THEORIZING STATE SPENDING
It is best here to quote at length from Mattick in the earliest published version of an argument (1967) he would emend over the next fifteen years as his prescience was confirmed by the course of events:
The government increases 'effective demand through purchases from private industry, either financed with tax money or by borrowings on the capital market. In so far as it finances its expenditures with tax money, it merely transfers money made in the private sector to the public sector, which may change the character of production to some extent but does not necessarily enlarge it. If the government borrows money in the capital market, it can increase production through its purchases. Capital exists either in liquid form, i.e. as money, or in fixed form, that is, as means and materials of production. The money borrowed by government puts productive resources to work. These resources are private property, which, in order to function as capital, must be reproduced and enlarged. Depreciation charges and profits gained in the course of government-contracted production--are 'realized' out of money borrowed by the government. but this money, too, is private property--on loan to the government at a certain rate of interest. Production is thus increased, the expense of which piles us as government indebtedness.
"To pay off its debts and the interest on them, the government has to use tax money, or make new borrowings. The expense of additional, government contracted production thus carried by private capital, even tough it is distributed over the whole of society and over a long period of time. In other words, the products which the government 'purchases' are not really purchased, but given to the government free, for the government has nothing to give in return but its credit standing, which in turn has no other base than the government taxing power and its ability to increase the supply of credit money.
"We will not enter here into the intricacies of this rather complex process, for, however, the credit expansion is brought about and however it is dealt with in the course of expanding government-induced production, one thing is clear, namely, that the national debt, and the interest on it, cannot be honored save as a reduction of current and future income generated in the private sector of the economy..."
"Because government induced production is itself a sign of a declining rate of capital formation in the traditional sense, it cannot be expected to serve as the vehicle of private capital expansion effective enough to assure conditions of full employment and general prosperity. It rather turns into an obstacle into such expansion, as the demands of government on the economy, and old and new claims on the government, divert an increasing part of the newly produced profit from its capitalization to private account.
"Of course, claims on the government, which make up the national debt, can be repudiated, and 'profits' made via government induced production are thus revealed for they actually are, namely, imaginary profits."
Here Mattick reveals how wrong Doug Kellner was to dismiss Marcuse's "orthodox" critics thusly:
"Marxist critics sharply attacked Marcsue's theory of capitalist stabilization, arguing that he had surrendered the Marxian theory of capitalist crisis, its emphasis on contradictions and class struggles, and its attempt to find disintegrating factors within society and social forces that would be able to overthrow capitalism and construct socialism. The orthodox Marxian strategy of critique tended either to quote classical Marxian doctrine against Marcuse, or to present social facts and tendencies which put in question Marcuse's tendencies"
It should be obvious from the previous passage that this was precisely not Mattick's strategy of critique of which Kellner evinces no understanding. Mattick had to develop Marxian theory to understand state spending, the key new feature of the post war society, as a form of fictitious capital. Mattick demonstrated that the issuance of government debt allowed overaccumulated capital to function only as if it were capital. This would then lead Mario Cogoy to clarify that government ordered production represented "unreproductive goods" in that while they indeed represented surplus value for their individual producers they constituted a loss for total capital in whose expanded reproduction as wage or capital goods these unreproductive goods did not enter and consequently did not transfer their value which was thus simply extinguished. These unreproductive were therefore paid out of revenue which entailed a deduction via taxes or government borrowing from the total surplus value available for accumulation. In this way Mattick, along with Cogoy, showed that the mixed economy would find its limits in the contradictions of production and structure of capital, yet this conceptually innovative demonstration was hardly a mere restatement of orthodox Marxism, as Kellner argues. New realities were analyzed on the basis of theoretical development, to wit:
"The money capital utilized by the government is not invested as capital and so preserved but disappears into "public consumption." If the state debt is ever paid off--which may well not happen--it can only be paid out of new surplus value freshly created in production. And this would in no way alter
the fact that the surplus value represented in the national debt has vanished without a trace instead of adding its volume to the accumulation of capital. It follows that the state's use of increased public spending to fight crisis ends by consuming capital. This consumption of capital appears as a growth of production and employment, but due to its unprofitable character, it is no longer capitalist production and really amounts to a hidden form of expropriation by the state. The state uses the money of one group of capitalists to buy the production of another group, with the intention of satisfying both groups by assuring for one the interest on and for the other the profitability of its capital. But the incomes that appear here as interest and profit can only be paid out of the total social surplus value actually produced, even if the reckoning can be deferred. As a result, from the standpoint of the system as a whole the proceeds of state-induced production must count as a deduction from the total profit and therefore as a diminution of the surplus value needed for accumulation. Since the crisis results from a shortage of surplus value, it can hardly be overcome by increasing this shortage."
However it can be said with confidence that Mattick predicted that the state in having to shed its commitment to the unproductive expansion of production would resume its classic functions as a class state, improving the conditions of production for capital and repression. Kellner was not wrong to characterize Mattick as an orthodox Marxist as his theoretical work served the purpose of clarifying the struggle to abolish capital, wage labor and the state. ____________________________
Yours, Rakesh