I have to apologize in advance, since this examination is somewhat dense in sections and long for a blog post. I will try to reduce the complexity of Kurz’s argument as much as possible and break it into a series of smaller posts. Feedback both on the accuracy of my presentation of Kurz’s argument and the subject itself is welcomed.
I spent the past week or so reading one of the most novel Marxist analyses of the so-called financial crisis I have yet come across. The really interesting thing about “The Apotheosis of Money”, by Robert Kurz is that, unlike most Marxist analyses, although it explains the so-called financial crisis of 2008, it was written in 1995. Thirteen years before the crisis, Kurz predicted a devaluation shock that will invalidate the bloated property claims of fictitious capital.
Of course, Kurz was not alone in this sort of thing — the bourgeois economist Hyman Minsky (pdf) was making a similar prediction. And beyond Minsky, there are writers who have predicted the imminent collapse of the financial sector for most of the past 40 years. This latter group — folks who are profoundly dissatisfied with fascist state monetary policy, like the financial guru John Williams — are mostly a group appealing to marginal capitalist elements and survivalists with libertarian or Austrian leanings. However, Kurz cannot really be compared to either Minsky or Williams, since he did not simply predict a money crisis, but the end of commodity production itself.
I find his argument interesting, because Kurz, in his analysis, seems to move along lines similar to Moshe Postone’s and against the sort of amateurish analysis that is typical of academic Marxism. Plus, he hits all the categories often missed by the typical Marxist argument. The aim of Kurz’s 1995 work was to demonstrate that there is a structural limit on the capitalist mode of production that would, in the near future, produce a catastrophic money devaluation shock, leading to the collapse of commodity production itself. In light of the so-called financial crisis of 2008, Kurz’s argument looks rather prescient. And it bears examination, because to support his prediction, Kurz takes us on a whirlwind tour through both the logical implication of the labor theory of value and developments within the capitalist mode of production over the last 80 years since the rise of the fascist state.
1. The Illusory Nature of Financial Capitalism
In Part 1 of his essay, Kurz’s analysis began with the relation between money itself and value-producing labor that is fundamental to Marx’s theory. He tries to show why, in the course of capitalism’s development, both our perception and the reality of the relation between finance and the so-called real economy becomes increasingly tenuous.
While money is only the product of value-producing labor, it becomes an end in itself with the capitalist mode of production. Money subordinates human need to itself and with it human relations and our relation to nature. An inversion takes place: rather than the the product of labor being subject to human needs, human needs are subject to the movement of products of labor.
The process which brings money and value-producing labor into balance is constantly upset by the vagaries of the movement of money and value-producing labor. The concept, although very abstractly stated by Kurz in dense Marxist terminology, can be made understandable by thinking about the constant fluctuations in the price of any commodity in the marketplace. Commodity prices constantly fluctuate even when there is no change in their actual values, because of fluctuations in supply and demand, for instance. A commodity can even appear in the market without a price — as is the case when there is a glut of the good — although the point of producing it was to tease money out of a customer’s pocket.
There is at least the potential for a perceptual disconnect between money and abstract value-producing labor always lurking in the background; and, with this, for the necessary connection between the labor and money to escape our apprehension. Commonsense tells us there is no connection between the two; money appears with its own logic as something that can develop independently of value-producing labor. Kurz argued Marginalist economic theory in its various forms is only the product of this commonsense misapprehension, which takes the lack of apparent connection between prices and the expenditure of labor as an accurate description of social reality.
Next, Kurz draws our attention to the theoretical distinction and relationship between productive capital (capital that actually produces surplus value) and interest bearing money capital (capital that yields profit from interest on loaned money) of Wall Street’s financial engineers, in order to show how the interest bearing money capital, although simply the product of the former, comes to appear as the “true form” of capital, as opposed to its actual basis in the production of new value through the expenditure of human capacities in labor.
Of course, money capital itself can only really become capital through the process whereby this money capital is exchanged for labor power, and this labor power produces surplus value. However, the rise in importance of interest bearing capital practically creates a situation where the money capital appears to return to the financier without undergoing self-expansion in the labor process. The money capital of the financier appears to increase without the creation of surplus value — something that is impossible within Marx’s theory.
Kurz argues that while this purely monetary increase in capital is impossible, the appearance that this is what has happened is not simply a subjective illusion, but also expresses the logical requirement of capitalism, where the capitalist must be indifferent to the particular origins of his profits. The problem concealed in profits derived from loaned money, however, is that capital, even when it is loaned capital must really undergo the conversion into a commodity to produce surplus value. The financier does not see this process, but it must still take place when the loaned money capital is employed by the industrial capitalist to produce commodities.
This can have consequences for capital when the movement of interest bearing capital, M-M’, represents not the full circuit of productive capital, M-C-M’, but is entirely shown to be fictitious — for instance, when the industrial capitalist goes bust, or when the loaned money is used for speculation instead of productive uses.
Such use of money, if it occurs on a large scale, causes interest-yielding capital to become increasingly separated from the real valorization process and therefore to become ‘fictitious capital’.
Now this does not mean the loaned money is spent idly on sex, drugs and rock and roll — although this can happen. As I noted above, it can occur simply because a project for its productive use results in a commodity that cannot be sold. Already we know a commodity can appear in the market without a price, now this becomes a complicating factor for loaned money. In this case, the loaned money is retroactively revealed to be fictitious capital by harsh realities of the marketplace, although everyone used due diligence.
Additionally, Kurz argued money capital becomes truly fictitious when failed loans are papered over by paying them off with new loans. This, he says, was already happening in 1995 in the Third World debt crisis, and with business and consumer loans (and this is what we see now on an astonishing scale in the euro-zone crisis). By 1995, an ever increasing quantity of purely fictitious assets were being treated as if they were productively employed capital — creating the material for an explosion in the near future:
Ultimately, the fictitious chain of extensions will end up breaking, because the meta-remuneration of interest of the M-M’ movement, developed beyond its substantive content, will reach its limits.
If this was as far as Kurz got in his analysis, there would be nothing really memorable about it — good money being tossed after bad. It would be on par with some of the best of Minsky’s analysis, or the Austrian school writers like FOFOA — but nothing more. Kurz, however, was just setting us up to understand this crisis — he was only giving us a framework for what comes next. While most Marxist, Austrian, and heterodox analysis admits to capitalism’s financial “excesses”, Kurz employs this as his starting point to discuss capitalism’s absolute material limit as a mode of production.