What Every Child Should Know About Marx's Theory of Value

By Michael A. Lebowitz

Republished from Monthly Review.

Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish. And every child knows, too, that the amounts of products corresponding to the differing amounts of needs demand differing and quantitatively determined amounts of society’s aggregate labour. —Karl Marx [1] [2]

Every child in Marx’s day might have heard about Robinson Crusoe. That child might have heard that on his island Robinson had to work if he was not to perish, that he had “needs to satisfy.” To this end, Robinson had to “perform useful labours of various kinds”: he made means of production (tools), and he hunted and fished for immediate consumption. These were diverse functions, but all were “only different modes of human labour,” his labor. From experience, he developed Robinson’s Rule: “Necessity itself compels him to divide his time with precision between his different functions.” Thus, he learned that the amount of time spent on each activity depended upon its difficulty—that is, how much labor was necessary to achieve the desired effect. Given his needs, he learned how to allocate his labor in order to survive. [3]

As it was for Crusoe, so it is for society. Every society must allocate its aggregate labor in such a way as to obtain the amounts of products corresponding to the differing amounts of its needs. As Marx commented, “In so far as society wants to satisfy its needs, and have an article produced for this purpose, it has to pay for it.… It buys them with a certain quantity of the labour-time that it has at its disposal.” [4] It must allocate “differing and quantitatively determined” amounts of labor to the production of goods and services for direct consumption (Department II) and a similarly determined quantity of labor for the production and reproduction of means of production (Department I).

To ensure the reproduction of a particular society, there must be enough labor available for the reproduction of the producers—both directly and indirectly (for example, in Departments II and I, respectively)—based upon their existing level of needs and the productivity of labor. This includes not only labor in organized workplaces, which produce particular material products and services, but also necessary labor allocated to the home and community and to sites where the education and health of workers are maintained. Every society, too, must allocate labor to what we may call Department III, a sector that produces means of regulation, and may contain institutions such as the police, the legal authority, the ideological and cultural apparatus, and so on.

In addition to the labor required to maintain the producers, in every class society a quantity of society’s labor is necessary if those who rule are to be reproduced. Thus, the process of reproduction requires the allocation of labor not only to the production of articles of consumption, means of production, and the particular means of regulation, but, ultimately, to the production and reproduction of the relations of production themselves.

Reproduction of a Socialist Society

Consider a socialist society—“an association of free [individuals], working with the means of production held in common, and expending their many different forms of labour-power in full self-awareness as one single social labour force.” [5] Having identified the differing amounts of needs it wishes to satisfy, this society of associated producers allocates its differing and quantitatively determined labor through a conscious process of planning. In this respect, it follows Robinson’s Rule: it apportions its aggregate labor “in accordance with a definite social plan [that] maintains the correct proportion between the different functions of labour and the various needs of the associations.” [6]

The premise of this process of planning is a particular set of relations in which the associated producers recognize their interdependence and engage in productive activity upon this basis. “A communal production, communality, is presupposed as the basis of production.” Transparency and solidarity among the producers, in short, underlie the “organization of labour” in the socialist society with the result that productive activity is consciously “determined by communal needs and communal purposes.” [7] The reproduction of society here “becomes production by freely associated [producers] and stands under their conscious and planned control.” [8]

To identify their needs and their capacity to satisfy those needs, the producers begin with institutions closest to them—in communal councils, which identify changes in the expressed needs of individuals and communities, and in workers’ councils, where workers explore the potential for satisfying local needs themselves. Those needs and capacities are transmitted upward to larger bodies and ultimately consolidated at the level of society as a whole, where society-wide choices need to be made. On the basis of these decisions (which are discussed by the associated producers at all levels of society), the socialist society directly allocates its labor in accordance with its needs both for immediate and future satisfaction.

Driving this process is “the worker’s own need for development,” “the absolute working-out of his creative potentialities,” “the all-around development of the individual”—the development of what Marx called “rich” human beings. [9] This goal is understood as indivisible: it is not consistent with significant disparities among members of society. In the words of the Communist Manifesto, “the free development of each is the condition for the free development of all.” [10] Accordingly, given the premise of communality and solidarity, this socialist society allocates its labor to remove deficits inherited from previous social formations. The socialist society, in short, is “based on the universal development of individuals and on the subordination of their communal, social productivity as their social wealth.” [11]

Conscious planning—a visible hand, a communal hand—is the condition for building a socialist society. This process does more, however, than produce the so-called correct plan. Importantly, it also produces and reproduces the producers themselves and the relations among them. What Marx called “revolutionary practice” (“the simultaneous changing of circumstances and human activity or self-change”) is central. Every human activity produces two products: the change in circumstances and the change in the actors themselves. In the particular case of socialist institutions, the labor-time spent in meetings to develop collective decisions not only produces solutions that draw upon the knowledge of all those affected, but it is also an investment that develops the capacities of all those making those decisions. It builds solidarity locally, nationally, and internationally. Those institutions and practices, in short, are at the core of the regulation of the producers themselves (Department III activity). They are essential for the reproduction of socialist society. [12]

Reproduction of a Society Characterized by Commodity Production

But what about a society that is not characterized by communality, a society marked instead by separate, autonomous actors? Such a society’s essential premise is the separation of independent producers. [13] Rather than a community of producers, there is a collection of autonomous property owners who depend for satisfaction of their needs upon the productive activity of other owners. “All-around dependence of the producers upon one another” exists, but theirs is a “connection of mutually indifferent persons.” Indeed, “their mutual interconnection—here appears as something alien to them, autonomous, as a thing.” Yet, if these “individuals who are indifferent to one another” do not understand their connection, how does this society go about allocating its “differing and quantitatively determined amounts of society’s aggregate labour” to satisfy its “differing amounts of needs”? [14]

Obviously, such a society does not utilize Robinson’s Rule: it cannot directly allocate its aggregate labor in accordance with the distribution of its needs. “Only when production is subjected to the genuine, prior control of society,” Marx pointed out, “will society establish the connection between the amount of social labor-time applied to the production of particular articles, and the scale of the social need to be satisfied by these.” [15] Although the application of Robinson’s Rule is not possible, its function remains. As Marx commented, those simple and transparent relations set out for Robinson Crusoe “contain all the essential determinants of value.” [16] In particular, the “necessity of the distribution of social labour in specific proportions” remains.

The necessary law of the proportionate allocation of aggregate labor, Marx insisted, “is certainly not abolished by the specific form of social production.” Only the form of that law changes. As Marx wrote to Ludwig Kugelmann, “the only thing that can change, under historically differing conditions, is the form in which those laws assert themselves.” In the commodity-producing society, the form taken by this necessary law is the law of value. “The form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products.” [17]

Since the allocation of society’s labor embedded in commodities is “mediated through the purchase and sale of the products of different branches of industry” (rather than through “genuine, prior control” by society), however, the immediate effect of the market is a “motley pattern of distribution of the producers and their means of production.” [18] Yet, this apparent chaos sets in motion a process by which the necessary allocation of labor will tend to emerge. In simple commodity production, some producers will receive revenue well above the cost of production; others will receive revenue well below it. Assuming it is possible, producers will shift their activity—that is, they will show a tendency for entry and exit. An equilibrium, accordingly, would tend to emerge in which there is no longer a reason for individual commodity producers to move. Through such movements, the various kinds of labor “are continually being reduced to the quantitative proportions in which society requires them.”

In short, although “the play of caprice and chance” means that the allocation of labor does not correspond immediately to the distribution of needs as expressed in commodity purchases, “the different spheres of production constantly tend towards equilibrium.” [19] Through the law of value, labor is allocated in the necessary proportions in the commodity-producing society. In the same way as “the law of gravity asserts itself,” we see that “in the midst of the accidental and ever-fluctuating exchange relations between the products, the labour-time socially necessary to produce them asserts itself as a regulative law of nature.” [20] There is a “constant tendency on the part of the various spheres of production towards equilibrium” precisely because “the law of the value of commodities ultimately determines how much of its disposable labour-time society can expend on each kind of commodity.” [21]

Can that equilibrium, in which labor is allocated to satisfy the needs of society, be reached in reality? If we think of a society characterized by simple commodity production, equilibrium occurs when all commodity producers receive the equivalent of the labor contained in their commodities. In fact, however, there are significant barriers to exit and entry: the particular skills and capabilities that individual producers possess will not be easily shifted to the production of differing commodities. Indeed, this process might take a generation to occur, in which case producers in some spheres will appear privileged for extended periods.

In the case of capitalist commodity production—the subject of Capital—the individual capitalist “obeys the immanent law, and hence the moral imperative, of capital to produce as much surplus-value as possible.” [22] Accordingly, there is a “continuously changing proportionate distribution of the total social capital between the various spheres of production…continuous immigration and emigration of capitals.” [23] Equilibrium here occurs when all producers obtain an equal rate of profit on their advanced capital for means of production and labor power. This tendency “has the effect of distributing the total mass of social labour time among the various spheres of production according to the social need.” [24] However, here again there is an obstacle to the realization of equilibrium—the existence of fixed capital embedded in particular spheres does not permit easy exit and entry.

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Nevertheless, for Marx, the law of value (the process by which labor is allocated in the necessary proportions in capitalism) operates more smoothly as capitalism develops. Capital’s “free movement between these various spheres of production as so many available fields of investment” has as its condition the development of the credit and banking system. Only as money-capital does capital really “possess the form in which it is distributed as a common element among these various spheres, among the capitalist class, quite irrespective of its particular application, according to the production requirements of each particular sphere.” [25] In its money-form, capital is abstracted from particular employments. Only in money-capital, in the money-market, do all distinctions as to the quality of capital disappear: “All particular forms of capital, arising from its investment in particular spheres of production or circulation, are obliterated here. It exists here in the undifferentiated, self-identical form of independent value, of money.” [26]

Equalization of profit rates “presupposes the development of the credit system, which concentrates together the inorganic mass of available social capital vis-á-vis the individual capitalist.” [27] That is, it presupposes the domination of finance capital: bankers “become the general managers of money capital,” which now appears as “a concentrated and organized mass, placed under the control of the bankers as representatives of the social capital in a quite different manner to real production.” [28]

Marx’s Auto-Critique

There is no better way to understand Marx’s theory of value than to see how he responded to critics of Capital. With respect to a particular review, Marx commented to Kugelmann in July 1868 that the need to prove the law of value reveals “complete ignorance both of the subject under discussion and of the method of science.” Every child, Marx here continued, knows that “the amounts of products corresponding to the differing amounts of needs demand differing and quantitatively determined amounts of society’s aggregate labour.” How could the critic not see that “It is SELF-EVIDENT that this necessity of the distribution of social labour in specific proportions is certainly not abolished by the specific form of social production!” [29] Similarly, answering Eugen Dühring’s objection to his discussion of value, Marx wrote to Frederick Engels in January 1868 that “actually, no form of society can prevent the labour time at the disposal of society from regulating production in ONE WAY OR ANOTHER.” [30] That was the point: in a commodity-producing society, how else could labor be allocated—except by the market!

Although Marx was clearer in these letters on this point than in Capital, he was transparent there in his critique of classical political economy on value and money. In contrast to vulgar economists who did not go beneath the surface, the classical economists (to their credit) had attempted “to grasp the inner connection in contrast to the multiplicity of outward forms.” But they took those inner forms “as given premises” and were “not interested in elaborating how those various forms come into being.” [31] The classical economists began by explaining relative value by the quantity of labor-time, but they “never once asked the question why this content has assumed that particular form, that is to say, why labour is expressed in value, and why the measurement of labour by its duration is expressed in the value of the product.” [32] Their analysis, in short, started in the middle.

This classical approach characterized Marx’s own early thought. It is important to recognize that Marx’s critique was an auto-critique, a critique of views he himself had earlier accepted. In 1847, Marx declared that “[David] Ricardo’s theory of values is the scientific interpretation of actual economic life.” [33] In The Principles of Political Economy, Ricardo had argued that “the value of a commodity…depends on the relative quantity of labour which is necessary for its production.” By this, he meant “not only the labour applied immediately to commodities,” but also the labor “bestowed on the implements, tools, and buildings, with which such labour is assisted.” Accordingly, relative values of differing commodities were determined by “the total quantity of labour necessary to manufacture them and bring them to market.” This was “the rule which determines the respective quantities of goods which shall be given in exchange for each other.” [34]

Marx followed Ricardo in his early work. “The fluctuations of supply and demand,” Marx wrote in Wage Labour and Capital, “continually bring the price of a commodity back to the cost of production” (that is to say, to its “natural price”). This was Ricardo’s theory of value: the “determination of price by the cost of production is equivalent to the determination of price by the labour time necessary for the manufacture of a commodity.” Further, this rule applied to the determination of wages as well, which were “determined by the cost of production, by the labour time necessary to produce this commodity—labour.” [35] The same point was made in the Communist Manifesto in 1848: “the price of a commodity, and therefore also of labour, is equal to its cost of production.” [36]

In the 1850s, however, Marx began to develop a new understanding. In the notebooks written in 1857–58, which constitute the Grundrisse, he began his critique of classical political economy. Marx concluded the Grundrisse by announcing that the starting point for analysis had to be not value (as Ricardo began), but the commodity, which “appears as unity of two aspects”—use value and exchange value. [37] The commodity and, in particular, its two-sidedness is the starting point for his critique and how he begins both his Contribution to the Critique of Political Economy (1859) and Capital. [38]

The Best Points in Capital

The law of value as a “regulative law of nature” was not one of the best points in Capital, nor one of the “fundamentally new elements in the book.” After all, if the law of value is the tendency of market prices to approach an equilibrium in the same way as “the law of gravity asserts itself,” then this “regulative law of nature” was already present in Ricardo.

Rather, what Marx argued in Capital is that classical political economy did not understand value. “As regards value in general, classical political economy in fact nowhere distinguishes explicitly and with a clear awareness between labour as it appears in the value of a product, and the same labour as it appears in the product’s use value.” [39] But that distinction, Marx declared to Engels in August 1867, is “fundamental to all understanding of the FACTS”! That “two-fold character of labour,” he indicated, is one of the “best points in my book” (and indeed, the best point in the first volume of Capital). [40]

Marx made the same point in the first edition of the first volume of Capital about the two-fold character of labor in commodities: “this aspect, which I am first to have developed in a critical way, is the starting point upon which comprehension of political economy depends.” [41] Writing again to Engels in January 1868, Marx described his analysis of the double character of the labor represented in commodities as one of the “three fundamentally new elements of the book.” All previous economists having missed this, they were “bound to come up against the inexplicable everywhere. This is, in fact, the whole secret of the critical conception.” [42]

The secret of the critical conception, the starting point for comprehension of political economy, the basis for all understanding of the facts—what made the revelation of the two-fold character of labor in commodities so important? Very simply, it is the recognition that actual, specific, concrete labor, all those hours of real labor that have gone into producing a particular commodity, in themselves have nothing to do with its value. You cannot add the hours of the carpenter’s labor to the labor contained in consumed means of production and come up with the value of the carpenter’s commodity. That specific labor, rather, has gone into the production of a thing for use, also known as a use value. Further, you cannot explain relative values by counting the quantity of specific labor contained in separate use values. If you do not distinguish clearly between the two-fold aspects of labor in the commodity, you have not understood Marx’s critique of classical political economy.

Marx’s Labor Theory of Money

“We have to perform a task,” Marx announced, “never even attempted by bourgeois economics.” [43] That task was to develop his theory of money—in particular, to reveal that money is the social representative of the aggregate labor in commodities. For this, Marx demonstrated that (1) the concept of money is latent in the concept of the commodity and (2) that money represents the abstract labor in a commodity and that the manifestation of the latter, its only manifestation, is the price of the commodity.

If adding up the hours of concrete labor to produce a commodity does not reveal its value, what does? Nothing, if we are considering a single commodity. “We may twist and turn a single commodity as we wish; it remains impossible to grasp as a thing possessing value.” [44] We can approach grasping the value of a commodity only by considering it in a relation. The simplest (but undeveloped) form of this relation is as an exchange value—the value of commodity A is equal to x units of commodity B, where B is a use value. We always knew A as a use value but now we know the value of A from its equivalent in B. (If we reverse this, we would say the value of B is equal to 1/x units of A, and here A is the equivalent.) The second commodity, the equivalent, is a mirror for the value in the first commodity. It is through this social relation that we may grasp the commodity as something possessing value.

Having established that the value of a commodity is revealed through its equivalent, Marx logically proceeds step-by-step to establish the existence of a commodity that serves as the equivalent for all commodities—that is, is the general form of value. It is a mini-step from there to reveal the monetary form of value: money as the universal equivalent, money as the representative of value. [45] In short, once we begin to analyze a commodity-exchanging society, we are led to the concept of money. This is what Marx identifies as his task: “We have to show the origin of this money form, we have to trace the development of this expression of value relation of commodities from the simplest, almost imperceptible outline to the dazzling money form. When this has been done, the mystery of money will immediately disappear.” [46] But this was a closed book to the classical economists; “Ricardo,” Marx commented years later, “in fact only concerned himself with labour as a measure of value-magnitude and therefore found no connection between his value-theory and the essence of money.” [47]

But what is money? To understand money, we need to return to the two-fold character of labor in commodities, that point upon which comprehension of political economy depends. We know that concrete, specific labor produces specific use values. Insofar as labor is concrete, we cannot compare commodities containing different qualities of labor. But we can compare them if we abstract from their specificities—that is, consider them as containing labor in general, abstract labor, “equal human labour, the expenditure of identical human labour power.” [48] The aggregate labor of society is a composite of many “different modes of human labour”: “the completed or total form of appearance of human labour is constituted by the totality of its particular forms of appearance.” [49] That “one homogeneous mass of human labour power,” that universal, uniform, abstract, social labor in general, “human labour pure and simple,” enters into each commodity. [50]

Think about the aggregate labor in commodities as so-called jelly labor, as made up of a number of identical, homogeneous units. A certain amount of this jelly labor goes into each commodity. The value of a commodity is determined by how much of this jelly labor—how much homogeneous, universal, abstract labor, that common “social substance”—it contains. Obviously, we cannot add up jelly labor simply, as we might attempt for concrete labor. How, then, can we see the value of a commodity? We have answered that already. The value of a commodity (that is, the homogeneous, general, abstract labor in the commodity) is represented by the quantity of money, which is its equivalent. Indeed, the only form in which the value of commodities can manifest itself is the money-form.

Every society obtains the amounts of products corresponding to the differing amounts of its needs by devoting a portion of the available labor time to its production. As noted above, “in so far as society wants to satisfy its needs, and have an article produced for this purpose, it has to pay for it…[and] it buys them with a certain quantity of the labour-time that it has at its disposal.” [51] How do we satisfy our needs within capitalism? We buy them with the representative of the total social labor in commodities—money.

Ignorance both of the Subject under Discussion and of the Method of Science

As Michael Heinrich writes, “many Marxists have difficulties understanding Marx’s analysis.” Like bourgeois economists, “they attempt to develop a theory of value without reference to money.” [52] It is a bit difficult to understand why, however, given Marx’s criticisms of classical political economy about this very point. Ricardo, Marx commented, had not understood “or even raised as a problem” the “connection between value, its immanent measure—i.e., labour-time—and the necessity for an external measure of the values of commodities.” Ricardo did not examine abstract labor, the labor that “manifests itself in exchange values—the nature of this labour. Hence he does not grasp the connection of this labour with money or that it must assume the form of money.” [53]

That is why Marx undertook his task “to show the origin of this money form” and to solve “the mystery of money,” a task “never even attempted by bourgeois economics.” We need to understand the nature of money, and how we move from value directly to money. As he explained in chapter 10 of the third volume of Capital:

in dealing with money we assumed that commodities are sold at their values; there was no reason at all to consider prices that diverged from values, as we were concerned simply with the changes of form which commodities undergo when they are turned into money and then transformed back from money into commodities again. As soon as a commodity is in any way sold, and a new commodity bought with the proceeds, we have the entire metamorphosis before us, and it is completely immaterial here whether the commodity’s price is above or below its value. The commodity’s value remains important as the basis, since any rational understanding of money has to start from this foundation, and price, in its general concept, is simply value in the money form. [54]

To understand why Marx felt it was essential to solve the mystery of money, it helps to understand his method of dialectical derivation. Like G. W. F. Hegel, upon examining particular concepts, he found that they contained a second term implicitly within them; he proceeded then to consider the unity of the two concepts, thereby transcending the one-sidedness of each and moving forward to richer concepts. In this way, Marx analyzed the commodity and found that it contained latent within it the concept of money, the independent form of value—and that the commodity differentiated into commodities and money. Further, considering that relation of commodities and money from all sides, Marx uncovered the concept of capital. [55]

The concept of capital, in short, does not drop from the sky. It is marked by the preceding categories. Since money is the representative of abstract labor, of the homogeneous aggregate labor of society, capital must be understood as an accumulation of homogeneous, abstract labor. By understanding money as latent in commodities, we reject the picture of money juxtaposed externally to commodities as in classical political economy and therefore recognize that abstract labor is always present in the concept of capital.

However, all accumulations of abstract labor are not capital. For them to correspond to the concept of capital, they must be driven by the impetus to grow and must have self-expanding value (i.e., M-C-M´). How is that possible, however, on the assumption of exchange of equivalents? Where does the additional value, the surplus value, come from? The two questions express the same thing: in one case, in the form of objectified labour; in the other, in the form of living, fluid labor. [56]

The answer to both is that, with the availability of labor power as a commodity, capital can now secure additional (abstract) labor. This is not because of some occult quality of labor power, but, because by purchasing labor power, capital now is in a relation of “supremacy and subordination” with respect to workers, a relation that brings with it the “compulsion to perform surplus labour.” [57] That compulsion, inherent in capitalist relations of production, is the source of capital’s growth.

Let us consider absolute surplus value by focusing upon “living, fluid labor.” The value of labor power, or necessary labor, at any given point represents the share of aggregate social labor that goes to workers. The remaining social labor share is captured by capitalists. When capital uses its power to increase the length or intensity of the workday, total social labor rises; assuming necessary labor remains constant, capital is the sole beneficiary. The ratio of surplus labor to necessary labor—the rate of exploitation—rises.

Alternatively, let the productivity of labor be increased. To produce the same quantity of use values, less total labor is required. Accordingly, increased productivity brings with it the possibility of a reduced workday (a possibility not realized in capitalism). If, conversely, aggregate social labor remains constant, who would be the beneficiary of such an increase in productivity? Assuming the working class is atomized and capital is able to divide workers sufficiently, capital obtains relative surplus value because necessary labor falls. Alternatively, to the extent that workers are sufficiently organized as a class, they will benefit from productivity gains with rising real wages as commodity values fall. In Capital, this second option is essentially precluded because, following the classical economists, Marx assumed that the standard of necessity is given and fixed. [58]

In short, we need to understand money if we are to understand capital, and for that we need to grasp the two-fold character of labor that goes into a commodity. Unfortunately, many Marxists fail to grasp the distinction “between labour as it appears in the value of a product, and the same labor as it appears in the product’s use value”—the distinction Marx considered “fundamental to all understanding of the FACTS.” As a result, they offer a “theory of value without reference to money,” what Heinrich calls “pre-monetary theories of value,” which I consider to be pre-Marxian theories of value or Ricardian theories of value. [59]

Ricardian Marxists do not grasp Marx’s logic, or how Marx logically moves from the abstract to the concrete. The problem is particularly apparent when it comes to the so-called transformation problem. What those who attempt to calculate the transformation from values to prices of production fail to understand is that, rather than transforming actually existing values, prices of production are simply a further logical development of value. [60] The real movement is from market prices to equilibrium prices, that is, prices of production. As we have seen, this is how the law of value allocates aggregate labor in commodities, similar to a law of gravity. The failure of these Marxists to distinguish between the logical and the real demonstrates their “complete ignorance both of the subject under discussion and of the method of science.”

Notes

1. In his fine introduction and interpretation of Capital, Michael Heinrich criticizes traditional and worldview Marxism in An Introduction to the Three Volumes of Karl Marx’s Capital (New York: Monthly Review Press, 2012). Heinrich further expounds the early sections of the first volume of Capital intensely in Michael Heinrich, How to Read Marx’s Capital (New York: Monthly Review Press, 2021).

2. Karl Marx and Frederick Engels, Collected Works (New York: International Publishers, 1975), vol. 43, 68.

3. Karl Marx, Capital, vol. 1 (London: Penguin, 1977), 169–70.

4. Karl Marx, Capital, vol. 3 (London: Penguin, 1981), 288.

5. Marx, Capital, vol. 1, 171.

6. Marx, Capital, vol. 1, 172.

7. Karl Marx, Grundrisse (London: Penguin, 1973), 171–72.

8. Marx, Capital, vol. 1, 173.

9. Marx, Capital, vol. 1, 772; Marx, Grundrisse, 488, 541, 708; Karl Marx, Critique of the Gotha Programme in Marx and Engels, Selected Works, vol. 2 (Moscow: Foreign Languages Press, 1962), 24.

10. Marx and Engels, Collected Works, vol. 6, 506.

11. Marx, Grundrisse, 158–59.

12. On this view of socialist society, see Michael A. Lebowitz, The Socialist Alternative: Real Human Development (New York: Monthly Review Press, 2010) and Michael A. Lebowitz, Between Capitalism and Community (New York: Monthly Review Press, 2020).

13. Discussion of the individual commodity producer applies as well to collective or group commodity producers (as in the case of cooperatives).

14. Marx, Grundrisse, 156–58.

15. Marx, Capital, vol. 3, 288–89.

16. Marx, Capital, vol. 1, 170.

17. Marx and Engels, Collected Works, vol. 43, 68.

18. Marx, Capital, vol. 1, 476. It is important to keep in mind the distinction between the aggregate labor in commodities and the aggregate labor in society as a whole.

19. Marx, Capital, vol. 1, 476.

20. Marx, Capital, vol. 1, 168.

21. Marx, Capital, vol. 1, 476.

22. Marx, Capital, vol. 1, 1051.

23. Marx, Capital, vol. 3, 895.

24. Karl Marx, Theories of Surplus Value, Part II (Moscow: Progress Publishers, 1968), 209.

25. Marx, Capital, vol. 3, 491.

26. Marx, Capital, vol. 3, 490. We are describing here so-called jelly capital.

27. Marx, Capital, vol. 3, 298.

28. Marx, Capital, vol. 3, 528, 491.

29. Marx and Engels, Collected Works, vol. 43, 68.

30. Marx and Engels, Collected Works, vol. 42, 515.

31. Karl Marx, Theories of Surplus Value, Part III (Moscow: Progress Publishers, 1971), 500.

32. Marx, Capital, vol. 1, 173–74.

33. Marx and Engels, Collected Works, vol. 6, 121, 123–24.

34. David Ricardo, The Principles of Political Economy and Taxation (Homewood: Richard D. Irwin, Inc., 1963), 5–6, 12–13, 42.

35. Karl Marx, Wage Labour and Capital in Marx and Engels, Collected Works, vol. 9, 208–9.

36. Marx and Engels, Collected Works, vol. 6, 491. Here, Marx accepted Ricardo’s symmetry in the production of hats and men, and he continued to hold that position in Capital. For a criticism, see Lebowitz, “The Burden of Classical Political Economy” in Lebowitz, Between Capitalism and Community, chapter 6.

37. Marx, Grundrisse, 881.

38. By the time of the writing of Capital, however, Marx had moved to identify that two-fold nature of the commodity as use value and value and explained that exchange value is merely the necessary form that value takes.

39. Marx, Capital, vol. 1, 173n.

40. Marx and Engels, Collected Works, vol. 42, 407.

41. Albert Dragstedt, Value: Studies by Karl Marx (London: New Park Publications, 1976), 11.

42. Marx and Engels, Collected Works, vol. 42, 514.

43. Marx, Capital, vol. 1, 139.

44. Marx, Capital, vol. 1, 138.

45. In classical political economy and in Marx’s time, gold was the money-commodity; however, Marx’s theory of money only requires social acceptance as the universal equivalent.

46. Marx, Capital, vol. 1, 139.

47. Karl Marx, “Marginal Notes on Adolph Wagner’s Lehrbuch der Politschen Oekonomie” in Dragstedt, Value, 204.

48. Marx, Capital, vol. 1, 129.

49. Marx, Capital, vol. 1, 157.

50. Marx, Capital, vol. 1, 129.

51. Marx, Capital, vol. 1, 288.

52. Heinrich, An Introduction to the Three Volumes of Karl Marx’s Capital, 57, 63–64.

53. Marx, Theories of Surplus Value, Part II, 164, 202.

54. Marx, Capital, vol. 3, 294–95.

55. See the discussion of the derivation of capital in Michael A. Lebowitz, Beyond Capital: Marx’s Political Economy of the Working Class (New York: Palgrave Macmillan, 2003), 55–60.

56. “The rate of surplus-value is therefore an exact expression for the degree of exploitation of labour power by capital, or of the worker by the capitalist.” Marx, Capital, vol. 1, 326.

57. Marx, Capital, vol. 1, 1026–27.

58. See Lebowitz, Between Capitalism and Community, chapter 7.

59. Heinrich, An Introduction to the Three Volumes of Karl Marx’s Capital, 57, 63–64.

60. As Heinrich indicates, the transformation of values “represents a conceptual advancement of the form-determination of the commodity.” Heinrich, An Introduction to the Three Volumes of Karl Marx’s Capital, 148–49.

Housing is Determined By Class Power and Profit, Not "Supply and Demand"

By Shi Sanyazi

There is a widely accepted belief among the journalists, think tanks, and politicians who animate the housing discourse that a lack of housing supply is the source of tenants’ present conditions (ever-rising rents, primarily). It follows that these thinkers advocate for a variety of policies which will, in their eyes, allow the market to “self-correct.” Once the supply of housing has met the demand, they argue that rents should go down (just like in the graphs we drew in high-school economics class!).

We shouldn’t deny that the idea has a comforting appeal. It offers a neat, ostensibly “common-sense” solution that all sides — developers, landlords, tenants — can theoretically get behind. It’s very easy to say: “match supply and demand and rents will go down — that’s just how markets work.” It’s more difficult to admit the inconvenient truth. 

The truth is that — especially in the era of algorithmic price-setting and increasingly financialized, corporate ownership of rental housing — our conditions as tenants are determined by the balance of class power, not the balance of supply and demand. 

Landlords, developers and their financiers are classes with class interests — namely, making the fattest profits possible. They are highly organized and have historically been willing to wage war on anyone who challenges their bottom line. Real estate capital’s return-on-investment depends on their capacity to out-organize and overpower tenants. 

Tenants' class interests — community control over our housing and the basic need for shelter — are, by definition, the opposite of real estate capital’s class interests.

The “supply crisis” narrative is deficient because it makes no attempt to reckon with the class relationships which define the housing market. The assumptions this narrative makes about the behavior of the housing market hinge on ignoring the structural imbalance of power between tenants and landlords, developers and their financiers. 

Landlord’s profit margins are determined by their level of organization (aided nowadays by political corruption, algorithmic financialization and consolidation of the rental housing stock) and the state’s ability to enable their exploitation with neglect, violence, and the threat of violence. Developers similarly ensure their profits by working in tandem with local governments and the police to forcibly remake neighborhoods to their liking, displacing working-class Black and brown communities. Lurking in the shadows, backing the landlords and developers, is the ruthlessly efficient and sophisticated arm of finance capital.

If we understand real estate capital as an organized class pursuing its class interests, and if we take the “pro-housing” argument at face value (i.e; increased supply will decrease rents), then we would expect real-estate interests (whose profits would be cut into if rents decreased) to oppose their policy prescriptions.

It’s quite curious then that the real-estate lobby and their political bedfellows openly support “pro-housing” non-profits and propagate their political lines. Powerful lobbying groups like the Real Estate Board of New York (REBNY) and the National Multifamily Housing Council revel in parroting “pro-housing” talking points. From REBNY’s 2022 testimony on Mayor Adams’ housing plan: 

New York is facing a housing crisis. A key driver of this crisis is the lack of housing production and inadequate supply to meet the needs of our growing and diverse city.

They go on to — shocker! — recommend the city and state remove regulatory barriers to development and continue to subsidize their lucrative construction projects. It shouldn’t come as a surprise that NYC Mayor, Eric Adams, agrees: he’s pledged to administrate a “city of yes,” arguing bluntly in The Economist that “although many factors contribute to the problem, at its core we have a housing crisis because we are not building enough housing.” NY Governor Kathy Hochul’s housing proposals echo the same logic. For what it's worth, Adams and Hochul have both been consistently showered with real-estate donations.

So, despite the promise that building more housing will bring down rents, the real-estate lobby embraces the prospect of building more housing! Why? Because the “supply crisis” narrative is an idea working in defense of their class interests.

Do we really believe that landlords and developers will actively support a reduction in their profits? Do we think they’re going to resign themselves with a deep sigh and a “well, that’s just the way the cookie crumbles?” How naïve can we possibly be? As James Baldwin once wrote of capitalism, to imagine these leeches ceding power and profits willingly demands “yet more faith and infinitely more in schizophrenia than the concept of the Virgin Birth.” 

Landlords and developers have no interest in solving the housing crisis because the permanence of that crisis is the condition of their wealth and power. This understanding has serious practical implications. 

In other words, if we understand our conditions to be a result of class struggle (rather than a market imbalance), it becomes quite clear that our conditions will be determined by our level of organization as tenants and our ability to wage struggle against the force that commodifies our need for shelter: real-estate capital.

The magic lies in our hands and our hands alone

This conclusion is the same as that at the core of all consciousness-raising movements, indeed at the core of all anti-capitalist, anti-colonial, anti-racist, anti-patriarchal movements (see, for example, the Black Consciousness movement in South Africa; the Combahee River Collective; or the Landless Workers Movement in Brazil). It's the same conclusion which the legendary anti-colonial thinker Frantz Fanon came to:

[Political education] means driving home to the masses that everything depends on them, that if we stagnate the fault is theirs, and that if we progress, they too are responsible, that there is no demiurge, no illustrious man taking responsibility for everything, but that the demiurge is the people and the magic lies in their hands and their hands alone.

The magic lies in our hands and our hands alone.

When we get organized, we have the capacity to transform our conditions. Will we win collective control over our cities? Will the threadbare protections we have left be rolled back? Will we stagnate? It’s up to us! 

Through militant organization, tenants wield — and historically have wielded! — a tremendous amount of power. Every concession from the landowning class; thus, every victory for tenants, has been won through this organization. 

The first rent control laws in New York City were passed due to pressure created by waves and waves of militant rent strikes (not to mention the fears of a Bolshevik-style revolution that these strikes helped inspire). Great Depression-era tenant activism — which included the successful efforts by the Communist Party to reverse evictions of working class tenants — was the impetus for New York City’s first public housing projects (FDR himself said that the concessions of the New Deal were driven by a desire to “save our system, the capitalist system…”). Mass agitation by Black organizers led to the passage of Fair Housing laws (while the real estate lobby was organizing against them). The COVID-19 eviction moratorium in New York was fought for and repeatedly extended due to pressure from organized tenant unions.

These are all tenuous and often contradictory reforms (public housing in the US, for instance, often deepened racial segregation), class truces which politicians negotiated in exchange for relative peace and quiet. The goal is not to aspire to reform, but to highlight that these reforms were not enacted because of our participation at the ballot box, nor passed by a benevolent state, nor advocated for by benevolent landlords and developers — they were fought for, collectively, in the streets and hallways and lobbies of our neighborhoods. 

Tenants are and always have been the protagonists of the struggle for control over our buildings, neighborhoods, and cities. 

OK. With that in mind, we can move on to addressing the core claim — that the “housing crisis” is caused by a supply deficit — in detail. Through this, we can highlight that the “housing crisis” is not “fixable” with “policy.” Our conditions as tenants are determined by our level of organization and effectiveness at waging class struggle.

The “supply crisis”

An imbalance between supply and demand is not the source of tenants’ present conditions. The real source — as has been the case since capitalism violently imposed its will on the world four centuries ago — are the private property relations which enable the exploitation of working people by the landowning class. Present-day gentrification is just one chapter in the centuries-long story of displacement, enclosure and imperialism which has marked the penetration of capital into indigenous and working class communities. So long as these relations remain intact, our struggle will persist. 

This is not to say that we should never build housing. There’s no doubt that under the collective governance of the working class (god-willing), the supply of housing would be responsive to migration and other fluctuations in demand. The disagreement stems from a core question: who is building housing and for whom are they building housing?

The alternative to the current arrangement, wherein tenants have next to zero democratic control over their communities, is to organize towards a world where tenants themselves collectively control and direct the development of safe, beautiful, ecological housing. 

That’s the polemic response — let’s dive a little deeper. As we work through the details, let’s keep the argument in mind:

Tenants’ conditions are determined by the balance of class power, not “supply and demand.”

This section is divided into a few parts to make it a bit more digestible. 

Mind the rent gap!

We can start by exploring the process of gentrification, where we can very clearly observe how real estate capital wields its class power to mold cities to its liking. Notably, its class organization has become increasingly sophisticated in recent years, as the rental housing stock has been consolidated in fewer and fewer hands. It can be quite challenging nowadays to figure out who your landlord actually is, as they usually hide behind a maze of shell companies, LLCs and Real Estate Investment Trusts (REITs). An army of supers and management companies further distance landlords from tenants, acting as convenient buffers for the corporate owners and private equity firms pulling the strings.

As a result of this consolidation, private equity firms, mega-developers and corporate landlords execute rent hikes, serve evictions, illegally (and legally) deregulate apartments and in sum, cause displacement, in an increasingly coordinated manner. 

In our organizing, more often than not, we work with tenants in buildings owned by a landlord with hundreds to thousands of units in their portfolio. (The average apartment in New York City is part of an 893 unit portfolio.) When we visit other buildings in that portfolio, we’ll usually find the same issues, whether disrepair, harassment, skyrocketing rents, and (illegal and legal) deregulation. 

(If you are interested in researching the owner of your building in NYC and kick-starting a tenants association in your building, JustFix is an incredible asset.)

To streamline gentrification, mega-developers, corporate landlords, and private equity firms utilize sophisticated algorithms to identify “rent gaps.” A rent gap is the difference between the rent currently being paid by tenants and the rent that could be potentially charged in the same location if the current tenants were evicted through legal or illegal means. PropTech companies like Skyline AI and RealPage are accomplices in this plunder. Their business is that of identifying apartments which are “‘inefficient’ in the rental market in relation to their total cost, before teaming up with the largest property investment companies to make an offer.” 

These advanced techniques (enabled by troves of data collected by big tech firms) allow investors to target optimal neighborhoods for gentrification with pinpoint accuracy. It shouldn’t surprise us that at a neighborhood level, there is a direct correlation between concentrated corporate ownership and gentrification. 

Naturally, real estate capital’s drive to extract as much profit out of our cities as possible does not care much for pesky renter protections like rent-stabilization and public housing. In fact, the relatively low rents in rent-stabilized apartments and public housing (as compared to market-rate) make them even more appealing, in the sense that they present even larger rent gaps to “close.” 

From a private equity firm’s perspective: Imagine a rent-stabilized building which rents for an average of $800/mo per unit, in a neighborhood where rents are averaging $1500/mo per unit (and climbing!), or are where rents are primed to increase to that price (in accordance to the precise calculations of algorithms from RealPage and Skyline AI). To a private equity firm, the building represents an opportunity for superprofits. To the building’s working class, usually Black and brown tenants, the building is not an investment opportunity — it’s home, a small pocket of resistance to the waves of real estate capital engulfing their communities. But if the private equity firm can evict the current residents, destabilize the building, and slap on a gentrification mask — then they can charge many times as much in rent and make a fat profit. All in a day's work for the vampires sucking our cities dry. 

Real estate capital also pushes this class agenda through legal action. For instance, New York City landlords are currently suing to wipe out rent regulations which protect around 1 million tenants from naked exposure to the “free market.” This case will go to the revanchist Supreme Court, who will likely rule in favor of the landlords. Once again, we can plainly observe that our class enemies are organized and aggressive!

It’s not an accident that in our organizing we encounter and experience consistent patterns of harassment, disrepair, and neglect in rent-regulated buildings. In New York City, deregulation is most commonly allowed upon vacancy, so it follows that landlords and speculators doggedly pursue vacancy via eviction. Some of their choice strategies include: buyouts, fake eviction notices, illegal refusal to renew leases, intimidation, neglect, intentional disrepair, cutting off heat, electricity and water, calling the police on tenants, and direct harassment. There are technically legal protections against strong-arming tenants out of regulated apartments, but they’re rarely enforced. Like other tenant’s rights (or, for that matter, any right “granted” by the state), protection from harassment is generally only realized when enforced by organized tenants. 

It’s also not an accident that the real-estate lobby and their politician friends have intentionally neglected to fund the upkeep of New York City’s remaining public housing stock. After all, NYCHA’s repair backlog (many tens of billions dollars) makes for a very convenient political device. When it came time to justify the “Preservation Trust” — nothing more than a scheme to privatize and commodify that remaining bastion of working class affordability — NYCHA’s repair backlog was cynically presented as evidence that public funding is no longer feasible. When challenged by outraged NYCHA tenants, conservative and “socialist” politicians alike argued that we have no option but to turn to the private sector to save NYCHA. As Holden Taylor writes: 

The line of reasoning put forth by the policy wonks and “socialists” advocating for the trust is, as usual, one of pragmatism and practicality. The Trust is the only way to get money for repairs, they say. This boils down, to butcher Rosa Luxemburg’s aphorism, a framework of “Privatization or Barbarism,” as these experts claim that the only alternative to the Trust is the status quo and the ever more crumbling infrastructure and dire quality of life that define it. Again, this is a failure of imagination. It is the socialist’s responsibility to push past the status quo, to fight for socialism, not merely a different form of marketization.

These observations about de-regulation and the privatization of public housing also help us to understand why the minority of left YIMBYs — who argue we should pair market solutions with an increase in social housing and tenant protections — are so woefully misguided. There is no way to guarantee that any housing we build will stay affordable when landlords, developers and finance capital have demonstrated they will wield their class power to commodify every inch of the city they can get their grubby hands on. Even our supposedly “socialist” elected officials are liable to bend to the will of real-estate capital without an organized mass movement to back them. The sober reality is: the remaining sources of off-market housing are being eroded because we are not sufficiently organized to protect them. The only way to protect those apartments and reverse the trend is through organized struggle. 

For instance, in 2020, organized community groups resisted the illegal eviction of tenants at 1214 Dean St. in Crown Heights. By occupying the stoop and physically resisting the eviction, the tenants eventually forced the city to buy the apartments and convert them into publicly-funded, affordable housing.

Build, baby, build! What could go wrong?

It doesn’t matter how “market optimistic” you are (as one reporter recently described the “pro-housing” non-profit Open New York) — when we let developers build freely, they will always be incentivized to build market-rate housing because those are the developments with the juiciest profit margins (and often the juiciest subsidies). This is not a neutral outcome. Building housing which people in surrounding neighborhoods cannot afford is the one of the first steps in the process of gentrification. 

In response to residents’ concerns about displacement, politicians will often promise that developments will meet the needs of communities because they contain 10% or 20% affordable units. This logic is premised on the idea that flooding a working class neighborhood which desperately needs cheap housing with, for instance, 900 market-rate units and 100 “affordable” units (which, due to the way affordability is measured, are often not actually affordable to those who most desperately need them), will produce anything but an influx of wealthier people who will displace the current residents. Just the announcement of permits for new market-rate developments can set off a frenzy of speculation, as investors look to sink their grimy fingernails into the imminently gentrifying neighborhood. 

The rise in the median income of an area (which inevitably accompanies market-rate development in working class neighborhoods) is often the impetus for steep hikes in the median rent. Which is to say: when people have more money, landlords generally raise rents (and rents usually rise faster than income — a few studies to reference: here, here and here.) Income inequality ensures that rising median rents disproportionately displaces working class tenants, as Francesca Manning explains:

While some people’s income is increasing at a rate to keep pace with rising rents, a large group of people’s wages are stagnating, falling, or rising far too slow to keep them housed … households that live in high-income [areas], whether or not they are themselves high income, end up paying a higher and higher percentage of their wages in rents.

In locales where market-rate development is not profitable, developers will not develop unless subsidized. This is a prominent form of “organized abandonment,” the movement of capital and social services away from populations and geographies deemed surplus and/or no longer profitable. Working class Black and brown communities are the first victims of this abandonment. These communities are faced with either: investment and gentrification; or disinvestment and abandonment. It’s russian roulette, except all of the chambers are loaded. Flint’s working-class Black population is one such example of a community which has been systematically abandoned by capital and the state.

Even with an understanding that developers will always build for profit, some will maintain that new housing supply at the top-end creates downward pressure on the market and “filters” units down to working class tenants. This is not an effective strategy, especially with the urgency that present conditions demand. Even when a filtering effect can be observed over decades, it is usually outweighed by the more immediate effects — sharply increased rent burdens and displacement  — that market-rate development set in motion. It’s important to understand that the “housing market” is not a single, unified market, but rather a series of income-level based sub-markets. Increased supply at the top end of the market can simultaneously stabilize rents for high-income tenants and increase rents for low-income tenants.

The “filtering” theory makes more than a few dubious presumptions. Three more are:

1. that new apartments will be occupied by warm-blooded humans;

2. that tenants are able to move constantly to and from apartments in the name of market equilibrium; 

3. that landlords who were recently collecting rent from a wealthier tenant will suddenly have a change of heart and lower their rent to accommodate the new, lower-income tenant who is moving into the “filtered” apartments.

1) ignores the reality, which is that many of these apartments are destined to be bought for investment purposes. At least a hundred thousand units in New York City are investment properties and second homes for the ultra-rich. As Raquel Rolnik writes, luxury real estate in places like New York City has increasingly become a “safe-deposit box for the transnational wealthy elite,” rendering many new apartments un-filterable.

2) and 3) are even further divorced from reality. I’m not quite sure where the filtering theory nerds are finding landlords willing to grant day-to-day leases to allow for this kind of flexibility — nor where they find landlords willing to sacrifice their bottom line for the sake of market equilibrium. 

To this point (that supply and rents are not necessarily, or even likely to be correlated), we can briefly look at two of the metropolitan areas which produced the most housing in the last decade (2010-2019): Raleigh, NC and Austin, TX. Both of these cities maintained a ratio of 1-2 jobs per new housing unit, which mainstream economists consider to be “healthy.”

In Raleigh, housing construction kept pace with population growth from 2010-2019. Did rents stabilize or go down in accordance with the magic supply and demand graph? No! They rose 53%, miraculously spurning the ironclad economic law of supply and demand.

In Austin, between 2010 and 2020, new housing production actually outpaced population growth (25.5% to 21.7%). According to the “supply crisis” narrative, rents should have gone down or at least stabilized, right? You’ll be shocked to learn that between 2010 and 2020, rents in Austin increased by 93%. Historically Black enclaves like East Austin have rapidly gentrified in spite of the growth in housing construction. The supposedly common sense relationship between housing supply and median rents is, uh, not so apparent to the average tenant in Austin.

The shock troops of real-estate capital

Class power requires enforcers, and real-estate capital’s war on working-class tenants is no different. The police are intimately involved in the process of displacement. 

The police are, after all, the most visible manifestation of the violence which undergirds private property relations. When you don’t (or can’t) pay your rent, you come face to face with the enforcers of the private-property relation: the court sending a Marshall to serve you with an eviction notice, and the police forcefully and violently executing that eviction if you resist. Landlords rely on the police to backstop evictions, which is the most fundamental mechanism for the reproduction of privately-owned housing. Without the threat of eviction, the landlord's power would evaporate, as we experienced during the COVID-19 eviction moratoriums. The state’s power is also felt implicitly: even if a tenant association is interested in taking a radical action like resisting a fellow tenant’s eviction, they understand that the state will almost certainly intervene on the side of the landlord, and can therefore be discouraged from acting. 

The process of eviction is nothing less than the state using their monopoly on legal violence to privilege the landlord’s right to exploit us over our human need to have a roof over your head. 

Gentrification relies on the same violence to function. In its infancy, gentrification is marked by the violent projections of private property relations onto working class communities, which solidify in physical form as the police. Cops consistently step up broken windows policing in neighborhoods which are gentrifying, further exposing working class Black and brown communities to the carceral state. Broken windows policing is the proverbial stick to the carrot of tax abatements, rezoning and developer incentives which open the floodgates for real estate capital. 

In the process of gentrification, homeless tenants (homeless people are tenants in that they do not control their housing; the struggles of housed tenants and homeless tenants exist along the same spectrum of precarity) are brutalized and disappeared. Eric Adams’ assault on homeless tenants which we have resisted over the past year is inseparably part of this same project. He is not uniquely evil either; his predecessors De Blasio and Bloomberg similarly utilized the NYPD to terrorize homeless tenants and remake the city to the real estate lobby’s liking. Connecting the struggles of homeless tenants to housed tenants — not just in solidarity, but as a movement united in opposition to the same forces of real estate capital — is a crucial task.

As many have compellingly argued, including her own family, Breonna Taylor was, at least in part, a victim of state-sanctioned gentrification. Breonna was murdered in the Russell neighborhood, which was being explicitly targeted for gentrification by the city of Louisville. Before and after her murder at the hands of the state, there was an observable “sharp increase in public nuisance cases, with 84% of those cases occurring in Louisville’s predominantly Black western half, which includes the Russell neighborhood.” As the Root Causes Research Center explains:

… the forces of property and police converged in Russell to acquire the remaining property for the redevelopment of Elliott Ave through the collaboration of the Louisville Metro Develop Louisville Office and the Louisville Metro Police Department’s Placed Based Investigations Squad (PBI). Increased pressure from the Louisville Mayor's Office to acquire these properties led directly to the rapid employment of PBI. The PBI Squad, then, employed a concept they were barely familiar with, to create the false evidence needed for the "No-Knock Warrant" that led to the murder of Breonna Taylor.

Gentrification is a process which travels along the existing contours of racial capitalism. Working-class Black communities (including homeless tenants) are the first to encounter — and the first to resist — the rusty knife edge of displacement. 

In sum: Gentrification is initiated by speculative, algorithmically-backed, financialized development and landlord harassment; enabled by racist police violence, tax abatements, developer incentives and capitalist urban planning; and resulting in displacement and harm (sometimes death) for the working class Black and brown communities who stand in its way. Gentrification is, in other words, not a natural phenomenon, not an unavoidable but necessary process, but rather one front in real estate capital’s organized class war on working class tenants.

Does this evidence point to a solution which gives more freedom to developers and landlords? No. Gentrification can only be stopped by collective control of our buildings, neighborhoods and cities. After all, it's highly unlikely that communities would displace themselves if and when they win control over their space.

One glimmer of hope we can look to for inspiration: In Los Angeles, after being confronted with rent increases of up to 200%, the tenants of Hillside Villa organized, militantly — in Spanish, Cantonese and English, no less. In 2022, their organizing paid off: they successfully pressured the city to buy their building on their behalf, thwarting their landlord's attempt to fatten his profit margins and placing their housing under some level of community control.

Ransom, manipulation, collusion

Organized real-estate capital demonstrates every day that it will protect its profits by any means necessary — regardless of “market equilibrium.” Outside of the strategies we’ve already covered, some of their choice tactics include market manipulation, legal action and collusion.

For instance: CHIP — a New York landlord advocacy group — is currently keeping 20,000 rent-stabilized units vacant (an act that is particularly malicious considering that over a hundred thousand New Yorkers are homeless, including thirty thousand children). In total, over 60,000 rent stabilized units are currently vacant across the city. Why? As a threat! A show of force! An act of organized class war! CHIP has openly stated that they won’t put these apartments back on the market until the state legislature repeals the 2019 Housing Stability and Tenant Protections Act, which limits their ability to jack up rents after making necessary renovations. It’s a “ransom!”

As Karl Marx himself pointed out (and others have more recently argued), the tendency of the landowning class to withhold their land from the market, and to threaten to withhold land from the market, is intrinsic to capitalism. Holding land off the market is not an irrational action for landlords — it is a rational, profit-maximizing strategy that is employed everyday by landowners across the world. This tendency is why, seemingly paradoxically, increases in vacancy rates do not always correspond with reduced rents.

This tendency explains why property owners will always fight vigorously against any regulation which would restrict their ability to keep units vacant. For example, in response to a newly passed vacancy tax which would fine landlords for failing to rent empty apartments, organized San Francisco landlords (through lobbying groups representing thousands of property owners) are suing the city, arguing they have “constitutional and statutory rights to keep their units vacant if they so choose.” Constitutionally speaking, they’re correct — the Supreme Court will always protect property owners “right to exclude” — but that’s only because the Supreme Court is designed to codify and protect private property relations.

According to the most recent statistics (from 2021), there are around 250,000 (officially) vacant units in New York City. Importantly, the vacancy rate does not include the hotel rooms which sit empty while homeless tenants beg for change just outside their doors, nor unreported warehoused market-rate apartments, nor the hundred thousand or so units which are kept as investment properties and second homes for the ultra-rich.

While in any context, there will be some vacancies, to really understand this number we have to understand which apartments are vacant. Low-cost apartments are at near-zero vacancy levels while the vacancy rates  in high-cost apartments remain extraordinarily high. Tracy Rosenthal of the LA Tenants Union sums up this disparity bluntly: “There is no shortage of housing except for poor and working people, which the market has never and will never provide.” 

In their 2022 report, the Community Service Society of New York echoes Rosenthal, writing that many of New York’s vacancies can be attributed to “long-term overproduction of luxury condos/co-ops as investment vehicles.” They sum up their findings neatly:

There is very little available housing at low rents, but a lot available at rents most New Yorkers couldn’t possibly pay. At the same time, more and more apartments are going unused, not because nobody wants them – clearly there’s plenty of demand for housing – but because their owners are keeping them as pieds-a-terre, Airbnbs, investment properties, or warehoused rentals.

One example of this phenomenon, from Madden and Marcuse:

On January 16, 2015, a limited liability corporation named P89-90 bought a single penthouse apartment in Midtown Manhattan for $100,471,452.77 … the luxury tower that it tops, branded as One57, is not likely to be a particularly sociable environment. Chances are that none of the building’s ninety-two condominium units will be their owner’s sole residence. In fact, many of the apartments in One57 will remain empty. They will be held as investments or as vanity homes for people who do not lack for places to live. One57 is not high-rise housing so much as global wealth congealed into tower form.”

In recent years, the rental housing stock has become increasingly concentrated in larger and larger portfolios controlled by private equity firms and corporate landlords. In New York City, around 9 in 10 apartments are owned by corporate landlords. 

One important implication of this trend: the more organized and concentrated ownership is, the easier it is for landlords to collude and fix prices — a task made significantly easier due to the rise of algorithmically-informed price-setting. Services like the now infamous RealPage — which uses advanced data to help landlords charge the highest possible rents for their units — openly boast about their role in driving the staggering rent hikes of recent years. A ProPublica investigation revealed RealPage has “recommended that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money.” RealPage and other similar services are a potent tool for cartel style market collusion, a fact which has not escaped the ire of the Department of Justice's antitrust lawyers. 

A common “pro-housing” argument is that increased supply gives renters more options, thus allowing us to play landlords off of eachother and secure lower rents. Again, this line of thinking ignores the sordid reality, which is that landlords will flex their class muscle to keep rents high — and that without organization, tenants have no power to contest their ever-worsening conditions. What good is a market equilibrium if the landlords are almost certain to collude, warehouse apartments and keep rents high regardless?

Landlord’s profit-maximizing behavior plainly highlights the irrationality endemic to capitalism. Well, let's amend that: it's quite rational for those who own the property. For the rest of us (the vast majority) — not so much. A system which distributes (and chooses not to distribute!) housing based on the profits that will accrue to its owners is a system which is incapable of ending the precarity which defines our lives as tenants. 

The “housing crisis” is not so much a crisis as a permanent feature of urban capitalism, an unavoidable consequence of developing and distributing housing as a commodity to line the pockets of the few, rather than organizing housing around the social need for shelter. Framing our experience as a “crisis” insinuates that it is an aberration from the norm, an aberration which can be “solved” with policy fixes, new legal protections and, most insidiously, the market. The system is not in crisis; the crisis is the system!

It's all about class power? Always has been.

What we’re observing here is the all too familiar dissonance between capitalism’s economic theories and its economic realities. Despite what free-market proselytizers and “market optimists” alike want us to believe (as if there’s any functional difference between the two), capitalism is a system whose outcomes are ultimately determined by the balance of class power. Landlords, developers and financiers, who are single-mindedly driven by a desire to extract as much profit as possible out of tenants, do not submit meekly to the “laws” of supply and demand. 

To imagine that rent prices hinge on supply and demand rather than class power is completely ahistorical. Time and time again, capitalism has demonstrated an inherent tendency towards monopoly, cynical market manipulation and organized class warfare. 

Understanding the balance of class power as the condition of our exploitation is simultaneously key to grasping that our exploitation can only be limited and abolished through the exercise of our own class power as tenants. We’re engaged in a class war which only one side is consciously fighting. Our choice as tenants is whether or not we want to fight back.

If the future came on a platter…

The common sense which commands our collective reflexes does not permit us to think of revolution. After all, “it is easier to imagine the end of the world than the end of capitalism.”

So it’s natural that we’re derided as unrealistic for striving towards the abolition of the landlord class, and by extension the abolition of capitalism — but are we the unrealistic ones?

Our critics (liberals!) — on all issues, not just housing; think climate change, for instance — position themselves as “realistic” for arguing that handing the reins to organized capital will alleviate the conditions of the working class. Don’t we have hundreds of years of experience telling us that the exact opposite will happen? We can look to our cities as they are right now to understand that control of our buildings and neighborhoods by profit-motivated landlords, financiers and developers is a disastrous arrangement.

There’s nothing realistic about giving capital the freedom to roam where it wants and praying that it will magically change course and defy its five hundred year history of ravaging indigenous and working class communities for profit.

It's nonsense. Don’t listen to these people — they are the ones being unrealistic. 

And yes, to organize towards community control of our buildings and neighborhoods is a tremendous, daunting task. But let’s remember that we don’t organize simply because we believe in a political program. To struggle, to think — to really think! — to learn, is nothing less than the process of being alive. To not be in the struggle is a much more demoralizing proposition.

So let's get to it! Landlords and developers, and the financiers that back them, are tremendously well organized. To beat them, we have to turn to the only method by which we have historically won: that is, through our militant organization. If history has taught us anything, it's that we can only win by out-organizing our class enemies. 

Check out the Autonomous Tenants Union Network to see if there’s an existing organization in your area. In New York City: the Crown Heights Tenant Union, the Ridgewood Tenants Union, Brooklyn Eviction Defense and Tenant Union Flatbush; nationwide, the aforementioned Los Angeles Tenants Union; Tenants and Neighborhood Council (TANC) in the Bay Area; Stomp Out Slumlords in DC; and many more are doing incredible, principled work. 

You can find some resources and thoughtful reflections on tenant organizing here, here, here, here, here and here.

I like to think of this essay as a small contribution to uncovering the shape of the conjuncture, as Stuart Hall would call it. There is, of course, much more to be uncovered (and much more that has already been uncovered!), such as: the relation of tenants in the imperial core to the global anti-imperialist movement; how the tenant movement can resist settler-colonialism and aid the struggle for indigenous sovereignty; feminism and the tenant movement; the homeless industrial complex; and the ideology of homeownership, to name a few.

None of this work is easy. But, as Eduardo Galeano reminds us: “If the future came on a platter, it would not be of this world.”

From Commodity Fetishism to Teleological Positing: Lukács’s Concept of Labor and Its Relevance

By Wang Pu

Republished from Monthly Review.

The concept of labor constituted a pivotal problematic in Georg Lukács’s theoretical development throughout his Marxist years. His 1922 essay, “Reification and the Consciousness of the Proletariat”—the central piece of his work History and Class Consciousness, famously opens with the phrase phantom objectivity. The idea of phantom (or phantom-like) objectivity derives from Karl Marx’s discussion of commodity and labor in Capital. The question of labor becomes especially crucial in the third section of History and Class Consciousness, where the young Lukács argues that the proletariat will become conscious of being the object-subject of history. On one hand, labor is reduced to the pure abstractness of labor-time, which marks the nadir of capitalist reification; on the other, it is within the immediate experience of reified labor that the proletarian consciousness is rendered possible. In this sense, labor under capitalism not only determines the lowest point of reification, but also forms “the vantage point of the proletariat.” [1]

Lukács’s later criticism of History and Class Consciousness revolved around the issues of labor and human praxis in general. In his preface to the 1967 edition, he wrote that “the purview of economics [in History and Class Consciousness] is narrowed down because its basic Marxist category, labor as the mediator of the metabolic interaction between society and nature, is missing.” Thus, labor refers not only to the historical phenomenon of reification (that is, wage-labor), but also stands for a more general, even ontological, question. In the same preface, Lukács later wrote that labor, characterized by its “teleological system,” should be taken as “the original form and model” of all human praxis. [2] He described his own development in the following way:

Once I had gained a definite and fundamental insight into what was wrong with my whole approach in History and Class Consciousness, this search became a plan to investigate the philosophical connections between economics and dialectics. My first attempt to put this plan into practice came early in the thirties, in Moscow and Berlin, with the first draft of my book The Young Hegel (which was not completed until autumn 1937). Only now, thirty years later, am I attempting to discover a real solution to this whole problem in the ontology of social existence, on which I am currently engaged. [3]

The first attempt produced his book The Young Hegel, in which the discussion of labor is associated with his reading of G. W. F. Hegel’s The Phenomenology of Spirit and his encounter with Marx’s Economic and Philosophic Manuscripts of 1844. The outcome of this project, on which he was working in the 1960s, was The Ontology of Social Being, one chapter of which was devoted to the question of labor. In that chapter, labor is philosophically defined as the fundamental teleological positing that forms the model for social praxis.

His 1923 essay “Reification and the Consciousness of the Proletariat” and later works, The Young Hegel and TheOntology of Social Being, constitute a trajectory in his theorization of labor. Here, we trace emergence of the question of labor in “Reification and the Consciousness of the Proletariat,” and the ambiguity it causes in the Hegelian-Marxian tradition.

Dualism of Wage-Labor: Labor-Time and the Soul

It is no accident that the issue of the of labor emerges in third section of essay “Reification and the Consciousness of the Proletariat,” in which Lukács discusses immediacy and mediation. The reification confronting the proletariat differs little from the rigid immediacy imprisoning the bourgeoisie. However, the proletariat contains the potential of unveiling and overcoming the “opposition of subject and object.” For the proletarian consciousness to emerge, both the immediacy and the mediating force must consist of reified labor. When writing this essay, Lukács was highly concerned with “the Marxist analysis of labor under capitalism.” What he referred to as labor was wage-labor, rather than labor per se. He conceived of wage-labor as the point of departure for the identity of immediacy and mediation for the proletariat. [4]

Above all, Lukács wrestled with the issue of labor-time. While bourgeois thought always assumes a rigidly double form, “for the proletariat social reality does not exist in this double form.” To substantiate this thesis, Lukács followed Marx’s abstraction of labor into labor-time in the first volume of Capital. This abstraction is identical to the historical “process of abstraction of which [the proletarian] is the victim.” Yet Lukács also went on to claim that it is this very fact of quantification into labor-time that “forces [the worker] to surpass the immediacy of his condition.” At this point, the young Lukács’s eloquence and ambiguity become intertwined. He continued thus: “the quantitative differences in exploitation which appear to the capitalist in the form of quantitative determinants of the objects of his calculation, must appear to the worker as the decisive, qualitative categories of his whole physical, mental and moral existence.” The emergence of this consciousness hinges on the fact that “the worker is forced to objectify his labor-power over against his total personality and to sell it as a commodity.” In this sense, labor-time is not merely considered the immediate social existence of reification and abstraction in which the worker is dehumanized; it is also the mediation for class consciousness. [5]

A presupposed duality, however, is already discernible, for the commodification of both the worker’s labor-power and “total personality” coexist in the same labor-time. Lukács then raised the question of the “work-situation” as the concrete experience of dualism within wage-labor, abstract labor-time versus “the soul”:

This enables us to understand why it is only in the proletariat that the process by which a man’s achievement is split off from his total personality and becomes a commodity leads to a revolutionary consciousness. It is true…that the basic structure of reification can be found in all the social forms of modern capitalism… but this structure can only be made fully conscious in the work-situation of the proletarian. For his work as he experiences it directly possesses the naked and abstract form of the commodity, while in other forms of work this is hidden behind the facade of ‘mental labor.’… The more deeply reification penetrates into the soul of the man… the more deceptive appearances are. Corresponding to the objective concealment of commodity form, there is the subjective element. This is the fact that while the process by which the worker is reified and becomes a commodity dehumanizes him and cripples and atrophies his ‘soul.’… It remains true that precisely his humanity and his soul are not changed into commodities.

Here, the word soul is especially worth pausing over. Lukács indicated that it is the coincidence of the reifying manual, machine-like labor and the resisting soul in the same work-situation that determines the proletariat’s “vantage point,” from which to grasp historical totality. [6]

To this point, we can summarize that Lukács’s dualism assumes two corresponding, yet incongruous, forms: the first, as shown above, is the dual meaning of labor-time, that is, that labor-time is simultaneously recognizable as the pure quantity and the determining category of personality. The second is a kind of internal division of the “total personality.” The worker is divided into two antagonistic parts: the commodified labor-power and the soul resisting dehumanization. To some extent, the second seems to be developed to mediate the first, but at any rate, the two forms highlight the ambiguity in the identification of immediacy with mediation. Between the two forms arises Lukács’ ambivalence. [7]

The reference to “the soul” reminds us of Lukács’s pre-Marxist aesthetic endeavor; his invocation of experience also is reminiscent of the Diltheyian categories and the Neo-Kantian atmosphere of German so-called spiritual sciences in the early twentieth century. We must also bear in mind that, as Harrt Liebersohn has tried to demonstrate, the young Lukács’s pre-Marxist conception of labor was in dialogue with Weber’s and Simmel’s discussions of work in the context of bourgeois life and Christian-Protestant culture. Yet what characterizes Lukács’ dualism on the issue of labor in “Reification and the Consciousness of the Proletariat” is his radical move from German sociology and Neo-Kantianism to revolutionary Marxism. The mediation for this move was nothing other than his turn toward Hegel. [8]

One of the philosophical origins for such correlation between labor and self-consciousness is found in Hegel’s “lord-bondsman dialectic.” According to his work The Phenomenology of Spirit self-consciousness springs from the triangular relationship among the lord, the bondsman, and the object on which the bondsman is working. Hegel asserted forcefully that “through work… the bondsman becomes conscious of what he truly is.” Thus, Hegel assumed the activity of labor as the “middle term” and concluded that “it is in this way, therefore, that consciousness, qua worker, comes to see in the independent being [of the object] its own independence.” What lies hidden the bondsman’s work is the issue of objectification. That is to say, the bondsman’s spiritual freedom is objectified in the “permanent independence” of the product of his labor, and thereby is made conscious. [9]

Though Lukács certainly drew upon Hegelian logic in the discussion concerning labor and consciousness, it is evident that his case was complicated by the fact that he wedged commodity fetishism into this context. The worker’s objectification through wage-labor is interlocked with the commodification of labor-power. [10] As quoted above, wage-labor is shaped by the “compulsion to objectify [the worker] himself as a commodity.” Lukács then argued:

Above all, the worker can only become conscious of his existence in society when he becomes aware of himself as a commodity. As we have seen, his immediate existence integrates him as a pure, naked object into the production process. Once this immediacy turns out to be the consequence of a multiplicity of mediations, once it becomes evident how much it presupposes, then the fetishistic forms of the commodity system begin to dissolve: in the commodity the worker recognizes himself and his own relations with capital. [11]

Here, the mediating role of work in Hegel’s dialectics is repeated, yet reversed: while the Hegelian bondsman recognizes his freedom in his objectification, the Lukácsian worker recognizes his imprisonment. If the product of work attests to the bondsman’s humanity, as is shown in Hegel’s case, then the capitalist history in the Lukácsian sense is the opposite: the worker himself is commodified as the “pure, naked object.” To translate this into Marxian language: what the bondsman recognizes in the object is his own objectification; what the worker recognizes in the object/commodity, according to Lukács, is actually his own “phantom-like objectivity.”

Moreover, though this step forms a parallel with Hegel’s idea of labor as the “middle term,” in Lukács this very mediation itself is dualized—at least implicitly—corresponding to Marx’s fundamental insight about labor’s duality under capitalism (that is, use-value/value, objectivity/phantom-like objectivity). The antithesis between the qualitative objectivity and the quantitative “phantom objectivity” cannot be solved by a Marxian version of the Hegelian notion of labor that mediates self-consciousness. Rather, what is at stake here is how, in the crude immediacy of the “work-situation,” can commodity fetishism dissolve in the experience of the worker, rather than devour the worker’s whole humanity and absorb it into phantom objectivity? Despite Lukács’s theoretical vigor, the chasm between objectification (as found in Hegel’s The Phenomenology of Spirit) and phantom objectivity (from the penetrating analysis offered by Marx) remains unbridgeable. [12]

Vergegenständlichung and Entäusserung [13]

It is interesting to note that, when writing History and Class Consciousness, Lukács, like V. I. Lenin, had no access to Marx’s Economic and Philosophic Manuscripts of 1844. In formulating his revolutionary labor theory of Entäusserung (or alienation, also translated as estrangement and externalization), the young Marx placed Entwirklichung (“the loss of realization”) in opposition to Vergegenständlichung (objectification), thereby launching a profound critique of Hegel’s phenomenology:

The object which labor produces—labor’s product—confronts it as something alien, as a power independent of the producer. The product of labor is labor which has been embodied in an object, which has become material: it is the objectification of labor. Labor’s realization is its objectification. In the sphere of political economy this realization of labor appears as loss of realization for the workers; objectification as loss of the object and bondage to it; appropriation as estrangement, as alienation. [14]

Concerning the alienation of labor, Marx went on to say:

The fact that labor is external to the worker, i.e., it does not belong to his essential being; that in his worker, therefore, he does not affirm himself but denies himself…does not develop freely his physical and mental energy but mortifies his body and ruins his mind. The worker therefore only feels himself outside his work, and in his work feels outside himself. He is at home when he is not working, and when he is working he is not at home. [15]

This striking account, with no doubt, marks a Marxian subversion of Hegel’s dialectics of labor: the independence of the product does not testify the bondsman’s freedom, but stands as an alien power governing the worker’s existence. While the Hegelian concept of work humanizes the bondsman and realizes his being as self-consciousness, Marxian wage-labor dehumanizes the worker totally and alienates the worker from his or her own “essential being.”

Marx’s critique turned out to be a crucial intervention into Lukács’s theoretical practice following the debate about History and Class Consciousness. In his preface to the 1967 edition he recollected one of his “unexpected strokes of good luck” in the 1930s: “the text of the Economic-Philosophical Manuscripts had just been completely deciphered and I was able to read it.… In the process of reading the Marx manuscript all the idealist prejudices of History and Class Consciousness were swept to one side.” [16] This encounter with early Marx therefore helped initiate his study of early Hegel. The same passage from the young Marx was used in The Young Hegel to lay the foundation for Lukács’s analysis of the difference between Hegelian Entäusserung and Marxian Entäusserung. Lukács’s emphasized Hegel’s “confusion” concerning alienation: the young Hegel equated alienation (Entäusserung) with objectification (Vergegenständlichung), while the young Marx drew a “precise distinction between objectivity and alienation in human praxis.” [17]

Only when it comes to the question of labor can the relevance of such confusion or distinction be fully manifested. In the chapter “Hegel’s Economics During the Jena Period,” Lukács dealt with the young Hegel’s labor theory in relation to Entäusserung. Correspondingly, in the concluding chapter, “‘Entäusserung’ as the Central Philosophical Concept of The Phenomenology,” Lukács elaborated on this concept in relation to Marx’s labor theory. Through a close reading of the bondsman’s labor, Lukács believed that Hegel’s discovery of the origin of self-consciousness concerned labor as the universal mode of human existence. Whereas in “Reification and the Consciousness of the Proletariat” Lukács focused on wage-labor under capitalism, this time, Lukács wanted to seize the interpretation of labor (in a universal sense) found in Hegel’s The Phenomenology of Spirit. [18]

Here arises the problem of Entäusserung. In short, at least two interrelated points made by Lukács are significant at this juncture. First, since Hegel had no insight into the “specifically capitalist form of ‘externalization’ (alienation or Entäusserung), i.e. what Marx would later call ‘fetishism,’” Hegel tended to equate Entäusserung with objectification. [19] Second, as the alienation of labor was beyond his sight, Hegel made a “false equation of ‘externalization’ (Entäusserung) and ‘thinghood’ or objectivity.” [20] This led to his central theme that “all alienation (Entäusserung) of the human essence is therefore nothing but alienation of self-consciousness.” [21] As a consequence, alienation can always be superseded by returning to the subject-substance identity. Hegel’s characterization of labor as the origin of self-consciousness, therefore, conceals the starting point of what Lukács called the “mystification of alienation.” Drawing upon Marx’s Economic and Philosophic Manuscripts of 1844, Lukács summarized Hegel’s confusion in a schematic manner: “on the subjective side, there is the mistaken identification of man and self-consciousness demonstrated and criticized by Marx; on the objective side, there is the equation of alienation and objectification in general.” [22] Meanwhile, Lukács’s distinction between alienation and objectification is built solely upon a distinction between two modes of labor itself. The following passage, as a part of Lukács’s cross-reading of Hegel with Marx, is particularly lucid:

For alienation is sharply distinguished from objective reality, from objectification in the act of labor. The latter is a characteristic of work in general and of the relation of human praxis to the objects of the external world; the former is a consequence of the social division of labor under capitalism, of the emergence of the so-called free worker who has to work with the means of production belonging to another and for whom, therefore, these means of productions as well as his own product exist as an independent, alien power. [23]

One can even go so far as to say that if the act of labor is the universal mode of human praxis, objectification is the alienated labor under capitalism.

While Lukács asserted that “the socialist critique of ‘externalization’ (Entäusserung) has exposed the real alienation contained in the capitalist form of work, an alienation that has to be annulled in reality,” he nevertheless gave much credit to Hegel for uncovering labor as the origin of human essence: “the decisive factor…was that Hegel thought of work as the self-creating process of man, of the human species.” Rather than point out the road toward the supersession of alienation of labor (so-called bad labor), Lukács seemed more concerned with laying the philosophical foundation of labor as the genesis and model of praxis, that is, the universal and humanizing labor (or good labor). [24]

Between these two chapters of The Young Hegel, there is a chapter devoted to labor and the problem of teleology. There, Lukács turned to Marx for a definition of labor as “an exclusive characteristic” of human beings. He quoted from Marx: “at the end of every labor process, a result emerges which had already been conceived by the worker at the beginning, hence already existed ideally.” By linking it with Hegel’s philosophy, Lukács tried to elevate this Marxist insight into labor as a “purposeful activity” to a kind of teleology of labor, and, therefore, a teleology of history. Since labor is posited as the objective realization of purpose, Lukács’s teleology of labor comes back to Hegelian alienation/objectification and use-value. What he attempted to demonstrate is that “Hegel’s concrete analysis of the human labor-process shows that the antinomy of causality and teleology is in reality a dialectical contradiction in which the laws governing a complex pattern of objective reality become manifest in motion.” For the young Hegel, the bondsman’s labor—associated with a pre-capitalist, quasi-feudal economy—is a phenomenological agent; in early Marx, the worker’s labor testifies to the alienation of labor under capitalism. But in grounding labor as the model of human praxis, Lukács now reached a point of further generalizing labor as an ontological category. [25]

The If… then of Teleological Positing Versus the as if of Commodity Fetishism

In his post-Hungarian Uprising magnum opus, The Ontology of Social Being—written in the 1960s and still under revision until the last days of the author’s life—Lukács addressed the issue of labor in the first chapter of the second volume. His elaboration of labor teleology was a direct continuation of his discussion of the relationship between labor and teleology in The Young Hegel. [26]

In the section on “teleological positing,” Lukács came to focus on what he found missing in his early writings (such as “Reification and the Consciousness of the Proletariat”): labor as immediacy and mediation; as the metabolism between man and nature; and as a condition for human social being. In this way, he proceeded from the so-called general characteristic of labor to “elementary labor” in its “essential original nature.” In this chapter, most of Lukács’s examples come from primitive forms of labor, such as the making of a knife or an axe from stone. This generalization was undertaken by Lukács in order to fill the gap left by what he called the “leap” from nature to humanity. Again, labor is posited as the “genuine humanization of man.” [27]

At the beginning, Lukács cites Marx’s definition of labor as purposive activity: “labor, then, as the creator of use-value, as useful labor, is a condition of human existence which is independent of all forms of society.” Central here is use-value/objectivity in labor teleology. Lukács then articulated his ontological category of labor:

Through labor, a teleological positing is realized within material being, as the rise of a new objectivity. The first consequence of this is that labor becomes the model for any social practice, for in such social practice—no matter how ramified its mediations—teleological positings are always realized, and ultimately realized materially. [28]

Clearly, the Hegelian ideas of objectivity and realization again resurface. Here, the later Lukács reverts to the Hegelian/pre-Marxist idea of Entäusserung (alienation/objectification), which, according to Lukács’s interpretation, initially meant the positing of the object in the German idealist tradition. [29] Ultimately, the “teleological positing of causality” is supposed to contain the “ontological kernel of freedom.” Consequently, every social practice, no matter how developed or complex it is, can be ontologically reduced to the original nature of labor, which, he maintained, is as elementary as everyday experience. Its basic rationality, as Lukács contended, can be formulated as if… vthen. [30]

Though Lukács often said that he would deal with the question of capitalist labor in subsequent chapters, one cannot help but realize that what is missing on this ontological landscape is precisely the phantom objectivity of capitalist labor, or commodity fetishism. According to Slavoj Žižek, commodity fetishism centers on the fantasy of as if rather than if… then For Žižek, the problem of fetishism happens on the side of objective reality: people act as if the money-form is the embodiment of the objective Universal; “they are fetishists in practice, not in theory.” It is in the sense of as if that the objectivity of capitalist labor becomes phantom-like at best. Interestingly enough, both the Žižekian as if and the Lukácsian if… then hinge on the famous Marxian formula to which both Lukács and Žižek frequently referred: “they do not know it, but they do it.” Žižek considered Marx’s formula to be a definition of ideology and related it to the “fetishistic illusion” Žižek attempted to demonstrate that commodity fetishism is “at work in the social reality itself, at the level of what the individuals are doing” and that it is in the reality of doing that people “are guided by the fetishistic illusion.” He then drew the following conclusion:

The illusion is not on the side of knowledge, it is already on the side of reality itself, of what the people are doing. What they do not know is that their social reality itself, their activity, is guided by an illusion, by a fetishistic inversion. What they overlook, what they misrecognize, is not the reality but the illusion which is structuring their reality, their real social activity. They know very well how things really are, but still they are doing it as if they did not know.

In this light, we can say that phantom-like objectivity is presupposed and performed as if it were the Universal the objective necessity. [31]

Yet for Lukács’s ontology, Marx’s formula means that, even though humans do not consciously recognize the causality of objective necessity, the teleological positing of causality is still constantly practiced in basic human labor. In this labor, objective causality is directed to human ends, and in turn contains the genesis of science and human knowledge. However, a closer look reveals that this rationality is not purged of as if. Above all, if labor teleology is indeed ultimately determined by social being itself, then objective necessity (the internal necessity of nature; the chain of causality; the logic condition of if… then; and so on) can be viewed as if it were necessity. The formula of if… then seems to be drawn closer to the “bourgeois philosophy” that had been criticized by the young Lukács in “Reification and the Consciousness of the Proletariat.” In the labor process of if… then, an illusion has to be presupposed as the internal necessity of nature in order to structure labor (doing/reality) itself. Under capitalism, a new layer of phantom-like objectivity is added upon the layer of presupposed objective necessity in order to structure capitalist labor. This is what Lukács depicted as the “doubly intensified” alienation (or objectification) of labor or, in Žižek’s language, the “doubled” illusion. [32] At this point, Žižek came much closer to the critique of bourgeois idealism developed in “Reification and the Consciousness of the Proletariat.” Žižek wrote that “the roots of philosophical speculative idealism are in the social reality of the world of commodities; it is this world which behaves ‘idealistically.’” In this light, the later Lukács’s ontology of if…then has idealized—if not fetishized—labor per se with a concealed, yet presupposed, as if. Thus, if then actually represents an elementary level of fetishistic as if. [33]

While raising the question of teleology in The Young Hegel, Lukács cited Lenin: “in actual fact, men’s ends are engendered by the objective world and presuppose it… but it seems to man as if his ends are taken from outside the world, and are independent of the world.” [34] This is a Leninian version of Marx’s formula, a version in favor of Lukács’s labor teleology. However, Lenin’s as if should be reversed to a Žižekian one. To translate it into Žižekian language: as if happens precisely on the side of presupposition; on the side of actual human activity. The presupposition of the objective world is an as if, which engenders the chain of if…then. The idea of teleological positing betrays the imprint of positing as if. [35]

All this leads us to the issue of the fundamental leap from nature to human. As we have seen, Lukács’s labor teleology is formulated in order to address this leap ontologically. Although—and also because—this leap cannot be historically reconstructed, Lukács believed that his labor teleology could fill the unfathomable chasm between nature and human beings. As he wrote: “the leap remains a leap, and in the last analysis it can only be made clear by intellectual comprehension.” [36] Here, by “intellectual comprehension,” Lukács meant the Marxist method of abstraction. Yet his ontological abstraction—from every social practice to the elementary realization of use-value—runs counter to Marx’s historical abstraction which, following the abstracting power of capital itself, moves from use-value to phantom objectivity. Nevertheless, this ontologization/de-historicization is itself a structural positing, or presupposition like as if, in the understanding of human nature.

Conclusion and Further Questions

From the “phantom objectivity” of labor-time to “useful labor” as teleological positing, this theoretical trajectory can be sketchily characterized as a reversal in development of the historical abstraction from use-value to value that opens Marx’s Capital. Moreover, this counter-movement should be examined alongside the historical context in which Lukács was writing. As Lukács himself noted, History and Class Consciousness was related to the high tide of Bolshevism and Messianism in Central Europe, as well as his determination to become a communist in the wake of the catastrophic First World War and triumphant October Revolution. His study of Hegel was associated with his reflections on his early work, but also on the changed situation of European communist politics. After the defeat of the Hungarian Revolution and the controversy of his Blum Theses, he had to reorient himself amid a series of party struggles toward the new historical task of antifascism. This turn should be viewed as an effort to renew the linkage between Marx and Hegel under Stalinism. One should bear in mind, finally, that The Ontology of Social Being was undertaken in a post-1956 situation; it was written between his Specificity of the Aesthetic (finished in 1963) and his long-planned (yet constantly suspended) Ethics. When he dealt philosophically with the realization of freedom modeled on elementary labor, he was, practically speaking, concerned with the deterioration of everyday ethical life under socialism as it existed at the time.

This outline of Lukács’s theoretical development is not immune to doubt, for the theology of labor was not intended to be the final chapter of Lukács’s The Ontology of Social Being. His philosophy of labor was written in preparation for subsequent chapters on reproduction, ideology, and alienation. Yet the other side of the story is also worth noting: according to his student István Mészáros, when Lukács began writing his Ethics, he realized in the process that it was necessary to write an introductory ontology. Not only did this introduction turn out to be a manuscript of more than two thousand pages, but the protracted writing of this social ontology “procede[d] very slowly” up until his death. [37] The difficulty for our philosopher might be this: there is always an idealistic short-circuit in any materialistic ontology, just as in Žižekian sense, reality presupposes a fetishistic as if. Lukács’s theory of labor attains particular significance in that it shows how he was caught between historicization and ontologization—a structural yet symptomatic tension of his Marxist theory.

But we will not end this essay merely with this critical note. Criticism of a similar kind, in fact, have already surfaced in internal debates between Lukács himself and his disciples. “Notes on Lukács’ Ontology”—a document prepared by his students Ferenc Fehér, Agnes Heller, György Márkus when Lukács requested critical feedback in the late 1960s—records their discontent with their mentor’s manuscript. The first sentence of their commentary to the labor chapter reads thus: “In our view, the greatest defect of this chapter is that the problem of objectification remains unsolved—indeed, is not even posed—which is the same reproach that Comrade Lukács leveled against his own History and Class Consciousness.” [38] In this, his students touched upon the ultimate aporia of Lukács’s lifelong philosophical inquiry. As they indicate in their notes, they became inclined to believe that a project of Marxist ontology may be a dead end. Upon receiving these critical yet insightful comments, the ailing Lukács submerged himself in painstaking revisions and suspended publication of the work. In “Lukács’ Later Philosophy,” Heller laments the futile effort–though “not a complete failure” of The Ontology of Social Being while lauding The Specificity of the Aesthetic as the true masterpiece of later Lukács. [39]

But should we simply consign the ontological issue of labor to the trash bin of the history of philosophy? I contend that precisely because of this aporia of ontologization that the role of the concept of labor in Lukács’s philosophical development should not be overlooked, and that his problematic conceptualization of labor spurs us on to re-problematize this classic Marxist category in a vastly changed historical context. Marxism holds that the fundamental contradiction of capitalism is the antinomy between capital and labor. Yet it seems to me that our current perception of labor—both as a concept and as human experience—has become ever-more confusing; vague and pallid. On one hand, the idea of labor has degenerated into a common positivistic word for sociology or economics, losing philosophical and political relevance. On the other hand, wage-labor has penetrated into every corner of social praxis and everyday life, becoming more amorphous and pervasive. Its contemporary dominant form is immaterial labor, which has less to do with the mediation between nature and humanity and more to do with the constant reconfiguration of effects within commodity fetishism itself. As a result, even the machine-like labor of industrial age seems backward and primitive, receding into the remote horizon. In this fully fetishized world, is an ontology of social being possible? To what extent can we revive and redeem the category of labor as a part of our de-fetishization and as a reflection of social praxis and its future? If we deny the possibility of the socio-anthropological-ontological issue of labor, we will surely avoid the idealistic abstractions we see in Lukács. At the same time, we risk giving up a task of critical philosophy and unintentionally succumbing to vulgar sociology, which is yet another product of bourgeois, limited consciousness. Therefore, Lukács’s conceptualization of labor, with all its insights and limitations, is not yet a closed case.

Wang Pu is associate professor of Chinese and chair of the comparative literature program at Brandeis University. He attended Peking University and received his PhD in comparative literature from New York University. He is author of The Translatability of Revolution: Guo Moruo and Twentieth-Century Chinese Culture (Harvard University Asia Center, 2018). He is also the translator of the Chinese edition of Walter Benjamin: A Critical Life.

Notes

1. Georg Lukács, History and Class Consciousness: Studies in Marxist Dialectics, trans. Rodney Livingstone (Cambridge, MA: MIT Press, 1971), 83; Karl Marx, Capital, vol. 1, trans. Ben Fowkes (New York: Vintage), 128.

2. Lukács, History and Class Consciousness, xvii, xviii, xx.

3. Lukács, History and Class Consciousness, xxxiv.

4. Lukács, History and Class Consciousness, 167.

5. Lukács, History and Class Consciousness, 165, 166, 167–8.

6. Lukács, History and Class Consciousness, 171–2. Not only can one detect the duality between the dehumanization of labor power and the soul that resists such dehumanization, but there is also some trace of the latent division between the manual, mechanical labor and mental labor, the latter of which is doomed to fuller fetishization and therefore penetrates the soul. For the question of fetishism of intellectual labor, see Alfred Sohn-Rethel, Intellectual and Manual Labor: A Critique of Epistemology (London: MacMillan, 1978), 13–16.

7. For one thing, the idea of “total personality” or “soul” seems to be too subjective to be historically grounded. In this respect, the soul is more like an enclave of overwhelming reification, further exposing an intense duality. This might account for what Lukács, in his later self-criticism, called subjectivism. More important, while labor-power can be reduced to the totalizing abstractness of labor-time, the “total personality” cannot be restored to the level of the historical totality. The furthest point Lukács could reach is labor’s daily experiential or phenomenological confrontation, or in his own language, appearance: the labor-time or work-situation “appears to the worker” as a qualitative category. Meanwhile, for the “mental laborer,” the appearance is too deceptive to be demystified. After all, according to the duality of capacity and personality that Agnes Heller, one of Lukács’s disciples, proposed in Everyday Life, the daily activity of work under capitalism does not necessarily involve any historical experience or historical consciousness. See Agnes Heller, Everyday Life, 60–70 (London: Routledge and Kegan Paul, 1984). In other words, while in “Reification and the Consciousness of the Proletariat” the abstraction of labor is sufficiently formulated alongside historical abstraction, the mediating force of wage-labor turns out to be an invalid leap (or rebound) from the immediate work-situation to revolutionary consciousness, which itself remains unmediated. In short, rather than illustrate the identity between immediacy and mediation, Lukács became enmeshed in ambiguous dualism.

8. Harry Liebbersohn, “Lukács and the Concept of Working German Sociology,” in Georg Lukács: Theory, Culture, and Politics, ed. Judith Marcus et al., (New Brunswick: Transaction Publishers, 1989), 63–71.

9. G. W. F. Hegel, The Phenomenology of Spirit, trans. A.V. Miller (Oxford: Oxford University Press, 1977), 118, 114. Here arises the question of recognition, or, in Hegel’s language, “recognition as an independent self-consciousness,” a question that has been (over)developed by Alexandre Kojève and others. When Kojève marked the lord-bondsman dialectic (which he translated as “master-slave”) as the starting point of so-called recognition politics, he downplayed the relationship between the bondsman and the object was downplayed, thus missing the point of labor in his account.

10. Whereas Hegel’s lord-bondsman anecdote bears reference to feudalist conditions.

11. Lukás, History and Class Consciousness, 168; emphasis added.

12. Marx, Capital, vol. 1, 128.

13. I leave the two terms untranslated because people have translated Entäusserung into different words. For instance, Martin Milligan, the translator of Economic and Philosophic Manuscripts of 1844 into English, translated Entäusserung as estrangement. Rodney Livingstone, a major translator of Lukács, translated Entäusserung as alienation when related to Marx, and as externalization when related to Hegel.

14. Karl Marx, The Economic and Philosophic Manuscripts of 1844, ed. D. J. Struik, trans. Martin Milligan (New York: International Publishers, 1984), 108.

15. Marx, The Economic and Philosophic Manuscripts of 1844, 110.

16. Lukács, History and Class Consciousness, xxxvi.

17. Georg Lukács, The Young Hegel: Studies in the Relations between Dialectics and Economics, trans. Rodney Livingstone (Cambridge, MA: MIT Press, 1976), 561. Also see Lukács, History and Class Consciousness, xxiv.

18. Elsewhere in the book, Lukács was critical of Hegel’s myopic observation of labor under capitalism. Though the young Hegel, a reader of Adam Smith, was sensitive to the phenomena of labor division, abstraction or mechanization of labor, exchange of labor, and so on, his era simply did not allow for a dialectical understanding of capitalist labor. (See Georg Lukács, The Young Hegel, 329–31.)

19. Livingstone explained why he translated Hegelian Entäusserung as externalization in his Translator’s Note: “I have preferred to translate it as ‘externalization’, since in Hegel’s usage it has a broader application than the current term.” See Luckács, The Young Hegel, i.

20. Lukács, The Young Hegel, 540, 542.

21. Marx, Economic and Philosophic Manuscripts of 1844, 178.

22. Lukács, The Young Hegel, 551.

23. Lukács, The Young Hegel, 549

24. Lukács, The Young Hegel, 570, 553.

25. Lukács, The Young Hegel, 338–64; Marx, Capital, vol. 1, 284, 346.

26. This chapter includes sections of “Labor as a Teleological Positing” and “Labor as a Model for Social Practice,” translated into English as an independent volume entitled Labor.

27. Marx, Capital, vol 1, 133; Georg Lukács, The Ontology of Social Being: Labor, trans. David Fernbach (London: Merlin, 1980), 42.

28. Marx, Capital, vol. 1, 133; Lukács, The Ontology of Social Being: Labor, 3.

29. See Lukács, The Young Hegel, 538; especially Lukács’s etymological survey of Johann Gottlieb Fichte’s use of this term.

30. Lukács, The Ontology of Social Being: Labor, 39.

31. Slavoj Žižek, The Sublime Object of Ideology, (London: Verso, 1989), 31

32. Lukács, The Ontology of Social Being: Labor, 18; The Young Hegel, 549.

33. Žižek, The Sublime Object of Ideology, 32.

34. Cited in Lukács, The Young Hegel, 350

35. The disagreement between István Mészáros and Jean Hyppolite concerning Entäusserung can be viewed as a similar case. What was at issue was whether the transcendence of Entäusserung, which Mészáros insisted is a myth, or the “insurmountable otherness” (central to Hyppolite’s Hegelian version of Entäusserung), is a mystification. See Mészáros, Marx’s Theory of Alienation (London: Merlin, 1972), 243–44.

36. Lukács, The Ontology of Social Being: Labor, iii

37. István Mészáros, Lukács’ Concept of Dialectic (London: Merlin, 1972), 6–7

38. Ferenc Fehér et al., “Notes on Lukács’ Ontology,” in Lukács Reappraised, ed. Agnes Heller (New York: Columbia University Press, 1983), 141.

39. Agnes Heller, “Lukács’ Later Philosophy,” Lukács Reappraised, ed. Agnes Heller (New York: Columbia University Press, 1983), 190.

What is the Fetishism of Commodities?

By Carlos Garrido

I was asked by a few comrades to explain Marx’s concept of the fetishism of commodities, and with that, the main ways it has been misunderstood by both mainstream bourgeois academia and by well-meaning Marxists. The following short reflection attempts to do just that.

Marx begins section four of the first chapter of Capital by saying that “a commodity appears, at first sight, a very trivial thing;” however, “its analysis shows that it is, in reality, a very queer thing, abounding in metaphysical subtleties and theological niceties” (Marx, 71). I can imagine ‘bourgeois’ political economists reading this in 1867 wondering what the hell is ‘queer’ about a commodity? I can envision them asking “what in the world does a commodity, a category of political economy, have to do with metaphysics and theology?” Before I analyze what Marx means, let us look at some of the things he doesn’t mean, but which, as usual, people think he does.

There are a few ways the commodity fetish is misunderstood, but the most prominent misunderstanding describes the fetishism of commodities as a sort of ‘false consciousness’ which takes us over when we engage in the market; a sort of ‘illusion’ that occurs when we idealize the products we consume, or the products we are faced with the opportunity to consume. The commodity fetish is understood here as a sort of libidinal connection to products. It is as if one could watch Confessions of a Shopaholic and retrieve the same message Marx is proposing in this section.

This is not, in my view, what Marx means by the fetishism of commodities. It is not an illusion which functions as a filter to distort our view of the world. If that were the case, as Michael Heinrich notes, “false consciousness must disappear once the real conditions have been explained” (Heinrich, 71).  This is not, however, the case. We don’t become immune to the ‘false consciousness’ of the commodity fetish after reading Marx’s Capital. Instead of thinking of the commodity fetish as a subjective experience of ‘false consciousness,’ Marx holds the fetish is in the world itself. It has an objective presence in the social relations of capitalist commodity production.

Marx uses the example of the construction of a table. When wood is formed into a table, there is no mystery present. We have a “common, every-day thing” (Marx, 71). However, “so soon as it steps forth as a commodity, it is changed into something transcendent” (Ibid – my italic). Notice here how he is very explicit that it is the object itself that is changed into something transcendent when it becomes a commodity. It isn’t, again, simply a matter of a mental illusion or false consciousness.

“The mystical character of a commodity,” Marx will go on to say, “does not originate, therefore, in their use-value” (Ibid). If it was simply a result of the use value of the good, all things – regardless of whether they were commodities or not – would have ‘metaphysical subtleties and theological niceties.’ Instead, what makes a commodity such a queer thing is the relation which makes a good into a commodity in the first place –  its exchangeability. It is here where a good becomes a sinnlich übersinnliches ding (sensuous extrasensory thing). As Marx says: “whence, then, arises the enigmatic character of the product of labour, so soon as it assumes the form of commodities? Clearly from this form itself” (Ibid, 71-2).

For a good to carry an ‘exchange value’ means that the specific type of concrete labor and materials which were necessary to create that good have fallen to the background. What matters in exchange value is not the type of work, but the socially necessary time it takes for that work to produce its product. In essence, qualitatively different forms of work, producing objects with qualitatively different utilities, are all homogenized and differentiated only quantitatively, that is, by the amount of socially necessary labor time materialized in the work. The homogenization of the human element of the commodity creates the conditions where “the social relations of the producers… and the social character of their labour” takes “the form of a social relation between products” (Ibid, 72). The human source of the commodity disappears, it becomes absorbed and metamorphized into the thing itself, appearing “as an objective character stamped upon the product” (Ibid). In the commodity a “definite social relation between men” assumes “the fantastic form of a relation between things” (Ibid).

A good analogy to such a queer relation can be found in the religious fetish, wherein human creations (the Gods) are disconnected (in their being and in their qualities) from their human creators. The relationships are seen not as relations between human constructions, but relations between “independent beings endowed with life” (Ibid). A prominent example of this phenomenon can be seen in the religious alienation Ludwig Feuerbach depicts in The Essence of Christianity. Nonetheless, the point is that because this fetishism “attaches itself” to the “products of labor, so soon as they are produced as commodities,” in a system of commodity production, this fetish has an objective character (Ibid).

For instance, in the movie ‘They Live,’ the protagonist John Nada finds a box of glasses which when worn show the real message behind social symbols (e.g., advertisement for vacation reads ‘reproduce and consume,’ the dollar reads ‘this is your God,’ etc.). In his reaction to the film, Slavoj Žižek’s The Perverts Guide to Ideology provides a helpful analysis of these “ideology critique glasses,” which aids our understanding of how the commodity fetish has been misunderstood. Ideology, Žižek states, is usually thought of as a set of glasses distorting our view of the real world. Therefore, ideology critique is usually framed as the removal of these glasses, an act which allows a spontaneous and direct engagement with the real world. Similarly, the central misunderstanding of the commodity fetish is that it is merely an illusion we hold, once we remove the illusion from our understanding the fetish disappears. This way of thinking about ideology critique is, as Žižek notes, ideological as well.

Instead, as the movie rightly depicts, ideology is objectively in the world. The task of critique is beyond the commonsensical and spontaneous. Critique is an often-painful addition which mediates between us and the world in such a manner that provides us with insights into the objective limitations of the objective world. The commodity fetish is not a distorted view of the world. It is not ‘fixed’ through easy liberal consumptive practices; through knowing where your cow died and where your eggs came from. The commodity fetish is an objective reality in a world dominated by commodity production. It takes critique to see this, but a revolution to change it.

Bibliography

Karl Marx (1867), Capital Vol. I, International Publishers (1974).

Michael Heinrich (2004), An Introduction to the Three Volumes of Karl Marx’s Capital, Monthly Review (2012).

A Mad World: Capitalism and the Rise of Mental Illness

By Rod Tweedy

Originally published at Red Pepper.

Mental illness is now recognised as one of the biggest causes of individual distress and misery in our societies and cities, comparable to poverty and unemployment. One in four adults in the UK today has been diagnosed with a mental illness, and four million people take antidepressants every year. ‘What greater indictment of a system could there be,’ George Monbiot has asked, ‘than an epidemic of mental illness?’

The shocking extent of this ‘epidemic’ is made all the more disturbing by the knowledge that so much of it is preventable. This is due to the significant correlation between social and environmental conditions and the prevalence of mental disorders. Richard Bentall, professor of clinical psychology at the University of Liverpool, and Peter Kinderman, president of the British Psychological Society, have written compellingly about this connection in recent years, drawing powerful attention to ‘the social determinants of our psychological wellbeing’. ‘The evidence is overwhelming,’ notes Kinderman, ‘it’s not just that there exist social determinants, they are overwhelmingly important.’

A sick society

Experiences of social isolation, inequality, feelings of alienation and dissociation, and even the basic assumptions and ideology of materialism and neoliberalism itself are seen today to be significant drivers – reflected in the titles of a number of recent articles and talks on this subject, such as those of consultant psychotherapist David Morgan’s groundbreaking Frontier Psychoanalyst podcasts, which have included discussions on whether ‘Neoliberalism is dangerous for your mental health’, and ‘Is neoliberalism making us sick?’

Clinical psychologist and psychotherapist Jay Watts observes in the Guardian that ‘psychological and social factors are at least as significant and, for many, the main cause of suffering. Poverty, relative inequality, being subject to racism, sexism, displacement and a competitive culture all increase the likelihood of mental suffering. Governments and pharmaceutical companies are not as interested in these results, throwing funding at studies looking at genetics and physical biomarkers as opposed to the environmental causes of distress. Similarly, there is little political will to combine increasing mental distress with structural inequalities, though the association is robust and many professionals think this would be the best way to tackle the current mental health epidemic’.

There are clearly very powerful and entrenched interests and agendas here, which consciously or unconsciously act to conceal or try to deny this relationship, and which also makes the recent willingness amongst so many psychoanalysts and therapists to embrace this wider context so exciting and moving.

Commentators often talk about society, social context, group thinking, and environmental determinants in connection with mental distress and disorders, but we can I think actually be a bit more precise about what aspect of society is mainly driving it, is mainly responsible for it. And in this context it’s probably time we talk about the c word – capitalism.

Many of the contemporary forms of illness and individual distress that we treat and engage with certainly seem to be correlated with and amplified by the processes and byproducts of capitalism. In fact, you might say that capitalism is in many respects a mental illness generating system – and if we are serious about tackling not only the effects of mental distress and illness, but also their causes and origins, we need to look more closely, more precisely, and more analytically at the nature of the political and economic womb out of which they emerge, and how psychology is fundamentally interwoven with every aspect of it.

Ubiquitous neurosis

Perhaps one of the most obvious examples of this intimate connection between capitalism and mental distress is the prevalence of neurosis. As Joel Kovel, a former psychiatrist and professor of political science, notes: ‘A most striking feature of neurosis within capitalism is its ubiquity.’ In his classic essay ‘Therapy in late capitalism’ (reprinted in The Political Self), Kovel refers to the ‘colossal burden of neurotic misery in the population, a weight that continually and palpably betrays the capitalist ideology, which maintains that commodity civilization promotes human happiness’:

‘If, given all this rationalization, comfort, fun and choice, people are still wretched, unable to love, believe or feel some integrity to their lives, they might also begin to draw the conclusion that something was seriously wrong with their social order.’

There’s also been some fascinating work done on this more recently by Eli Zaretsky (Political Freud), and Bruce Cohen (author of Psychiatric Hegemony), who have both written on the relations between the family, sexuality, and capitalism in the generation of neuroses.

It is significant, for example, that one of the most prominent features of the psychological landscape that Freud encountered in late nineteenth-century Vienna were the neuroses – which, as Kovel notes, Freud saw as being entirely continuous with ‘normal’ development in modern societies – with much of these, he adds, being rooted in our modern experience of alienation. ‘Neurosis,’ Kovel says, ‘is the self-alienation of a subject who has been readied for freedom but runs afoul of personal history.’

It was of course Marx who was the great analyst of alienation, showing how capitalist economics generates alienation as part of its very fabric or structure – showing how, for instance, alienation gets ‘lost’ or ‘trapped’, embodied, in products, commodities – from the obvious examples (such as Nikes made in sweatshops, and sweatshops embodied in Nikes) – to a wider and much more pervasive sense that the whole system of production and creation is somehow alienating.

As Pavon Cuellar remarks, ‘Marx was the first to realise that this alienation actually gets contained and incarnated in things – in “commodities”‘ (Marxism and Psychoanalysis). These ‘fetishised’ commodities, he adds, seem to retain and promise to return, when consumed, the subjective-social part lost by those alienated while producing them: ‘the alienated have lost what they imagine [or hope] to find in what is fetishised.’

This understanding of alienation is really the core issue for Marx. People probably know him today for his theories of capital – how issues of exploitation, profit, and control continually characterise and resurface in capitalism – but for me the key concern of Marx, and one that is constantly neglected, or misunderstood, is his view on the centrality and importance of human creativity and productivity – man’s ‘colossal productive power’ as he calls it – exactly as it was in fact for William Blake, slightly earlier in the century.

Marx refers to this extraordinary world-transformative energy and agency as our ‘active species-life’, our ‘species-being’ – our ‘physical and spiritual energies’. But these immense creative energies and transformative capacities are, he notes, under the present system, immediately taken from us and converted into something alien, objective, enslaving, fetishised.

Restructuring desire

The image he evokes is of mothers giving birth – another form of labour perhaps – with the baby immediately being taken away and converted into something alien, something doll-like — a commodity. He considers what effect that must have on the mother’s spirit. This, for Marx, is the source of the alienation and unease, the sort of profound dislocation of the human spirit that characterises industrial capitalism. And as Pavon Cuellar shows, we can’t buy our way out of this alienation – by producing more toys, more dolls – because that’s where the alienation occurs, and is embodied and generated.

Indeed, consumerism and materialism are themselves widely recognised today as key drivers of a whole raft of mental health problems, from addiction to depression. As George Monbiot notes, ‘Buying more stuff is associated with depression, anxiety and broken relationships. It is socially destructive and self-destructive’. Psychoanalytic psychotherapist Sue Gerhardt has written very compellingly on this association, suggesting that in modern societies we often ‘confuse material well-being with psychological well-being’. In her book The Selfish Society she shows how successfully and relentlessly consumer capitalism reshapes our brains and reworks our nervous systems in its own image. For ‘we would miss much of what capitalism is about,’ she notes, ‘if we overlook its role in restructuring and marketing desire and impulse themselves.’

Another key aspect of capitalism and its impact on mental illness we could talk about of course is inequality. Capitalism is as much an inequality-generating system as it is a mental illness producing system. As a Royal College of Psychiatrists report noted: ‘Inequality is a major determinant of mental illness: the greater the level of inequality, the worse the health outcomes. Children from the poorest households have a three-fold greater risk of mental ill health than children from the richest households. Mental illness is consistently associated with deprivation, low income, unemployment, poor education, poorer physical health and increased health-risk behaviour.’

Some commentators have even suggested that capitalism itself, as a way of being or way of thinking about the world, might be seen as a rather ‘psychopathic’ or pathological system. There are certainly some striking correspondences between modern financial and corporate systems and individuals diagnosed with clinical psychopathy, as a number of analysts have noticed.

Robert Hare for instance, one of the world’s leading authorities into psychopathy and the originator of the widely accepted ‘Hare Checklist’ used to test for psychopathy, remarked to Jon Ronson: ‘I shouldn’t have done my research just in prisons. I should have spent some time inside the Stock Exchange as well.’ ‘But surely stock-market psychopaths can’t be as bad as serial-killer psychopaths?’ the interviewer asks. ‘”Serial killers ruin families,” shrugged Bob. “Corporate and political … psychopaths ruin economies. They ruin societies.”‘

Pathological institutions

These traits, as Joel Bakan brilliantly suggested in his book The Corporation, are encrypted into the very fabric of modern corporations – part of its basic DNA and modus operandi. ‘The corporation’s legally defined mandate,’ he notes, ‘is to pursue, relentlessly and without exception, its own self-interest, regardless of the often harmful consequences it might cause to others.’ By its own legal definition, therefore, the corporation is ‘a pathological institution’, and Bakan helpfully lists the diagnostic features of its default pathology (lack of empathy, pursuit of self-interest, grandiosity, shallow affect, aggression, social indifference) to show what a reliably disturbed patient the corporation is.

Why should all of these contemporary social and economic practices and processes generate so much illness, so many disorders? To answer this I think we need to look back at the wider Enlightenment project, and the psychological models of human nature out of which they emerged. Modern capitalism grew out of seventeenth century concepts of man as some sort of disconnected, discontinuous, disengaged self – one driven by competition and a narrow, ‘rational’ self-interest – the concept of homo economicus that drove and underwrote much of the whole Enlightenment project, including its economic models. As Iain McGilchrist notes, ‘Capitalism and consumerism, ways of conceiving human relationships based on little more than utility, greed, and competition, came to supplant those based on felt connection and cultural continuity.’

We now know how mistaken, and destructive, this model of the self is. Recent neuroscientific research into the ‘social brain’, together with exciting developments in modern attachment theory, developmental psychology, and interpersonal neurobiology, are significantly revising, and upgrading, this rather quaint, old-fashioned view of the isolated, ‘rational’ individual – and also revealing a far richer and more sophisticated understanding of human development and identity, through increased knowledge of ‘right hemisphere’ intersubjectivity, unconscious processes, group behaviour, the role of empathy and mentalisation in brain development, and the significance of context and socialisation in emotional and cognitive development.

As neuroscientist David Eagleman observes, the human brain itself relies on other brains for its very existence and growth—the concept of ‘me’, he notes, is dependent on the reality of ‘we’:

We are a single vast superorganism, a neural network embedded in a far larger web of neural networks. Our brains are so fundamentally wired to interact that it’s not even clear where each of us begins and ends. Who you are has everything to do with who we are. There’s no avoiding the truth that’s etched into our neural circuitry: we need each other.

Dependency is therefore built into the fabric of who we are as social and biological beings, hardwired into our mainframe: it is ‘how love becomes flesh’, in Louis Cozolino’s striking phrase. ‘There are no single brains,’ Cozolino observes, echoing Winnicott, ‘brains only exist within networks of other brains.’ Some people have termed this new neurological and scientific understanding of the deep patterns of interdependency, mutual cooperation, and the social brain ‘neuro-Marxism’ because of the implications involved.

Capitalism is, it seems, rooted in a fundamentally flawed, naive, and old-fashioned seventeenth-century model of who we are – it tries to make us think that we’re isolated, autonomous, disengaged, competitive, decontextualised – an ultimately rather ruthless and dissociated entity. The harm that this view of the self has done to us, and our children, is incalculable.

Many people believe, and are encouraged to believe, that these problems and disorders – psychosis, schizophrenia, anxiety, depression, self-harm – these symptoms of a ‘sick world’ (to use James Hillman’s terrific description) are theirs, rather than the world’s. ‘But what if your emotional problems weren’t merely your own?’, asks Tom Syverson. ‘What if they were our problems? What if the real problem is that we’re living in wrong society? Perhaps Adorno was correct when he said, “wrong life cannot be lived rightly”.’

The root of this ‘living wrongly’ seems to be because we live in a social and economic system at odds with both our psychology and our neurology, with who we are as social beings. As I suggest in my book, we need to realise that our inner and outer worlds constantly and profoundly interact and shape each other, and that therefore rather than separating our understanding of economic and social practices from our understanding of psychology and human development, we need to bring them together, to align them. And for this to happen, we need a new dialogue between the political and personal worlds, a new integrated model for mental health, and a new politics.

Rod Tweedy is an author and editor of Karnac Books, a leading independent publisher of books on mental health and therapy. His edited collection, The Political Self: Understanding the Social Context for Mental Illness, is published by Karnac.

Challenging the Music Industry's Commodity Complex: An Interview with Punk-Rock Guerilla, Justin Pearson

By Mimi Soltysik

This interview originally appeared at The Socialist , the official publication of the Socialist Party USA.

"Would the owner of an ounce of dignity please contact the mall security?"

- The Locust

What Justin Pearson has done and continues to do as an artist isn't going to be for everyone. It's a challenge. Perhaps it's a threat. Notes and shrieks spray like bullets through the speakers. Our attention, so thoroughly bombarded by the mass marketing of apathy, pacification, and complacency, is the target. While critics fawn over his work with The Locust, Dead Cross, and RETOX, Justin's resume reads (and sounds) like a massive "fuck you" to a dying music industry's lowest-common-denominator commodity complex. As a longtime fan, I'm here for it. A passive discussion with Justin Pearson might be possible. But when you have a minute with a punk rock guerrilla, why go passive?

Mimi : The first time I saw you perform was with the Locust back in 2000 at the Smell in L.A. At the time, it sounded to me like the audio companion to systems collapse. I mean no offense when I say that. It felt like a storm was brewing and the Locust was going to be the soundtrack. Eighteen years later, it seems to have been somewhat prophetic. Since then, we've had the wars in Iraq and Afghanistan, the financial crisis, incredibly bleak news about climate change, and of course, Donald Trump. And all of this happening at a point where, with social media, we're seeing the collapse in real time. I'm wondering what you were feeling, as an artist, that led to that sound? What was your environment like? Was there a relationship between the socio-political environment and what you were creating musically? How does an album like "Plague Soundscapes" fit today?

Justin : Thanks for the analogy of our sound. I think you are pretty accurate in that description. I think that music in a much broader platform, perhaps addressed just as art in general, can draw from non-musical aspects. Where one would ask a band what their musical influences are to understand what pushes them to do what they do, it might be just as important, or maybe even more important to address the things outside of music that are influential. Of course, what we do is subjective and anyone can interpret it how one wants to. And even with that being said, most of the time, for me at least, I am not even aware of what might have influenced something I was part of when it's coming to life. So with The Locust and probably a lot of stuff I'm part of, influences come from social politics, culture, economics, and then it also brings in science fiction, absurdity, subversion, and probably a million other elements that helped shape what we do. I do feel, unfortunately in 2018, something like The Locust's "Plague Soundscapes" is relevant, both musically and lyrically. Perhaps even aesthetically still relevant too. I grew up thinking that it's the job of artists to reflect what the world that they live in consists of, and with that, it's also their job to change it or influence change. But with all that being said, it's just music, or just art. It's not like we are great revolutionaries in the world. However, it is music that transcends certain things such as age, gender, language, geography, etc. It speaks to people, it enables people to do certain things, and at times, keeps people alive. But a lot of the stuff you mentioned, such as the war in Iraq and Afghanistan, as well as stuff like climate change and possibly the overall destruction of the planet, were already on our radar. Those were things that we were aware of at the time, so I wouldn't call it prophetic, but more accurately just being aware of the world as a whole. Sure, before Rump managed to get into office, it seemed impossible and extremely absurd. But if you were to consider a lot that has happened previous to that, such as Vietnam, the assassination of Kennedy, the Nixon administration and Water Gate, even Reagan, a crappy actor, becoming President, it all seemed unimaginable.

On a basic musical level, I have always been drawn to what some might see as non-traditional musical elements. I grew up with stuff like PIL, Septic Death, This Heat, and even more known artists like Cecil Taylor, or maybe even Sigue Sigue Sputnik. So stuff like that coupled with not having a proper musical education possibly translated into the general realm of what I have been part of. And with those musical influences, they all seem to have depth to what they did. It wasn't the run-of-the-mill lowest common denominator music that is often what is marketed on a larger level. I grew up really resonating with stuff that people thought was garbage.

Mimi : I think that the piece about the impact that outside influences can have on songwriting might be overlooked a bit. I'm glad you brought that up. Would it be safe to say that, with something like the new Dead Cross EP, we're hearing that impact, or is there a concerted effort to put something together that has a specific sound? And shit, how are you feeling in 2018? I don't know that I see many cases where artists are asked how they might be holding up emotionally. It's such a big consideration within organizing and activism circles. How are we taking care of ourselves? Are we supporting another? Seriously, how are you?

Justin : I wish there was an easy answer. For me, what I end up doing, or being part of, usually stems from my subconscious, or comes from something that might include elements that I am not initially aware of. It's the retrospect where I can fully study the outcome of something that I was part of. I can breathe and dissect it with ease and in peace (with myself). I think over the years, while everything that happened, tons of weird energy was exchanged and moved. It made sense to some degree, but it took time to really see the broader picture or possible understand the magnitude of something. I'm not sure if that makes sense or not. I suppose, the simplistic way to answer that part of this question would be that fortunately things seem to come organically, for the most part. However with that being said, organically doesn't mean that it's a simplistic way, or a peaceful experience, or that it comes from a natural space. So moving into the later part of your question, about the era that we are in, it's grim in many respects. It's more and more absurd. I feel a great deal more anxiety than what I felt in recent years. It seems that time might be running out. I can feel the tension in the air, and smell the shit that is lingering. But with that being said, I can see new ideas, I feel rad power from people, and change is being birthed and evoked in a lot of creative and powerful stuff. Man, this is a massive, massive topic to try to articulate and nail down in a simple answer. I guess over all, I see things being polarized. I do think that might be what was and is needed, to avoid the stagnation that seemed to keep everything at bay. For so long, I could see that nasty band-aid on everything was gonna fall off eventually. It sure seems to have fallen.

Mimi : The band-aid metaphor really strikes a chord, no pun intended. From where folks on the radical left stand, capitalism is a cancer that is consistently growing. Reforms are essentially band aids, providing some minor relief and perhaps offer a veneer of progress. But with each band aid applied, the cancer grows. It seems like we're getting to a place where the band aids no longer offer that veneer, that hope. I mean, for so many oppressed communities throughout the world, there's been no band aid. And I'm seeing little hints here and there that some are in the U.S. are becoming aware of that. In that context, do you have feelings about the potential impact of your music, whether it be RETOX or Dead Cross? Your audiences are living in that context. Do you feel any sense of responsibility to play a role in how we move forward? To how your audience perceives your output and where they might go with that perception? And I do acknowledge that, when I'm asking this, I know that this is some heavy shit. I know of very, very few artists who would be willing to engage in this kind of dialogue and I have tremendous respect for you in agreeing to participate.

Justin : It's so interesting to do this interview. I'm also doing some press for the Dead Cross EP that just came out and to be honest, most of the questions I get are garbage, have no substance, and are not challenging aside from challenging me to figure out how to write something interesting to a vague irrelevant inquiry. So thank you for providing the opposite of that stuff.

As for the concept of responsibility, you are correct, that is a massive topic. I'm not trying to take the easy way out, but I don't feel that I'm responsible for anyone aside from myself. When someone creats art that is in the public sector, it can reach one other person, or a million other people and I still don't think that the artist is responsible for anyone outside of themselves. Maybe that is the part of me who identifies with the concept of anarchy. But for me, I feel I have aligned myself with people to communicate certain things, or even just one certain general thing. We then say what we have to say, maybe over and over each time we play, or with each album, and so on. We are calculated, educated, and aware, for the most part. Once we create that art, we can also learn from it, and adjust it, for the next attempt. Then we grow on our own, and hold ourselves responsible for our own actions and words. Or perhaps we adjust that thing being communicated and see if we can speak differently, and possibly set things straight outside of ourselves. A song is something that might not be linear, it's not physical. It's energy and that energy at times goes beyond language, class, race, geography, gender, etc. I think I might be going down a wormhole here, trying to figure out how to address the responsibility on an artist, but it might be the artist who are reflecting the world that they live in. It could be the world's voice. At least it is for myself. So maybe the responsibility could be placed on the world that we live in, which is what created the art.

Mimi : Why do you think that questions posed to artists are frequently garbage? What do you think fans lose as a result? I mean, I know there are probably many who feel that's "just the way it is" or that "it's the nature of the beast", but does it have to be that way? I also wanted to ask you, as someone who has been involved with the music business for quite some time, albeit not necessarily in the employ of the major labels, how do you think the music business might be different if it was run on a socialist model, where the workers owned and controlled production, where they had democratic control over process, and where the full value of their labor couldn't be exploited from above?

Justin : I assume there are a few reason why interviews are garbage. For one, the person conducting the interview isn't always invested in it. Perhaps there is some sort of need to get a piece about a band's new album, so the publication just assigns the interview to whoever works there. I really don't care to talk about how Dead Cross started, or what the date was when we put the band together, or why we play hardcore. You can Google those answers. And with questions like that, it's void of conversation and substance. You can tell, even out of ten or so questions, where there isn't one thing that is unique or specific to the band, that they are just uninterested. It's almost like it makes more work for the band to come up with a way to spin something that won't come off as boring and general just to locate some sort of substance. I'm not sure that socialism would play into making an interview be better for a certain publication. I think more so, it's just people being lazy, or being told what to do, or people being uneducated, or perhaps it's part of some facet of a broken industry. I have done way too many fill-in-the-blank interviews over time to really understand why they even still exist. You'd assume with the internet, and blogs, that people would be able to create new things and communicate about genuine things by people who are genuine. There are really awesome publications out there and great interviews do exist. But at the end of the day, I'm not in a place to pass up interviews, since they could help with a show, or a tour, or perhaps equate to at least one new listener.

Mimi : When did Dead Cross start? Just kidding. At the end of the day, while what you do is art, it's also how you make a living. Do you feel that artists, and you specifically, are treated fairly for the work they do? And how do you think a broken music industry can repair? Is it possible? If Justin Pearson was tasked with fixing the music industry, what would he do?

Justin : Good one! Make a living? Another good one. You are on a roll here. I often reference this thing that John Waters once said to me, something like, if you want to make art that is legit and by your own standards, you have to intern for yourself for roughly forty years before you make money. So I'm half way there by those guidelines. But as far as fixing something like the music industry, shit. If I had an answer to that I wouldn't be doing this interview. I'd be a wealthy philanthropist and my intern could answer this for me. But maybe there is no need to fix the industry, or at least no need for me to come up with a way to do so. It's done a great job at killing itself over the past few decades. It's been rude and arrogant. But with that being said, to me, the industry as it's perceived, is becoming more and more irrelevant. I see music in a much larger picture. Music is more than sound for me. It's part of something bigger that fits under the umbrella of art. There are aspects that are part of music, such as intellect, chance, aesthetic, and so on, that are never the industry focal point. Making profit was never an objective. And with that, we can take it a bit further. It wasn't something that was done for fun. It was a necessity in our lives. It still is that very same thing.

Mimi : You wrote on your label's website that you "started Three One G in hopes to better the quality and creativity of stuff that I was part of, as well as the music culture that I am part of - something obtainable, tangible, and real." Would you say that, to achieve that goal, that hope, ownership (not in some sort of greedy "it's mine, asshole!" way, but in a direct involvement way) of the process is necessary? And as possible advice for artists who might have an interest in taking a similar approach, what are you doing to realize that vision? Are there artists that may have forged a path that you've been following?

Justin : I mean, the creator of something is the owner. Or we could use a different term I suppose. Something less capitalistic, ha! But nonetheless, we own what we create in my opinion. Nonetheless, the concept of obtainable, tangible, and real is basically something that my ethics are derived from. You know, the basic ideals behind what "punk" was born out of, and what later became known as DIY. We all can do this stuff. I'm not special. We can all own our creations. We can also give that stuff away for $8.99 or for gas money, or a floor to sleep on, or whatever it is that we need to survive. Whatever we feel is suitable. As for artists who steered me on a path, I would say that Dischord was easily one of the biggest influences on my early life in the world of music. Then Ebullition, which I ended up releasing records on. And then later, perhaps Gravity. I think those tree labels are what have collectively made Three One G what it is.

Mimi : Dischord was probably the first time I'd seen some sort of ethics introduced on what might be called the "business" side of things. I still look at what Dischord's done - frequently - and find inspiration. It's like Ian MacKaye found a way to say "fuck you," in a really empowering way, to the gross excess of corporate music. You mentioned a bit ago that you see these glimpses of power coming from the people. Are you seeing those glimpses in the music community? Are there things you might be seeing from your side of things that the rest of us aren't quite yet? Where do you think music might be headed? Where might the industry overall be headed? I hear arena rock artists like KISS (fuck Gene Simmons, by the way) say that they might not make full-length albums any longer because there's no money in it, that they won't be paid fairly for their work.

Justin : My reference to power might be misconstrued. Power definitely has a negative or oppressive element to it. But I think I meant power more along the lines of energy that humans exchange, and sometime though music, and therefore, a positive concept. I suppose my terminology comes from stuff like The Stooges "Raw Power," other than some bullshit spewed out by Ian Stewart. As for the music community, just like the music industry, I'm not sure I have answers there. I think outside of those guidelines. And again, if I knew where things were headed, I would prepare myself. I just have no idea where most things on this planet are headed.

Mimi : I just gotta ask. What does "punk" mean to you? Is punk inherently an expression of resistance or rebellion? If it is, do you think it's a good sign when a band like Motley Crue covers a Sex Pistols song?

Justin : Awe, the "what is the meaning of life" question. I can certainly tell you what punk doesn't mean to me, which is Sid Vicious, or the commercialized image of nihilism. To me, it's cultural, political, social, progressive, and a million other things. Punk is James Chance deciding to wear a suit and play a sax since punk was said to be the opposite. Punk is The Weather Underground, pet rescues, re-purposing the bourgeoisie's trash, the Me Too movement, sustainable living, Planned Parenthood - it's everywhere.

Mimi : There's been a lot that you've said that would be fairly-well in alignment with what we might call "radical." The interesting thing about radical ideas, to me, is that when you say them out loud, they appear to be common sense, like they are just expressions of care and support. Yet, in the U.S., those ideas are packaged as being subversive or worse. Do you think we'll see the day in this country where we'll penetrate the propaganda surrounding radical/revolutionary politics and shift toward models that see people, not profit, as the priority? I mean, I think we can understand why the rich would have an interest in protecting their power and systems of exploitation and oppression. Do you feel like it's a foregone conclusion that they will maintain that power? You're going to have fans that will read this. What message would you have for them about the roles they might play in fighting that oppression and exploitation?

Justin : I do think ideas that were once looked at as radical are the norm now. It just takes times. Unfortunately too much time though. It's like that saying, change comes one funeral at a time. When I was fifteen, and had to stick up for LBGTQ+ friends as well as myself, or when I decided to have a plant based diet, or even when I started playing music, all of that stuff was so out there, and people thought it was crazy. Now, all of it seems normal. Homophobia is not acceptable by any means, you can get vegan food just about anywhere now, and my first band sounds like stuff you hear on the radio or on TV now. It just takes a lot of time, but it will change. I'm not sure it's necessarily a class thing though. I do feel that there are wealthy progressive people, who do good for the people. However, it's the oppressive forces in charge who use the idea of having people hate downwards to keep others oppressed. We've seen it first hand, in our faces recently, with the white middle class hating the poor. But as far as a message to send, in relation to oppression and exploitation, I'm not sure. That is a massive space to try to fill with one's ideas. I do think, no matter what class one falls into, it's extremely important to pay attention where you spend your money and what it's going to. That is the real way to vote, by how you spend, or don't spend your money. We can bring down corporations by being smart and funding progressive entities and not the garbage ones out there.

Mimi : Before we wrap up, I want to thank you for doing this interview. I've seen very, very few artists agree to engage with a radical publication. Why do you think that is? And why did you agree to do this?

Justin : Perhaps a lot of artists are scared to make not be known where they stand on things. Or they don't care to discuss such topics. I agreed for a couple reasons. I'll pretty much do any interview that someone wants to do with me. I'm grateful for that in itself, being aware that someone cares to some extent about the stuff I am part of. But with you, I was pretty psyched to get into an interesting conversation. If anything, it's a honor to have you want to talk with me about the stuff we have covered.

Mimi : Again - many, many thanks. I really appreciate that you've taken the time to do this. In parting, I think there are going to be a lot of radicals/revolutionaries reading this who are just learning about what you've done. What about you, as an artist, do you feel is the most important piece or takeaway that folks walk away with? Any parting words you might have for the comrades?

Justin : Speaking of how interviews pan out, the parting ways last words part is so fucked. Especially to fellow comrades. Ha! There is a lot that we should be discussing, and a lot that I could, or should say, but where do I start or what is punctual enough to wrap this up? I guess I can leave it with a quote that I reference almost daily.

"The opposite of love is not hate, it's indifference" - Elie Wiesel

Thank you for taking the time to talk to me.

Identity Theft and the Body's Disappearance

(Art by Steve Cutts)

By Robert Bohm

"What sphinx of cement and aluminum bashed open their skulls and ate up their brains and imagination?"

- Allen Ginsberg from his poem " Howl "

Identity theft, at least the most familiar type, is possible because today the individual exists not merely as flesh and blood, but as flesh and blood spliced with bank account numbers, user names, passwords, credit card chips, etc. These added parts aren't secondary to the individual's overall identity, they're central to it. Sometimes they're all there is of it, as in many banking and purchasing transactions. In such instances, the data we've supplied to the relevant institutions doesn't merely represent us, it is us. Our bodies alone can't complete transactions without the account numbers, user names, passwords, credit card numbers, and ID cards which have become our identity's essence. Without them, in many ways, we don't exist.

In a worst case scenario, if someone gets hold of this private data, they can become us by possessing the data that is us. Following this, who or what we are is no longer a question. We don't exist, except in the form of a stolen dataset now under someone else's control.

In such a case, an unknown proxy has eliminated us and become who we once were.

Although problematic, the above form of identity theft is relatively minor. A worse form is one we all know about, yet chronically underestimate because we think of ourselves as too canny to be conned. Nonetheless, this other form of identity theft frames and limits everything we do. In the process, it fleeces us of the fullness of our identities and subjects our lives to a type of remote control. This remote control consists of the combined influence on us, from childhood onward, of society's major institutions and dominant activities, which seed us with a variety of parameters for how to acceptably navigate society and and its particular challenges.

This process is usually called "socialization." However, it's better seen as a sorting procedure in which society sifts us through a citizenship sieve in order to eliminate supposed defects, thereby guaranteeing that, despite each of us possessing unique characteristics, we share an underlying uniformity. Ultimately, this process is a kind of identity eugenics which strives to purify the population by eliminating or weakening troublesome qualities - e.g., an overly questioning attitude, chronic boundary-testing, a confrontational stance toward authority, a fierce protectiveness toward whatever space the body inhabits, etc. Such traits are frowned upon because they're seen by the status quo as a likely threat to society's stability.

Such indoctrination is much subtler yet, in many ways, more pervasive than outright propaganda. Its theater of operations is everywhere, taking place on many fronts. Public and private education, advertising, mass culture, government institutions, the prevailing ideas of how to correct socioeconomic wrongs (this is a "good" form of protest, this a "bad" one), the methods by which various slangs are robbed of their transgressive nature through absorption into the mainstream, the social production of substitute behaviors for nonconformity and rebellion - each of these phenomena and others play a role in generating the so-called "acceptable citizen," a trimmed down (i.e., possesses reduced potential) version of her or his original personality.

Make no doubt about it, this trimming of the personality is a form of identity theft. It is, in fact, the ultimate form. Take as an example the African slave in the U.S.: abducted from her or his homeland, forbidden from learning to read or write, denied legal standing in the courts, given no say over whether offspring would be sold to another owner or remain with them. The slave was robbed of her/his most essential identity, their status as a human being.

In his book, The Souls of Black Folk , W.E.B. Du Bois described this theft in terms of how slavery reduces the slave to a person with "no true self-consciousness" - that is, with no stable knowledge of self, no clear sense of who she or he is in terms of culture, preceding generations, rituals for bringing to fruition one's potential to create her or his own fate. As Du Bois correctly argued, this left the slave, and afterwards the freed Black, with a "longing to attain self-conscious manhood," to know who she or he was, to see oneself through one's own eyes and not through the eyes of one's denigrators - e.g., white supremacists, confederate diehards, "good" people who nonetheless regarded Blacks as "lesser," etc. Du Bois understood that from such people's perspectives, Blacks possessed only one identity: the identity of being owned, of possessing no value other than what its owner could extract from them. Without an owner to extract this value, the slave was either identity-less or possessed an identity so slimmed and emaciated as to be a nothing.

The point here isn't that today socialization enslaves the population in the same way as U.S. slavery once enslaved Blacks, but rather that identity theft is, psychologically and culturally speaking, a key aspect of disempowering people and has been for centuries. Today, because of mass culture and new technologies, the methods of accomplishing it are far more sophisticated than during other eras.

How disempowerment/identity theft occurs in contemporary society is inseparable from capitalism's current state of development. We long ago passed the moment (after the introduction of assembly line production in the early 20th century) when modern advertising started its trek toward becoming one of the most powerful socialization forces in the U.S. As such, it convinces consumers not only to purchase individual products but, even more importantly, sells us on the idea that buying in general and all the time, no matter what we purchase, is proof of one's value as a person.

To accomplish this end, modern advertising was molded by its creators into a type of PSYOP designed for destabilizing individuals' adherence to old saws like "a penny saved is a penny earned" and "without frugality none can be rich, and with it very few would be poor." Once this happened, the United States' days of puritan buying restraint were over. However, modern advertising was never solely about undermining personal fiscal restraint. It was also about manipulating feelings of personal failure - e.g., dissatisfaction with lifestyle and income, a sense of being trapped, fear of being physically unappealing, etc. - and turning them not into motives for self-scrutiny or social critiques, but into a spur for commodity obsession. This wasn't simply about owning the product or products, but an obsessive hope that buying one or more commodities would trigger relief from momentary or long-term anxiety and frustration related to one's life-woes: job, marriage, lack of money, illness, etc.

Helen Woodward, a leading advertising copywriter of the early decades of the 20th century, described how this was done in her book, Through Many Windows , published in 1926. One example she used focused on women as consumers:

The restless desire for a change in fashions is a healthy outlet. It is normal to want something different, something new, even if many women spend too much time and too much money that way. Change is the most beneficent medicine in the world to most people. And to those who cannot change their whole lives or occupations, even a new line in a dress is often a relief. The woman who is tired of her husband or her home or a job feels some lifting of the weight of life from seeing a straight line change into a bouffant, or a gray pass into a beige. Most people do not have the courage or understanding to make deeper changes.

Woodward's statement reveals not only the advertising industry's PSYOP characteristic of manipulating people's frustrations in order to lure them into making purchases, but also the industry's view of the people to whom it speaks through its ads. As indicated by Woodward's words, this view is one of condescension, of viewing most consumers as unable to bring about real socioeconomic change because they lack the abilities - "the courage or understanding" - necessary to do so. Consequently, their main purpose in life, it is implied, is to exist as a consumer mass constantly gorging on capitalism's products in order to keep the system running smoothly. In doing this, Woodward writes, buyers find in the act of making purchases "a healthy outlet" for troubled emotions spawned in other parts of their lives.

Such advertising philosophies in the early 20th century opened a door for the industry, one that would never again be closed. Through that door (or window), one could glimpse the future: a world with an ever greater supply of commodities to sell and an advertising industry ready to make sure people bought them. To guarantee this, advertisers set about creating additional techniques for reshaping public consciousness into one persuaded that owning as many of those commodities as possible was an existential exercise of defining who an individual was.

In his book The Consumer Society , philosopher Jean Baudrillard deals with precisely this process. He writes that such a society is driven by:

the contradiction between a virtually unlimited productivity and the need to dispose of the product. It becomes vital for the system at this stage to control not only the mechanism of production, but also consumer demand.

"To control ... consumer demand." This is the key phrase here. Capitalist forces not only wanted to own and control the means of production in factories, it also wanted to control consumers in such a way that they had no choice but to buy, then buy more. In other words, capitalism was in quest of a strategy engineered to make us synch our minds to a capitalism operating in overdrive ("virtually unlimited" production).

The way this occurs, Baudrillard argues, is by capitalism transforming (through advertising) the process of buying an individual product from merely being a response to a "this looks good" or "that would be useful around the house" attitude to something more in line with what psychologists call "ego integration." It refers to that part of human development in which an individual's various personality characteristics (viewpoints, goals, physical desires, etc.) are organized into a balanced whole. At that point, what advertising basically did for capitalism was develop a reconfigured ego integration process in which the personality is reorganized to view its stability as dependent on its life as a consumer.

Advertisers pulled this off because the commodity, in an age of commodity profusion, isn't simply a commodity but is also an indicator or sign referring to a particular set of values or behavior, i.e. a particular type of person. It is this which is purchased: the meaning, or constellation of meanings, which the commodity indicates.

In this way, the commodity, once bought, becomes a signal to others that "I, the owner, am this type of person." Buy an Old Hickory J143 baseball bat and those in the know grasp that you're headed for the pros. Sling on some Pandora bling and all the guys' eyes are on you as you hip-swing into the Groove Lounge. Even the NY Times is hip to what's up. If you want to be a true Antifa activist, the newspaper informed its readers on Nov. 29, 2017, this is the attire you must wear:

Black work or military boots, pants, balaclavas or ski masks, gloves and jackets, North Face brand or otherwise. Gas masks, goggles and shields may be added as accessories, but the basics have stayed the same since the look's inception.

After you dress up, it's not even necessary to attend a protest and fight fascists to be full-blown Antifa. You're a walking billboard (or signification) proclaiming your values everywhere. Dress the part and you are the part.

Let's return to Baudrillard, though. In The System of Objects , another of his books, he writes about how the issue of signification, and the method by which individuals purchase particular commodities in order to refine their identity for public consumption, becomes the universal mass experience:

To become an object of consumption, an object must first become a sign. That is to say: it must become external, in a sense, to a relationship that it now merely signifies ... Only in this context can it be 'personalized', can it become part of a series, and so on; only thus can it be consumed, never in its materiality, but in its difference.

This "difference" is what the product signifies. That is, the product isn't just a product anymore. It isn't only its function. It has transitioned into an indicator of a unique personality trait, or of being a member of a certain lifestyle grouping or social class, or of subscribing to a particular political persuasion, Republican, anarchist, whatever. In this way, choosing the commodities to purchase is essential to one's self-construction, one's effort to make sure the world knows exactly who they are.

The individual produced by this citizen-forming process is a reduced one, the weight of her/his full personality pared down by cutting off the unnecessary weight of potentials and inclinations perceived as "not a good fit" for a citizen at this stage of capitalism. Such a citizen, however, isn't an automaton. She or he makes choices, indulges her or his unique appetites, even periodically rebels against bureaucratic inefficiency or a social inequity perceived to be particularly stupid or unfair. Yet after a few days or few months of this activity, this momentary rebel fades back into the woodwork, satisfied by their sincere but token challenge to the mainstream. The woodwork into which they fade is, of course, their home or another favorite location (a lover's apartment, a bar, a ski resort cabin, a pool hall, etc.).

From this point on, or at least for the foreseeable future, such a person isn't inclined to look at the world with a sharp political eye, except possibly within the confines of their private life. In this way, they turn whatever criticism of the mainstream they may have into a petty gripe endowed with no intention of joining with others in order to fight for any specific change(s) regarding that political, socioeconomic or cultural phenomenon against which the complaint has been lodged. Instead, all the complainer wants is congratulations from her or his listener(s) about how passionate, on-target, and right the complaint was.

This is the sieve process, identity eugenics, in action. Far more subtle and elastic than previous methods of social control, it narrows what we believe to be our options and successfully maneuvers us into a world where advertising shapes us more than schools do. In this mode, it teaches us that life's choices aren't so much about justice or morality, but more about what choosing between commodities is like: which is more useful to me in my private life, which one better defines me as a person, which one makes me look cooler, chicer, brainier, hunkier, more activist to those I know.

It is in this context that a young, new, "acceptable" citizen enters society as a walking irony. Raised to be a cog in a machine in a time of capitalistic excess, the individual arrives on the scene as a player of no consequence in a game in which she or he has been deluded that they're the game's star. But far from being a star, this person, weakened beyond repair by the surrender of too much potential, is so without ability that she or he has no impact whatsoever on the game. Consequently, this individual is, for all practical purposes, an absence. The ultimate invisible person, a nothing in the midst of players who don't take note of this absence at all. And why should they? The full-of-potential individual who eventually morphed into this absence is long gone, remembered by no one, except as a fading image of what once was.

This process of reducing a potentially creative person into a virtual non-presence is a form of ideological anorexia. Once afflicted, an individual refuses nourishment until they're nothing but skin and bones. However, the "weight" they've lost doesn't consist of actual pounds. Instead, it involves a loss of the psychological heftiness and mental bulk necessary to be a full human being.

One can't lose more weight than that.

Human life as we once knew it is gone, replaced by the ritual of endless purchasing. This is existence in what used to be called "the belly of the beast." Our role in life has become to nourish capitalism by being at its disposal, by giving of ourselves. Such giving frequently entails self-mutilation: the debt, credit card and otherwise, that bludgeons to death the dreams of many individuals and families.

This quasi-religious self-sacrifice replicates in another form: the Dark Ages practice employed by fanatical monks and other flagellants who lashed themselves with whips made from copper wires, thereby ripping their flesh and bleeding until they descended into a state of religious hysteria. The more we give of ourselves in this way, the thinner and more weightless we become. Meanwhile, the god whom Allen Ginsberg called Moloch grows more obese day after day, its belly is filled with:

Robot apartments! invisible suburbs! skeleton treasuries! blind capitals! demonic industries! spectral nations! invincible madhouses! granite cocks! monstrous bombs!...

Dreams! adorations! illuminations! religions! the whole boatload of sensitive bullshit!

What capitalism wants from us, of course, isn't merely self-sacrifice, it's surrender. Hunger for life is viewed negatively by the status quo because it nourishes the self, making it stronger and more alert and, therefore, better prepared to assert itself. The fact that such an empowered self is more there (possesses more of a presence) than its undersized counterpart makes the healthier self unacceptable to the powers that be. This is because there-ness is no longer an option in our national life. Only non-there-ness is. If you're not a political anorexic, you're on the wrong side.

Wherever we look, we see it. Invisibility, or at least as much of it as possible, is the individual's goal. It's the new real. Fashion reveals this as well as anything. It does so by disseminating an ideal of beauty that fetishizes the body's anorexic wilting away. Not the body's presence but its fade to disappearance is the source of its allure. The ultimate fashion model hovers fragilely on the brink of absence in order not to distract from the only thing which counts in capitalism: the commodity to be sold - e.g., the boutique bomber jacket, the shirt, the pantsuit, the earrings, the shawl, the stilettos, the iPhone, the Ferrari, and, possibly most of all, the political passivity intrinsic to spending your life acquiring things in order to prove to others and ourselves that we've discovered in these things something more useful than Socrates' goal of knowing thyself or Emma Goldman's warning , "The most unpardonable sin in society is independence of thought."

What is true on the fashion runway is also true in politics. Just as the best model is one thin enough to fade into non-presence, so our democracy, supposedly ruled "by and for the people," has thinned down so much that "the people" can't even be seen (except as stage props), let alone get their hands on democracy except in token ways. No matter how often we the people are praised rhetorically by politicians, we aren't allowed as a group to get in the way of the capitalist system's freedom to do whatever it wants in order to sustain commodity worship and guarantee capital's right to permanent rule. If the military-industrial complex needs another war in order to pump out more profits, then so be it. We have no say in the matter. The identity theft built into society's structure makes sure of this. It's stripped us of our "weight" - our creativity, our willingness to take political risks, our capacity to choose action over posturing. After this forced weight loss, what's left of us is a mess. Too philosophically and psychologically anemic to successfully challenge our leaders' decisions, we, for all practical purposes, disappear.

As a reward for our passivity, we're permitted a certain range of freedom - as long as "a certain range" is defined as "varieties of buying" and doesn't include behavior that might result in the population's attainment of greater political power.

So, it continues, the only good citizen is the absent citizen. Which is to say, a citizen who has dieted him or herself into a state of political anorexia - i.e., that level of mental weightlessness necessary for guaranteeing a person's permanent self-exclusion from the machinery of power.

***

Our flesh no longer exists in the way it once did. A new evolutionary stage has arrived.

In this new stage, the flesh isn't merely what it seems to be: flesh, pure and simple. Instead, it's a hybrid. It's what exists after the mind oversees its passage through the sieve of mass culture.

After this passage, what the flesh is now are the poses it adopts from studying movies, rappers, punk rockers, fashionistas of all kinds, reality TV stars, football hunks, whomever. It's also what it wears, skinny jeans or loose-fitting chinos, short skirt or spandex, Hawaiian shirt or muscle tank top, pierced bellybutton, dope hiking boots, burgundy eyeliner. Here we come, marching, strolling, demon-eyed, innocent as Johnny Appleseed. Everybody's snapping pics with their phones, selfies and shots of others (friends, strangers, the maimed, the hilarious, the so-called idiotic). The flesh's pictures are everywhere. In movie ads, cosmetic ads, suppository ads, Viagra ads. This is the wave of the already-here but still-coming future. The actual flesh's replacement by televised, printed, digitalized and Photoshopped images of it produces the ultimate self-bifurcation.

Increasingly cut off from any unmediated life of its own, the flesh now exists mostly as a natural resource for those (including ourselves) who need it for a project; to photograph it, dress it up, pose it in a certain way, put it on a diet, commodify/objectify it in any style ranging from traditional commodification to the latest avant-garde objectification.

All these stylings/makeovers, although advertised as a form of liberation for the flesh (a "freeing" of your flesh so you can be what you want to be), are in fact not that. Instead, they are part of the process of distancing ourselves from the flesh by always doing something to it rather than simply being it.

When we are it, we feel what the flesh feels, the pain, the joy, the satisfaction, the terror, the disgust, the hints of hope, a sense of irreparable loss, whatever.

When we objectify it, it is a mannequin, emotionless, a thing that uses up a certain amount of space. As such we can do what we want with it: decorate it, pull it apart, vent our frustrations on it, starve it, practice surgical cuts on it, put it to whatever use we like. It isn't a person. It is separate from our personhood and we own it.

In fact we own all the world's flesh.

We live, after all, in the American Empire, and the Empire owns everything. As the Empire's citizens, we own everything it owns. Except for one thing: ourselves.

***

The flesh is both here and not here. Increasingly, it is more an object that we do things to - e.g., bulk it up, change its hair color, mass-kill it from a hotel window on the 32nd floor, view in a porno flick - than a presence in its own right (i.e., self-contained, a force to be reckoned with). In this sense, it is a growing absence, each day losing more of its self-determination and becoming more a thing lost than something that exists fully, on its own, in the here and now. Given this, the proper attitude to have toward the flesh is one of nostalgia.

Of course, the flesh hasn't really disappeared. What has disappeared is what it once was, a meat-and-bones reality, a site of pleasure and injury. Now, however, it's not so valuable in itself as it is in its in its role as a starting-off point for endless makeovers.

These makeover options are arrayed before the consumer everywhere: online, in big box stores, in niche markets and so on. Today, it is in these places, not at birth, that the flesh starts its trek toward maturation. It does this by offering itself up as a sacrifice to be used as they see fit by the fashion industry, the gym industry, the addiction-cure industry, the diet industry, the pharmaceutical industry, the education industry, etc. Each body in the nation reaches its fullest potential only when it becomes a testing site to be used by these industries as they explore more and better ways to establish themselves as indispensable to capitalism's endless reproduction.

In the end, the flesh, the target of all this competition for its attention, has less of a life on its own than it does as the object of advertisers' opinions about what can be done to improve it or to reconstruct it. Only to the extent that the flesh can transcend or reconstitute itself can it be said to be truly alive.

This last fact - about aliveness - represents the culmination of a process. This process pertains to the visualization and digitalization of everything and the consequent disappearance of everything behind a wall of signification.

A televised or computerized image, discussion, commentary, conjecture, etc., becomes the thing it meditates on, depicts or interprets. This happens by virtue of the fact that the thing itself (the real flesh behind the televised or computerized image, discussion, commentary, conjecture, etc.) has disappeared into the discussion or into the image of it presented on the computer or TV screen.

In the same way, an anorexic model (her/his flesh and blood presence) disappears into the fashions she or he displays for the public.

In each instance the thing (the flesh) now no longer exists except in other people's meditations on it; it has become those other people's meditations. The ultimate anorexic, it (the thing) has lost so much weight it's no longer physically there except as an idea in someone else's mind or in a series of binary codings inside computers.

This is the final victory of absence over there-ness, of the anorexic ideal over the idea of being fully human (i.e., "bulging with existence," "fat with life"). The self has been successfully starved to the point of such a radical thinness that it can no longer stand up to a blade of grass, let alone make itself felt by the powers that be.

This originally appeared at realprogressiveusa.com

A Brief Inquiry into the History, Logic, and Spatiality of Financial Derivatives

By Jacob Ertel

Capitalism, at its most elemental, is a system of inherent volatility. The character of this volatility is contingent on how a state's political-economic institutions are able to mitigate risk by facilitating the movement of capital. How and where this capital moves is paramount in crisis obviation. Capitalism tends towards a range of interrelated crises-democratic, economic, political, social-but central to them all is the ongoing accumulation of surplus-value. The central risk here is that competition will result in an excess of capital relative to available opportunities to reinvest it. This excess can take a range of forms, from commodities, to money, to labor power (i.e., unemployment). States may attempt to resolve crises of overaccumulation in two ways. The first involves devaluating capital through inflation, commodity gluts on the market and falling prices, diminished productive capacity, and/or falling real standards of living for workers. The second method, known as the 'spatial fix', entails developing new markets in which to invest excess capital.[1] These terrains are often conceived as untapped geographical markets that may be turned into new centers of production, thus allowing for a temporary displacement of overaccumulation. Though productive forces remain indispensible to any mode of accumulation, advanced capitalism today may be characterized above all by an ongoing 40 year shift towards the primacy of the financial sector and the predominance of circulation over production.

Whereas the motive of the production process is the extraction of surplus-value through the exploitation of labor, the circulation process itself does not create value; instead, its profits generally derive from the redistribution of surplus-value. [2] This fundamental shift (the specifics of which will be discussed below) exposes more individuals and firms to financial risk than ever before. While capital seeks out new productive markets for reinvestment in all modes of capitalist accumulation, with financialization have come new kinds of spatial fixes that cohere with the unproductive, fictitious, and redistributive logic of circulation. As both social and historical constructions, the structures that facilitate the displacement of risk undergo periods of relative strength and weakness according to the dynamic between an economy's productive capacity and its exposure to risk. [3] When productive capacity is diminished, speculative capital flows increase as investment shifts from productive to financial capital in the attempt to ensure stability against currency devaluation. With the advent of derivatives, however, risk is not only circulated faster and further, but commodified itself. Building on financialization and derivatives literature, this essay suggests that we may understand derivatives as a spatial fix in their own right, which paradoxically both displaces and amplifies risk. Despite important qualitative differences from older, more established strategies of crisis displacement, however, derivative-based spatial fixes exemplify a core dynamic central to all forms of capitalist accumulation. It will be argued here that while on one hand financial derivatives constitute the separation of the sphere of circulation from the sphere of production and thus from physical localities, they are simultaneously inextricable from them. This tension between production and circulation may in part account for the unique form of contemporary capitalist accumulation.

This essay is divided into four sections. The first section addresses the technical aspects of derivatives: what they are, how they work, and some of the different forms they may take. The second section will present an abridged history of derivatives spanning from their agricultural origins to their current use in financial markets. The third section explains how derivatives are unique from other financial instruments, and asks what these differences indicate for the state of the global economy more generally. The final section analyzes derivatives with regard to two critical concepts in geographical political economy: spatio-temporal fixes and time-space compression.

What Are Derivatives?

At the most general level, a derivative may be understood as a kind of financial contract used to expose counterparties to fluctuations in the market price of an underlying commodity, asset, or event. [4] They may also be thought of as "bilateral contract[s] that [stipulate] future payment and whose [values are] tied to the value of another asset, index, or rate or, in some cases, depends on the occurrence of an event." [5] Whereas other financial instruments may involve an exchange of principal or title, derivatives exist in order transfer value between parties based on an underlying price change or event. In so doing, derivatives exist "to bind and blend different sorts of 'particular' capital together" [6] through securitization and risk commodification. A derivative contract entails that the claim on the underlying asset or the cash value of that asset must be executed at a definite time in the future. Capital is moved until the contract is settled. As opposed to insurance instruments, which protect individuals from risk by requiring policyholders to buy in with some sort of collateral (an 'insured interest') that they could lose in the context of the issuance of the policy, derivatives do not require this kind of collateral; anyone can trade in derivatives regardless of their relation to the underlying asset.[7] As such, derivatives operate solely according to these bilateral contracts between parties with differing perspectives on or vulnerabilities to risk. [8] This is the core feature of derivatives: that a plethora of risk may be traded independent the underlying asset. This development now often comes in form of cash settlement, which frees counterparties from delivering the underlying asset.[9] Cash settlement allows various characteristics of a commodity, asset or security to be separated and traded. In financial derivatives contracts, transactions are purely monetary and do not entail any change in ownership of the underlying assets. [10] Derivatives are assigned a notional value according to the multiplication of its spot price by the number of units of the underlying asset stated on the contract. [11] Pricing derivatives is determined by a rate of interest, specifically the London Interbank Offered Rate (LIBOR). LIBOR is set by an amalgam of banks in the derivatives markets, and is made through the evaluating the average of interest rates submitted by each of these banks daily. [12]

Derivative contracts are supposed to offset volatility in financial markets by separating assets themselves from their price's volatility. [13] This separation constitutes a way to hedge the risks endemic to financial speculation, as speculators believe they can diminish their exposure to volatile asset prices. Because any potential failure to execute a contract at full notional value may be hedged through another derivative contract (valued according to perceived chance of execution of the initial derivative contract), the aggregate value circulating through derivatives contracts is grossly disproportionate to the price of all the underlying assets being traded for. [14] Despite this risk-exacerbating practice, derivatives are generally considered relatively inconsequential to capitalist economies. Because they are not a "real input in the production process nor a means of conveying wealth," and since they "fixate on short-term capital flows rather than longer-term investment," traditionally liberal economic views do not take derivatives seriously as a global threat to the banking system, even with their ability to concentrate a large amount of leverage on a single instrument. [15] Yet whereas they are often considered economically marginal and unrelated to the real economy, in fact derivatives have become the largest industry in the world, such that they themselves are becoming key sites of asset price determination rather than the other way around. [16] What these more traditional views miss, then, is that derivatives are in fact related to the real economy, despite their relative degree of separation from the production process.

Derivatives can be traded either in regulated exchanges or 'over-the-counter' (OTC). Exchanges include institutions such as the London International Financial Futures Exchange and the Chicago Mercantile Exchange. Whereas derivatives traded on exchanges require money as collateral and for extra margin payments to be made against adverse fluctuations in the market, OTC derivatives are entirely unregulated. [17] Unlike exchange-traded derivatives, which entail a finite transfer of payment between parties, OTC derivatives contracts are kept open through clearing houses that continuously circulate debt instruments. The market for OTC derivatives has expanded drastically in recent decades, bringing with it new forms of risk and volatility. OTC derivatives are cheaper and more flexible than exchange-traded derivatives, but also they carry a higher degree of risk and are not easily sold to third parties due to their relative lack of liquidity.[18] This means that during volatile periods OTC derivatives are more likely to adversely impact the entire financial system. Yet OTC trading has been on the rise despite this predicament, with nearly one third of trading taking place in dealer-to-dealer transactions, and with each transaction tied to at least one dealer bank as a counter party. [19] Dealer banks are highly concentrated, with fifteen to twenty dealers controlling bulk of OTC trading globally.[20] The boom in OTC trading may be exemplified best by the growth of hedge funds, the participation of financial wings of major corporations, and the involvement of commercial and investment banks. [21] All of this signals an increasing predominance of the financial sector of the economy over the productive sector. It also points towards greater susceptibility to economic instability, as the "default by a major institution, a shift in the prices of derivatives in financial markets sufficient to undermine the viability of a major institution, or the inability to net out obligations and receipts" could all trigger a system-wide crisis. [22] With less productive capital overall in the era of financialization, greater exposures to risk likewise threaten the longevity of the productive sector itself, which is now thoroughly integrated into the financial sphere. Taking on greater risks through trading in derivatives raises the likelihood that the investor will profit or lose money. Large losses can result in bankruptcy, engulfing the various individuals, banks, and institutions that lent money to them and exacerbating systemic risk. [23] In this sense, we may begin to better understand the paradoxical connectedness between the 'real' economy and financial markets.

Different Types of Derivatives

Most derivatives traded today take the form of forwards, futures, options, and swaps. The oldest and most intuitive type of derivative is a forward. Briefly, a forward is a contract between two parties codifying the obligation to buy or sell a particular quantity of an item at a fixed price or rate and a definite future point in time. Foreign exchange forwards, for example, obligate both parties to exchange agreed upon amounts of foreign currencies at a specified rate at a future date. These rates are generally traded 'at par' or 'at market,' meaning the value of the contract at the time it is traded is zero and no money need be traded at the contract's initiation. This means that the market value of the contract is zero, but parties can decide to post collateral as a means of insuring the terms of the contract.[24] Because they are specialized according to specific needs, forwards are relatively limited derivatives contracts, and may involve high search costs to find parties with opposite needs (i.e., exposures to risk). [25] Forwards' binding of parties to exchange may also lead to inconveniences for one or both parties after the contract is actually entered into. If one party defaults, significant legal fees may be required to secure the forward price, and this risk prompts both parties to monitor one another's respective viability.[26] Contract terms are often standardized in order to avoid some of these potential issues. Forward contracts that are standardized, publicly traded, and cleared through a clearing house are referred to as futures. As opposed to forwards, futures are traded on organized exchanges and are largely substitutable for one another, which allows for greater trading volume and contributes to higher market liquidity. This new liquidity may improve the price discovery process, or how reflective market prices are of key information.[27]

As opposed to forwards and futures, option contracts allow the buyer or holder (also called the long options position) to buy or sell the underlying asset in the future. More specifically, buyers are purchasing the right to buy or sell the asset at a particular price (known as the strike price) either at a particular date (known as a European option) or at any time between the option's initiation until its expiration date (known as an American option), and can be traded on individual stocks, stock indexes, and even through futures contracts themselves. [28] Options to buy and sell are known as calls and puts, respectively. Buying and selling on options is somewhat trickier than with forwards and futures; if the spot market price of a stock exceeds the strike price during the window in which the option could be exercised, then the holder may buy at a lower strike price by exercising the option. In this case, the option's value would be the higher market price. If the market price remained below the strike price during the period in which the call option could be exercised, however, then the option would expire worthless. [29] An option's price is often a reflection of market interest rates, the time to its maturity, the historical price volatility of the underlying asset, and the proximity of the underlying asset to its strike price. [30] As with other types of derivatives such as foreign exchange forwards, options can concern financial rather than real commodities. For example, interest rate options provide insurance against increases and deceases (caps and floors) and hikes and drops (collars) in interest rates. Cap options create a ceiling to protect against hikes in interest rates, while floor options create a minimum rate to protect against a potential fall in rates. [31] Options are predicated on the tension between selling short and going long. If someone who does not own the underlying asset sells it through a derivative contract in anticipation of buying it back at a lower price or in the open market at whatever price prevails, they are selling it 'short'. Short-selling produces tremendous exposure to risk. As Henwood notes, "short-selling exposes the practitioner to enormous risks: when you buy something-go long, in the jargon-your loss is limited to what you paid for it; when you go short, however, your losses are potentially without limit." [32] Brokers hypothetically are expected to evaluate clients' credit rating in order to justify short-selling, but this practice is not highly regulated.

More recently, derivatives markets have turned towards the proliferation of swap contracts, which differ somewhat from forwards, futures, and options. A swap contract is perhaps most reflective of the contemporary usage of derivatives, constituting an agreement between counterparties to 'swap' two different kinds of payments, each calculated by applying an interest rate, exchange rate, index, or the price of an underlying commodity or asset to a notional principal.[33] Swaps usually do not require the transfer or exchange of the principal. Uniquely, payments based on swaps are done at regular intervals throughout the duration of the contract. In other words, whereas exchange-traded derivatives involve actual claims on an underlying assets, swaps do not; instead, the swap is between two sets of cash flows, which are usually destabilized by positions in other securities such as bonds or stock dividends.[34] Swaps can take several forms. A 'vanilla' interest rate swap, for example, involves one series of payments based on a fixed interest rate and another based on a floating interest rate. A foreign exchange swap entails an opening payment to purchase a foreign currency at a specified exchange rate, and a closing payment selling the currency at a specified exchange rate. A foreign currency swap consists of one set of payments derived from either a long or short position in a stock or index, and another set derived from an interest rate or other equity position,

amounting to a combination of a spot and forward transaction. [35] Currency and interest rate swaps have become especially important in recent decades. The former allows investors to hedge principle and interest payments in one currency against a preferred currency, while the latter allows borrowers to arbitrate between component markets of the international bond market. In this respect, swaps have played an instrumental role in controlling for short-term risk and thus making international bond markets particularly attractive for global investment. [36]

While each type of derivative contract is uniquely structured, they all share important commonalities. Derivative contracts can be settled either through the physical delivery of the underlying asset or through cash settlement with adjustments of margins on financial differences. Cash settlements allow for agents uninvolved in either production or the use of the underlying assets to speculate. Today cash settlement is more common, as most derivatives no longer involve the transfer of a title or a principle; instead, they create price exposure by conjoining their value and a notional amount or principal of the item form which the contract derives.[37] Taking a price position in the market while only putting up a small amount of capital used allows the investor to leverage, making it cheaper to hedge and speculate. Here derivatives are able to cover hedgers' risks on the spot market covering losses or compensating gains. [38] In speculative transactions with derivatives, however, an agents' position does not correspond to the spot market, and is thus exposed to greater risks in price variation.[39] A similar dynamic applies to arbitrage transactions, which occur simultaneously on the spot market and in the derivatives market. Arbitrage transactions, however, involve parties attempting to profit by exploiting price differentials, thus creating the opportunity for gains without risks. [40] All of this shows us that derivatives are used by a wide range of actors (investors, corporations, banks, etc.) to protect themselves against forms of risk. International agencies and banks use derivatives to hedge their loan portfolio positions, and transnational corporations use them to reduce their exposure to risk, with many creating financial divisions to actively speculate in derivatives markets. [41] Investment banks may also trade in derivatives for corporate clients, with the aim of boosting their liquidity by hedging positions in an inter-bank market.

An Abridged History of Derivatives

Some accounts of derivatives date their origins to biblical times in the form of agricultural consignment transactions. While derivatives trading can also be traced to 12th century Venice (exchanges on agriculture), late 16th century Amsterdam (forwards and options on commodities and securities), and 18th century Japan (futures on warehouse receipts and rice), modern derivatives trading began officially in 1849 when a group of grain merchants created the Chicago Board of Trade (CBOT).[42] The Chicago Board of Trade was originally designed to coordinate "geographically dispersed agricultural markets." [43] Through its legal framework for standardizing the classification of grain trading, it became the central hub in the United States for pricing grains. The CBOT's centrality during this period was facilitated by the development of new networks of railways and telegraphs in the US, which consequently enabled the CBOT to become first institution with a highly liquid futures market for grain contracts.[44] In so doing, the CBOT set the stage for a new kind of financial system in the late twentieth century, with the first formal set of rules governing futures contracts in forged in 1865. [45] Many farmers initially objected to the CBOT because they believed their products were priced too far away from the point of production. Such prices soon became essential for farmers, processors, and traders, however. As Muellerleile explains, "as grain commerce became more integrated with circuits of credit and capital, and more dependent upon risk-management tools such as futures contracts, the flow of price information became a prerequisite for cash crop farming."[46] This integration into growingly expansive flows of capital allowed the consistency of the price mechanism to become a measurement of the strength of the grain industry, which the US Congress declared in the national interest in 1922.[47]

With the onset of the Great Depression, however, the government adopted a more stringent role towards financial speculation (though the agricultural sector was excluded from this approach). The financial legislation put in place by the New Deal would form the bedrock for these new regulatory efforts, most particularly the Banking Act of 1933, which comprised of Regulation Q (the imposition of ceilings on savings deposits and interest rates that could be paid on time), the Glass-Steagall Act, and the creation of a national deposit insurance system facilitated by the Federal Deposit Insurance Corporation.[48] By the 1970s, however, the Chicago exchanges began to apply their methods for pricing agricultural futures to urban financial instruments. State institutions began to more heavily regulate speculation, marking its first serious effort to do so since 1936. [49] The Chicago Mercantile Exchange created the International Money Market in 1972, which allowed for trading in currency futures and paved the way for more abstract contracts. [50] This development in part signified the dissolution of the boundary between agricultural futures and finance, aided by the expansion of the Chicago Mercantile Exchange's (the second largest exchange in Chicago) entrance into new products. [51] Chicago exchanges influenced the passage of the 1974 Commodities Exchange Act that expanded the definition of a commodity from several agricultural products (in the 1936 Commodities Exchange Act) to all goods, articles, services, rights, and interests that can be dealt in futures contracts. [52] At the same time, Congress granted the Chicago Futures Trading Commission (CFTC) sole jurisdiction over futures trading, disallowing any other federal agency or state government entity or law from interfering with the development of futures markets.[53] The CFTC and its related state financial agencies saw it as their duty to promote the spread and hedging of risk, including by the range of non-financial corporations that had traded in derivatives to shield themselves from fluctuating commodity prices, interest rates, and floating exchange rates with the demise of the Bretton Woods Agreement in 1971. [54] These developments were also aided by technological and conceptual innovations during the 1960s, as more economists began to claim that the US stock market was fully efficient in responding to all publicly available information and could be modeled with reasonable accuracy. [55] The popularization of the Black-Scholes pricing formula, for example, changed the character of speculation from advising on option prices to calculating mispriced options or assets, empowering traders to invest on market mispricings with large amounts of borrowed money. [56] Today hedge funds carry out these activities, pooling wealthy clients' investment contributions to arbitrate and trade in derivatives. [57] By the late 1970s in the midst of a crisis of stagnant economic growth and inflation, the Treasury decided it could stabilize currency by raising interest rates to encourage foreign holdings in US Treasury bonds and allowing for the exchange of derivatives on US debt brought to bond markets by the New York Federal Reserve.[58] This move provided the foundation for an unprecedented internationalization of derivatives markets.

Derivatives and Financialization

Derivatives trading has expanded to global proportions since the 1980s. The industry's growth may be attributed most centrally to the development over-the-counter trading for financial derivatives, which corporations utilize to protect themselves from volatility in interest and exchange rates, and which speculators use in their efforts to predict trends in financial markets.[59] The proliferation of financial derivatives during this period is a less frequently discussed but critical component of broader patterns of neoliberal financialization beginning with the gradual dissolution of the Fordist-Keynesian accumulation regime beginning in the late 1960s and taking off in the early 1970s. Keynesianism had provided a unique way of managing risks through stimulating consumer demand with demand-side policy. Its decline gave way to a flexibilization of price relations and the growing importance of market processes in managing financial matters, leading to an influx in derivatives trading. [60] With the deregulation of capital flows, Nixon's move to decouple the US dollar from the gold standard, and the 1973 OPEC oil shocks, price volatility increased in the early 1970s and paved the way for the internationalization of trade investment, exposing firms to greater degrees of risk. With the end of the fixed exchange rate system of Bretton Woods, Panitch and Gindin explain, "the derivatives revolution was crucial to the stabilization of currency markets…and was also immediately linked to the internationalization of the US bond market, which was occurring at the same time as the development of the separate Eurodollar market." [61] More simply, the growth of financial derivatives markets was a requisite for avoiding capital devaluation in a period of economic tumult. The growth of the multinational firm during this period demonstrates the attempts made to mitigate the new volatility endemic to a globalizing derivatives market. [62]As the US bond market opened up, foreign investors began maintain greater holdings in US Treasury securities, above 21 percent by the 1980s. Paradoxically, this uncertainty, "amid the volatility of commodity prices and rising short-term interest rates, actually enhanced the attractiveness of Treasury bills for international investors, who recognized the depth and liquidity of the US bond market despite all the hand-wringing about declining US economic power and strength."[63] Here we can begin to trace a theme of global integration into the financial derivatives market, underpinned by the US dollar-trading on international bonds implicates investors in the volatile movements of currency and interest rates. With investors able to swap various floating and fixed exchange rate obligations in order to better fit their perception of the market direction, the changes in currency levels and interest rates that had traditionally slowed markets down (investment in bonds denominated in suboptimal currencies were deemed too big a risk) began to play a different role in the global economy. [64]

Like the Fordist-Keynesian accumulation regime before it, financialization is a stage of capitalism fraught with contradictions. The term 'financialization' itself is heavily debated, with disagreements over its periodicity, its coherence with or distinctiveness from neoliberalism, and its most essential characteristics. For our purposes here, Kippner's definition is useful. For her, financialization refers to "a broad-based transformation in which financial activities (rather than services generally) have become increasingly dominant in the US economy over the last several decades."[65] The 'financial' here "references the provision (or transfer) of capital in expectation of future interest, dividends, or capital gains," as opposed to productive capital that arises from the production and trade of commodities.[66] This shift towards finance, beginning in the 1970s and expanding in the 1980s and 1990s, provided the state with a means for displacing the rigidities of the Fordist-Keynesian accumulation regime. This displacement occurred first and foremost in the deregulation of domestic financial markets throughout the 1970s, which gradually reduced restraints on the flow of credit. [67] Concurrent spikes in interest rates (most notably Federal Reserve Chair Paul Volcker's 1981 hike, more notoriously known as the "Volcker Shock") in order to restrain the economy in the absence of regulation on the supply of credit also emerged as a response to deregulation. These higher interest rates attracted remarkably high levels of foreign capital into the US economy, thus allowing for a drastic expansion of domestic financial markets and helping to tie the global economy to the floating US dollar. As strict monetary policy became the preferred tactic for stabilizing US currency during this time (resulting in rising unemployment), the Federal Reserve turned to a greater extent to the market, expanding credit at the same time as it increased interest rate volatility. [68] Above all, however, it was the deregulatory moves of the 1980s-removing controls that had restricted interest rates payable on savings deposits-that shaped the course of financialization. [69]

Financialization with Derivatives

Deregulation increased the price of credit while extending it to a broader constituency.[70] The incorporation of US multinational commercial banks into derivatives trading-in addition to Wall Street-based investment banks-should not be overlooked here. (Whereas investment banks create liquidity by dictating the terms of trading of securities, commercial banks do so by transforming deposits into longer-term assets.) [71] With the first significant derivative bond swap in the early 1980s between IBM and the World Bank, banks such as J.P. Morgan used overseas operations in London to bypass the regulations previously put in place by the Glass-Steagall Act and take advantage of growing derivatives markets. After executing the first credit default swap in the early 1990s, derivative contracts accounted for over half of Morgan's trading revenue. [72] Because derivatives are able to conjoin a variety of forms of capital and convert fixed and floating rate loans and currencies, Panitch and Gindin note, these markets were "able to meet the hedging needs not only of financial institutions (which exchanged 40 percent of all swaps among themselves), but also of the many corporations seeking protection from the rapidly evolving vulnerabilities associated with global trade and investment." [73] By the time the Clinton administration took power in 1993, Streeck explains, financial deregulation had "made it possible to plug the gaps resulting from deficit reduction, by means of a rapid extension of loan facilities for private households at a time when falling or stagnant wages and transfer incomes, combined with rising costs of 'responsible self-provision', might otherwise have jeopardized support for the policy of economic liberalization." [74] This shift may be understood as a kind of 'privatized Keynesianism,' [75] in which the public debt taken on by the state during the Fordist-Keynesian accumulation regime is transferred onto consumers in the form of individualized debt relations in tandem with a dissolving social safety net. This extension of credit to compensate for slipping wages and benefits effectively redistributes capital upwards.[76] With the state shifting debt-driven consumption from public financing to private, credit-based consumption, government debt comes instead from low receipts, or limits to taxation, while corporate interests are empowered to make increasing demands on the state. [77]

Arguably the central paradox of financialization is that while financial institutions, markets, and assets "can secure the return of value in particular instances," they "cannot guarantee the systematic augmentation and return of value in the aggregate." [78] As opposed to a wage labor relation, in which a fixed amount of capital is guaranteed to a capitalist according to the rate of surplus-value extracted from a worker and marks a contribution to the overall amount of real capital in circulation, financial markets operate in the sphere of circulation and can only either redistribute capital or create fictitious value. Financial markets begin to malfunction when the expansion of monetary value across an economy can no longer be guaranteed by participants in financial transactions. Here we can better understand a central contradiction of derivatives: they exist to offset or control this risk but ultimately increase it. Despite this paradox, it is not difficult to understand why derivatives have grown over the past nearly-four decades. They provide investors, corporate treasury departments, and bank risk management departments with the advantage of being able to hedge risk as a measure of insurance against adverse fluctuations in the market. [79] Moreover, they can provide signals to larger financial markets, which could ostensibly reduce uncertainty and unequal access to information. Derivatives also allow investors to more cheaply diversify their portfolios, as managers are able to expose themselves to derivatives according to a larger number of shares. Furthermore, derivatives operate on leverage and are thus cheap to trade in.[80] A liberal economic perspective might claim that derivatives are incapable of affecting the price of underlying assets in conditions of perfect market competition, and that they simply provide greater economic stability by spreading risk between different agents in the market; in reality, however, asymmetric access to information and imperfections in the instruments themselves open markets up to greater degrees of systemic risk. [81] In bypassing the sphere of production, surplus-value in production is replaced by essentially zero-sum casino bets, manufacturing risk through a social logic of mutual indebtedness.[82]

What's New About Derivatives?

As the field of financialized economic activity incorporates greater numbers of people through the financialization of risk, capital circulation becomes decoupled from the labor process. [83] Whereas the labor process relies on the extraction of surplus-value in the sphere of production, financialization means that the appreciation of fictitious capital becomes autonomous relative to productive appreciation, as tradable financial instruments are valued according to expected income flows and discounted by an interest rate. [84] On the other hand, however, this process should be understood as a means of integrating the workforce into financial channels and is thus actually semi-dependent on productive capital. Carneiro et al. assert that the advent of derivatives constitutes a new form of accumulation entirely, which they call the 'fourth dimension'.[85] While historically this fourth dimension of capital has developed in tandem with capital in its monetary form, it also "progressively constitutes an autonomous force in the process of capital appreciation when deep and liquid markets freely negotiate stocks of wealth." [86] In other words, this fourth dimension is linked to the changing role of derivatives in the 1970s, along with fundamental changes in the international financial and monetary systems allowing for more rapid accumulation over greater distances.[87]

At this point it is necessary to clarify two related yet distinct issues. One is the process of financialization, the other the growth of derivatives trading. Carneiro et al. assert that derivatives markets constitute a unique form of accumulation because capital appreciation occurs independent of initial investment. This is markedly different from credit-based capital appreciation. Since the 1970s financial relations have dominated economic policy-making, pushed more individuals into debt, and formed a new mode of accumulation characterized by falling profit rates and real wages, persistent unemployment, and mediocre growth in productive sectors. Yet within financialization, derivatives signify an even greater abstraction of capital from the process of accumulation. [88] Carneiro et al. explain this as "a difference in the nature of the gain from the operation," jettisoning the "need for money as a means of appreciation, or its advance in the beginning of the process." [89] This means that though "money is still an end to the process of valorization," it "loses its relevance as a vehicle of valorization, as well as the credit system." [90] This form of accumulation is intrinsically speculative-gains from derivatives transactions come simply from a bet on a price movement by an asset that is not owned by the speculator. Despite this fundamentally unique character of derivatives, however, it would be unfair to claim that derivatives are actually entirely independent of the production process. When changes in risk perception generate price-adjustments in the market in the form of the inversion of bets and settlements of contracts, "social relations of property and credit are again essential to ensure liquidity and solvency of agents involved in these markets, revealing the real social relations of power, property, and money that appeared previously only in a veiled manner."[91] The remainder of this report will detail the relation between the spheres of production and circulation vis-à-vis derivative-based accumulation.

Derivatives, Time-Space Compression, and Spatio-Temporal Fixes

Though the derivatives market is the most liquid in the world, it is also highly vulnerable to systemic crisis. Of particular concern is that derivatives may be based on practically any asset, including worker debt. As Lapavitsas explains, "these derivatives could be thought of as synthetic bonds," or "securities promising to pay the holder a return (interest) out of a variety of payments made by the workers which are pooled and then divided."[92] Workers' payments on, for example, housing and consumer debts, would entail a payoff for the holder of a given derivative security who has a claim on that personal debt. Despite their separation from the sphere of production, derivatives are in the final instance contingent on it. Labor thus becomes an extension of financial services themselves, vulnerable to risks entailed by the circulation and realization of capital, which it simultaneously empowers through deferred wages and relies upon in order to access necessities such as education and retirement costs. [93] Those that make up the productive sector are both incorporated into and dependent upon these circuits of realization.

Understanding derivatives' functionality helps us evaluate the specificities of contemporary capitalism's tendency towards crisis. As derivatives markets are predicated on the mitigation of risk, it is crucial here to consider how derivatives fit with established theories of capitalist crisis. One of the most notorious theories on this count is David Harvey's 'spatial fix.' Harvey explains that competition between capitalists leads to an uneven accumulation of capital, which threatens the reproduction of both capitalist and working classes. To recall from earlier, this threat takes the form of an excess of capital relative to available opportunities for profitable reinvestment (also known as overaccumulation). Overaccumulation manifests through a surplus of commodities, money-capital, and/or labor power. [94] There are two solutions to this problem. The first involves the devaluation of capital through inflation, gluts of commodities on the market and falling prices, productive capacity culminating in bankruptcy, and falling real wages and standards of living. This solution is not optimal for capitalists. The second solution, however, involves lending surplus capital abroad to create productive powers in new regions. This latter option is the crux of the 'spatial fix'. Crises are temporarily resolved because rates of profit in these new regions incentivize a flow of capital and raise the rate of profit in the system as a whole. The problem here is that higher profits entail an increase in the tendency towards overaccumulation; moreover, this now takes place on an expanding geographical scale. As Harvey writes, "the only escape lies in a continuous acceleration in the creation of fresh productive powers. From this we can derive an impulsion within capitalism to create the world market, to intensify the volume of exchange, to produce new needs and new kinds of products." [95] While capital is ultimately limited through productive capacity (only so many goods can be produced and circulated), derivatives-as instruments whose value is only derived from the asset underlying them-may represent a way of circumventing real barriers to accumulation.

According to Harvey, an irresolvable tension emerges between the devaluation of domestic capital due to international competition (apropos the development of new export-driven regions), and the internal devaluation of capital in these regions (as constrained development also limits international competition and blocks opportunities for profitable export). Productive forces in new regions constitute a competitive threat to the country that introduced the spatial fix, whereas limited development in new productive centers hinders international competition and reduces profitable opportunities for capital export, thus leading to an internal devaluation of capital with immobile overaccumulated capital. [96] Geographical expansion allows overaccumulated capital to be invested into labor surpluses and for the development of primitive accumulation processes in these exterior regions as an alternative to devaluation. Though the spatial fix applies mostly to overaccumulation resulting from competition in the sphere of production, overaccumulation itself is not limited to this dimension of capitalist relations. Beginning in the 1970s, for example, overaccumulated manufacturing capital in cities-in tandem with the influx of capital due to higher petroleum prices-garnered an excess of speculative capital that could not be used to boost industrial production. [97] This speaks to a crucial tension between speculative and productive capital, as this juncture required the freeing of speculative capital from the production process by creating a separation between new derivative instruments and their underlying assets. It is thus argued here, then, that derivatives markets constitute their own paradoxical form of a spatial fix, especially as the underlying assets become currency-related.

Crucial to the spatial fix embodied by derivatives markets is the time-space compression endemic to capitalist accumulation and financialization more dramatically. During the 1970s this dynamic took the form of organizational shifts in production that undid the managerial tendencies of Fordism, generating a more fluid and decentralized mode of production.[98] At the same time, technological innovation during this period allowed for a faster and more geographically distantiated financial sector. With an expanded reach, however, comes an increased tendency towards volatility; the shortened length of time capital takes to move across space facilitates more short-term gratification, but compromises states' ability to engage in long-term planning. This limitation means that financial institutions must either adapt quickly to rapid market shifts, or find ways to control volatility themselves.[99] The rapid and expansive movement of capital under financialization represents a paradox for Harvey, as "the less important the spatial barriers, the greater the sensitivity of capital to the variations of place within space, and the greater the incentive for places to be differentiated in ways attractive to capital," all of which leads to increasingly uneven development "within a highly unified global space economy of capital flows."[100] Though Harvey's "globalized space economy" still primarily refers to the sphere of production, the flexibilization of the financialized accumulation regime entails a fundamental shift in how value is represented as money: "the de-linking of the financial system from active production and from any material monetary base calls into question the reliability of the basic mechanism whereby value is supposed to be represented." [101] In other words, the productive sphere loses power relative to the financial.

Here it is necessary to question more precisely how the migration of capital from the sphere of production to the sphere of circulation may constitute a spatial fix. Bob Jessop, a critic of Harvey, argues that for however important the spatial fix, Harvey's focus on "the production of localized geographical landscapes of long-term infrastructural investments that facilitate the turnover time of industrial capital and the circulation of commercial and financial capital" [102] cannot adequately account for the movements and contours of capital under financialization. By examining spatial fixes solely in terms of the contradiction between the unstable movement of productive capital in the form of profits for reinvestment and the fixity of concrete assets with particular times and places, Jessop explains, Harvey elides a discussion of "the different forms of spatio-temporal fix in relation to the different stages or forms of capital accumulation, nor their articulation to institutionalized class compromise or modes of regulation." [103] While production entails a profit motive (the creation of surplus-value through relations of exploitation), the profits resulting from circulation derive not from any value it creates, but rather from its capacity to redistribute surplus-value. Jessop writes of the importance of 'time-space distantiation'-not just compression-in a globalizing world economy, or the expansion of political-economic relations across time and space such that they may be coordinated over greater distances and scales of activity. [104] For him, the twin dynamics of compression and distantiation indicate that "the power of hypermobile forms of finance capital depends on their unique capacity to compress their own decision-making time…whilst continuing to extend and consolidate their global reach." [105] This tension is present within any individual or interconnected circuit of capital, depending as they do on the relationship between "a physical marketplace and a conceptual marketspace." [106] Despite the altered character of these spatial barriers to accumulation, however, physical territory remains essential to the circulation of capital, as it is contingent on static ensembles in which the means of production and organization necessitate the extraction of surplus-value. [107]

Derivatives markets exhibit a unique spatio-temporal in relation to contemporary capitalist accumulation. As Bryan and Rafferty write, "derivatives, through options and futures, establish pricing relationships that 'bind' the future to the present." [108] Like Harvey's spatial fix centered on productive capital, derivatives markets may be viewed as a spatial fix in and of themselves in their attempt to hedge risk and stave off devaluation as more individuals and institutions become exposed to financial risk. Corporations trade in derivatives markets in order to handle their exposure to risks in a sea of variable rates and prices. Ensuring the value of money is key, and the spatial displacement constituted by derivatives (into cyberspace or digital space, as it were). It purports to facilitate this process in several respects. First, derivatives constitute a unique form of money by providing a universal measure for asset value across space, despite their dependence on nationally-based unequal levels of contestability. [109] In other words, derivatives are ultimately based on US norms of risk value and conceptions of secure financial claims. Second, derivatives markets aim to allow for the limiting of exchange- and interest-rate risks for corporations and for comparing various risk management strategies across time and space, though this may increase systemic volatility even these new strategies do not immediately drain productive capacity. [110] Finally, banks or other financial institutions might engage in securitization and over-the-counter trading in order to mitigate the uncertainties of profiting from credit money. As Soederberg explains, over-the-counter trading on securitized derivatives, particularly credit default swaps, "facilitates temporal and spatial displacements that allow banks to shift loans off the balance sheet by selling them to outside institutional investors, such as pension and mutual funds." [111] By spreading risk and shifting risks on to others, these institutions are able to at least temporarily protect themselves.

Here we encounter some problems, however. In particular, the dominance of credit makes it especially difficult to ensure the quality of money. This is especially true when it is less profitable to expand value production than to provide credit and profit through interest rates. [112] This is what Jessop means when he writes of "a fundamental contradiction between the economy considered as a pure space of flows and the economy as a territorially and/or socially embedded system of extra-economic as well as economic resources and competencies." [113] When capital is able to quickly exploit resources in one area without contributing to their reproduction and then move elsewhere to replicate this kind of circulation, it is compromising the sphere of production and thus the strength of the dollar. The sphere of circulation is particularly vulnerable when debt enmeshed in the web of speculation becomes irredeemable or the gap between the value of credit and that of real money becomes too wide. [114] However, the increasing use of securitization and derivatives markets as a risk management strategy has made regulating banks for capital adequacy unable to guarantee seriously limiting risk exposure. This is why in 2008 the key US financial institutions (the Fed and Treasury, as well as the Bank for International Settlements) all shifted to the same models for assessing risk as the largest banks, in the hope of accessing regulators' "fire codes."[115] Competitive pressures between big banks in derivatives and securities markets can lead to an indifference to these regulative warnings, thus further widening the gap between fictitious and real value. [116] When this occurs, the glut of fictitious values (in the form of privately created credit money) contributes to inflation and devalues currency. This problem was most severe in the crisis of 2008, when the American International Group (AIG)-a financial institution that provided insurance for other financial institutions on the creditworthiness of their derivative holdings-was ultimately unable to honor its insurance contracts and protect against loss.[117] Banks extending mortgages to borrowers turned to commercial banks in order to fund the loan, which would then sell the loan to government-sponsored enterprises such as Fannie Mae. These institutions consolidate a range of mortgages and sell the resultant mortgage-backed security (MBS) to an investment bank, which repackages the MBS according to its needs and issues other derivatives such as collateralized debt obligations (CDOs) to be bought by other lenders, banks, or hedge funds.

The link to the sphere of production is again crucial here. As Wolfson explains, "at the base of this complicated pyramid of derivatives might be a subprime borrower whose lenders did not explain an adjustable-rate loan, or another borrower whose ability to meet mortgage payments depended on a continued escalation of home prices. As the subprime borrowers' rates reset, and especially as housing price speculation collapsed, the whole house of cards came crashing down." [118] Derivatives do not require ownership of the underlying asset, so it is possible to speculate-via credit default swaps with an insurer-on the chance of default on a security without owning it. This property of derivatives means that the volume of insured securities can increase quickly and significantly, such that a relatively small quantity of securities can be insured at a much higher amount.[119] Since consumer credit can circulate only as a claim over a share of future profit, or surplus-value and depends on the stability of creditors to pay their loans, asset-backed securitzation has developed in order to ultimately ensure the quality of real money for speculative interests. [120] The time-space compression that occurs through derivatives trading "entails new actors, new strategies and the continual inversion of time and the expansion of virtual space to continue to fund claims on the fictitious value of credit."[121] It is clear, then, that derivatives are ultimately reliant upon productive capital. And while price fluctuations might trigger financial crises, the fear of devaluation due to an overaccumulation of capital is still at the crux. Because of the global scale of derivatives, it is not just the American state that must ensure the stability of the dollar, but any marginal economy, as a means of guarding against a downturn in their own currency value.[122]

Conclusion: Towards a Typology of Spatial Fixes

This paper has attempted to explain derivatives' instrumental properties, their historical development, and their distinct role in both mitigating and exacerbating crises. The basic premise argued that derivatives markets act as a kind of spatial fix in and of themselves, one that maintains several properties of Harvey's spatial fix of productive capital but that also differs in important ways. In summing up, then, this paper will provide a brief typology of spatial fixes in order to provide some clarity to the question of how these spatial fixes differ analytically.

We can think here of three kinds of spatial fixes. First is Harvey's spatial fix, which pertains to productive capital only. Second are financialized spatio-temporal fixes. These fixes are unique in their supplying of fictitious capital. Last are derivative spatio-temporal fixes which, like financialized spatio-temporal fixes, ultimately are dependent upon the sphere of production (in the sense of its effect on interest rates and exchange rates), but operate abstractly in digital OTC markets and move at an unprecedentedly rapid speed. While maintaining many of the properties of financialized spatio-temporal fixes, derivative spatio-temporal fixes constitute their own category because of their separation from an underlying asset. What unites these three forms of spatial fixes is that they are used in order to solve the problem of overaccumulation, yet ultimately contribute to greater systemic risk. What differentiate them are their respective degrees of separation from the sphere of production and, equally important, how they modify the circulation of capital according to spatial parameters. Each type of spatial fix also affects those linked to them in unique ways. For example, a spatial fix of productive capital mitigates a crisis of overaccumulation by opening up productive markets in new regions, or expanding the means of production. This affects capital by increasing the rate of profit in the system as a whole by incentivizing the flow of capital to these regions and trading on the world market, which ultimately tends again towards overaccumulation. A financialized spatio-temporal fix, in contrast, works by extending fictitious capital to individuals and institutions in exchange for later interest payments. Finance capital may be deployed in tandem with productive capital in order to build industry, procure assets, or pay for goods and services. At the same time, fictitious capital is by nature unproductive and thus its extension can be characterized as a mode of debt-driven accumulation. We can understand this process as a spatio-temporal rather than simply a temporal one because finance concurrently reshapes the landscape for productive capital while maintaining speculative interest due to stable currency. Of course, when expectations are too optimistic and a speculative bubble pops, debts are not repayable and financial institutions experience severe losses. [123]

Derivative spatio-temporal fixes are unique in their ability to commodify risk itself, thus "transform[ing] the temporal horizon of circulation-centered capitalism." [124] Derivatives constitute a fundamental shift in the operations of speculative capital and the internationalization of risk. [125] Whereas financial spatio-temporal fixes constitute a debt-driven accumulation tactic, derivative spatio-temporal fixes commodify the inherent relationship structured by that debt, and may be used for hedging, speculation, and leveraging across infinite space. This movement entails particular political consequences that are unlikely to recede on their own. As risks to capital are speculated on rather than altered and the globalization of risk is further insulated from political pressures, [126] crises such as that of 2008 will continue. Understanding the proliferation of these fixes to capitalist crisis is crucial if we are to consider viable alternatives.

References:

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Citations

[1] David Harvey, "The Spatial Fix - Hegel, Von Thunen, and Marx," Antipode, Volume 13, Issue 3 (1981): 7.

[2] Costas Lapavitsas, Profiting Without Producing: How Finance Exploits Us All (New York: Verso, 2013), 4.

[3] Scott Aquanno, "US Power and the International Bond Market: Financial Flows and the Construction of Risk Value," in American Empire and the Political Economy of Global Finance , ed. Leo Panitch and Martijn Konings (New York: Palgrave Macmillan, 2009), 121.

[4] Randall Dodd, "Derivatives Markets: Sources of Vulnerability in US Financial Markets," Financial Policy Forum, Derivative Study Center (May 2004), 1.

[5] Ibid, 643.

[6] Dick Bryan and Michael Rafferty, Capitalism with Derivatives: A Political Economy of Financial Derivatives, Capital, and Class (New York: Palgrave Macmillan, 2006), 13.

[7] Sarah Breger Bush, "Risk Markets and the Landscape of Social Change: Notes on Derivatives, Insurance, and Global Neoliberalism," International Journal of Political Economy, Volume 45 (2016), 127.

[8] Bryan and Rafferty, Capitalism with Derivatives, 2.

[9] Lapavitsas, Profiting Without Producing, 6.

[10] Ricardo de Medeiros Carneiro, Pedro Rossi, Guilherme Santos Mello, and Marcos Vinicius Chiliatto-Leite, "The Fourth Dimension: Derivatives and Financial Dominance," Review of Radical Political Economics, Volume 47 (2015), 642.

[11] Lapavitsas, 5.

[12] Ibid, 9.

[13] Carneiro et al., "The Fourth Dimension: Derivatives and Financial Dominance," 644.

[14] Randy Martin, "What Differences do Derivatives Make? From the Technical to the Political Conjuncture," Culture Unbound, Volume 6 (2014), 193.

[15] LiPuma and Lee, 87.

[16] Bryan and Rafferty, 63.

[17] Adam Tickell, "Dangerous Derivatives: Controlling and Creating Risks in International Money," Geoforum, Volume 31 (2000), 90.

[18] Tickell, "Dangerous Derivatives," 90.

[19] Lapavitsas, 8.

[20] Ibid.

[21] LiPuma and Lee, 91-92.

[22] Tickell, 90.

[23] Dodd, 6.

[24] Dodd, 20.

[25] Bryan and Rafferty, 42.

[26] Ibid.

[27] Dodd, 20.

[28] Doug Henwood, Wall Street: How It Works and for Whom (New York: Verso, 1997), 29.

[29] Dodd, 21.

[30] Henwood, Wall Street, 30.

[31] Dodd, 22.

[32] Henwood, 29.

[33] Dodd, 23.

[34] Henwood, 34.

[35] Dodd, 23.

[36] Aquanno, "US Power and the International Bond Market," 131.

[37] Ibid, 19.

[38] Carneiro et al., 643.

[39] Ibid.

[40] Ibid, 644.

[41] LiPuma and Lee, 43.

[42] Tickell, 88.

[43] Chris Muellerleile, "Speculative Boundaries: Chicago and the Regulatory History of US Financial Derivative Markets" Environment and Planning A, Volume 47 (2015), 2.

[44] Ibid, 4.

[45] Tickell, 88.

[46] Muellerleile, 5.

[47] Ibid.

[48] Greta Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance (Cambridge: Harvard University Press, 2012), 60.

[49] Muellerleile, 8.

[50] Tickell, 88.

[51] Muellerleile, 9.

[52] Ibid, 12.

[53] Ibid, 13.

[54] Leo Panitch and Sam Gindin, The Making of Global Capitalism: The Political Economy of American Empire (New York: Verso, 2013), 150.

[55] Donald Mackenzie and Yuval Millo, "Constructing a Market, Performing Theory: The Historical Sociology of a Financial Derivatives Exchange," American Journal of Sociology, Volume 19, Number 1 (July 2003), 114.

[56] Ibid, 44.

[57] Bryan and Rafferty, 4.

[58] Panitch and Gindin, The Making of Global Capitalism, 150.

[59] Bryan and Rafferty, 7.

[60] Ibid, 8.

[61] Panitch and Gindin, 150.

[62] Ibid, 50-51.

[63] Ibid, 151.

[64] Aquanno, 131.

[65] Krippner, Capitalizing on Crisis, 2.

[66] Ibid, 4.

[67] Ibid, 52.

[68] Ibid.

[69] Ibid.

[70] Ibid, 58-59.

[71] Lapavitsas, 134.

[72] Panitch and Gindin, 176.

[73] Ibid.

[74] Wolfgang Streeck, Buying Time: The Delayed Crisis of Democratic Capitalism (New York: Verso, 2014), 51.

[75] Colin Crouch, "Privatized Keynesianism: An Unacknowledged Policy Regime," The British Journal of Politics and International Relations , Volume 11, Issue 3 (August 2009), 382.

[76] Martin, 195.

[77] Streeck, Buying Time, 66.

[78] Lapavitsas, 108.

[79] Tickell, 89.

[80] Ibid.

[81] Ibid.

[82] Martin, 191.

[83] Ibid, 199.

[84] Carneiro et al., 647.

[85] Ibid, 648.

[86] Ibid.

[87] Ibid.

[88] Lapavitsas, 3.

[89] Carneiro et al., 649.

[90] Ibid.

[91] Ibid, 650.

[92] Lapavitsas, 167.

[93] Martin, 196.

[94] Harvey, "The Spatial Fix," 7.

[95] Ibid.

[96] Ibid, 8.

[97] LiPuma and Lee, 98.

[98] David Harvey, The Condition of Postmodernity: An Enquiry into the Origins of Cultural Change (Oxford: Wiley-Blackwell, 1991): 284.

[99] Ibid, 287.

[100] Ibid, 295-96.

[101] Ibid, 296.

[102] Bob Jessop, "The Crisis of the National Spatio-Temporal Fix and the Tendential Ecological Dominance of Globalizing Capitalism," International Journal of Urban and Regional Research, Volume 24.2 (June 2000), 337.

[103] Ibid, 340.

[104] Ibid.

[105] Ibid.

[106] Ibid, 346.

[107] Ibid.

[108] Bryan and Rafferty, 12.

[109] Aquanno, 130.

[110] Panitch and Gindin, 188.

[111] Susanne Soederberg, Debtfare States and the Poverty Industry: Money, Discipline and the Surplus Population (New York: Routledge, 2014), 91.

[112] Ibid, 54.

[113] Jessop, 347.

[114] Soederberg, Debtfare States and the Poverty Industry, 54.

[115] Panitch and Gindin, 266.

[116] Ibid.

[117] Marty Wolfson, "Derivatives and Deregulation," in Real World Banking and Finance, 6th Edition, ed. Doug Orr, Marty Wolfson, Chris Sturr (Boston: Dollars and Sense, 2010), 152.

[118] Ibid.

[119] Ibid, 153.

[120] Soederberg, 43.

[121] Ibid, 91.

[122] LiPuma and Lee, 52.

[123] Wolfson, 151.

[124] LiPuma and Lee, 127.

[125] Ibid, 37.

[126] Bush, 134.

Invisible Chains: Consumerism, Debt, and Consciousness

By Colin Jenkins

Critical analyses regarding the effects of "consumerism" have been a staple of Leftist theory for the past century. The Situationist International, appearing in the 1950s as an extension of Lukacs' unique brand of social analysis from the 20s, famously ridiculed the "western lifestyle" as a "fake reality which masks the capitalist degradation of human life."[1] The Situationists viewed the "spectacle" as the process for which people's desires are shaped and molded towards consumerist tendencies through mass media, marketing and advertising, and advanced techniques like "recuperation." This counter-cultural examination quickly became synonymous with a Left that had already come to terms with the "economic injustice" which characterized "the predatory phase of human development."[2] In opposition to this "rigged game," a determined and conscious working class countered with radical unionism and activism, direct action, stacks of polemics, studies on socio-economics, and avant-garde artistic techniques that fell under the banner of "culture jamming." "Detournement" turned the act of recuperation upside down by attempting to radicalize and politicize the corporate slogans and logos that flooded the "spectacle," leading to modern alternative media outlets such as Adbusters, the unsung catalysts of Occupy Wall Street and Rolling Jubilee, and street artists like Banksy, who combines detournement techniques with urban graffiti to send powerful counter-cultural messages via concrete canvass.

Naturally, any opposition to consumerism, especially from within those societies historically classified as "western" or "industrialized," is counter-hegemonic and proto-revolutionary. After all, the cultures derived from them have come to be dominated by ideals rooted in capitalism and market economies, naturally leading to intense daily routines that consist of celebrity worship at the altar of reality television and a multi-billion dollar "gossip industry." And when considering the dominant culture is one of superficiality, where our identities are based on what we own, wear and drive - in other words, consumerism - any stance in opposition to this is naturally "against the grain." The current counter-culture is one that not only recognizes the inherent dangers of a society where meaningful human concerns like impoverishment, homelessness, ever-increasing militarism, racism and misogyny take a backseat to Reality Housewives, American Idol and Jersey Shore; but also one that dares to make conscious lifestyle decisions which run contrary to this domination, while also working to break the collective trance that derives from such. Despite the obvious legitimacies found in this stance, and assuming we haven't conceded to nothingness, it's important to consider (1) how this opposition affects the Left's ability to function as a real alternative to the embedded socio-political hegemony, and (2) how it affects the Left's relationship with a working class that has embraced much of this culture as its own. The inherent risks of elitist-like diatribes against what have essentially become "cultural norms" beg for a re-evaluation which must recognize the need to accommodate both scathing cultural critiques and working-class political means. And while this seemingly half-assed approach to addressing such reactionary psychology may be debatable, the dangerous effects and continued escalation of consumerism clearly represent a powerful barrier to reaching any semblance of a collective working class consciousness. Its roots are not always as clear.

In 1901, following the conquest of Madagascar, French General Joseph Simon Gallieni immediately introduced a franc-based currency in order to impose an "educational tax" on the native population. This move had three implied purposes: "To teach the natives the value of work;" to create an immediate and effective monetary form of debt; and to instill consumerist tendencies within the population. While the first "function" followed the typical blueprint of colonialism by creating cheap forms of "human resources" to exploit, the latter two incorporated tangible debts to "legitimize" servitude (a tactic that would soon take hold in the "modern international financial system") and a culture of consumerism as the psychological means to establish and maintain what Antonio Gramsci once referred to as "cultural hegemony." As David Graeber explains, "The colonial (French) government was quite explicit about the need to make sure that (indigenous) peasants had at least some money of their own left over, and to ensure that they became accustomed to the minor luxuries - parasols, lipstick, cookies - available at the shops."[3] Understanding the connection between alienation, debt and consumerism - and how each may be used as a form of control - goes beyond the "inferiority complex" that Fanon once attributed to colonized populations which are "physically and symbolically destroyed, and in their place the colonizer produces a people who deserve only to be ruled."[4] Essentially, these are tools that transcend international and inherently racist relations between the "core" and "periphery" - making class analyses absolutely vital in regards to the "forced dependency" created by the architects of the dominant culture, not only from the perspective of an indigenous population, but also from that of the domestic working classes. "It was crucial that they (the colonized) develop new tastes, habits and expectations; that they lay the foundation of a consumer demand that would endure long after the conquerors had left, and keep Madagascar forever tied to France."[5]

Establishing a "cultural hegemony" runs analogous to principles that drive the market business model, which relies solely on individual "desires" to sell products. Since most of these desires do not constitute basic needs in the Maslovian sense, advertising and marketing must convince consumers that they need big screen televisions, new clothes, technological gadgets, and so forth. With such a task at hand, the business community had to look no further than the colonizers' experience in establishing control over its subject population. In a 1955 edition of The Journal of Retailing, Economist and Marketing Consultant, Victor Lebow, urged business "leaders" and marketers to cultivate and exploit this consumerist mentality with full force:

(Our economy) demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfactions, our ego satisfactions, in consumption. The measure of social status, of social acceptance, of prestige, is now to be found in our consumptive patterns. The very meaning and significance of our lives today expressed in consumptive terms. The greater the pressures upon the individual to conform to safe and accepted social standards, the more does he tend to express his aspirations and his individuality in terms of what he wears, drives, eats- his home, his car, his pattern of food serving, his hobbies.... We require not only "forced draft" consumption, but "expensive" consumption as well. We need things consumed, burned up, worn out, replaced, and discarded at an ever increasing pace. We need to have people eat, drink, dress, ride, live, with ever more complicated and, therefore, constantly more expensive consumption.[6]

To them, the ultimate challenge was not merely establishing a monetary system which allows for widespread consumer spending (fiat-based, supply-side economics) - a task that is handled in conjunction by the "financial wizards" of the hegemonic class - but rather creating the psychological desire to drive such spending. Essentially, as Lebow implied, this may only be accomplished by deflating the "meaning" out of life and replacing it with artificial "spiritual and ego satisfactions" that are achieved through false consciousness and "forced draft consumption." In a scene from the movie Fight Club, Tyler Durden famously rails against the effects of this conditioned psychology on the working classes:

I see all this potential, and I see squandering. God damn it, an entire generation pumping gas, waiting tables - slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit that we don't need. We're the middle children of history, man. No purpose of place. We have no Great War. No Great Depression. Our Great War's a spiritual war; our Great Depression is our lives.

While Durden's underground sermon accurately characterized the nihilistic decadence of America's Generation X - a generation born at the pinnacle of this consumerist assault - he was merely echoing the theoretical basis of "commodity fetishism" espoused by Marx nearly a century and a half prior:

(With the spread of markets) there will come a time when everything that people consider as inalienable will become an object of exchange, of traffic, and can be alienated. This is the time when the very things which till then had been communicated, but never exchanged, given, but never sold, acquired but never bought - virtue, love, conviction, knowledge, conscience - when everything, in short, passed into commerce. It is the time of general corruption, of universal venality. It has left remaining no other nexus between man and man other than naked self-interest and callous cash payment. [7]

As predicted, this commodity-consumer paradigm has dominated life for much of the past century. Just as workers are commodified and alienated by their role within the labor-capital relationship, they are doubly commodified and exploited in the consumer-capital relationship. Marx recognized this; western imperialists recognized this; and the corporate business community recognizes this. Hence, the appearance of an extensive "propaganda model" that is carried out in the form of a multi-billion-dollar marketing and advertising industry - which is controlled to a large extent by "a relatively concentrated network of major corporations, conglomerates and investment firms."[8] And while there are certainly examples of acute organization within this corporate community (i.e. The Business Roundtable, Chamber of Commerce, etc…), the maintenance of its hegemony ultimately falls on a loosely connected arrangement of entities that share one powerful commonality: the search for profit. It is this very dynamism that makes it such a formidable foe for the Left in its attempt to deploy class-conscious politics.

Long before the onset of industrialization, capitalism, and even market economies, there were many examples of cultures partaking in the act of accumulation for reasons other than need. Therefore, it seems such "gathering" is likely inherent in our DNA. So what's the problem? Well, first of all, it's important to differentiate between a superficial condemnation that borders on envy, and an analytical assessment that attempts to identify and deconstruct mindless, narcissistic and reactionary societal tendencies. By doing so, it brings much needed legitimacy to the latter purpose, while avoiding further alienation from folks who find natural enjoyment in the acquisition of things. In other words, it's not the act of "wanting" that's inherently bad, it's the totality of a "consumerist" society that intensifies the process of degradation and dehumanization which has already been established within the realms of capital, labor and property relations. And while the battle against exploitation via labor and property is complex, multi-layered and formidable, especially when considering its collective nature and the multitude of external factors involved, the battle against anti-consciousness perpetuated by consumerism can be won on an individual basis, from within. Ultimately, it is this compounding "superstructure" which houses many aspects of superfluous want, where the transition from a civil society to a "surface society" has been made complete; and ironically, where the reversal of such may begin. Therefore, juxtaposing "superficial condemnation" and "analytical analysis" is absolutely vital when breaking down this inherently destructive process. Secondly, it is important to identify such characteristics of a "surface society," with the most dangerous of those coming in the form of personal identity, whether internally through the self or externally through the perception of others. Historically, this process of "self-worth through accumulation" and its reciprocal effect on public perception has blurred the lines between consummation for personal enjoyment and "conspicuous consumerism" as a means of establishing human value. Thorstein Veblen's observations of more than a century ago, though somewhat obvious, still ring true:

Since the consumption of these more excellent goods is an evidence of wealth, it becomes honorific; and conversely, the failure to consume in due quantity and quality becomes a mark of inferiority and demerit."[9]

As if the illegitimacy and consequences of personal fortune and unequal distribution are not enough, the cultural norms that are created through consumption and public display serve to compound and further entrench such inequity on a social scale. As such, the "cultural hegemony" becomes a self-sustaining phenomenon that persists without the need for direct manipulation. "This principle has had the force of a conventional law," explains Veblen. "It has served as the norm to which consumption has tended to conform, and any appreciable departure from it is to be regarded as an aberrant form, sure to be eliminated sooner or later in the further course of development."

A civil society is one that recognizes the collective nature which exists within a community and realizes the inherent connection between a common good and the individual "pursuit of happiness." The essence of civility was captured by Peter Kropotkin in his historical work, Mutual Aid: A Factor of Evolution:

The mutual-aid tendency in man has so remote an origin, and is so deeply interwoven with all the past evolution of the human race, that it has been maintained by mankind up to the present time, notwithstanding all vicissitudes of history. It was chiefly evolved during periods of peace and prosperity; but when even the greatest calamities befell men --when whole countries were laid waste by wars, and whole populations were decimated by misery, or groaned under the yoke of tyranny --the same tendency continued to live in the villages and among the poorer classes in the towns; it still kept them together, and in the long run it reacted even upon those ruling, fighting, and devastating minorities which dismissed it as sentimental nonsense. And whenever mankind had to work out a new social organization, adapted to a new phase of development, its constructive genius always drew the elements and the inspiration for the new departure from that same ever-living tendency.[10]

A "surface society" is one that ignores this commonality and replaces it with narcissistic tendencies that are centered within a false sense of identity - one that constantly pursues wealth or, at the very least, the appearance of such. In Prosperity without Growth, Tim Jackson writes, "The profit motive stimulates a continual search for newer, better or cheaper products and services. Our own relentless search for novelty and social status locks us into an iron cage of consumerism. Affluence itself has betrayed us."[11] This society, in sharp contrast to its civil counterpart, has been intensified by the maturation and successive mutations of capitalism, a system that has far outlived the spotty improvements it once offered to its ancestral systems of feudalism and mercantalism.

The development of a "surface society" is as much intentional as it is incidental. On one hand, it represents a regression to what Kant once referred to as "man's self-imposed infancy." On the other hand, it represents a product of invention - the intended result of a social and economic system that is manipulated and shaped through intensely concentrated power structures and profit-seeking motives. The latter brings us back to the French subjugation of Madagascar, where a noted "strategy" used to gain control of the indigenous population was to mold them into consumers who become "accustomed to the minor luxuries available at the shops." Thus, by doing so, they are not only assimilated into the "western mindset," but also dependent on the perceived need for otherwise worthless commodities. Post-industrialized societies are marked by similar dynamics, some of which are natural byproducts of the corporatized market system, and others which are products of design through hierarchical decision-making and political and monetary policy. Ultimately, if the interests of the "ruling-class" (the super minority) not only differs from that of the "working-class" (the super majority), but actually runs adversarial to such, then the need to "manipulate a culturally diverse society so that the ruling-class worldview becomes the worldview that is imposed and accepted as the cultural norm," like Gramsci once suggested, is logical on face value.

As we embark well into the 21st century, debt has officially replaced "labor surplus value" as the fundamental tool used by "the rich to extract wealth from the rest of us."[12] However, below its tangible use for "extracting" and funneling wealth to the top lies a crucial weapon in the battle for consciousness and working-class servitude. One of the most notable instances of "assimilation through policy" is reflected within America's love affair with home ownership, which has been intensely subsidized by the federal government for the past century. Interestingly enough, the push for home ownership was rooted in two essential motives: to quell the radical working-class uprisings of the early 1900s, and to serve as a subtle avenue for transferring public funds to private finance. Federal support of home ownership "began as an extension of anti-communist efforts in the wake of the Bolshevik Revolution in Russia; as on organization of realtors put it at the time, "socialism and communism do not take root in the ranks of those who have their feet firmly embedded in the soil of America through homeownership."[13] The working-class angst that had begun to surface, both internationally with the events in Tsarist Russia and nationally with the groundswell of union activity and workers' strikes, presented the need to ramp up capitalist intervention in domestic policy. What followed were the federally-backed "Own Your Own Home" campaign, the Home Owners' Loan Corporation (HOLC), the Federal Housing Administration (FHA) and the Federal National Mortgage Association (better known as "Fannie Mae."). The consensus among the "owning-class" was that indebted homeowners do not go on strike. The subsidization of private home ownership through tax incentives (where the federal government actually pays homeowners a portion of their expenses at the end of the year) allowed for the manipulation of working-class interests, and were eventually fortified by modern advents of the same, such as consumer debt (rampant through the 1980s and 90s) and student loan debt (dominant from the 1990s to present). It is no surprise that this "control by debt" mantra has intensified during an historical macroeconomic transition from tangible production economies to highly abstract "financial" economies. In contrast to the potentially negative perception of debt, the introduction of seemingly positive forms of class connections have been deployed in the form of "privatized" retirement plans, company "profit sharing," 401Ks and "deferred compensation" plans - all of which urge workers to give portions of their earnings to Wall St. in the promise of long-term returns. Yet another artificial creation of vested (in the form of a direct monetary medium), though contradictory, interest in the owning-class' well-being. The result: A working-class that cheers on the Dow, Nasdaq and S & P 500 under the false impression of inclusion and mutual interest, all the while being fleeced.

Naturally, as "financialization" has sprung up as the dominant paradigm, so has the near-complete fusion of what C. Wright Mills once referred to as "The Power Elite." Graeber writes:

Financialization is not just the manipulation of money. Ultimately, it's the ability to manipulate state power to extract a portion of other people's incomes. Wall Street and Washington, in other words, have become one. Financialization, securitization and militarization are all different aspects of the same process. And the endless multiplication, in cities across America, of gleaming bank offices- 
 spotless stores selling nothing while armed security guards stand by-is just the most immediate and visceral symbol for what we, as a nation, have become.[14]

So, where does consumerism fit into this bleak reality? It's rather simple. Without a constant effort to ensure people remain "accustomed to the minor luxuries - parasols, lipstick, cookies- available at the shops," the potential reach of debt is limited. Of course, basic necessities like housing, health care, food, clothing, and even water can and have been commodified in this fashion - but this isn't enough. Without creating and maintaining an insatiable "need" for luxuries, immense avenues of profit (on one side) and debt (on the other side) are essentially shut down. Furthermore, beyond the basic pursuit of monetary gain (profit) and wealth extraction (debt) lies the foundation of the status quo: the struggle for consciousness. A working class that remains ignorant to its role in this struggle; that remains indignant towards members of its own class through artificial divisions (race, gender, nationality) or false consciousness (by foolishly blaming the poor, homeless, welfare recipients, etc..); that buys into the Weltanschauung established by the "owning-class," is one that stands idle in the face of its own collective disenfranchisement. It allows "the norms of gender, class, and culturally circumscribed behavior, the requirements of work, the pressures of seeking status through consumption, and, in the absence of viable social alternatives, the need to find almost all enjoyment from private commodities" to dictate human life.[15] In this sense, consumerism is the enemy of solidarity; and solidarity is the catalyst of social awareness. Because if and when genuine class consciousness takes flight, society runs the risk of offering a meaningful human existence - an inevitable death to the status quo and the collective realization that "you're not your fuckin khakis."

Notes

[1] Guy Debord. The Society of the Spectacle.

[2] Albert Einstein. Why Socialism? Monthly Review: May 1949. (Paraphrasing Thorstein Veblen)

[3] David Graeber. Debt: The First 5,000 Years (New York: Melville House, 2011)

[4] Franz Fanon. Black Skin, White Masks (New York: Grove Press, 1967)

[5] Graeber, Debt.

[6] Karl Marx. The Poverty of Philosophy, 1847.

[7] Victor Lebow. Journal of Retailing, Spring of 1955.

[8] Edward Herman and Noam Chomsky. Manufacturing Consent: The Political Economy of the Mass Media (New York: Pantheon, 1988)

[9] Thorstein Veblen. The Theory of the Leisure Class: An Economic Study of Institutions (New York: Macmillan, 1902), pp. 68-101

[10] Kropotkin, Peter. Mutual Aid: A Factor of Evolution. 1902

[11] Is rampant consumerism ruining our lives? The Guardian, March 17, 2011.

[12] "Can Debt Spark a Revolution?" David Graeber. The Nation, September 5, 2012.

[13] Vincent Cannato, A Home of One's Own, National Affairs, Spring 2010.

[14] The Nation.

[15] Michael Albert. Parecon: Life After Capitalism (New York: Verso, 2003), p. 205.