On Capitalist Decadence and Today's Crisis

Ascendant capitalism

Capital existed before capitalism; markets too, and thus the law of value also. The latter to the extent that labor power was not chained to land, to the extent that it could move to where its yield would be higher. If, for example, 8 hours of labor of a blacksmith could obtain more on the market than 8 hours of labor of a miller, some millers would become blacksmiths until there are too many blacksmiths so that the price of their product would fall, until equilibrium establishes itself. In this way, the market applies the law of value, comparing commodities on the basis of the socially necessary labor they contain and distributes labor power to different areas of socially necessary production. This existed before capitalism in a marginal way. The capitalist mode of production is born when labor power itself becomes a commodity, bought and sold. It is a commodity with a unique quality: it creates more value than it costs; it produces surplus-value. This is the shortest possible definition of capitalism: production for surplus-value.

That is capitalism’s goal and motor. Capitalism creates use-values (real wealth) only as a means to accumulate exchange-value (abstract wealth). It took the world as it found it and reorganized all existing production to function for the production of surplus-value. Despite all the misery it has inflicted, this system developed for centuries in a relatively harmonious way. The more production was organized on the basis of the relation of capital-labor, the more production increased. Use-values and exchange-value, profit and employment, grew hand in hand. Even though there were crises, due to the often chaotic way in which this development occurred, they were limited and did not touch the foundations of the system. But there are limits to exploitation. In the first place, physical limits: there is a point beyond which the number of hours workers can be forced to work for free for capital cannot be increased. But making workers work more hours is not the only way for a capitalist to obtain surplus-value. He can also lower the individual value of his product below its market-value at which he sells, and thereby make a surplus-profit. He can do so thanks to technology which lowers the labor power he needs to create his product below the quantity his competitors need. When, in the 19th century, this became the primary way in which capitalists sought to obtain surplus-value, a revolution began in the process of production, which continues to this day. It has been called the transition from the formal domination of capital over labor, to the real domination of capital.

The transition to real domination of capital

This transition changes the labor process drastically. Before this change, the tool was an extension of the hand, an appendix of the laborer; but now the machine has become the center of production and the laborer has become an appendix of the machine. Productivity is no longer determined by the amount of labor spent in production, but by the application of science and technology, put in motion by the collective worker. The law of value now not only shapes the labor process from the outside but penetrates it deeply, quantifying, instrumentalizing, and commodifying every facet of it. At first sight, this evolution has only benefits for capitalism. It unleashes giant advances in productivity, in the capacity to create real wealth. This in turn makes it possible to reduce the part of the working day spent on necessary labor (for the reproduction of labor power), and thereby increases the part that is surplus labor which yields surplus value. It furthermore gives capitalism the power to extend its realm, both inward and outward, and to transform the entire world into its image. Thus, the law of value penetrates all parts of the planet, all aspects of civil society, transforming every object, every act into a commodity, absorbing every emanation of social, political and cultural life into the fabric of capitalist society.

Fundamental contradictions

But this transformation also destroys the harmony between the capitalist economy and its foundation, the law of value. Use-value and exchange-value, the two sides of the commodity, become unhinged. The first grows exponentially through technification, a process in which labor power is subtracted and replaced by technology. But the law of value implies that the growth of the second requires a process in which labor power is added. Furthermore, the ever-growing productiveness resulting from this technification clashes with the narrow basis on which the conditions of consumption in capitalism rest. Capitalism is born out of conditions of scarcity and presupposes them. Without scarcity, the law of value cannot operate. In conditions of overproduction, capital cannot maintain its value and is forced to devalorize.

These are the two contradictions that capitalism cannot overcome. It cannot prevent the decline of living labor in production, and since surplus-value is part of that labor, it cannot prevent, in the long term, the fall of its rate of profit. Neither can it prevent its production from growing faster than its own productive consumption. Therefore, it cannot prevent overproduction. Some Marxists think the first is the fundamental cause of crisis, others think it is the second. In reality, they are linked and reinforce each other.

Financial crisis

Value appears as an intrinsic quality of an object, but in fact it is a social construction, a social relation between capital and labor. If it were an intrinsic quality, it would remain the same in all circumstances. Not so. The value created in production can only maintain itself as value by participating in the valorization process; by mobilizing, directly or indirectly, productive forces to create surplus-value. When the contradictions of capital ripen, we always see the same phenomenon: Capital, faced with the mounting difficulty to valorize, seeks refuge in the only commodity which does not need to be immediately converted into other commodities to maintain its value: money (in a large sense, not just currency). It flees from the sphere of production to the financial sphere, where the increased demand drives up prices of financial assets. Their rise in ‘value’ makes them even more desirable, so the demand for them rises further, which further depresses the demand for all other commodities. That process increases overproduction, which causes prices to fall, accelerating a fall of the general rate of profit. When the financial sphere and the real economy divorce – the first swelling, the second deflating- a breakdown is in the offing.

“The self-realization of capital becomes more difficult to the extent that it has already been realized” (Marx). Money is an ‘imperishable commodity’ only in appearance. Its value is its exchangeability and thus depends on the value of the commodities for which it can be exchanged. If those are means of production that generate no profit or commodities that find no solvable demand, if the claims of the financial hoard on profits fall without object, if in other words, it is cut off from valorization, money inevitably must devalorize too. It is the devalorization of capital in its financial form which transforms a crisis into a global collapse. When devalorization pulls the rug from under even the strongest currencies, money can no longer accomplish its function as a means of payment, and the chain of exchanges breaks at countless places. At that point, the capitalist economy breaks down.


The transition to the real domination of capital occurred through several spurts, but in the early 20th century the main industrial countries had moved to machinism. A telltale sign was the formation of a uniformly priced world market, the framework in which, in Marx’s view, all the contradictions of capital would come to the fore. This opened a new period in capitalism’s history, which we qualify as decadent. In this period, crises touch the foundations of the system, which can overcome them only through massive devalorization. Such devalorization becomes an integral part of the cycle of accumulation. Only Marxists understand why decadent capitalism is such an extremely violent mode of production; why it is not only destructive, but also extraordinary self-destructive; why the wars of the 20th century made more victims and destroyed more property than all the wars of the entire human history preceding it. They understand capital’s need to destroy value in all its forms, workers included.

Decadence does not mean, contrary to what some claim, a permanent stagnation. On the contrary, Capital’s contradictions push it to frantic production. Productivity increases tremendously in decadent capitalism. But rather than being a mitigating factor, this growth itself bears the violent imprint of decadence and threatens to destroy, in its blind hunt for profit, the natural environment on which we all depend.

Of course, there were plenty of wars before decadence: Wars to form nations, to conquer extra-capitalist areas, etc. But in decadence, war becomes cannibalistic and has, as its underlying goal, even if the actors don’t realize it, the self-destruction of capital.


Capital experienced its highest growth in the quarter century following the Second World War. The war itself was a ‘success’ of mass-production. Fordism displayed an awesome efficiency in the destruction of capital. After the war, the establishment of a vast, more or less, free trade zone based on the dollar as international currency, extended the field of operation of developed capital, its market, its access to a vast and cheap labor force. It was the apogee of Fordism, with its huge plants and assembly lines running day and night. At the end of the 1960’s /beginning of the ‘70’s, capitalism was again confronted with a falling rate of profit, overcapacity and a working class refusing to sacrifice itself. Stagnation and galloping inflation were the result. Since then, capitalism underwent other remarkable transformations, which have been called ‘post-Fordism’. The goal: to extend the global market, but most of all, to counter the fall of the rate of profit by increasing the rate of exploitation. For that, capitalism’s vulnerability to workers struggle had to be reduced.

In regard to the organization of production, it was expressed in a tendency towards decentralization, outsourcing, and the replacement of the vertically integrated company by a flexible ‘network’ form of production. The trend to privatization, and of ‘neo-liberalist’ ideologies and policies, are part of that tendency. In no way do they diminish the concentration of capital nor the role of the state in the capitalist economy. Their main goal is to create separation and division in the working class.

In regard to the labor process itself, the effort to reduce capitalism’s vulnerability to workers’ resistance has lead to an acceleration of automatization, which has opened the door to the explosive growth of information technology. This not only transformed the labor process itself but also led to a steep fall in the costs of transportation and communication, which increased the mobility of capital spectacularly. Coming together with the implosion of the East bloc and the elimination of most obstacles to the movement of financial capital, this created the conditions for an accelerated ‘globalization’ of capital.

The extension of the field of operation of developed capital has acted, at different stages in decadence, as the main counter-acting factor to the fundamental contradictions of capital. ‘Globalization’ too, widened the market for developed capital and increased the rate of surplus value, the exploitation of labor. Furthermore, the accelerated technological development strengthened the position of the strongest capitals which allowed them to rely more and more on monopolism to obtain surplus profits.


Monopolism is a typical tactic for the strongest capitals in periods of crisis. They seek to compensate for the tendential fall of their profit-rate by ‘cheating’ the law of value to force the market to price their commodities above their value. That was the case in the early 20th century, in the 1930’s and today. By introducing new or pseudo-new commodities, protected by patents, copyrights etc, the strongest capitals obtain profits above the surplus-value created by ‘their own’ workers, thanks to their monopolistic position on the market. This implies that the rate of profit of a company, or of a country, less reflects the profit it has directly created than the strength of its position of the market, backed up by the political/military power of the state. The more the contradictions of capital sharpen, the more dependent the strongest capitals become on monopolistic surplus profits. The protection of intellectual property is therefore a crucial aspect of the global order, and thus of the geo-strategic policy of the US.

The approaching storm

Despite the advantages of globalization for capitalism, the accelerated technological development further reduces the role of labor power in production, and thus lays the basis for a further fall of the general rate of profit, while at the same time increasing global overcapacity. Hence, capital’s tendency to flee production strengthens as does the need for the state to compensate this by stimulating production. The result is the spectacular growth of fictitious capital, especially in the form of public debt. Capitalism tries to rein in this tendency by making room for the payment of interest on this debt by attacking the social wage (pensions, medical care). In the coming period, such attacks will increase in brutality.

While the capacity to produce more use-values continuously increases, the destructive aspect of production, and the need for devalorization which translates itself into the rise of war-ideologies increase as well. Capitalism accumulates contradictions. Never before was so much possible; never before was so much possibility perverted. Never before was the world order so absurd and in need of radical change.


October 2006

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