Capitalism's Fatal Flaw, and the Way Forward: Horace Robbins on Technodepreciation, Fictitious Capital, and the Cause of the Self-Induced Demise of the Capitals-System.

Dear Reader,

Tonight’s blog-entry is about a rare book -- rare in more than one sense of the word -- and about an author who can’t be found.

The author is one Horace H. Robbins.

The book’s cover’s back flap describes him as “a U. S. Administrative Law Judge.”

The book, published in 1974 by the New York Philosophical Library, is entitled --

Fictive Capital and Fictive Profit -- The Welfare-Military State, A Political Economy Based on Economic Fictions.

¡The author is nowhere to be found!

¡Just try ‘“google-ing”’ his name!

But this author is the author of a text of rare synoptic vision and large-scale, historical, whole-system-theory ambition, one that addresses the issues that reside at the very heart of this Blog.

So may you enjoy -- and ‘“profit from”’, in a social-revolutionary sense -- this foray into Horace Robbins too-little-known theory of the self-induced demise of the capitalist system.

Regards,

Miguel

First of all, Horace Robbins’s theory is part of the broad current of thought in which this Blog’s theory also inheres, as one can readily see from the following initial extract from his long text.

He does not explicitly make all the connexions about technodepreciation as the fundamental, fatal flaw of the capitalist system, in the quote below, but all those that we know of inhere there implicitly, whether or not he consciously acknowledges them all or not --

“The basic cause of the ultimate failure of this political economy is the resumption of the process that exists in all capitalist relationships, i.e. the steady advance in technological development that reduces the unit value of goods (although this is concealed by the depreciation of paper money [M.D.: i.e., by the declining “buying power” per unit [e.g., per $] of paper money = “inflation”]) and reduces the rate of Aggregate Profit and entrepreneurial profit.”

“A point can be reached where the Aggregate Profit itself must always decline, and the Aggregate Capital must always shrink [M.D.: due to shrinkage of capital-value by ‘technodepreciation’ losses/write-downs, e.g., a “point” determined jointly by an acceleration of the rate of technological development -- hence an acceleration of the rate of ‘technodepreciation’, including of capital goods, relative to rates of physical, “wear and tear” depreciation/-amortization thereof -- combined with a growing preponderance of the value of capital goods in “Aggregate Capital” value], and there can be no market whatsoever for any new, additional capital goods [M.D.: E.g., implying a collapse of industrial, productive investment]... .”

“It was this tendency that produced the relative economic critical point [M.D.: e.g., “The Great Depression”] in the Independent Capitalist Economy [M.D.: I.e., in the “gold standard” capitals-system, prior to the 1913 “Federal Reserve” Act and to the 1929+ “Great Depression”], wherein constant expansion could no longer take place in sufficient volume to maintain the economy, and a variable, episodic expansion could no longer fill the gap.”

“But the fictive processes introduced and maintained by the Welfare-Military State [M.D.: E.g., by the fascist state-capitalist state in pre-WWII Germany, Italy, Japan, etc., by “pure-state-bureaucratic ruling class” state-capitalism in Pre-WWII Russia, and by the Roosevelt proto-state-capitalist reforms in the U.S.A.], and the creation of a pseudo Profit B made it possible for the relationship of individuals in capital units [M.D.: I.e., for the “capital-relation” [Marx]] to continue.”

“Yet the same tendency still continues, to the point where any real capital expansion becomes impossible.”

“This is the absolute economic critical point of any capitalist relationship, even if maintained by a pseudo Profit B [M.D.: The movement toward this absolute point of breakdown of the [state-]capitalist/fictive-capital system could, presumably, be averted only if the acceleration of the process technological development productively-applied were diverted into destructive uses [e.g., into weapons of mass destruction and “permanent war”], and otherwise wasted or suppressed -- hence the ruling-class engineered “anti-technology” ideologies of “zero economic growth”, “small is beautiful”, “limits to growth”, “post-modernism”, “post-industrialism” “Global Warming”, etc.].” [p. 415].

[Horace H. Robbins, Fictive Capital and Fictive Profit: The Welfare-Military State, A Political Economy Based on Economic Fictions, Philosophical Library, [New York: 1974], emphases added by M.D.].

The predictions that Robbins lodges for the finality of the global capitals-system are presented after he has applied his theory in a vast historical perspective of the lead-up to that finality, from the end of what we term ‘the ascendance phase of the capitals system’, and from the beginning of what we term ‘the descendance phase of the capitals-system’, as follows [in part] --

“The (capitalist) organism has a definite span of life; when the organism dies, its parts (units) cannot survive.”

“The organism came into being as an economy (the Independent Capitalist Economy), because of the immense power of its dynamic, the expansion of capital, which was self-creating and self-sustaining.”

“But such a capitalist organism must reach a critical point when this capital expansion cannot by itself take place.”

“(The capital expansion referred to is the normal and inherent expansion of capital, not the gross overexpansion of capital that is induced by war, inflation, etc., an overexpansion of capital that is itself periodically destructive to the economy).”

“When this critical point is reached, and even the gross overexpansion is no longer possible, the organism (Independent Capitalist Economy) must enter into a final, and ever widening spiral decline, to its ultimate collapse.”

“(Topic 4, Syllabus -- 1914-1929 the period of the critical point).”

“This organism (Independent Capitalist Economy) came to its end in 1930; it cannot be resurrected.”

“The Democratic State, the political structure characteristic of the period of the Independent Capitalist Economy, then also failed.”

“The fact that in the political economy of fictitious capital and profit the same relationship seems to exist in the units, as stated at the outset, does not mean that the same economy exists. ... .” [op. cit., p. 18]. ...

“The political economy based on the fictive expansion of capital is created by the establishment of the Welfare-Military State, of which it is an integral part...”

“This political is a simulacrum of a capitalist economy; the fictions are simulacra, although they have an absolute adequacy and reality for units and individuals.”

“But the political economy created, is plainly not the capitalist economy that existed (in the Independent Capitalist Economy up to 1930).”

“By the creation of a simulacrum, a new economy is actually created.”

“The capital units themselves become creatures of the State.” ... [op. cit., pp. 28-29.].

“The Political Economy Based on Fictive Forms, and the Welfare-Military State, must come to an end.”

“This political economy, this State, are mortal, as were the Independent Capitalist Economy and the Democratic State.”

“The political economy must reach a point (called the absolute economic critical point) where there can be no real capital expansion, but rather a contraction of the Aggregate capital sets in, and the pseudo-Profit B must begin to steadily decline, the fictive forms losing their value and utility, finally becoming inadequate to create the pseudo Profit B.” [op. cit., p. 44]. ...

“In the fifty years before the Great War of 1914-1918, the full development of the Independent Capitalist Economy took place.”

“The half century period was a troubled one.”

“There were recurrent serious depressions and financial crises that resulted in widespread distress and in the ruin of many.”

“There was labor conflict and the degradation of large parts of the laboring class.”

“The units in nonconcentrated sectors of the economy found increasing difficulty in surviving.”

“The accumulation of immense fortunes, and political corruption seriously weakened the ideology of the Democratic State.”

“ “Socialist” movements caused much concern.”

“However, they were not in themselves significant.”

“In 1914, the relative economic critical point was clearly recognizable.”

“The size and productivity of all the capitals in the developed capitalist nations had reached such that new investment for constant expansion was grossly insufficient to maintain an equilibrium except at a low level of Production, including investment in existing undeveloped areas.”

“The course of the national economies for several years had been erratic, and in most there was a great degree of dependence on production for war purposes, to maintain normality.”

“The relative economic critical point must be viewed in the actual political and international situation at this time, i.e. several fiercely competing national economies, rather than abstractly, as though there were one single great capitalist economy, highly advanced, and unable to maintain an equilibrium.”

“In the actual situation, the relative economic critical point could not really could not really take the course of a decline into low level stagnation.” ...

“The war was effective in delaying the effect of the relative economic critical point.” ...

“The war itself was a popular war in all the warring countries, and it relieved the economic, social, and political stresses of the relative economic critical point.” ...

“There were two major unforeseen consequences of this war.”

“First the Russian economy reached a socially critical point and the Communists seized power.”

“The second was that the period of prosperity that was to come after the war for the successful warring powers, was achieved only by the United States, which entered the war later.”

“The other victors, as well as the defeated nations had to turn to the United States to save themselves from the socially critical point that their economy was entering, something which the war itself could not do.”

“The period of prosperity in the United States, the second great period of variable expansion in the relative economic critical point, indeed not only postponed the depression of the relative economic critical point but was able to postpone the socially critical point of the European economies.”

“The remarkable variable expansion that took place in the U.S. after WWI, was, first, the result of war, and of the loans to rebuild or sustain the European economies.”

“But the real basis of the boom was the extraordinary development of the financial system, and a related private monetary inflation through the banking system, to a degree that had never been reached before.” ...

“There was an immense real capital expansion.”

“Furthermore new capitals were formed, and old ones expanded because the new capital papers themselves became things of value; capitals could be created because their paper forms would constantly sell for a higher price.”

“And capital papers were then created upon the basis of these papers, their values increasing in the booming stock market.”

“The great sums of money made on all these papers was in part fed back into the economy in the purchase of consumer goods.”

“A genuine private inflation was in being. (Ch. IV on techniques of private inflation despite a gold standard, and its consequence.)”

“The results and the technique were the basis of a belief that a new economic system had been devised, unhampered by the limitations of ordinary capital expansion and the business cycle.”

“This belief was held by high Government officials and professional economists, as well as business men, financiers, and bankers.”

“That this new era was based on the full development of private fictive paper and bank credit money inflation and a variable capital expansion based on a pseudo Profit B -- all of which had to be temporary and all of which were in fact only the ultimate stage of the relative economic critical point -- was not recognized.” ...

“The collapse of the stock market in 1929-1930 was the critical factor terminating the boom and the great capital overexpansion, real and fictive.”

“The financial system and the inflation had been the main forces behind the real capital expansion, and when these could no longer function, the great structure of paper capitals collapsed, and with this collapse the whole economy failed.”

“The Level of Production and Income at once entered into a precipitous decline.” ...

“Extensive as the depression and collapse were, if they had proceeded further in 1933 the result would have been the destruction of the economic and political organization of the society.”

“But the socially critical point had been reached, and the Independent Capitalist Economy came to an end and the political economy of fictive capital and profit had its inception.” ...

“The final depression and collapse of the capitalist economy (Independent Capitalist Economy) in the relative economic critical point is qualitatively and quantitatively unlike the cyclic depression of the Independent Capitalist Economy.”

“Even if the relative economic critical point had resulted only in profound depression, it would have been a non-cyclic depression, without recovery.” [op. cit., pp. 172-175.].

Robbins's book includes a full chapter focused on "“Welfare” and “Military” Systems of Distribution and use of Goods", which describes how a system of vast overproduction of "military" "goods" -- of production, for-national-government-as-sole-customer/sole-market, of non-use-values, of non-reproductive "capital" goods, of 'anti-use-values' from a human social-reproductive standpoint, and from a social forces of production standpoint, that is, vast production of 'anti-goods', or of 'bads' -- can delay the onset of "the absolute economic critical point" of collapse / transformation of "the political economy of fictive capital and profit", including the excerpts below --

“... The laws that govern the distribution and use of goods that constitute the pseudo Profit B can be stated as logically necessary principles flowing from the nature of a political economy based upon fictive expansion of capital.” ...

“... The goods, and the money, may not be used as capital to produce other goods (in a capitalist relationship).”

“Nor may they be used to produce goods in any other economic relationship, as for example by Government production of goods for sale.” ...

“... The good must be used in a way socially accepted as desirable or necessary. Corollary No programs of direct, physical destruction of the good is permissible.” [pp. 299-300]. ...

“The welfare system of distribution and use cannot be used alone; if an adequate Military program is not in existence, the Welfare Program must be supplemented by a “public works” system of expenditure.

“But the latter will not permit a high level economy or a high level welfare system; the Military system of expenditure is essential to secure both a high level economy and a high level welfare system.” ...

“Actually the greater part of the purchases must directly, or indirectly be made from the capital goods industries.” ...

“Even at a low level political economy based on fictive capital and profit -- as in the early U. S. political economy based on fictive capital and profit [M.D.: i.e., the Roosevelt administration’s pre-WWII New Deal] -- when welfare expenditure was the only major system, of expenditure, the political economy based on fictive capital and profit could not be sustained by the welfare system alone.”

“In the absence of a military program of adequate size, a public works program is essential to furnish a market for heavy industry.”

“Early public works programs often included the construction of power generating facilities, etc., which is inconsistent with the laws of use and distribution [for “welfare” goods, and military “goods” -- M.D.].”

“However, this was necessary as an emergency measure to maintain the political economy based on fictive capital and profit, in the absence of military expenditure on a sufficient scale.” [pp. 304-305]. ...

“The defense requirements of the Welfare Military State (in which an immense, technologically advanced military establishment and armament is constantly maintained) constitutes a distribution and use of goods that can always be at a high level, always consistent with the laws of distribution and use [for “welfare” goods, and military “goods” -- M.D.].” [p. 329].

Robbins describes the final breakdown-crisis [<<Zusammenbruch>>] of the capitals-system as follows --

“What then occurs, stated generally, is the beginning of the failure of the fictive Profit form (Welfare-Military State tax), the return declining, and the rate reduced in an effort to maintain entrepreneurial profit.”

“Inflation must then increase.”

“A rapid depreciation of the paper money and all fictive capital forms sets in.”

“The pseudo Profit B becomes difficult to maintain, and it declines, and the declining spiral in the pseudo Profi[t] B, induces a declining spiral in the level of production; value begins to decline faster than volume.”

“The Level will decline to the point of a possible socially critical point, with collapse of State and Economy.”

“That is to say the fictive forms (fictive capital, fictive profit, inflated money as capital money, the private fictive capital forms) can no longer maintain an equilibrium at any acceptable level of production (acceptable for labor class, welfare class, military, capitalists themselves), and as a corollary, the fictive forms themselves lose all acceptability.”

“The actual approximate sequence is:”

“I. The real expansion of capital, whether involving technological advance or not, comes to an end, including any possible “reactive” expansion of capital for Government demand. (Note, however, that this does not mean that technological advance terminates.) There is, of course, an end to the creation of new private fictive capital forms and private inflation.”

“II. Parallel: The continuous fall in the fictive profit form -- Welfare Military tax in amount of return and usually in the overall tax rate.”

“The steady increase in the issuance of fictive capital public forms.”

“The steady increase in the public inflation of the paper money.”

“III. The beginning and continuation of the spirally increasing decline in the Level of Production, as the pseudo Profit B begins to decline.”

“V. Loss of acceptability of new and existing fictive capital forms, almost final loss of value of the paper money. Level of production insufficient to maintain Government distribution -- welfare-military systems. (Note: if gold reaches private possession in sufficient amount, the fictive capital forms and the paper money are the sooner destroyed.)”

“VI. Final spiral. (Note: before final spiral, it is likely that the final Great War intervenes. This will appear as an attempt to maintain an “ideology.” In view of the needs of the Government, which cannot be met thru the dependent capitalist organism, it is possible that a Military Government system of production -- production directly undertaken by the Government for military purposes, something like existing so called “communist” States [,][--] comes into being.”

“If the end is not in the devastation of war and collapse, the point of the declining spiral will be such that the economy is socially unacceptable to any class.”

“Note that the welfare distribution would have to increase as the Level of Production declines.”

“The inability to expand real capital, and expand the pseudo Profit B is really made critical by the lower tax return (and the fall of the tax and of the whole Aggregate Profit will be precipitous because of spiral effects).”

“Thereafter, the Government bond will not be privately purchased; the Government must rely on inflation to obtain money, and this will destroy the political economy.”

“The Government will not be able to arrest the spiral.” [pp. 415-417].