us himself, Mark Chirik was no economist. His standard arguments for asserting the primacy of Luxemburg’s theory were to quote the passage in The Communist Manifesto where Marx states that

"In these crises there breaks out an epidemic that in all earlier epochs, would have seemed an absurdity - the epidemic of over-production. (2)"

and to equate our views with those of the bourgeois nineteenth century French economist J.B. Say, who argued that in the long run supply and demand always fell into line (so-called Say’s Law). Both these arguments are shamelessly repeated by C McL. in the first part of the ICC article. Our reply has always been the same. The Communist Manifesto was written before Marx had embarked on his scientific investigation into the inner workings of the capitalist system. (3) Market gluts and over-production are an obvious feature or, as Marx says in Theories of Surplus Value Volume II, “phenomenon” of capitalist society, and set it apart from all other previous societies. In Capital, Marx sought to explain how this society capable of creating vast quantities of cheap commodities was suddenly thrown back on itself, and despite the self-evident poverty all around, was, in certain crisis conditions, incapable of maintaining, let alone extending, its market. We believe he found these in his analysis of the operation of the law of value, and it is this which determines the cycle of expansion and contraction of both the market and the forces of production. This is totally different from the wretched Say (and other capitalist apologists like McCullough, the editor of Adam Smith’s works) who tried to deny that there were crises and that there was overproduction under capitalism. The question is not whether these take place (as they self-evidently do, we can move on from red herrings like James Mill, McCullough and Say, etc.), but to explain how they come about. C McL’s resort to this insulting and misleading argument betrays a desperation to throw in anything to discredit this enquiry. It is also not true that the CWO (and IBRP for that mater) have “ignored the market” (our analysis of financialisation and the world trade in commodities demonstrate that). We have tended to refer to it not in polemics with the ICC but in passing, in other articles. For example the following

"Then though the main aim of imperialism was to open up Chinese markets for their own manufactures, today they and their local partners are more concerned to exploit low-cost Chinese labour power to produce cheap commodities for the advanced capitalist market. As for the prospect of turning China into a vast market for consumer commodities, this will remain limited to certain local enclaves and the cities of the coastal strip around which will remain the unemployment and underemployment that capitalism always engenders to restrict the consumption of the masses. (4)"

This takes us to the central plank of the ICC argument. The basic argument for them is that the real cause (rather than just a “phenomenon” as Marx stated) of crises lies in overproduction. They accuse the CWO (and then tack on the IBRP) of having a mono-causal view in seeing crises as the product of the law of the tendency of the rate of profit to fall. They imply that they take this law seriously but in none of their analyses of capitalist reality does this enter into their argument. For them there is only a problem of “saturated markets”.

However, C McL tries to refine and develop ICC theory as hitherto upheld. He now turns to Capital Volume III to argue that the real fetter on capital is “the wage labour relationship” (sic - the capital-wage labour relationship is meant) and quotes a famous passage from that volume.

"The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses, in the face of the drive of capitalist production to develop the productive forces as if only the absolute consumption capacity of society set a limit to them. (5)"

It has taken the ICC a long time to get round to this view. We actually put this very passage to them over thirty years ago. In Revolutionary Perspectives 6 (First Series) we published a text called “The Accumulation of Contradictions or the Economic Consequences of Rosa Luxemburg” which had a section on “Underconsumption and the Law of Value”. This section began with the two quotes from Marx already cited and argued that these quotations have to be placed in the context of capitalist relations of production. In fact it was not that there was overproduction per se, but that the capitalists could not valorise their production. This means that they could have sold their commodities but not at the level of profit to provide for a new round of expanded reproduction. As Marx also wrote in Capital Volume III:

"There are not too many necessities of life produced, in proportion to the existing population. Quite the reverse. Too little is produced to decently and humanely satisfy the wants of the great mass."

and then he went on

"On the other hand, too many means of labour and necessities of life are produced at times to permit of their serving as a means for the exploitation of labourers at a certain rate of profit. (6)"

We have emphasised “at times” because this is the main issue. We have to ask why is it possible to expand production profitably at one time and not at another? It is not the physical impossibility of selling commodities but of selling them at a sufficient rate of profit to offset the decline in the rate of profit. This is capital’s bind. As we wrote in 1976,

"There are not too few labourers or too many productive forces in the world but there are too few productive labourers to create the necessary mass of profit needed to offset the decline in the rate of profit; and there are too many productive forces to be able to sell commodities profitably. The rise in the organic composition, the diminution of v in relation to c is the clearest expression of this relation. (7)"

As Marx said when discussing the creation of the world market

"The stupendous productivity developing under the capitalist mode of production relative to population, and the increase, if not in the same proportion, of capital-values (not just of their material substance), which grow much more rapidly than the population, contradict the basis, which constantly narrows in relation to the expanding wealth, and for which all this immense productiveness works. They also contradict the conditions under which this selling capital augments its value. Hence the crises [our emphasis]. (8)"

In other words it is only the shift in value relations which explain why the market can be expanded at one moment and not at another. The market is not simply a physically immutable entity but depends on the question of its profitability for its extension. In any cycle of accumulation, there are only two elements to production, one of which is constant capital which is the machinery and raw materials advanced by the capitalist (sometimes called dead labour) and denoted as c. But to actually make this constant capital produce anything it requires the labour power of the workers or variable capital (v) as Marx described it. It is only the variable part of capital (sometimes referred to as living labour) which can produce new value over and above the costs of its own reproduction. This extra value is the surplus value (s) which is the source of the capitalist profit. At the beginning of the cycle accumulation can proceed quite comfortably (and there is no problem of the capitalists finding new markets within the system for both new capital goods - like machines - and new consumer goods - like food and clothes). However, the capitalists are constantly seeking ways to increase the capital which they control and the main way to do this is to reduce the element of v in respect to c. This increases his individual profit and this also increases the productivity of labour since he aims to produce more with less labour power. In other words, v declines in relation to c. The capitalist sells his goods ever cheaper (expanding the market at the same time), but, as all capitalists are doing this, a contradiction begins to emerge. As v (labour) is the only source of surplus value (machines don’t produce anything unless someone operates them), the rate of profit expressed in the formula s / (c + v) tends to decline. There are counter-tendencies, which slow the operation of the law down, but they do not halt it, and, indeed, in the long run make the situation worse. Now the capitalists are still making profits (and they may even still be rising) but the rate at which they are making them are insufficient to provide a sufficient mass of profit for accumulation to proceed. At this point the self-expansion of capital is arrested and the crisis sets in. In the nineteenth century the bigger or more efficient capitalists could then buy out their competitors at knock-down prices (i.e., a devaluation of the constant capital such as factories and machines) and the new capital could be released to employ more workers to begin the cycle anew. As the ICC recognise, capitalist relations are dynamic and this is the secret of that dynamism.

Here, though, we are at least arriving at a common ground for debate with the ICC since they now recognise that the cause of capitalism’s crises are internal to the wage labour-capital relationship itself. If this view was consistently held by the ICC we could now more profitably (pun intended!) move on to discuss with them the link between the law of the tendency of the rate of profit to fall and the “poverty and restricted consumption of the masses”. It would though also signal that the ICC had broken with the Rosa Luxemburg’s central thesis in The Accumulation of Capital (1913).

The Nature of Rosa Luxemburg’s Break with Marx

We cannot go into a full critique of Luxemburg’s theories here. (9) Put simply Luxemburg claimed to have discovered a mistake in Capital Volume II. In this volume, subtitled “The Process of Circulation of Capital” Marx simply demonstrated how commodities circulated under capitalism as a precondition for accumulation to take place. It was not intended to demonstrate where the capitalist crisis lay. In it also followed the method of Volume One in that he was talking only of a purely capitalist system.

"If we are to examine our topic in its integrity, without disturbances by subsidiary circumstances, we must, for that once, treat the whole world as one nation, must assume that capitalist production is everywhere established and has got possession of all branches of industry.10"

Marx went on to divide production into two broad Departments (Department 1 being producer goods - like machine tools - and Department 2 being consumer goods - like bread and clothes). Marx then investigated how the two Departments related to one another and, using a series of diagrams, explained how circulation of commodities took place. There was no attempt here to demonstrate where the crisis of capitalism was located (since he assumed a constant rate of profit throughout) . He concluded that the key to conditions of equilibrium in capitalist reproduction were that the constant capital (c) of Department II (in the form of consumer goods) had to exchange with the variable capital (v) and surplus capital (s) of Department I. The formula he used to express this equilibrium was thus I_v_ + I_s_ = II_c_. This was simply a way of explaining how accumulation took place under conditions of simple reproduction. However, in the real capitalist world, accumulation only takes place in conditions of expanded reproduction (i.e., where there is an increase in the total social product. Nevertheless, Marx maintained that the formula held good as long as the proportionality between the increased production of both departments of production is maintained.

"In production on the basis of increasing capital, I (v + s) must be equal to II_c_ plus that portion of the surplus product which is re-incorporated as capital;, plus the additional portion of constant capital required for the expansion of the production of II; and the minimum of this expansion is that without which real accumulation i.e. real expansion of production in I itself is unfeasible. (11)"

For Luxemburg, who by this time had decided that

"...there is still some time to pass before capitalism collapses because of the falling rate of profit, roughly until the sun burns out, (12)"

there had to be an error here. Basically, she was already looking for a problem in the sphere of consumption. She dismissed Capital Volume III which dealt with “The Process of Capitalist Production as a Whole” arguing that it was just made up by Engels from Marx’s notes (ignoring the fact that Volume II had been produced in the same way as Volume III!) and then proceeded to discover that;

"The flaw in Marx’s analysis is, in our opinion, the misguided formulation of the problem ... the real issue is the effective demand ... (13)"

By refusing to accept that Volume II is simply about how commodities circulate, Luxemburg is demanding a capitalism which could not accumulate at all. By making the simplifying premise of his investigation here a constant rate of profit, Marx has removed both the motive power for insatiable capitalist expansion and the real explanation as to why the commodities can circulate within the capitalist system quite happily at one moment and then not at another. In an earlier and more honest article the ICC recognised this.

"There is no getting away from the fact that to take the diagrams literally means that capitalism can indefinitely create its own market. (14)"

Perhaps Marx was a follower of Say after all! The ICC clearly recognised in this article that Luxemburg was deviating from Marx. This is not the approach of C McL. in the latest articles.

Basically his tactic is to try to prove that the CWO has distorted Marx’s total view of capitalism and then he goes onto assert that Rosa Luxemburg was simply carrying Marx’s work a stage further. This is a piece of breathtaking sophistry. The passage in which this is summarised is a gem so we will quote it in full.

"... as will be clear to anyone who approaches this question in a serious and honest way, the CWO defends, on the question of the fundamental causes of the economic crises of capitalism and the decadence of this mode of production, a different analysis from the one defended in their day by Marx and Engels. They have every right to do so and even the responsibility to do so if they consider it necessary. Whatever the depth and value of his contributions to the theory of the proletariat, Marx was not infallible and his writings should not be seen as sacred texts. The writings of Marx must also be subjected to a critique by a Marxist method. This is the approach that Rosa Luxemburg adopts in The Accumulation of Capital (1913) when she brings to light the contradictions of Volume II of Capital with regard to the schemas of enlarged reproduction. This said, when you put a part of Marx’s work into question, political and scientific honesty demands that you openly and honestly take responsibility for such an approach. This is exactly what Rosa Luxemburg did in her book and it was this which provoked such hostility among the “orthodox marxists” who were so scandalised by anyone putting Marx’s writings into question. Unfortunately this is not what the CWO does when it moves away from Marx’s analysis while at the same time claiming to remain loyal to it, and at the same time accusing the ICC of distancing itself from materialism and thus Marxism. For our part, if we take up Marx’s analyses here, it is because we consider then to be correct and they take into account the reality of capitalism. (15)"

Make of this what you will! The CWO defends Marxist method (and not just the text of Marx as the ICC imply here), whilst the ICC (alongside Rosa Luxemburg) criticises Marx except where it says it agrees with him! And the ICC have the cheek to talk here of “honesty”. These are just weasel words to disguise the fact that whatever steps the ICC has taken towards understanding how the law of value operates in the capitalist system they have the stumbling block of Rosa Luxemburg to get around. They have two planks to their argument here. On the one hand, they omit the most damning parts of Luxemburg’s analysis (the question of third buyers and then the discovery that arms production is a market solution for capitalism after all) and try to pretend that she was simply arguing the same as Marx, i.e., that there was a problem expressed in the internal market. Crucially, though, they don’t say that this is caused by the shift in value relations in the course of the cycle of accumulation - so much for their supposed holistic approach to the question of the capitalist crisis. On the other hand, they once again concentrate on attacking our supposed deficiencies in not including the market per se in our explanation for the cause of crises. This is devious polemic, not honest scientific appraisal. Further evidence of ICC dirty tricks can be seen in the conclusion to the first part of their article where they lump our critique of Rosa Luxemburg with those “propagated by Stalinism and leftism”. (16)

Let’s deal with Rosa Luxemburg and the ICC’s evasions first.

Under the heading “Marx and Luxemburg: an identical analysis of the economic contradictions of capitalism” the ICC asks

"How does capitalism overcome its immanent tendency to restrict its solvent markets? How does it seek to resolve this contradiction, which is internal to its mode of operation?"

Before we look at their answer we have to ask what are “solvent markets”. They are markets in which commodities are sold where the money returned can be used for a new cycle of investment (Marx called this “valorisation”). (17) These markets are expanded as long as there is sufficient capital (both variable and constant) available to pay for commodities. As the ICC says they are “internal to its [i.e. capitalism’s] mode of operation”.

In answer they then go on to quote a passage from Marx also quoted by Rosa Luxemburg

"The market must, therefore, be continually extended, so that the inter-relations and the conditions regulating them assume more and more the form of a natural law working independently of the producer and become ever more uncontrollable. This internal contradiction seeks to resolve itself through expansion of the outlying fields of production."

This is just another expression of the constant drive to accumulate based on the internal antagonism between capital and labour. The contradiction that the capitalists have to drive down variable capital, i.e., the workers’ wages and the source of surplus value in order to maximise profitability also means that they undermine the internal market.

The ICC then go on to say that Luxemburg agreed with this. Funny then that she should not only object to this passage but even try to rewrite it. She concluded that Marx could not have meant expansion of “the outlying fields of production” and that what he really meant was an expansion of the “outlying fields of consumption”. Luxemburg may have been trying to make words mean what she wanted here but her argument drives a coach and horses through any supposed identity of views she had with Marx. As is well known, the market crisis for Luxemburg was not internal to this dynamic mode of production but was caused by the fact that capitalist development had only been possible by finding markets in pre-capitalist or non-capitalist areas. Once these had all been exhausted, capitalism was faced with a permanent crisis which led to attempts to colonise parts of the globe in order to hold on to these markets and thus it led to imperialist war. It is neat and in 1913 was very powerful, but ultimately it’s not Marxism. (18) She may have understood that the problem of the capitalist system was its tendency to expand production faster than it could expand its internal market but the crises of capitalism emerged only at intervals. Why? Because the conditions of capital accumulation at the beginning of the cycle of accumulation allowed for a greater average rate of profit and wages also rose, and thus the market expanded as a consequence. However, as the cycle proceeded, each capitalist was forced to continuously revolutionise his own means of production in order not to find himself selling below value (whilst his competitors who did invest in new constant capital were selling cheaper commodities at prices which were still above their value to his own workers!). However, as the development led to an increase in productivity it also automatically led to a decline in variable capital (even if actual wage rates rise) and the relative impoverishment of the mass of the population led to what appears as a crisis of overproduction. This, as we stated earlier, is not an absolute physical overproduction of commodities (since so many needs are not satisfied) but an overproduction based on the need to raise the rate of profit. It is not pre-capitalist “third buyers”, tribesmen with cowrie shells or even more sophisticated pre-capitalist entities, which can act as a market for capitalism but, for the most part, those who have already been drawn into the capitalist system. Luxemburg actually wrote some wonderful passages showing how capitalism extends throughout the world (19) but in none of them does she prove that these extensions are in pursuit of markets. In South Africa, to give one example, she finds that capitalism is after “labour power”, or cheaper raw materials such as “diamonds” and “gold” (pp.412-3). In short, the drive towards imperialism is more in line with the ones Marx gives in Capital Volume III.

If some still doubt that Rosa Luxemburg was beginning to lose her earlier clarity on economic theory (20) then the final chapter of The Accumulation of Capital confirms it. Entitled “Militarism as a Province of Accumulation” Luxemburg now affirms what she has all along denied; that the state spending of tax revenues was itself a kind of “third buyer”. She now argues that the taxation of v (variable capital or portion of capital dedicated to the labour force) provided extra surplus value for capitalisation.

"But as yet no opportunities for such capitalisation have come into being, no new market, that is to say for the surplus value that ahs become available, in which it could produce and realise new commodities. But when the monies are concentrated in the exchequer by taxation are used for the production of armaments, the picture is changed.21"

Armaments production is thus for her a “third buyer”

"... it is a pre-eminent means for the realisation of surplus value; it is itself a province of accumulation. (22)"

This, pace the ICC, is a total break with Marx (and not even acknowledged as one at that) Luxemburg has mistaken revenue (i.e. the recycled value of taxation) for new value. Revenue arises from the taxation of already existing variable and surplus value. It cannot of itself stand as a separate “third buyer”. For Marx only the labour which produces surplus value