Competition of Capitalists
III. Increasing growth: The productivity of capitalism
§ 13 Reducing unit costs
There is one achievement the capitalist mode of production can count on making a good impression with, or at least commanding respect: unstoppable technological progress, seen in all kinds of consumer goods along with the means for producing them. It is popularly illustrated by sophisticated equipment in fashion at the moment. On suitable occasions it is measured in the few hours and minutes of working time required for producing a certain product nowadays as compared with the past. “Downsides” are not ignored: the oversized “footprint” left by the consumption of resources, destruction of the environment, loss of jobs due to “rationalization” — all this is recognized as problematic. But “rationalization” is still called by that name; and the solution of choice for the excessive load on “nature” is considered to be — alongside a personal willingness to do without things — more technological progress. Yet it is quite clear that neither free choice nor rationality is the reason for the unstoppable technological progress the capitalist mode of production impresses with. It is caused by a practical constraint that industrialists actually create for themselves.
1. The dictate of the market: reduce unit costs
To make sure their source of income flows properly both to meet their high-status personal needs and to comply lastingly with its own requirements, capitalist industrialists act as responsible functionaries of their assets’ growth. Beyond the returns from their capital’s turnover, they advance money that has to pay off through rising future profits. They incur financial liabilities that make it imperative for their business to grow. With all this entrepreneurial spirit, they inevitably run up against the limits of buyers’ ability and willingness to pay for the increasing mass of product they throw on the market. Their growth overtaxes the buying power they are competing for. At some point, buyers will no longer provide the needed profit anticipated by the expansion of production.
This self-created limit to his company growth makes the capitalist producer self-critical. If the market — this ruthless authority — no longer yields the profit already marked off for growth, then there must be something wrong with his company before all else. The effect it exists for, namely, as advanced capital to achieve a growing surplus, leaves something to be desired. So its capitalist effectiveness comes under scrutiny. The relation between the cost of producing goods to be sold and the profit realized by selling them at the prevailing market price must be radically improved within the company — the place where the industrialist himself has control. What has to be done is to reorganize the production process in such a way as to radically reduce unit costs.
2. The remedy: even more advanced capital so that fixed costs lead to a saving of labor costs
The problem already indicates the direction for solving it. The industrialist inevitably turns his attention to that factor whose effect on the cost of production is entirely in his hands, regardless of the conditions he is faced with when buying and selling on the market: the work he has others do. Unlike all the other ingredients of his production process, this one enters into the production cost of his goods not solely through its price but through its productivity. The higher the productivity, the less paid working time there is in the unit produced, so the lower this component of the calculated unit costs. And just that — what can be got out of paid labor in that way — is the industrialist’s business, with his command over labor.
To achieve thoroughgoing success here, it is not enough to pressure workers to work harder, of course — a capitalist manufacturer is already doing that anyway. As the owner of the means of production, he doesn’t just have formal control over the labor done in his company, however, he has its productive power at his disposal. This power is essentially separate from his employees’ ability to work, existing rather in the technical means applied and in an organization of sub-operations adapted to these means. This is where to start. The industrialist’s control over the production process allows him to intervene and make changes that serve his purpose: to use improved machinery that reduces the labor required for producing a commodity, and to analyze the necessary work process so as to measure the time spent on each individual operation and permit operations to be broken down and recombined to save time. Such advances are often launched by changes to the product, or result in the product being adapted to the optimized manufacturing process.
All this can be done and procured for money. One can buy experts to develop new products and processes; machinery, reactors, production lines that reduce a lot of human work to control tasks, thereby making it extremely productive; ergonomists to analyze and measure out the necessary use of body and mind and adapt it for performance in the banal sense, i.e., work per time or, more precisely, the productive effect of a paid task per unit of time. That all this can be bought is not only an estimable advantage, however, it is at the same time a drawback that forces the industrialist concerned about the growth of his assets to strike a tricky balance. Everything that increases the positive effect of paid work on the production result, i.e., lastingly lowers costs per unit, costs money and drives up the advance to be paid. Apportioned to the unit of goods, this will normally increase the unit costs that are intended to be reduced. So the saving of labor expenditure through modernized means and methods of production is not only to be translated into a saving of labor time and therefore saved labor costs, there additionally being a fine saving effect to be achieved by paying worse for the “easier” work adapted to new conditions. The total wages thus saved in the long term must be set in relation to the required costs; over the estimated period of use of new means of production, the reduction of unit labor costs has to exceed the additional expenditure for the technology, in terms of the unit of goods to be produced. Only then will the increase in labor productivity belonging to the industrialist yield what matters to him, namely, an improvement in the cost-profit ratio associated with the goods to be sold: an increase in capital productivity permitting business to be continued in the face of the barriers imposed by the market on a capital growth pursued with more and more means of the same kind.
3. From the market price determining the rate of profit, to the profit-rate calculation determining the selling price
By increasing the profit share contained in his products thanks to reduced unit costs, the capitalist frees himself in a double way from the limit the given market price sets on the anticipated, and therefore absolutely necessary, growth of his profit. He can earn more on each commodity, and he has procured the freedom to lower his selling price below the existing market price without sacrificing any profit per unit sold, and thus to influence this condition for his business success himself. That is, he can influence the extent to which he lays claim, for his profit, to customers’ ability and willingness to pay. By renouncing the increased profit share per commodity, or only part of it, he is able to sell more at reduced selling prices and thereby increase the total mass of his profit, in addition to or instead of the rate of his profit per commodity. While he was originally forced to put his company in a profitable relation to the given market price of his product, the profitable price to be realized on the market is now the result of the performance, i.e., the improved capital productivity, that the producer gets from the work process in his company made more efficient with the aim of increasing sales. The increased profit margin empowers him to define the market price at which increased sales will make the mass of his profit grow to the greatest extent. With his control over the productive force of the work done in his company, he makes himself the determining factor on the market he experiences as an objective constraint.
4. The method: radically changing the production process, and systematically applying the formula to the use of wage labor and its payment
In order to become the master of the market condition he is crucially dependent on, the industrial capitalist completes the separation between the workers he pays and the productive force of the work he has them do, thereby at the same time completing their subsumption under the means of their productivity. He organizes the production process in his company keeping strictly to his calculation, with each technical advance moving him farther away and freeing him from the requirements and necessities of natural processes, craftsmanship, and physical abilities. He sets up the workplaces his employees occupy entirely in the interest of maximum cost efficiency, meaning that even the smallest task, every human activity, is geared to maximum production speed. This has to be accepted by his paid workers as an accomplished fact. Being released from physical effort and the need for dexterity to the extent that both can be profitably managed by technical equipment, they are confronted with the practical necessity to serve the production process where its automatism requires human labor to operate it, i.e., makes it — still, or again — profitable to use labor. The corresponding tasks are organized as a sequence of sub-operations that are meaningless in themselves but are to be performed at the highest speed, being coordinated at some higher level, if not actually by automatic monitoring systems. This is an effect that even reactionary supporters of the idea that labor is supposed to give life meaning can criticize as alienation. Capitalists, who have applied a lot of entrepreneurial zeal to bring about this kind of “employment” lamented as a “loss of meaning,” are more likely to think of the concrete, capitalist meaning they are thereby gaining from the abstract labor they apply in their companies.
Increasing the effect of paid work gives the industrialist further benefits of streamlined production. First of all, workers generally become redundant and are taken off payroll even with further growth of the scale of operations. The success of such measures tends to be quantified directly in economized jobs and the associated wage bill. Ultimately, such a savings target is set before new technologies are introduced and guides the search for appropriate means and methods of production. Advocates of the social aspect then contrast the army of dismissed workers with the number of experts and other specialists who see to this splendid progress with their extremely intelligent and spanking clean work. However, not even the number of these specialists necessarily grows with technological progress; many a development engineer unexpectedly “rationalizes” his own job away. Besides, under the command of profit-oriented industrialists, this fine work also tends to develop into a monotonous variety of maximally simplified sub-tasks that are optimized for performance, namely, for completion of tasks per unit of time. Those still employed are also held liable for each “labor-saving” advance with their income. Capitalists keep entirely to the law they consider natural, that wages are lower the simpler the task they are paid for. And because the simpler that work gets, the easier it is to replace workers, increased productivity also provides employers with the means of extortion for enforcing this natural wage-law and getting from their expensive investments a further counterbalance to the burden of progress.
And in any case, there are enough unemployed people at all levels of wage-dependent employment to make it easy to squeeze wages. So in the end all capitalists get something from progress.
§ 14 The market:
Where capitalist progress does its work and is put to the test
1. Demands on the market, effect on the market:
Price, mass, and speed of the turnover of goods pass their judgment on the capitalistic usefulness of productivity
With the price-calculating freedom he creates for himself by reducing his production costs per unit of goods, the progressive industrialist turns to the market. For now it is a matter of using this freedom to gain power over the market situation and shape it to his advantage.
To do this, his sales department must find the right price: a selling price below the current market price that ensures the sale of a continuously increased volume of commodities and thereby attracts so much more buying power to his increased supply that it is worth sacrificing part of the increased profit share arithmetically contained in the more cheaply manufactured commodity. That is, the price must make the mass of profit increase — beyond the limit to further increases that the market sets when traditional means of production are used. At the same time, the industrialist must make sure that the period of time between the advance of capital and the return on capital doesn’t drag on, an advance that has definitely increased with the mass of manufactured articles and that additionally includes the — usually higher — expenditure for technically advanced means of production, and sales proceeds that have accordingly increased as well. Any delay in capital turnover will worsen the crucial ratio between capital expenditure and profit, reducing the usefulness of the increase in capital productivity that the industrialist has brought about in his company. So he must not only prevent the duration of the production process from growing with the increasing output of goods. He must above all make sure that the market absorbs the increased mass of goods without requiring any additional time.
Thus the producer’s demands on the market rise with the increased supply of cheaper goods. Conversely, the right choice of selling price, the right extent of increase in the mass of goods, and the correspondingly increased speed of commodity circulation are crucial for determining whether the expenditure for increasing labor productivity within the company has a useful capitalist effect. For this calculation to work out — and especially when it does not work out — the producing capitalist is thrown back to the sphere that he has full command over: production, which he must streamline to acquire pricing freedom and thus effective power over the market situation.
2. Competing for an attribute called ‘competitiveness’
To the extent that the capitalist producer succeeds in turning the market into a means of increasing his profits, he sets new, tougher conditions of success for his competitors. His selling price undercuts the current market price that businesses in the relevant product market take as a guide for their operations, that is, have geared the productivity of their capital to with regard to the profit margin to be achieved. The mass of his products ties up customers’ ability and willingness to pay, that is, market shares that his competitors have previously laid claim to and made use of. The speed of his sales puts them under pressure. The new market conditions are too much for their capital with the productivity it has attained — without this productivity having changed in any way. Rather, it is because the competing companies have not — yet — made any radical change to the productive power of labor in their businesses that they are no longer getting the returns they got before, to say nothing of the rising profits they, too, already planned for future, increased growth. For the sake of their business survival, they must not merely obey the dictate of the market calling for a reduction in unit costs as the indispensable condition for further growth. They also have to manage this under the condition of heightened demands that their progressive colleague has set for fulfilling this dictate.
This tougher market imperative of course not only affects the producers whose usual business has been spoiled by a particularly innovative competitor; it also has repercussions for this competitor himself. The protagonist of technological progress will feel them at the latest when competitors introduce the successful methods of increased capital productivity in their own companies — maybe even using “new generation” means of production that have meanwhile become cheaper or been developed further — and enter the market in their turn with a lower sales price, a greater mass of goods, and vehemently accelerated sales. The consequence is clear to every progressive producer: increased capital productivity is not enough; he needs a — constantly renewed — lead in increasing the rate and mass of profit. Only superiority can put him in the position of dominating the market with the productive power of his company more than he is dominated by the competitive situation the market presents him with.
A large part of company assets is tied up in the form of purchased and not yet amortized means of production, a part regularly larger in both absolute and relative terms with every major technological advance. This especially makes such competition a demanding and tricky undertaking, since the money that has been advanced for no longer sufficiently effective means of production is, more or less suddenly, unfit as capital and consequently worthless as assets. As for the goods produced with them, the industrialist is faced with the lousy alternative of either selling them below value or not at all; here too he will inevitably suffer an erosion of his assets. This precarious situation is not a mere side effect of competing for exemplary capital productivity; it is actually a business objective of his colleagues: striving for superiority aims at eliminating opponents. However, the industrialist taking the lead in technological progress and confronting his competitors with new standards of capital productivity must in the same way take into account the period of time during which capital invested in a promising reduction in unit costs is tied up before it has paid off. The criterion of speed of capital turnover gains importance because it is not merely a factor of the returns that have to be achieved, but also involves the risks of the entire capital and the entire investment in rationalization being devalued if the next “innovation push” is put on the capitalist agenda prematurely — possibly by the so successful pioneer of technological progress himself. Thus, the imperative to take the lead in matters of capital productivity is absolute and at the same time not unconditional: the capital expenditure involved is as necessary as it is risky.
The criterion of this competition is known as competitiveness, as if competing were a matter of inclination or suitability — and not of the active will to pursue one's own benefit at the expense of one's peers according to given opportunities and necessities. And as if it were about competing in general — and not about pushing competitors off the market through superior capital productivity. And as if succeeding at this were an attribute of the successful company. Actually, the latter is true in an ironic sense: “competitive” companies are the ones that have managed to eliminate others in the fight for market shares and are able to maintain their position. This supposed attribute makes a taken-for-granted good thing out of the necessarily destructive working of capitalist progress. Such progress deals in an extremely wasteful way with products and productive forces — and in an extremely contemptuous way with the work that it makes more and more productive and with the wage-earning personnel: with their talents, their budgeting of their lifetime, the material freedoms and pleasures their wages can buy them. Their work proves to be superfluous, even retroactively; the consequence being that entire workforces or sections of them are up for dismissal, while others have to crank up their performance to keep up with state-of-the-art equipment, in many cases having to compensate for the damage of an extensive capital devaluation as well.
3. A progress-geared labor market, through and for a progress-geared capital growth
With their methods of cutting unit labor costs for increased growth, competing capitalists create the conditions that secure them a reservoir of workers to match. This is because their advances in productivity mean that capital growth parts ways with pay-effective employment of workers in terms of both quantity and quality.
In terms of quantity, increased capital productivity reduces the demand for workers in relation to the growth they create. When a company is “rationalized,” whole sections of the workforce are “let go”; when it has been out-competed, sometimes even the whole lot of them. “Progress” itself produces an army of job-seekers who are freely available and who depress wages. In addition, capitalist producers make use of technological progress to change the nature of work. Technologically simplified sub-operations are fitted into predefined, (partly) automated, more compact production steps, which increases work performance. Following the logic that simplified, one-sided work makes a smaller claim on the worker’s body, state of mind, and intellect, less is paid out for it. In this way, the progressive capitalist, by purchasing means and methods of production that incorporate the expertise and ingenuity of society corresponding to his purpose, emancipates himself in terms of quality, too, from the “supply” of strength, skill, and intellectual ability he finds on the labor market. This programmed de-skilling of personnel allows — it virtually demands — a more intensive and more mobile use of the required people, along with a downward consolidation of the wage hierarchy. In this way, capitalists define the kind of labor market they need, and at the same time fill it with the people they will use.
The working people never put any bounds on the industrialists’ needs and demands, either in qualitative or in moral terms. What is required of the masses is essentially that they adjust to the workplace in a way that is unconditional, effective, and controlled by the production apparatus itself; adjusting as long as the workplace meets the requirements of competitive capital productivity, and then adjusting to the modernized follow-up model. Progressive industrialists can count on a willingness to perform these feats of adjustment at the required intensity because the labor market they have developed involves the practical necessity for staff to strive for jobs on their own responsibility — to try and keep the ones they’ve got or be good enough to deserve new ones. As free citizens, members of the workforce are placed in a permanent competition for a job whose content and selection criteria are decided solely by the other side. Anyone who needs to be employed this way to make a living has no choice but to make it his own business to meet those demands and standards. It is precisely because employees have no control over the conditions under which their work pays off for their companies that they get the task of producing in their own selves the conditions for properly filling a workplace, including any next-generation ones ad infinitum. For that is what they have control of: without any sure prospect of success, without any guarantee of meeting the specific requirements coming at them as technology advances in the service of increased capital productivity, they can work on themselves. By “lifelong learning,” as modern adult education calls it, they present themselves as willing instruments of the prevailing growth interests, or rather as the better ones in comparison to their peers. The only sure thing to come of this effort is that their employers will utilize them according to their own needs and discard them after use. They will be treated the same way as productive wealth, along with the useful achievements of society’s knowledge and skill, when all that stops being good for competing to be competitive.
4. The public’s buying power: both demanded and restricted; two top products of the market: customer and advertising
Even successful industrialists have a certain problem with their wasteful way of economizing. After all, by cheapening their goods they want to attract in absolute terms more ability to pay, more revenue for increased growth. For this purpose, they save on wage payments relative to the result and, if possible, in absolute terms; destroy competing businesses along with the incomes of the workforce dependent on them; and thereby reduce society’s ability to pay, which they need and make use of to an increasing degree. There is in fact no monetary quantity in the whole capitalist economy that is at the same time so demanded and so restricted by the same business success strategy as “mass buying power.” But like all the contradictions that producing capitalists create for themselves by their money-making, this one, too, presents itself as a problem that they find forward-looking solutions for.
Conveniently, they do not know the problem as a self-created one. They see no connection between society’s ability to pay that they are are laying claim to, and the people they and their direct competitors are in part no longer paying and in part paying worse in absolute terms or in any case in relation to the commodity value to be realized. What they do see is the abstraction in which society’s ability to pay takes on a concrete form for them: the person as customer, i.e., as owner of money they need to get hold of. The trouble for the capitalist producer here is the free will this character exercises when considering his needs and calculating how to satisfy them. So this is where the producer seeks and finds the leverage for a solution. He addresses and courts people as masters of their need-nature, feeding them points of view that present the marketed product as the fulfillment of a desire that is perhaps sensible, perhaps more or less deep-down, but in any case ultimately undeniable. Just as the industrialist develops his methods of production so as to free himself from all his paid workers’ individual ability and skill and transform them into tools in an optimized operational process — to the point of considering people’s physiological and mental features as elements for enhancing their performance; just as he develops the produced use-values with an eye to their suitability as cheap mass-produced goods on the one hand, or as high-priced luxury goods on the other hand, in any case as exchange-values for his capital growth: in the same way, capitalists spend considerable advertising effort to teach their contemporaries to form a need-nature that emancipates them from the regime of natural necessities as far as possible in order to make them fit the predator-prey pattern of competing producers. They are to be instruments for a competition of offers that makes everything that is of any use commensurable from the point of view of the sum of money to be pocketed, making the needs for the touted products appear so interchangeable that choosing one justifies, or even better makes one forget, the relinquishment this choice involves according to market-economy logic, that is, the relinquishment of an alternative use of one’s available buying power.
This of course by no means does away with the limits that industrialists themselves put on society’s ability to pay. But that is the last thing capitalists are interested in. These limits are instead the ultimate incentive for them to try and induce a holder of buying power to prefer their product firstly over all similar alternatives, and secondly over satisfying some competing need.
§ 15 Growth through progress: a new catalog of tasks for the lawgiver
The state recognizes that the general progress its capitalists bring about in their competition for increased growth is the essence of the common good — which gives it plenty to do.
Within its borders
- the state ensures with the power of its laws that achievements in the field of the intellect, of science and technology, can be used as weapons of competition to the point of eliminating rivals. At the same time, it elevates progress in this area to the status of a general concern whose success it pursues itself. After all, industrialists require for their struggle for competitiveness certain services of society that they do not provide themselves; they “live beyond their means,” so to speak.
- the state takes an affirmative stance toward effects of permanently increased capitalist growth that undermine and destroy the preconditions for this growth. Thus, it allows society’s labor power to be ruined but only within the legal limits it imposes. In addition, it goes to some trouble to make workers able, and keep them able, to meet the high demands of social progress.
- the state takes control of its society’s inevitable conflicts of a general nature as challenges to its monopoly on force. At the same time, it confers legitimacy on the conflicting interests existing in its society and endeavors to make them interact productively. It makes the impossible class situation of wage-earners its business: it takes their situation as a task of the budget it manages its society with, and deals with it by dividing the class.
1. Legal assistance for the competition over progress through technology,[i] in the factory and on the market
Industrialists wage their fight for sustainable increases in the productivity of their capital within their own factories using the means of technological innovation. Their clear goal is to gain a lead in production costs over their competitors so as to make more profit at their competitors’ expense. Measured against this goal, technological progress involves the contradiction that, by its very nature, it is not limited to optimizing just the means of production of one progressive industrialist. It is based on knowledge — from science, technology, organizational theory — that is not tied to its discoverer, let alone to its user, but can be understood and applied quite generally once it is out in the world. Knowledge resists being privatized, and thus its capitalist purpose as a means of competition. Resolving this contradiction is not within the power of capitalists in need of knowledge for their competition. What is required is an act of force by the authority whose laws dictate the general living conditions of society.
In order to make the impossible into a reality, to make something universally available into something that can be privatized, the constitutional state has devised intellectual property. It declares achievements of the intellectually reproducible kind to be at the exclusive private disposal of their legally defined originator, provides economically exploitable scientific and technological achievements with a legal copy protection, and thereby endows them with the legal quality of being saleable and purchasable like any product. The vast superstructure of patent rights, patent offices, and patent attorneys that has arisen on the basis of this state decree testifies to how tenaciously the capitalist business world and its constitutional state put into practice the contradiction of privatizing what is inherently universal in order that knowledge can prove itself as a weapon in capitalist competition. Protagonists of progress are willing to spend a pretty penny on this kind of legal protection to make it all the more expensive for the competition to follow them — this expense, too, must be covered by reducing unit labor costs.
What the state does to support the competition for increasing capital productivity, it also does, logically enough, when it comes to the inevitable fight over realizing the benefit from a legally protected productivity lead. For of course the progressive producer is confronted “on the market” with his competitors’ attempts to void his lead, and everything he does for his sales success, through imitations, misleading advertising, or other machinations. The lawgiver makes every effort to ensure that no one obtains a business success he is not entitled to, i.e., hasn’t paid or done anything for. It also extends its legal safeguards to the economic figure of the consumer, who (contrary to popular belief) has no control over anything with his buying decisions and must therefore be protected from being “had over a barrel” with unfair offers and false promises, which the state quite soberly reckons with.
2. A public foundation for science and technology
Scientific findings are supposed to serve the sectional interests of resourceful producers; that is in the common good. This is so important to the state that it does not leave useful knowledge to be worked out by those most resourceful and thus to chance, but brings it about in a planned, organized, and proper manner. “Proper” means that science, to be useful, has to be conducted according to its own criteria: as research separate from any particular needs and problems and an interest in solutions that it is out to serve, and instead investigating the causal relations in the nature of things. When the laws of nature are comprehended, one can apply them to one’s own purposes by setting suitably chosen initial conditions for a naturally determined process.
This standpoint of the state coincides with the need of capitalist producers for technologically useful knowledge. However, it by no means meets with any willingness on their part to bear the costs that inevitably arise in a market economy for determining laws of nature and the way and conditions under which they take effect. A business interest in a research that pays off for the competition of an individual company emerges very late, seen from the logic of scientific knowledge. In keeping with the logic of capitalism, it only emerges when there is a prospect of findings being applied exclusively and privately. The expenditure for investigating potentially exploitable cause-and-effect relations, which has no calculable relation to possible returns, is a service that industrialists expect their state to provide.
The state takes on this task, being the public authority distinct from the commercial concerns of its competitive society. It establishes a separate world of institutes that are intended to devote themselves fundamentally to science as if the sole goal were true knowledge for its own sake, divorced organizationally and financially from the “knowledge-based” progress of capitalist competition for growth. The state decrees autonomy within this realm of “pure” science, as if that were a guarantee for objectivity, and organizes a separate competition[ii] over careers on the salary ladder and over research funds.
On the other hand, interested companies meddle in this sphere — this being partly desired and partly denounced — by sponsoring research in order to gain cheapest possible priority access to commercially exploitable results. This and all the above reflect the contradiction involved in the state setting up a sphere of “academic” research separate from business precisely in order to provide a secure footing for technological progress as a means of competition for producers to gain a lead in increasing the productivity of their individual capital.
3. Legal conditions for using society’s workforce to promote growth
Growth through progress involves a clear tendency to treat wage-earning workers ruinously. The state doesn’t expect employers to show any restraint, even if only to serve their own interest in able personnel. At some point it intervenes with the force of its law: against the tendency of competing capitalists to destroy the people they need as workers; in the interest of people competing for a job and against the ruthlessness they often enough show toward themselves.
- The cost of technologically increased growth gives rise to an objective necessity for industrialists to further accelerate the turnover of their growing business assets. For this purpose they make more and more demands on the still-needed workforce in terms of the duration and intensity of their efforts. This prompts the lawgiver to decree limits for the destructive effects of work. It issues safety regulations for the handling of dangerous equipment and reactors; it imposes time limits on work per day and per week, as well as breaks in the daily, weekly, and yearly work hassle. It also introduces lower and upper age limits for the use of workers.
- Capital growth, based on the advance of labor productivity and increasing pressure on workers to perform, leads to the elimination of whole company departments and their particular jobs, the end of entire occupations, and an at least relative reduction in the demand for labor. For the masses who have to live on wages, the result is in any case that their livelihood is insecure in general and periodically quite intensely. In many nations, the welfare-caring lawgiver addresses their distress by issuing rules for normal and mass layoffs: regulations for making companies take account of certain survival problems they cause for wage earners in their just war on labor costs. The welfare state likes to leave it to employee representatives to worry about implementing such regulations and to specify modalities for the company’s particular requirements for work performance. When such works councils do so, this is considered consent in the name of those affected, and in return these councils even get a codified legal status of their own in some countries.
4. Forming and maintaining a serviceable working class
Capitalists and state agencies need a lot of experts, the former to further their capital productivity and the latter to do the organizational work involved in modern rule. And they need a mass of young people whose qualification consists in being willing to work, and able to work so as to meet demands. Industrialists like to take the position that the best training is “on the job,” i.e., simply being used by them. But this still requires some suitable preparation of their human material. This they expect as a free service from their state.
The state firstly recognizes this need as justified; and at the same time it sees its own obligation toward its up-and-coming generations of citizens — to let them acquire the qualification and practical training needed to meet the requirements of its competitive society, which is constantly being transformed by progress. So it organizes an education system, with a hierarchical structure ranging from imparting elementary skills up to the verge of sharing in society’s current knowledge — explicitly separate from subsequent working life and its hierarchy. The state obligates the nation’s youth to go through an educational career that is designed as a continuous performance test, i.e., designed to sort them, and that rewards proper evidence of academic achievement with admission to the next appropriate level. This provides the state and business world with adaptable people usable at every requirement level. At the same time, it accustoms people on the career ladder to applying themselves and everything they have learned and know how to do as a means for a comparison of performance that is staged and decided by others, namely, by those in authority. And it accustoms them to imagining that this personal development process is not all about tailoring them for the commercial purposes of others, but rather offering them, at least in principle, one opportunity after another to “show what they are made of." Competition is supposed to be nothing but self-realization.
In reality, the competition of capitalists and wage-earning personnel is a permanent test of the limits of human physical and mental performance. It is a test that employers subject their workforce to, and that the latter subjects itself to for the sake of making a living. This test is hard for body and mind to take — in the long run impossible — even when it keeps to the state’s occupational safety standards. Added to this is the vulnerability to damage caused by the capitalistic consumption of the natural environment: people get sick. This necessary consequence is something no one can afford since health is not just “the highest good” but, for employers, an item that is constantly being worn away by stress in their companies and, for workers, their constantly depleted means of making a living. And because employers are responsible for profitably using the workforce but not for its usability, and workers are less able to maintain or recover their health the more they lose it, the state is once again called on to make sure the nation’s labor force stays useful.
This it does from the point of view of public health. That is, it consistently disregards the purpose that people’s health is being sacrificed to, and (this being the same thing) the reason why their health has to be restored again and again, as long as it can be. Separate from all the damage, wear, stress and strain that gainful employment causes on the great majority of people, with a view solely to the private individual with his or her infirmities, the state (following the same logic as with the education of young people in terms of detaching individuals from their function) organizes a health care system that repairs or restores in patients whatever biochemistry and the medical arts are capable of, regardless of how and why they have been laid low. In keeping with its public duty, the medical profession carries out the abstraction of taking sick people as clinical cases that it must help regain a maximum ability to act; with or without knowledge of external causes and pathogenic politico-economic necessities, medical science quite autonomously embraces the prior decision to investigate and counteract their effects on and in the damaged organism.
5. Dealing with troublesome protest from “the grass roots”: rejection but also recognition, and treatment as a collective welfare case
As state-promoted capital productivity grows on a national scale, there is an increase in producers’ demands on their workforce and in their power over them. Companies lay down what has to be done at their workplaces tailored to maximum profitability, and the level of performance to be maintained there. They reduce their staffing needs in relation to their capital growth, and also in absolute terms, thereby gaining even more power to determine the wages they have to pay. The wage-dependent majority experience all this in their working life. Their jobs require a lot of effort for little money and are never secure. They have no control over anything except their own willingness to adapt. They compete against each other by adapting, thereby making the employers’ power even stronger, and life for each other even harder. Their interests in life, and even survival, collide directly with the industrialists’ growth needs, which are objectified in the workplaces workers need, and which are brought to bear in the corresponding wage hierarchy. Moreover, their interests conflict strikingly with the standpoint of leading a self-responsible life that the democratic state commits its citizens to, not merely ideologically, but very much in practice. Citizens are supposed to rely, and have to rely, on their own abilities and engagement to cope with living conditions under which they have no real control over anything crucial.
Dissatisfaction and disappointment are therefore inevitable; as are occasional outbursts of collective indignation. When these turn into encroachments on capitalist property or actually disrupt the nation’s functioning, the constitutional state has no choice but to intervene with force. As a matter of principle, its fundamental freedom-based system forbids it from having any sympathy with rebelling wage-dependent citizens, whom it allows to freely exercise their materialism just like everyone else, with the friendly proviso that this means in the first instance trying to make money. From its point of view, they are rebelling against justice and freedom. With the clear conscience of a defender of nothing but these fundamental values, the government takes action against such trouble-making by all manner of deterrent policing, thereby making it clear to their proletarian citizenry that there is no alternative to its contradictory social system: freedom is identical to powerlessness for those competing without property.
But force is not the state power’s last word. The monopoly it grants capitalist property on the use and remuneration of society’s labor means that the survival of the wage-dependent class is always precarious. Wages definitely pay for no more than the labor whose amount and nature capitalists redetermine with every advance in science and technology, and that workers dependent on these wages for their livelihood compete to carry out. But their life lasts longer than the phase of business-required work performance; a proletarian employment history regularly includes periods of unemployment under the conditions of capitalist progress; illness and the costs of treating it are part of life but can, virtually by definition, not be included in a wage paid for work done. This means that the total livelihood of the average individual employee or, by a different calculation, of the collective of wage-earners conflicts with the economic nature of the sum that industrialists spend on labor.
The state cannot ignore this conflict. It doesn’t resolve it; it insists that it cannot and must not be its business to interfere with the freedom of wage competition that it grants. However, it acknowledges that the nation’s workforce saddles it with a collective welfare case that it does have to see to. It brings the necessities of the livelihood of its wage-dependent rank and file in line with the necessary limits of a profitable wage by holding wage earners accountable for this by law. It takes away their freedom to manage their money themselves, allocating half of the wage not only to its own general budget but also to various social insurance funds. For all those obliged to contribute, these funds reserve money for any periods of unemployment and for the definitely foreseeable, now also legally defined, age of retirement. When necessary they pay out an amount determined by actuarial rules; they also bear the costs of the public health system.[iii]
By this social service, the state does both sides a favor. Wage-earners are compulsorily rendered able to maintain themselves with their wage even though it’s not enough; employers paying a wage for profitable work get to maintain something quite essential not included in the wage at all, namely, available personnel to do this work.
6. Making sure that capital, land ownership, buying power, and the environment work together to serve the common good
Wage workers have the other half of their pay at their free disposal. And for that, too, the state knows the much more important purpose in its economic system. The part of wages that can be spent at will and lands in private pockets is part of the buying power that, according to the rules of the free market, belongs in more competent hands, namely, in the coffers of the two classes whose property gives them the right to a permanent income and the means to achieve it. In the course of unstoppable general progress, however, the weakness of this buying “power” as well as the conflicts of interest between capitalist producers and landowners give rise to new problems for the state to see to.
As far as buying power in workers’ hands is concerned, it exists and is necessary, in the view of business and its national guardian, for securing companies the profitable sale of their goods which they are manufacturing at ever lower cost. By increasing labor productivity, however, industrialists are constantly reducing the sum they need and compete for. This is a contradiction that they in fact perceive — as the market forcing them always to be one step ahead of their colleagues when it comes to “labor-saving progress.” So they all keep working on reducing their wage bill in relation to their turnover. This logic does not bother the state either. It only sees the necessity that more, additional ability to pay arises in its society at the same time. Its politicians translate this need into the wish that the class presiding over society’s labor create jobs alongside the saving of paid labor in their companies, and preferably to an even greater extent. And to give this wish some teeth, they place the state budget under the imperative to promote the growth of the nation’s capital not only ‘intensively’ by way of progress but also ‘extensively’ with the establishment of ever new businesses that will create the “mass buying power” lost in wage incomes through higher capital productivity. For, according to the laws of free-market reason, there is always only one remedy for the contradictions of capitalist growth: more capital, more growth. The funds from a growth-oriented economic policy will enable industrialists to devote themselves all the more intensively to progress again.
The buying power of the masses is additionally strained, and much too greatly depleted for the purpose of turning the rising supply of goods into money, by the demands of those who own land. And this happens to an increasing extent because landowners’ monopoly power by no means diminishes as paid wages go down. It actually tends to increase as more people compete for a place to live and companies with their growing operations, and merchants and shippers with their space requirements, etc., compete for plots of land. As growth progresses, totally new fronts also emerge between the two classes of property owners. Each relevant advance creates a new need, and eliminates the old one, for space and natural substances, for resources of all kinds, and for infrastructure. It causes entire regions to blossom or to decay. Accordingly, it causes a rise and fall in the asset values and money revenues of landowners, who thanks to the force of the law have land at their disposal and are allowed to turn that power of disposal into money. When a shepherd’s idyll is transformed into a brown-coal mine, a desert into a Silicon Valley, and, conversely, a huge region of heavy industry declines into a Rust Belt, there are incompatibilities and collisions between capital-intensive use requirements or their ending and land-register entries that are worth money or else becoming worthless. All this means the regulatory state power has to get busy. It supports housing construction so that ground rent can be earned even from poorer tenants. And there are urban development plans; regional politicians make efforts to mediate between the various opposing income interests so that as the capitalist grasp on a monopolized piece of nature escalates, the relevant owners’ greed for money keeps within tolerable limits. And, conversely, as capital progressively abandons the opportunities that an area offers, the devaluation of real estate does not get out of hand to the point of creating a desert and completely expropriating its owners.
Finally, the constitutional social state can also not avoid dealing with the material damage that the advances in capital growth cause not only to the buying power of the masses but across the board. The majority of its citizens are already exposed inescapably to such damage because of their income-related living conditions: polluted air and water, toxins in food and the environment, noise not only at the workplace… Since the extent to which an individual is affected depends largely on the standard of living he can afford, this is not the concern of a state power that relies on the principles of liberty and on self-responsible citizens. However, some unpleasant side effects of growth are too much to burden even poorer people with in the long term or can’t be privately avoided or gotten over, but rather affect “the general public.” This regrettably means that the main capitalistic effects have become far too important to permit any fundamental corrective action to be taken against the mechanisms, let alone the causes, of such collateral damage. So as a rule, it can only be a matter — but sometimes really has to be a matter — of passing laws and using budget funds, i.e., applying state force and money, to ensure that the most toxic consequences of growth become, or remain, tolerable side effects. Often, increasingly often, it is actually necessary for the state to demand that its free entrepreneurs show some consideration for “the environment.” There is no doubt about the hierarchy of purposes, of course, when the lawgiver sets out to “reconcile economy and ecology.” From a market-economy point of view, it would be paradoxical if the money it cost to deal with harmful effects of growth actually cost growth. It’s best for common good when the reduction, compensation, maybe even prevention, of ruinous effects of progress gives rise to new growth industries that can operate profitably even without government subsidies. Otherwise, the solution to all remaining problems, i.e., to the vast majority of problems, is sought where it can certainly not be found: in the everyday lives of “ordinary people” and with the “end user” of the goods that cause so much ubiquitous damage themselves and especially in their production. Private economizing, the right buying decisions, which are of course usually expensive and therefore not made, and self-denial, which is the order of the day for most people anyway, serve to produce a good ecological conscience at least.
How much dissatisfaction democratic governments arouse by such measures in the various sections of society, or whether they actually earn some thanks, they sort out every few years with their voters.
7. How the state budget divides the working class
The state creates order in its society by decreeing through its laws that all conflicting interests be compatible, and enforcing what it declares legal. It does not eliminate any antagonism between its competing citizens; that would be equivalent to abolishing the system of competition itself. It establishes the cohesion necessary for constantly settling these antagonisms by forcing its citizens to recognize each other and to reach a compromise according to its rules.
It follows a different logic when taking care of the working class. It sees to their interest in survival because this interest is negated by the rights, power, and interest of the other side; it organizes how they cope with the contradiction, which is the same for all of them, between the price of labor and their own livelihood. But it does so without zeroing in on the manifest conflict of interest between capitalists paying a price for labor and those who have to live on it. It makes coping with the predicament resulting from the class antagonism the business of just one side: it ties down the workers to helping themselves according to its stipulations, by means of the welfare funds it has set up. It imposes solidarity on them as a class, but not something like a class standpoint — that would mean asserting their fundamental politico-economical conflict of interest against the collective of their employers. It is the exact opposite: as participants in the various social services, which finance their survival by recourse to their wages, they are individuals with rights and obligations toward the state, just as in their capacity as taxpayers they have the fine legal entitlement to be governed. Of course it is not as free and equal competing citizens that they are required to pay and are taken care of, but rather according to their class situation, as wage earners. At the same time, this is done in such a way as to abstract from a class point of view, namely, in accordance with the amount of wages individually earned. Consequently, the welfare state brings the workers’ politico-economic identity it is dealing with to bear in such a way as to split the publicly insured collective. There is the sub-collective of contributors whose material interest in making a living conflicts directly with the withholding of wage components, and there are the subgroups of beneficiaries whose elementary needs run up against the barrier of the sum of contributions collected from them and their peers. This state-imposed solidarity pits the young and active against the old and inactive, the healthy against the sick, the acutely employed against the unemployed — and not merely ideologically, but in actual practice. The shared class situation that underlies and creates these antagonisms is reflected here only, and exactly, the way it always is when the state mediates between conflicts of interests that are necessary to the system. It takes the form of an individual’s calculation with an unpleasant necessity that he submits to “in his own best interest” since the law leaves him no choice anyway. The welfare state is also so kind as to spell out to its clientele how to properly understand this contradictory best interest of theirs. As a contributor, a wage-dependent person should think of his personal life risks — illness and lay-off — and his personal old age; when receiving the scant benefits, he should think of the burden of the contributions that have been withheld from his nominal gross salary.
So the state is negotiating in due form nothing but conflicts of interest when taking care of its wage-earners too. But these conflicts are ones that it itself creates by burdening workers with the consequences of their real, collective conflict of interest with employers. It establishes class solidarity by treating the class as chronically in need of care and by creating conflicting interests within this clientele. In this way, there is nothing left of the class antagonism on the side of the dependent workers, a crucial contribution to the unity and order and cohesion of the whole show.
Beyond its borders
1. Benefit and disadvantage of progress in international competition
With the increase in their capital productivity and resulting freedom of pricing, capitalist producers open up entirely new prospects for their cross-border trading business. They compete through the selling price of their goods with foreign manufacturers of the same products, too. What is being sold back and forth across national borders is no longer just what a nation “does best,” or objectively speaking, what capitalists have to offer abroad on the basis of the business conditions they find at home, but rather products of the same kind. This applies to more and more categories of goods, all the more the more successfully producers are able to emancipate themselves through progressive technology from the chance production conditions found at home. Cross-border competition using the weapon of permanently increased capital productivity creates one world market for all industrial products, where manufacturers from all countries fight for market shares against competitors in all countries.
The state acknowledges – initially and fundamentally – that this universal performance comparison is included in its licensing of cross-border trade. However, the way this competition is conducted in actual practice makes immediately clear that it is not just the international competitiveness of the involved companies that is being decided on. The winners and losers created by their competition on the basis of technological progress are part of the nation from whose soil they are supplying the world market with their goods, and are a contribution to, or deduction from, its total capital growth. Victories and defeats in this competition do not balance each other out as they do within a country; what a company wins or loses internationally is reflected not only as a gain or loss in the foreign trade balance but also in the growth record of its home location, so it is directly the nation that wins or loses.
Cross-border competition for profit and capital growth using the means of increased capital productivity consequently establishes a new competition of nations. They are now out to conquer a portion of the growth of a foreign country’s capitalist wealth and to prevent profitable business being lost to a foreign country. What is at stake is not just the distribution of world-market shares among competing capitalists, but the distribution of globally generated profits and capital growth between states. As guardians and promoters of their nations’ growth, states are directly affected by the capitalists’ competitive struggle to eliminate each other. They end up being major players in an economic trial of strength aimed at realizing increased growth in their own country at the expense of their peers.
2. Growth policy based on protective tariffs and free trade
The first weapon the state has at its disposal for this trial of strength and also makes extensive use of is its sovereignty over the country's borders. However, being a partisan of growth and progress, it will never consider closing them or revoking the licenses and guarantees it has granted for doing business abroad. But it does have a decisive, system-compliant instrument in its hands for steering the course of trade across its borders. Tariffs, its means for participating in the success of foreign producers in its own country, can be used for making corrections to competitive conditions in the international goods market, that is, for protecting companies or industries whose competitiveness is threatened or not yet achieved.
This instrument has its disadvantages of course. Applying tariffs might make entire categories of goods more expensive for buyers in one’s own country. This accordingly decimates buying power and reduces the productivity of companies that need the tariffed goods, thus harming them in their competition with foreign firms. And such an intervention naturally provokes countermeasures from the states whose exporters’ business is being impaired or even ruined by the tariffs in a part of the international market. So for any state interested in its domestic economy sustaining growth by tapping foreign ability to pay, effective tariffs may be necessary now and again but are not a permanent solution. They are calculated to promote the progress of a national industry until it no longer needs such assistance. Once that has been achieved, the sovereign in charge will endorse the free trade that its partner states with developed capital productivity have long since been demanding, along with any industrialists of its own who are already successful internationally.
States with a strong export economy pursue a trade policy aimed at achieving a customs union, whose participating countries refrain from intervening in the price calculation of foreign companies across the board. This does not rule out measures for discriminating against foreign products, but on the contrary makes them more important in the competition of nations for world-market shares. Such measures follow all kinds of policy perspectives — regulatory, health, security, etc. — but are regularly accused by disadvantaged partners of being “non-tariff trade barriers” applied out of sheer calculation, and are usually meant that way too. When they are lifted, often in the form of recognizing each other’s national regulations, the aim is to establish a common market, where competition by means of increased capital productivity is modified only — but all the more tangibly — by the influence of currency exchange rates on the price comparison. Conversely, this means that a nation’s lead in capital productivity has a double advantage. Firstly, the sales successes the more progressive capitalists achieve on foreign markets with their profitably lowered prices add up to enrich the nation. Secondly, the increased demand for the nation’s money increases its value relative to other currencies. This effect is watered down by the relative increase in price of the cost-effectively manufactured goods, measured in the money of foreign buyers, and the possibly resulting reduction of increased sales, but it is by no means canceled out. All in all, this is a remarkable double reward for nationwide success in reducing unit labor costs.
3. Modern location policy
In order to survive as nations in this competition, states cannot be content with the growth policy they are pursuing anyway. They have to make sure that what they are doing domestically for their industrialists’ growth needs takes effect beyond their borders so that their capitalism proves superior in the global competition of nations.
What are of crucial importance for this are the amount and the exclusivity of the capitalist benefit obtained from science and research. That is, intellectual property must be increased, and secured as a national possession. What capitalists need by way of state assistance and legal certainty in order to keep reducing their unit costs in a lasting way and thereby gain a lead over their competitors, that is something states must develop on a broad front and at the same time withhold from other countries. So “industrial nations” — those are the ones with technologically increased capital growth — measure themselves against each other in terms of progress. Each one owes it to itself to be ‘broadly diversified’ and seek the lead in all sectors in principle, both with articles and with production means and methods. It is not just a matter of being successful at this as such, but of succeeding faster and faster than the others, because it is all about the lead. At the same time, they have to deal with the problem that privatizing the benefit of science and research is an achievement of their legal authority that cuts no ice abroad. Nationalizing the progress that is indispensable for the competitiveness of capital requires binding agreements between the very states that are competing with each other for economic superiority in this very field. Indeed, the shared interest in such arrangements goes so far that there are agreements on respecting the intellectual property of others. At the same time, the practical validity of such arrangements is considerably watered down by the institution of industrial espionage, not only between competing firms but between states. In the final analysis, they are only valid anyway as far as the reach of cross-border control and extortion power that a constitutional state is able and willing to muster against its peers. The countries that can most readily be excluded from capitalistically useful knowledge are naturally the ones that are still out to become industrial nations in the modern sense —and therefore most urgently need the progress that has been achieved abroad.
In order to become really useful capitalistically, the intellectual property the state promotes or provides, and protects against foreign abuse, of course requires above all material capitalist property. And it requires all the more of it the further scientific and technological progress has advanced, because all the more investment is required for exploiting it. In order to take on international competition, the state is therefore all the more called on as a source of money for subsidies to enable interested companies to make appropriate use of this progress. This is especially so when a breakthrough on the world market appears within reach but, for the same reason, is risky and possibly too tricky for a private business commitment. At the same time, progress that noticeably advances a nation in comparison to the competition always becomes increasingly costly itself, making profitable returns in the nation appear questionable. To finance cutting-edge research and large-scale technological experiments that are remote from application, leading industrial nations therefore even join forces. This does not make them forget their competition of course. In joint ventures of this kind, the participating states meticulously make sure that they profit as nations that produce and trade, at least to the extent of their budget share, and that the potential commercial benefit of the result ends up mainly with them. Which again requires financially strong companies and usually government aid. These states are already competing to attract the “best brains” in the world to their country anyway. Politicians and policymakers interested in science do not wait to see the trade balance to measure success and failure, but critically compare the number of patent applications and, as a nice bonus, of Nobel laureates from their own nation. Together with the industrial avant-garde, they identify the areas of research that are most promising economically; when further developing and founding research institutions, they look to the currently hot criteria of international competition for science locations. Politicians and policymakers interested in education define the canon of knowledge to be acquired, as well as the number of those who are to acquire it, according to points of view that merge the performance requirements of globally successful companies with those from cross-country studies of educational systems. And so on. The competition between states has repercussions on the politics of maintaining their domestic business locations down to the smallest detail.
4. The imperative to be competitive, and the conditional validity of local patriotism in capitalism
Education and science policy are by no means the only areas affected. With the constantly promoted technological advances, the state has means at its disposal for developing all kinds of natural conditions found in its country into singular, particularly advantageous sources of capitalist wealth. Like the emancipation of national industry from special local conditions, this of course especially requires not just inventive and pioneering spirit and technology but a lot of money for subsidizing innovative ventures. Accordingly, once they are properly opened up and utilized, regionally differentiated natural phenomena, such as wind, sun or shale formations, can be turned into energy suppliers that cheapen a country’s commodity production so as to make it significantly more competitive on the world market. Even a country’s geographic location can be profitably marketed internationally when — and as long as — it is useful to world-wide commerce as a hub for flight routes or foreign-exchange trading thanks to relevant technological achievements. Only in the radiant light of capitalist progress will it emerge how much business potential, if any, there is in the locality where a state power is offering its capitalist class legal certainty and financial aid.
Other potentials, including sources of capitalist wealth that have already been opened up and utilized, are rendered superfluous by this same progress, or rather by capital growth driven by progress with its growing demands for sufficient capital productivity. In capitalism, this does not mean a welcome saving of labor and consumption of resources, but rather the destruction of competitive advantages and thus of the business that benefited from them. The homeland that a state readies for its industrialists is constantly being tested in world business under the harsh criterion of international competitiveness. As a result, some natural constants turn out to be politico-economically fleeting potentials, and the business built on them to be industries with no future, which the state power in charge would be wise to liquidate rather than help survive by showering money on them. Whatever fails to meet the requirements of increased capital productivity has lost its right to reside in the beautiful world of technical progress.
§ 16 Power and powerlessness of credit in the competition for competitiveness
1. Necessity and function of credit in capitalist producers’ competitive struggle for increased capital productivity
Industrial capitalists compete for a capital productivity that will secure their own superiority, leave competitors behind, and enable them to capture additional market shares and more of the market’s ability-to-pay from their competitors. This competition overburdens their financial resources in a special way. Their customary practice of dividing up returns and borrowed liquidity is no way to gain superiority. The necessary increase in capital productivity does not merely require a greater expenditure of money, as does a simple expansion of production. It requires an advance that has to meet the criterion of substantially reducing unit costs and gaining a sufficient lead over the competition, an advance that has yet to prove its correspondingly far-reaching effect and so can definitely not be measured by previous business activities. After all, it is about a new quality of conditions for success; this overturns all the calculations that were successful up to now, and calls for the feat of converting the desire for a higher return per unit of goods and an overall increase in the mass of profit into a realistically expected monetary return, and quantifying the expenditure that is to bring about the hoped-for effect. The progress-hungry capitalist’s need for liquidity lacks the usual reliable measure: liquidity has to be sufficient for outdoing competitors who are in turn seeking the same thing; in this qualitative sense it has no measure.
The means for meeting this need are not lacking; the amount of loanable money-capital is not really the problem. What has changed is the business basis between the industrialist and his bank. The industrialist does not merely need a cash supplement for his current business, but rather is unable to pay with regard to his breakout agenda, and admits there is a fundamental gap between his own funds generated from his previous course of business and the expenditure for the required progress. The bank is supposed to close this gap, financing not merely the expanded continuation of his profit machinery, but rather its renewal. For this purpose the industrialist must convince the bank that the agenda he needs its funds for will definitely be successful. And he has no means for convincing it but his own accumulated capital that is avowedly not enough; and as for the competitiveness that he wants to generate once he gets the requested credit: that is something he can therefore demonstrate even less. So he bases his bid for the loan on his company’s previous business success, which is no good any more and exactly what he wants to emancipate himself from. His will and the speculative prospect of making his company successful in a new way is his argument for the bank investing the necessary money in this company. His purpose itself is supposed to yield the means necessary for realizing it.
To persuade the bank, the industrialist needs a business plan that provides speculative certainty: renewing his company with advanced technology will make production equal an enormous increase in realized profit because this equation will definitely no longer work out for his competitors. This plan must take into account that the required loan will incur interest and repayment obligations for the company, additional liabilities that the anticipated additional revenue through technical progress must also cover. So the reduction of unit labor costs must definitely also yield what the bank earns. In other words, what the company additionally gets out of labor by increasing its productivity, and realizes on the market, has to be transformed into a return on the invested money capital before increasing the industrialist's wealth. The company has to be transformed into an instrument of the money capital shelled out by the bank.
The industrialist’s task is not merely to create such a business plan but to convince his bank of its soundness and negotiate with it to get beyond the unfortunate fact that the finest plan only turns out to be correct when the money it requires has been spent, i.e., is gone. In addition, the lender must be kept on board even and especially when the desired success takes its time materializing. This new task requires additional effort and qualities of a special kind from the industrialist. His new main job is to credibly present his speculative future plans, i.e., above all to demonstrate his own faith in their success. He must prove his trustworthiness by showing off; perform a work of persuasion without its calculating nature turning into obvious dishonesty. Once the industrialist has got his loan, one thing is certain no matter what becomes of his competitive success: his capital will be acting as a dependent part of the credit that his company is putting into operation as capital of progress-geared productivity. The industrialist uses his own assets already existing in the form of a capitalist enterprise to buy into the process of transforming external funds into progress-geared productive capital that will henceforth take place in his enterprise.
2. Speculative reality in the development of productive forces: The banking industry directs a competition that causes selection. Insolvency and bankruptcy
The need that industrialists have for external financing increases without any definite measure, and this has consequences for the business of those who create credit. Their daring equating of debt with capital is increasingly made use of and practiced for a new purpose; this strengthens their decision-making power, and expands it. At the same time, their own course of business runs into greater danger; they must take special precautions and carry out a lot of new tasks to conduct and safeguard it.
The prime task of banks is to assess the creditworthiness of the companies dependent on others to supply money for the required increase in their capital’s productivity. The lender needs to pay at least as much attention to his clients’ business plan as do the clients themselves; because when it finances the plan, it makes its risk its own. It has to examine it critically, taking account of the industrialist’s calculating or even honest over-estimation of himself, questionable records of past performance, and whitewashed speculative consideration of the competitive situation on the market in general and his own superiority over competitors in particular. It is not an option for banks to stay out of the precarious business of speculative growth forecasts; after all, there is not just a lot of money for them to make from capitalist progress, there are earnings at entirely new scales. So they spare no expense to set up their own rating departments and consult specialized agencies to establish the soundness of business development plans. Also, they cannot wait to see if and when a client will come up with a soundly calculated loan application for making over his company. If no funds are being requested for the required progress, a house bank must become suspicious. It must fear its borrower is failing to make the necessary “investments for the future,” i.e., the bank’s business has no future, and “proactively” “take on more risk.” Quite of their own accord, in the interests of their business, banks preemptively need to gain an overview of “new developments,” in all sectors, and take on the role of instigator in the producers’ competition for superior productivity. So they have no choice but to develop their own growth strategies, which go before and override the industrialists’ business plans, and to “challenge and support” their clients in terms of progress. That is the counterpart, the complementary side, to the fact that industrial capital, in its competitive struggle to eliminate rivals, now only acts as part of the financial mass that banks provide for that purpose.
So the banking industry, driven by the new financial needs of a clientele struggling to be creditworthy, assumes the role of active, mobilizing, decision-making body. This it does not merely with regard to the progress-geared increase in the productivity of applied capital, but also on the negative side with regard to the victims of the competitive struggle it finances. For the banks’ own strategies involve crediting a competition in which defeats are not just a chance bad event, “shit happens,” as in all earthly life. Rather, it is actually geared toward devaluing the capital of competitors, ruining companies, eliminating them as market participants. Banks definitely do not merely look on while this happens: it is they who decide whether and when a competitor’s ruin is called for — by their judgment on whether a customer deserves another chance, or has no future and therefore for lack of liquid assets no present any more either. At this stage, the banking business consists in permanently deciding on rescue or bankruptcy, continuation or liquidation of credited companies. In the negative case, financiers get together to argue over how to divide up the remaining capital — some parts of the company may still be viable — or else the residual assets that have lost their capital quality and now only have money value. The financial enterprise’s task and its art here is to make sure the invested capital is liquidated in such timely manner and so one-sidedly that the money capital it had “working” there emerges from the meeting of financial vultures, from the called-for liquidation, as intact as possible even if it is now only a sum of money.
The banking industry’s far-reaching new tasks and competencies in financing capitalist progress have consequences for the other part of its debt-based economy, where banks act as debtors themselves. On the one hand, they must be prepared to meet the — only speculatively quantifiable — need of competition for superior capital productivity. On the other hand, they must be able to cope with their own decisions — or those initiated by their competing colleagues — about the termination of enterprises. For a bankruptcy reduces any credit a bank has granted to the status of mere debt that is more or less lost. After all, the powerfully established doubled existence of a money advance as applied capital and money capital only lasts as long as the financed company acts as capital; when that stops growing the credit loses its capital quality too.
In the first respect, in raising funds as a basis for the extensively stretched freedom to create and grant credit, banks have some persuading to do themselves when it comes to their growth strategy. As the instigator of a competition aimed at eliminating competitors, they do their business with a great number of risks, many of which are bound to occur. So they must take some pains to make it appear credible that they are on top of the overall situation. They are expert at presenting what are supposedly unquestionable best business prospects, the complete congruence of debt and successfully growing money capital in their books. Even better than their clientele, they master the art of representation, of showing off, in order to attest the shaky conclusion that demonstrable wealth means its source is sound. Their contributions to capitalistic cultural life, to architecture and patronage, are accordingly impressive. The target of their self-presentation is in principle all money-owners, whose cash-flow they are managing anyway but whose financial assets they would like to bring under their power of disposal for the longer term. But above all they are making a claim on each other; not just as partners in book-money transactions, in the circulation of their credit-monies, but expressly as credit creators who are to refinance the payment obligations they incur with their lending and their debt. In this way they pass on the risks inherent in their money capital to each other, thereby making them acceptable at all, and enabling themselves and each other to perform their role as originator and driver of capitalist growth on a qualitatively high level. They socialize the financial cost of that growth, generalize the risks they take, and thereby make the transition to their sector having joint liability for the credit devoured by the competition of capitalists for creditworthy growth.
This of course does not alter the fact that a bankruptcy will hit first and foremost the bank that has put the most credit into the failed company and now has to write it off; when money capital is being destroyed, there is no more solidarity between money capitalists. However, they are forced to take into account that they are interlinked with each other through countless refinancing loops, meaning they are dependent on the solvency of their business partners. If one of them is in trouble, the others will do everything to recoup themselves, just as with a normal liquidation. But in breaking up a firm for its assets as best they can, they encounter all kinds of monetary claims they have to answer for themselves. The cancellation of loans taken out or granted by a colleague threatened with insolvency inevitably affects the ability of quite a few, indirectly all, other financial companies to earn money with debts. Actual bankruptcies must therefore be handled much more carefully than normal business failures and with special provisos. In the end, they always reduce the total volume of the money-capital whose growth the sector is all about, and at least throw a bad light on the grand delusion this sector shares and lives on.
Of course, what has to be has to be. Even if all those involved have to book losses, the community of money capitalists determine the bank that they trust least. They withhold the liquidity it requires, thereby blowing a whistle on its failed growth strategy. In this way, a selection takes place in the competition for the most creditworthy capital productivity also among the financiers whose credit is becoming productive as capital — or isn’t. This selection repeatedly allows money and credit traders — in normal times — to avoid giving an overall negative answer to the question they continually raise with their boundless business conduct, while each one of them is modest enough to answer it unconditionally and ruthlessly in the positive for himself: the question of to what extent the accumulation of debt actually still expresses the growth of productively applied capital…
§ 17 The state as promoter, user, and guardian of the credit system
Within its borders
The state has no problem with banks doing business with the money needs of companies competing for a lead in the productivity of their capital that ruins others. It values this as a service to the progress of the national economy. So the state approves the banks’ power to apply their standards of creditworthiness to companies’ competitive efforts and accordingly decide on their financing or on withholding or canceling necessary loans, i.e., decide on companies’ chances of survival or liquidation. By licensing the business of banks, the state recognizes the regime of money lenders over industrial capital. On the other hand, the inevitable outcome, that business dealings between banks and companies produce not only growth but also losers, victims of judgment calls by financial capitalists — this does not suit the state as the guardian of property and promoter of growth at all. It wants the benefit of competition with its selection of winners but without the necessary destruction of capital. For this reason, and along these lines, it intervenes in the relationship between banks and borrowers; with the force of the law and the power of money.
1. New tasks for the law: Separating conscientious risk from fraud, and properly handling the regular exceptions to the required growth
The constitutional state respects the freedom of industrialists to procure others’ money with the ever-dubious promise of future profits. It also respects the freedom of banks to finance business as long as they see it as profitable, and if necessary order its termination. These are freedoms it has granted, after all. But it considers this license to have brought about more growth, not liquidated productive capital. So when faced with the inevitable failures and always somehow impending bankruptcies, it suspects on principle that there has been some dishonesty, some violation of the fine practices of the lending business; as if their meticulous observance should really guarantee success on all sides. So it endeavors to regulate the interaction between creditors and debtors in such a way that if the law is followed nothing but general success can ensue. It leaves to banks and companies what they arrange with each other, what commitments they make toward each other, but it makes sure that certain principles of good faith, demands for openness, honesty, reliability, etc., are heeded. It issues regulations for this purpose and maintains a judicial system to enforce them — under civil law, and also criminal law in the case of fraudulent intent. In doing so, it statutorily regulates, as best it can, the gray area of mutual persuasion efforts between business managers and financiers, who are speculating on and against each other at the same time. The state’s aim here is to deal with the economically unavoidable juxtaposition of business successes and failures by legally distinguishing between correct and improper to fraudulent business conduct in such a way that cases of damage may only occur as exceptions to the rule.
This does not lead to a successful outcome all around of course. With the criterion of legal inadmissibility, the state only makes a skewed selection among the necessary defeats in the competitive struggle of its progressive industrialists, a competition bloated by loan capital and decided by creditor banks. It defines prohibited cases of damage, punishes them where applicable, and differentiates them from cases where special circumstances excuse the bad result. In this way, it constructively complements the destructive acts of its capitalists: it understands and acknowledges that this competition inevitably involves the destruction of capitalist wealth, which is not at all on its agenda. And it takes the appropriate measure: it enacts a bankruptcy law that puts the cases of damage that are sure to occur in a legal form to ensure their orderly settlement. This is how the state limits the effects of selection and makes sure otherwise everything goes on as before. The bankrupt firm is required to disclose all its remaining assets, and a just hierarchy is created for the claims of creditors and business partners, assigning a natural priority to government claims to the legally defined bankruptcy assets. This also formally regulates, i.e., recognizes as legitimate, the losses of lenders who order the ruin of companies with their verdict of credit-unworthiness. Thus, the constitutional state’s regulatory interventions end up putting through by sovereign authority and force what credit-financed competition achieves economically: a consistent selection among firms that increase the productive force of their capital against each other with the power and under the direction of financial capital.
Credit institutions, while calculating carefully, drive their customers into a competition for growth that is ruinous for some and thereby risk losses themselves. The constitutional state gives them special and distinctly different consideration because their business, from the outset, is not merely private. After all, the essence of this business is that banks vouch for the equation of debt and expanding money-capital on all sides. This service makes them dependent on the business success of the totality of their customers, both their creditors and their debtors, who they at the same time make dependent on themselves, the banks, on their own business success and their solvency. They are affected in both their active and their passive debt business when they give up loans as lost and decide to liquidate debtors. Depending on the size and severity of the damage, this impairs the ability of many depositors to make payments and the business activities of many credit customers. In the end, the cycle of refinancing between financial institutions and the credit business as a whole might even be jeopardized. Banks are therefore basically not allowed to fail, especially big ones. That is why the constitutional state requires of them a particularly high level of transparency, caution, and precaution, a permanent critical and self-critical risk assessment, the avoidance of “cluster risks,” the reporting of large exposures, even higher moral standards for those responsible, etc. — measures intended to prevent banks from ever going bust.
Such measures cannot actually prevent bankruptcies, of course. Lenders are also subject to a selection process. The license they enjoy includes the danger of their deals falling through, the risk of it being disclosed that credit does not in fact equal capital growth, and it by no means precludes the necessity of losses that put banks in trouble. This, too, is no surprise to the constitutional state with its experience in business matters, so it issues rules for liquidating failed banks in the hope of containing the repercussions of a bankruptcy, preferably neutralizing them. These regulations are, of course, once again the admission that, despite all legal containment, the system of credit-financed growth-competition is and remains as precarious as it just is due to its economic nature.
But this is not all the guardian of the common good does. To protect the credit system, it resorts to the material means it has at its disposal as the sovereign master over society’s generated wealth, its credit, and its means of payment.
2. Public debt to protect and preserve an effective credit system
By legally defining and treating financial fraud and honest failure as different exceptions to the rule of all-round successful credit transactions, the state brings into effect a competition in which failures are the necessary other side of success, that is, anything but the exception. Because this also affects the credit system, i.e., growth in general, the state sees itself compelled to distinguish bank insolvencies that are bearable from cases of damage of national importance, and to take action in particular when important creditors threaten to go under. Then it intervenes with its budget funds, even rescuing large private companies if necessary, in any case saving the banking industry from serious losses or compensating such losses so that the industry as a whole can continue with its productive exposures. That means it keeps accumulating losses along with its profits, thereby over and over giving the state plenty to save and to compensate.
The means the state uses for this purpose is its debt. On the one hand, there is the debt it incurs with the banking industry for its budget. With this debt it finances subsidies, tax breaks, and similar relief measures. This debt also benefits its banking industry quite directly in that it creates not so much risk as additional security, i.e., acts as a source of profit that ultimately just goes on forever. This is not only guaranteed by the authority of a minister of finance; it is also constantly provided by the state with the debt that it, on the other hand, incurs — indirectly — with itself: with the liabilities, the payment promises “backed” by its monetary sovereignty, that the central bank puts in circulation as legal tender in order to meet the liquidity needs of commercial banks. In this way the central bank places its circular refinancing operations on a firm footing and at the same time, as if incidentally, ensures the financing of the state’s own borrowing. To the extent that banks endanger the security of their credit creation with their regime over the competition of capitalists, the central bank’s creation of directly valid credit-money acts as a permanent rescue operation: as a reliable source of the required funds.
The state thus establishes a rather precarious relationship between itself and the financial world. By virtually forever subsidizing the course of banking business — and thereby ensuring that its own financial needs are served — it makes the value of its credit-money dependent on this business ultimately working out capitalistically, i.e., turning debt into accumulating capitalist wealth. So the help the state is offering gives banks at the same time a task having the binding force of an economic necessity. They and the companies they finance must apply the state-guaranteed credit-money so as to achieve capitalist success, in order for the state, with its creation of money, not merely to inflate, but to strengthen the financial power of the banks and their customers, including the financial power of its own budget. After all, the relation between credit creation and a capital growth that gives the credit real value is crucial to how well credit circulating as a means of payment fulfills its function as money — for capitalists, for the state, and quite generally. The rate of inflation, which measures this quality of national money, quantifies how successful the state power is in its offensive to deal with the damage the financial sector necessarily causes, and suffers, by serving growth through selection, and with the perpetual danger this sector is thereby exposing itself to. The inflation rate indicates — in a very abstract form — the extent to which the state has managed, with its debt circulating as money, to strike a happy medium between the growth of capital in the country and the repair of the damage resulting there.
The rate of money devaluation is significant to the state as an indicator of this always very relative success, so a stable currency is an important national objective. On the one hand, it cannot avoid intervening in the course of competition in its country, on its own account, with its central bank’s liabilities and its budget debt, and by compensating losses jeopardizing the capital quality of national credit and thus the value of its money. But in the interest of the effectiveness of the credit-money that it uses for itself and to intervene continually and keep its financial sector going, it cannot avoid obeying the imperative of monetary stability either. It therefore supplements its policy of promoting growth and permanently bailing out banks with a monetary policy that is dedicated to this purpose. It works by stipulating the terms by which the central bank lends financial institutions the liquidity they require. There should always be just enough money at hand for the banks to be able to serve as a source of money for the competition of capitalists, for their mutual refinancing business, and also for the state budget’s money needs. Therefore, the interest rate should be just high enough to prevent a predictably unproductive use of credit but not ruin any opportunity for productively using debt and not make the state’s money needs unduly expensive. At the same time, there is one unquestionable constraint: insolvency in the credit sector must be avoided or if necessary undone. But it is also clear that a state has to be able to afford continually using credit to avoid or compensate for derailments and emergencies without ruining the value of its money. For that value is the blunt final reckoning when it comes to the whole mode of production and what a state does with it.
Beyond its borders
1. “Strong” or “weak” currency: The abstract summary of the nation’s world-market successes and failures, and its significance
The real, crucial reckoning of the benefit and damage of government debt for a good, all-round outcome of the selection-seeking competition of capitalists takes place in a nation’s relations with rival trading nations. This is not a reckoning in the sense of some final account; it happens continually. Foreign exchange markets produce the exchange rates of national currencies by exchanging them, continually determining and revising their value in relation to each other. What they don’t constantly revise is their decision on the use of the various monies for transactions, stockpiling liquid funds, receivables and payables, financing exports and imports — for handling the money side of international trade altogether. They are actually quite particular about it. After all, the ultimate matter at hand is which money will act as a means for transferring capitalist property from one nation to another, that is, as the universally binding substance of the wealth of nations. On this basis and to this end, the creators of national credit-monies, the states’ central banks, decide which currencies to accumulate — and which not — in order to safeguard their state’s financial assets, which they are managing, and to guarantee their nation's international ability to pay. They are therefore deciding which currency to recognize as a definitive bearer of value, and which to consider to be questionable promissory notes that have no business being in their treasury. Then there are the private business people and government agencies, which distinguish national currencies according to their function as world money, as the stuff that makes up the monetary wealth that matters all over the world. By the use they make of these currencies, they decide, with their critical comparisons, how internationally useful the currencies are.
As a result, the issuers of these monies — states with their central banks — undergo a classification as economic actors that are more or less, fully or not at all fit for capitalist business, actors whose monetary guarantee is more or less reliable or, in the end, not at all. They are confronted with a valid, effective decision on what can be done with their money internationally, and what they can consequently do internationally themselves with the money they have produced. They see their own business world’s ability to pay in world trade when using the national currency, and whether it gives them an internationally usable means of access to foreign goods and markets at all. They see if their money is welcomed by other central banks as sound, or if they are told to take it back and exchange it for better money. The use of their money by the outside world is a vote of confidence or no confidence. And this is something they cannot take seriously enough, for it affects their very existence, their status as participants in world trade.
In one respect, in retrospect, a money’s rating is a comparative judgment about what the state has factually achieved with its entire growth policy, its just deserts so to speak. The competition of companies and their lenders is about conquering world-market shares through capital of superior productivity. This competition is not merely supported by the state’s intervention somehow, but raised to a different level. Between nations, the goal is nothing less than to resolve the contradiction of growth through selection, which always involves the destruction of capitalist wealth, by having the successes take place in one’s own country while the costs of the necessary defeats are incurred abroad. While companies compete for growth with an edge on their competitors, whether nationally or internationally, states — as guardians of the success of all their capitalists and as guarantors of the common business basis, of the nation’s credit — compete for a one-sided distribution of benefit and harm, for self-assertion of their nation’s capital in its entirety on the world market. They compete to eliminate the competitors that are located abroad and kept going with credit by foreign state powers. The criterion of success here is to assert oneself in this competition, as a collective capitalist against other collective capitalists. That is what a state uses its credit for; that is the purpose of its efforts to rescue, reorganize, or subsidize businesses. It is the result of this competition at the level of nations that is reflected in the rating of national money; that is what is expressed by the general confidence or lack of confidence in a particular state’s credit-money, by its currency being qualified with the terms “hard” or “soft.”
This abstract rating that summarizes the state’s debt and and its effects is not just a retrospective summary. In the other respect — and this is the crucial one — it is a sign of confidence or no confidence and thus a crucial premise when it comes to how, with what monetary power, a state enters into an incessantly continuing international competition. For “good money” means that currency markets and foreign central banks are betting on the continuing success of the nation as a whole. With their demand for “good money,” they are inferring from the proven, past effects of a state-guarded and state-used national credit what effectiveness it is inherently capable of, and relying on this. They are attesting that a state’s success in asserting itself in the competition of capitalists at the national level gives it the capacity to continue asserting itself against other nations and win the pan-national selection. And with this attestation they are putting in place a crucial condition, an essential means, for the continuing success they trust in. “Good money,” “strong currency,” means the nation’s unmediated ability to pay in world business. It means the money earned in that country has a strong and undoubted power to access all sources of capitalist growth anywhere on the globe.
And all this applies the other way around when the outside world punishes a national currency with mistrust, classifying it as “weak.”
2. Everything for a “strong” currency
As a committed collective capitalist, the state devotes itself to the international success of its credit, this consisting crucially in its money being used, by making all its productive and compensatory interventions in the course of its national economy — and even interventions it expressly refrains from — into a demonstration of its self-assurance, its certainty of being on the right track and the absolute master of the situation. It always pursues its policy of supervising the nation’s overall success as a chain of confidence-building measures, with an eye on the machinations of competing states. It aims for its money to be acknowledged as immediately identical to globally usable capitalist wealth.
However, it does not just leave the result to the speculators’ discretion. For the purpose of having a “hard” money, a modern state, after doing everything for a stably valued money with its domestic monetary policy, moves on to directly confront its currency’s exchange rate. It makes corrections so that its currency will attract greater interest from money dealers and central banks, gain more international power to access wealth, and thereby strengthen the nation’s ability to pay and the state’s own financial power. It has the power to do this, the financial sovereignty to set an official exchange rate that will provide the desired appeal. This measure is often justified by calculations showing that the actual rates of exchange it needs to correct are all wrong when it comes to the true economic situation, the evidence being comparisons of purchasing power carried out on suitably composed baskets of goods. For foreign trade, however, such corrections always seem to have problematic side effects somehow. And in any case, fixing the exchange rate like this is only worth anything — or at least in the long run only effective — if it is accepted by money dealers on the basis of their own calculation and taken into account by the central banks of other countries in the composition of their foreign-exchange reserves. Moreover, to support the exchange rate of its currency by buying it up, a measure dictated only by its monetary interest, a state in need of such an action will sooner or later be dependent on the help of the central banks whose currencies it requires for its exchange-rate interventions, and their help cannot be taken for granted. Such loans between states, supposed to secure a nation’s ability to act in matters of currency policy in order to maintain it as a business partner at all, are really no longer part of the competition for confidence in a national money.
When a state is faced with the outside world’s persistent mistrust and is unwilling to let its business location degenerate into a “soft-currency country,” it is thrown back to what it is doing all the time anyway: everything for the effectiveness of its credit, against losses that destroy domestic capital and cost financial power. This confronts it with the same contradiction as before: it has control over the creation of credit with the goal of achieving an overall competitively progress-geared capitalism in the country, but no control over whether this credit will achieve what is required, therefore no control over the right relation between debt and growth either. Thus, when push comes to shove, the state is thrown even further back to the power over its society that it has as well, as the legally and socially acting monopolist on the use of force. For even if it cannot decree successful growth, its rule is definitely good for one thing. By lowering labor costs, which it already manages with its social policy, and giving employers more freedom to increase performance, it can bring about a reduction of unit labor costs completely free of cost. It is true that such an increase in labor productivity through a general drop in the standard of living and forced intensification of labor performance is not a very powerful alternative to the capitalist benefit of the productive force that can be got out of paid labor by investing additional capital to subordinate it to and integrate it into a technologically ever further perfected production process. But to a state trying to assert itself on the world market, this can only mean that it has to push through its alternative all the more powerfully.
One result is clear from all this. The competition aiming for selection between capitalists and between states worrying about the value of their money expands the politico-economic hierarchy of nations both at the top and at the bottom, above all filling the lower ranks with countries that are bit by bit losing their international ability to pay.
§ 18 Success alongside failure, the standpoint of real and imagined victims & beneficiaries as an opinion-forming productive force
Growth using the means of increased capital productivity is an eternal struggle. It forever requires new means, constant further development of the productive forces objectified in machines; standstill is out of the question. At the same time, it is an ongoing throwaway process: of wealth that no longer proves to be productive enough, and of workers with their vocational skills; of entire industries and lines of business. For everything is aimed at competitors failing; growth doesn’t work without victims. The class of capitalists, who all want the same thing and together run the economy, separate into winners and losers. This does not happen by chance or fate, but by necessity, precisely because they are all equally striving to succeed on the market. Capitalist business life is not a prospect for everyone conducting it; and certainly not a lifetime post for those who do the work.
Nevertheless, all those concerned approve of the market regulating all economic activity and have a fundamentally positive stance toward the system of competition. The fact that goods are produced and needs supplied in the market economy in the form of a permanent struggle for survival between the main economic actors causes plenty of dissatisfaction. But it does not give rise to a critique, either of the competitors, at least as long as they keep to the rules of the system, or — even less — of the system of rules that recognizes, allows, and requires progress in the productivity of labor only as a means in the struggle between capitalist firms over victory or defeat. Their interest and the resulting mutual coercion to keep achieving new advances to move in on their peers are considered an opportunity and a factual constraint for capable industrialists to prove themselves under conditions that “simply” prevail, to fulfill all the predetermined requirements for expedient economic activity. The capitalistic free-for-all is to be taken, and is accepted, as a proof of performance when it comes to meeting objective challenges. So in the end, what is left as the balance of the competitive struggle with all its harshness and ruthlessness, of capitalists’ victory and defeat, is — regarded in terms of the result — success alongside failure.
For those affected, this conclusion is of course not value-free. Winners and losers of competition, their respective existential interest confirmed or hit hard, see themselves correspondingly as beneficiaries or victims of the system whose rule they do not question. And they are not alone with this point of view. In addition to real victims — competitors driven to bankruptcy, as well as those harmed without having done anything, dismissed workers and ones kept on under tougher conditions — there are plenty of people who suffer because nothing stays the way they imagine it should be for their economic existence and their bourgeois lives altogether. They like to call yesterday’s hardships and life struggles “the good old days.” The elite, real beneficiaries of stepped-up capital growth are not ideologically alone either. Anyone who has to fear for his job and income with every change in the company can already consider it a success to keep being used and paid for bearable labor service. People who have learned nothing from bad experience except to hope for a better future — at least “for the children”… — tend to find whatever prevails to be comparatively good. And even those who have too little buying power to acquire products prettied up for advertising purposes or genuinely new are often very impressed by them and set new goals for their working life, which is almost as gratifying as a real improvement in their situation.
Both of them, the (real or imagined) victims and beneficiaries of “developments,” also have an idea of the reasons for their fate. The former claim to know who is to blame, whether for the failure they have suffered or for the loss of retrospectively idealized working conditions or “way of life.” The latter credit their benefit as their success, and success as merit, whether directly their own or that of a collective they consider themselves part of. With this moral assessment of advanced capitalist competition, the two sides are as close to each other as illusion and disillusionment; and with this standpoint, they each make their contribution to a lasting judgment formation about the way of the world.
1. “Mismanagement” is popular business theory
In their thinking that they have done everything right and deserve their success, the winners of competition are confirmed by a whole science. Business administration research focuses on finding recipes for the success of capitalist business and deriving them from a wrong concept of economy in general, making it its practical concern to advise the business community and its management. It draws its ethos as a helpful practical science, and its claim to the importance of its findings, in particular from the fact that companies are concerned with surviving the constant competition on the market, with succeeding or failing (and by no means with overcoming natural scarcity through the appropriate use of resources, although this is what every textbook starts out saying their main concern is). This of course conflicts with its offer to provide scientific information about correct business management so that anyone who follows it is able to succeed with their business. But representatives of this discipline don't take such a narrow view. They turn it around and interpret the success of companies that outdo their peers as a successful application, or at least confirmation, of their universally valid recipes for success. In this way, business people and scholars move around in a conceptual circle, which assures successful competitors that they have managed their business in a correct, scientifically certified way, and flatters representatives of the discipline with the illusion that their theories are fit for reality.
This naturally also proves that failure in competition results from management errors, that business people only fail when they have made some fundamental mistake. And this finding coincides with what market-economy practitioners and people in general have always thought about the art of successful business anyway. Good results are generally considered to require no explanation; they are gone after by the decision-makers and expected by the public, because that’s what business people get all the money they pocket for. Success is part of the capitalist’s job description; anyone who loses has failed to meet the demands of his job. Which tasks he fell short of is irrelevant to this judgment. In the light of the established equation that success proves you right and failure disqualifies you as the wrong person for the job, the causes can readily be found. Anything that an ultimately unsuccessful management has been doing and that was previously considered normal business practice can be cited as a mistake. Conversely, a lacking success then really proves that any kind of dissatisfaction with the way the company was being managed was right.
This popular quintessence of the doctrine of correct business administration is an impressive ideological achievement. It takes aim at no less than the fact that a capitalist competition conforming to all standards necessarily creates losers, squanders wealth, destroys livelihoods. It thus targets what everyday practice proves: that it is definitely not among the purposes of unstoppably progressing capitalist growth to promote general prosperity, not even that of the property-owning class. The dogma that all the aforementioned evils are not attributable to functioning capitalism but rather can be traced back to mistakes and omissions, that failure is virtually by definition uncapitalistic, does not merely excuse the devastation wrought by the relentless efforts to keep increasing capital productivity; considering the ravages of competition to be foreign to the nature of a correctly practiced capitalism testifies to its goodness.
In this way, the buzzword “mismanagement” alone, applied as needed, does a good job of theoretically squaring the world of market-based competition with all its inevitable harm and nastiness.
2. “Rapacious” vs. “productive” capital is an entrenched part of cultural heritage[iv]
Those who lose in competition cannot use the excuse that their job is so hard; the winners are — paradoxical, but convincing — proof that “it can be done,” i.e., could have been done by the loser too. However, one thing comes home to every businessman, and is no secret to anyone else either. A defeat on the market doesn’t just involve the company that has to take it — and the better one that wins — but always also and most importantly a third party: the house bank — or some other credit institution — that has stopped financing further operations.
The relation of dependency that then becomes so blatantly clear is perfectly all right as long as business is good. Banking business is useful and important, in fact necessary to the system, because companies need loan capital to increase the productivity of their capital. It is fine that they are out to get a competitive edge, i.e., ruin others. But as soon as the credit weapon fails, there is no criticism of what the loser was trying to achieve, or of the credit that financed its business to the bitter end. Rather, a dim view is taken of the calculation of the bank that refuses to “throw good money after bad” but is instead dropping the debtor, insisting on repayment, driving the company into bankruptcy and possibly breaking it up for sale to recoup its losses. In this light, the bankruptcy is the doing of the creditor that financed the company; and its claims for money mean that it is to blame.
That’s the point of view of the failed businessman at least. And not only he sees it that way, and not just the members of his workforce, who would never have gotten the idea of criticizing their employer’s debts for enabling him to rationalize their wage income down, but instead think he should borrow much more to save the jobs that were left. This point of view is in fact quite popular. Out of the depths of people’s awareness of market-economy problems, a distinction crops up that is without any practical importance in the world of capitalist money accumulation — like an inkling that the market economy is somehow actually a mode of production and not just perpetual bartering. The fixed idea is that on the good side there are companies that provide people with commodities and jobs, and on the other there are financial institutions that are only interested in money. Their interest in it is so undivided that they even sacrifice the production of commodities and honest work for their right to accumulate it. And yet it is quite well-known that honest producers are interested in exactly the same thing. They throw away those fine goods they supply when it is no longer profitable to sell them. They are the ones who eliminate those dear jobs when necessary, doing it for the same purpose they set them up for. It is by no means just the creditor sponging off the debtor’s business, it’s the businessman borrowing money to live beyond his means and outperform competitors. Despite this knowledge, in cases of conflict, the market-economy moralist tends automatically and quite fiercely to regard a capitalist producer as a public utility company for the benefit of mankind while accusing bankers of sheer profiteering with no recognizable achievement of their own, who have no right trying to collect on their debts. Western culture no longer fosters the image of the Jew taking away the poor, overindebted farmer’s last milk cow, since antisemitism has been morally banned. But the image still thrives of profit-mad wire-pullers luring upright borrowers and even entire nations into the debt trap — or gladly seeing them walk into it —in order to enslave them and mercilessly suck them dry.
This is the way system loyalists with their humane sense of justice create a refuge for their residual indignation about the purpose of capitalist progress, its methods, and its consequences. It helps them reconcile with the unrestricted domination of this progress over society’s work and life. And, in the end, all reservations about purely monetary transactions coexist quite peacefully with the recognition that both commercial and savings banks are a service industry that one cannot imagine modern business life without.
3. One is allowed to ask if the government should really permit some things, much less support them
The damage to wealth and means of survival that results from capital growth through increased capital productivity is chalked up as the consequence of failed business management, that is, as being foreign to the system. When brought about by recognized institutions of the market economy, it is — if not approved as ultimately unavoidable — blamed on a greed for profit that is likewise contrary to the system. Both excuses for the economic system that still keeps continually producing such damage lead straight to the question: aren’t the higher authorities responsible, aren’t they supposed to keep an eye on everything and prevent derailments, where is the state’s regulative hand? This question does not lead to the answer that the state has been active the whole time — no loan is granted without the law guaranteeing enforcement of payment obligations; no bankruptcy takes place without the public power’s blessing, … The very question has its roots in the trust that state power exists to avert damage to social life, to prohibit any evil intentions that are being pursued — whereby ‘prohibit’ is understood to mean ‘prevent’ and government failure is suspected whenever something bad ends up happening — and to prevent capitalists from running their business into the ground even without evil intention, or to undo that when they do.
Of course, this trust is constantly disappointed — how could it not be! The resulting complaints to the responsible state power always follow the same pattern. First of all, the government neglected to successfully intervene, it was inactive when "Action!" was called for. The accusation of being asleep on the job manages to cover a great deal of dissatisfaction and is always right even if there is no mention of what good deed one was expecting. In reality, a government rarely does nothing, of course, especially when a lot is going wrong in the economy. It promotes business success wherever it matters and might be in danger. That is why the second accusation is that government assistance has provided the wrong incentives. When one concern out of the big nest of mutually hostile particular interests that make up business life in a market economy is promoted, another one always comes up short. And when it is simply about the success of those who are already successful, there is fear for the freedom that the state is destroying with each intervention in the anarchy of the market.
So whenever a bourgeois individual is looking for a culprit to “explain” some grievance or other, he hits on the public power. And the enormous ideological benefit of this is: the state can take it. In the first place, it has a monopoly on keeping order in its society, and those affected know no other address for their complaints anyway. With these complaints, they therefore confirm that those in charge are in charge — after all, there is nobody else to see to things. Secondly, politics in a democratic state really thrives on a dialogue getting underway between those responsible and complainers criticizing them, in actual practice between rulers in office and representatives in the opposition. Any criticism of inaction or mistakes is countered in this dialogue by the question of what alternative would have been feasible, thereby committing the critic to the standpoint of the ruling authority. Its action thus appears as a compromise, negotiated between the diverging social interests and points of view in society, i.e., as a consensus of those who in reality have only to obey. People are therefore not only allowed, but welcome to ask about all the things the government has done wrong again. When put properly, this question not only achieves the reconciliation but also the identification of all citizens with the sovereign power, which takes responsibility for the damage and nasty business its competing capitalists cause.
4. It is lamentable that jobs end up elsewhere
When a look beyond national borders reveals that jobs are moving abroad, this does not essentially alter the sacrifices of wealth and wage-dependent livelihoods caused by competition for a lead in capital productivity. But it does change their political significance and the way the general public judges them. For the state, jobs are the measure of economic power that it chooses out of calculating consideration for its wage-dependent people. This applies only to the profitable workplaces of course; the others will be done away with anyway and are dispensable. If a country loses jobs while others gain, this indicates a loss in the competition between national capital locations for shares in global business, a lack of productivity of the country’s labor. Business people don’t care about such an overall balance, on the one hand; they are interested in their own business, which is not directly affected by such a balance and may even benefit from it. But even then it is a useful argument for their complaints about real or alleged disadvantages of doing business at home; and of course all the more so when foreign competitors reduce their profit. As for wage earners, with each cross-border performance comparison, they face demands from their employers in terms of the wage and performance level on a national scale. It is actually irrelevant here whether losses of jobs to foreign countries are actually taking place or just looming. In either case, the money-earning of the country’s entire workforce comes under pressure.
For these workers, however, a negative job report in comparison to other countries involves a quite different message. This kind of reckoning makes it look like it’s not their bosses’ ever more demanding profit and growth calculation that is responsible for the precariousness of their existence and the resulting hardships in terms of wages and performance, but rather foreign countries where capital might be growing faster. As if it’s not the capitalists’ competition with its technological progress that is constantly threatening their dependent existence, but rather the growing number of those equally dependent on wages who are employed under the same pressure abroad. This mix-up seems to offer a strong material reason for those actually or prospectively taking the brunt of the damage to staunchly close ranks with the nation’s business community, who drive competition both abroad and at home at the expense of the ‘labor factor’ in order to win this competition; and to stand in solidarity with their state, for which workplaces that have been made profitable on a world-record scale translate into economic power. Thus, the complaint about jobs ending up elsewhere unites all three parties. Those whose livelihood is really threatened and harmed bear their fate with all the more resolute patriotism.
5. Equally lamentable: the state of health of the environment, but saving it is compatible firstly with the economy, and secondly with technology, whose progress nobody wants to stop
The constant increase in economic growth causes the natural basis of mankind’s existence to go to the dogs. This is not very nice, and — like all harm caused by the capitalist economic system — prompts the bourgeois mind to ask who is to blame. The answer is given with unanimous clarity, by citizens’ initiatives, “green” parties, in manifestos of concerned scientists, by problem-conscious citizens in general: the blame must be placed on the lack of regard for air and water, soil and plants, resources and climate, the “blue planet” altogether. Complaints and accusations are aimed, the louder the more clearly, at greed for profit, which is understood to be the cancer of modern capitalism — and is thereby neatly distinguished from the market economy as such. The bad thing is the irresponsible treatment of the factors “we all” live on: it is the vice of thoughtlessness, of short-sighted egotism, of boundless greed for money that shows no regard for anything. The big picture, an overview of decades and centuries, really brings it to light: what more than anything else has been disrupting everything, what is destroying nature — beyond all economic systems and in each transitory one — is the human race.
It is clear from the diagnosis what needs to be done. First of all, the environment has to be saved. Whether for love of one’s native land, a pious responsibility for Creation, concern for the grandchildren’s future, or a passion for recreation in the great outdoors, that is up to each individual. Secondly, the main thing, what really therefore matters, is that everyone has to be mindful, ecologically aware when doing business, when making a profit, in general when doing anything that leaves way too big a footprint in nature: in consuming and traveling, in using energy and creating waste, in agriculture and livestock breeding. There is a duty for everyone in his private life, but of course the bigger picture also comes into play; especially the economy. Its positive achievements can’t be rolled back; nobody is willing or able to do that; but “things can’t keep going on this way.” Capitalism has to become more ecological: it has to conserve resources, avoid polluting emissions, reduce CO2; otherwise it has no future. At least, renewable energy stocks and green bonds are a promising start…
So the ability to make distinctions is not exactly a strength of modern environmental awareness. But that’s not needed for lamenting everything bad. And it would get in the way of finding a sustainable solution that does not overwhelm people morally — a solution that is already at hand, if you look at it with market-economy expertise. In the course of their accelerated growth, capitalists are constantly overturning everything anyway: production and consumption, trade and transport. They know no problem that can’t be solved with the revolutionary means of technology while still allowing business to flourish. If there is any way to save the environment, then this will be it: to keep on developing the productive forces of their capital. And if that costs money, then it offers the fine opportunity to earn money and create jobs. That’s why science and technology must not be stopped in their service to capitalist growth — not that anybody wants to do that. What else if not the newest productive forces can fix up what the ones that have just become obsolete have ruined!
The bottom line: The ethics of capitalism
One last time: competition for capital growth waged with the means of increased capital productivity divides the economically dominant class into winners and losers, costs masses of capitalist wealth, ruins people having dependent labor as their only source of income, and adds to systematically produced and reproduced poverty the ruin of natural conditions for survival, i.e., an extra helping of impoverishment.
How do those affected cope with this? Ideologically and morally they end up with an attitude that can be summed up in a single catchphrase: that's just how progress is.
It is a process that involves all kinds of activists but no actor, no originator, no goal that might be its endpoint. The idea conjured up is that the world fundamentally won’t and can’t stay the way it is, but also shouldn’t and mustn’t, because there will always be better solutions to its problems, whatever they are and wherever they come from. This combines the quite formal ideal of gradual improvement with the idea of an objective law of constant, unstoppable change. One doesn’t have to actually favor progress, because it will come anyway. But everything speaks in its favor because what progress brings is always better, in whatever respect.
So a member of the human race has no choice but to adapt, not just once but as a constantly renewed effort. He enjoys the freedom of opinion to take an affirmative stance to this or to be generally skeptical about the equally general promise of continual optimization. Resistance, in any case, would be backward: wrong and useless. On the other hand, eager endorsement carries the risk of missing the mark. After all, progress does not involve any predefined purpose to be achieved. It means, instead, that the result alone decides whether the desired thing was really the good thing that was due, the next item on the agenda of the process that ultimately dominates the world and makes it better and better. Whatever catches on proves the same thing the other way round. Firstly, it is the enemy of the previously good thing, i.e., it is better, and secondly, its time had simply come. Those who don’t keep up are not only left behind, they are rightly left behind, put in the wrong by the superior right to existence of what can’t be stopped anyway. Consequently, the only appropriate outlook on life is a healthy combination of optimism and opportunism.
The idea of progress reflects the way interest is identical to factual constraint when it comes to the competition of capitalists by the means of superior capital productivity and for a decisive lead in having this means at one’s disposal. It idealizes this contradiction into a basic law of how the world works. So capitalism justifies its regime over society’s work and life and all its effects by the formal logic of its progressive growth, even when these effects harm the beneficiaries themselves. It provides its victims with the only guiding principle that matches it.
Such are the ethics of capitalism.
[i] ‘Vorsprung durch Technik’ is the tagline of auto manufacturer Audi, also rendered as ‘innovation through technology.’
[ii] With their moral self-conception, the people taking part in this competition interpret it as being all about academic excellence per se, as reflected in the name of Germany’s “Excellence Initiative” under which its research universities compete for additional state funding.
[iii] The specific arrangements mentioned here relate to Germany. Of course, the degree to which states see their workforce as a collective welfare case or leave its well-being up to free competition varies from one country to the next, as do the modalities of welfare instituted. Looking at the health system, for example, wage earners may contribute to the cost through insurance funds (mandatory payments to a state-run or a contractual workplace-organized insurance fund, voluntary payments to private health or supplementary plans, or some mixture) or general taxation may support a public system as in the UK. In many poor and some rich countries, especially the USA, there is no mandatory health insurance for wage–dependent employed people at all — with results that demonstrate in their own way the necessity of such an institution.
[iv] “Schaffendes und raffendes Kapital” [productive and rapacious capital] is a familiar phrase to German speakers, the latter referring not kindly to finance capital, especially to its international, supposedly Jewish branch.
 “Right” is as much as to say successful here, as it is always and everywhere in bourgeois life. So the choice of selling price calls on the capitalist’s inner speculator.
 The point here is no longer just the industrialist’s interest in profitably turning over his capital as frequently as possible on the principle “time is money” (as in §§ 1 and 2). And it is no longer enough for additional capital to turn over and bring in additional profit alongside the originally applied capital (as in §§ 7 and 8). The increase in productivity of the increased capital advance — corresponding to new machinery and more material — shows its full capitalistic advantage only when the sale of the increased mass of goods does not delay capital turnover. The purchase of means of production and the sale of products also have to “get out of their old rut,” just like production itself. It is always in the capitalist producer’s interest to have goods turn over as fast as possible, but technological progress in the company now makes this a necessity.
 This problem only gets shifted when the industrialist passes on to commercial capital that part of the turnover time that occurs outside his control on the market, as well as the expenses incurred there (see § 8). The relation between capital advance and sales proceeds, the surplus that the industrialist aims to profitably increase by having things produced, and that merchants take their share out of, also suffers when the increased amount of cheaper merchandise remains with the merchants longer. To tackle this time problem, those involved have found constructive solutions such as shifting stockpiling and warehousing to rail and road over which means of production are supplied and finished goods transported away, minimizing the time spent on orders through the “internet of things,” “just-in-time” production “to order," etc. — all this for speeding up the turnover of goods. These state-of-the-art achievements, too, follow as objective necessities from the aim and object of permanently increasing the productivity of labor.
 This has consequences for the profession. Ambition and resentment of colleagues come into their own as criteria of truth. Mistakes are defended because academic lives depend on continued funding and respect. Uncertainty is passed off as certainty in order to impress sponsors and get promotions. Real findings are “popularized,” i.e., reinterpreted as answers to deep questions about the meaning of life, in order to beguile a broad public and arouse interest in the funding of pure research. And so on.
 For this and the following points, see Competition of Capitalists, § 11. There it is shown how the state, as guardian of property and sole holder of monetary sovereignty, responds to the financial industry’s service of generating credit on the basis of its actual and legally secured disposal over society’s money and having it circulate as a means of payment. It responds by creating a single, legally binding credit-money, thereby taking control of this banking service, approving it, and safeguarding it. This opens up the possibility of banks enabling their capitalist clientele not only to grow beyond their own accumulated funds, but also to use the excess legal tender merely for raising sales prices and compensating for price increases as well. This possibility turns into a necessity when banks enable, and compel, companies to enter into a competition aimed at growth through selection, i.e., one that includes the destruction of capital, and when the state compensates for the resulting damage and puts its creation of money at the service of preserving its banking industry.
 When currency traders establish exchange rates by buying and selling national monies earned or needed abroad, they are not merely putting supply and demand in a chance relation to each other. They are already making a comparative judgment on the relation, measured in the national inflation rate, between the capitalistically productive and the unproductive effects of national credit systems; see § 11 in Chapter II. The money market’s services turn into the momentous reckoning spoken of in the text under the conditions of an international competition that aims at selection, i.e., at the liquidation of uncompetitive capital, and with a policy of using state credit to intervene in the face of any damage in one’s own country in order to win the selection on the international level.
 This universal power of access is the opening for using national credit directly as money capital and productive capital all over the world. This progress will be dealt with in § 23 of Chapter IV.
© GegenStandpunkt 2021