9min chapter

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PoliEdPod 4: Reading Alfred Sohn-Rethel on Fascism, Today

Class Unity

CHAPTER

Artificial Effective Demand in the Market

This chapter explores the concept of creating artificial demand when there is none, the necessity of planning the economy, and how war becomes a solution to surplus production.

00:00
Speaker 1
Your respective of whether the markets can absorb that, whether there's a buyer with money on hand to buy it at a profitable rate, they want to sell as much steel as the laws of physics allow, but the market can't always absorb that and so the question arises, how do you create artificial effective demand for a product for which there is no sort of spontaneous effective demand? And Sun Raethol has a nice way of putting that. Basically he says that the overall effect is that the economic autonomy of structures of production have become increasingly, have increasingly destroyed the market economy's capacity to regulate itself. So the plant economy overwhelms the market economy in terms of productivity. He says if production is no longer able to obey the demands of the market, then it's necessary to try to subject the market to the demands of production. That's to say if the market can't absorb all the products, then bend the market to fit whatever you need to sell. The times when a large company was closed down because it was bankrupt according to the regulations of the free market of long since past. Today market regulations are manipulated instead and all of this can be understood under the banner of monopoly. That's the way he put it. And so when you get to that point, you have curated markets instead of free markets and that's when wars start to be waged out of economic necessity because otherwise the steel monopolies will go bankrupt simply which was the case in the interwar period.
Speaker 2
So one of the features you're describing is that as capital becomes concentrated, it becomes necessary to plan the economy. And so this is one of the features that Marx was really predicting before it happened was that the development of industrial productive capability leads to the necessity for some manner of economic planning. And this is how the big industrial trusts and cartels operated. They streamlined and the production process such that it was as efficient as possible as you're describing. But as you're also describing, this leads to a split between the economic imperatives of production and the imperatives of the market. And so on the one hand production demands a certain rate of output, a certain efficiency of output, but the market doesn't necessarily meet the demands of production itself. So we have a bifurcation of economic incentive within capitalism itself. Yeah,
Speaker 4
I just wanted to add like a little flavor to this to make it hopefully a little more tangible and it might help us kind of transition to the specific situation in Nazi Germany. So, you know, one of the reasons why there's this compulsion to continuously produce more goods is tied to this concept Marx talked about called the organic composition of capital. So basically the concept is that over time, the amount of labor used are the amounts of a cost of a good being derived based on the amount of labor that was put into that, producing that commodity tends to go down over time. So, and that's a direct result of this monopolization process. So obviously that, you know, in the short term that works out well for the capitalist because they can produce goods more cheaply. But obviously there's a competitive you know, aspect to this where there's multiple competing monopoly interests. And so there's a race to the bottom. And so that's one aspect. And then the other is obviously we know that capitalism has boom and bust cycles. And so there's obviously periods of time where there isn't demand for your products. So the way you handle that when labor costs make up a big chunk of the cost of goods and services in earlier phase of capitalism is just to lay off workers. Because at the end of the day, who cares what happens to them, they need to take care of themselves, you lay them off, that helps resolve the contradiction a little bit. But when this organic composition of capital changes to where the majority of your costs or fixed costs, you're in a real bind because as we'll talk about in a second, like when you have a factory and you've bought a bunch of equipment on loan, it's not like you can just get rid of that stuff. I mean, you've got it whether you're using it to produce goods or services or not. That's why they're compelled to continuously produce more and more goods even when there's no demand for it. Because at the end of the day, if you stop producing, that's even a bigger hit than if you just kept producing these goods.
Speaker 1
Right, because we're talking about massive steelworks, chemical factories and so forth, things which run constantly. And if you turn them off, they break. It's not like a light switch. It has to be on all the time. Once you invest in it, you're committed to it. And whatever financing you took to get that is a sunk cost. So basically, we were talking about industrialists suffering from a sunk cost fallacy. And they can't give up because it means their political economic power and their hide. Just one thing though, maybe to relate it back to more familiar language, what this is, is another way of saying what Marx calls the forces of production and relations of production. Basically, the productive forces are so immense that the relations of production, the market relations, can't accommodate all the surplus that's being produced. There is more surplus than can be profitably reinvested, we could say. And so, there has to be a way to deal with it. You might want to find a new place to invest it, but then it's just passing the sort of, passing the hot potato and somebody's going to get stuck with it. Ideally, you'd find a way to invest it so that it doesn't create any more surplus in need of investment. You can just produce purely
Speaker 4
for the profit of
Speaker 1
the industrial producer without recreating the problem. And that's why war is so interesting because you produce a product which isn't going to demand further investment, it's going to go be destroyed. You make bullets, and the only way to use them is to shoot them, and the only way to keep selling them is to keep using them, keep shooting them. So, the industrial situation in the interwar period under the bad financial conditions it was under
Speaker 4
forced a
Speaker 1
decision on the people in power, namely, either you own up to the kind of economic planning that capitalism is already necessitated for itself through the course of the war and monopolization, and you transition to
Speaker 4
socialism, or you
Speaker 1
try to reboot capitalism by whatever means necessary, and that is, you know, Rosalux and Berg's socialism or barbarism, that meant barbarism.
Speaker 3
So, yeah, yeah. So,
Speaker 2
I mean, I think it's worth pointing out that there is there's another yet another irony to this. I mean, I think, you know, people, if you look at human history, human beings have always fought wars, you know, since we were in the trees, presumably, overthink, over scarcity, over lack of resources, and over control of territory. What we have since the advent of advanced industry is an impulsion to war, not from lack, and not from need, but from overabundance. It's from the overabundance of productive capacity, and the need to be able to profitably reinvest the surplus itself that necessitates war, essentially. And so, to illustrate this a little more concretely, I think it's time maybe to get into the specifics, one specific, the major, the one most people think of when it comes to the crises of capitalism. So, what is this description of monopoly capitalism? What happens when the entire global economy just shuts down, and it just is annihilated,
Speaker 3
essentially,
Speaker 2
as happened in 1929?

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