Technology and Economic Crisis
Because it is ubiquitous, rapid technological change is easily taken for granted. Technology: alphabets, language, story telling, arithmetic, algebra, calculus, the printing press, chalk, pencils, pens, thinking, logic, hammers, corn, transistors, telephones, cell phones, lap tops, the internet and motorcycles for example. But if we stop and think about it for a minute we realize that technological change is the force that compels humans to make dramatic historical changes. Technological change took us from hunting and gathering to agriculture and from agricultural to industrialized production. Technological change precipitates historical change. Technological development is the main cause of economic crisis in the 21st century.
Marx developed this insight into a theory of historical development. “The hand-mill,” writes Marx, “gives you society with the feudal lord; the steam-mill society with the industrial capitalist.” This is widely known as the “materialist conception of history” or more simply, historical materialism. With this insight Marx investigated in painstaking detail the way that capitalism would grow into a global system and develop technology to such a fevered pitch that no further technological development would be possible within the matrix of the existing system. In other words, in the same way that hunting and gathering gave way to agriculture because of technological developments, capitalism will give way to a new social system.
To be a little more specific, Marx argued that any social arrangement for the production of things people need would last until technology could no longer be furthered developed within that arrangement: “At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production.” A social relation like credit-debt can at one period be a spur to technological development and then become a fetter. When this happens on a mass scale, when social relationships that drove rapid technological development (and hence “economic growth”) become a hamper on further development social transformation follows. “From forms of development of the productive forces,” Marx writes, “these relations turn into their fetters. Then begins an era of social revolution.”
In an advanced and matured capitalist economy the conflict between continual technological advances and the social arrangements takes the form of a tendency for the profit rate to decline. The system can counter this tendency but there is a point as we approach greater and greater levels of automation in the production process where economic crisis will become incessant.
The notion of a falling rate of profit is inherent in the labor theory of value itself. The labor theory of value explains where profit comes from and why the profit rate falls.
The old adage “buy low, sell high” is a seeming explanation of profit making. But in reality this merely transfers existing wealth from the the person who sold low to the person who will sell high. While this explains how wealth is redistributed to an extent, it doesnt really explain how new wealth is created. It would become painfully obvious very quickly if a group were stranded on an island that human effort — labor — is required to acquire food, clothing, and shelter. It is labor that is the source of new value creation. Marx explains in volume one of capital how this process works. Briefly, raw materials and machinery can be bought but they merely transfer their existing value to the new product. What adds value to the outcome of the production process is additional human labor.
Herein is the simple explanation for the profit rate’s tendency to fall. If labor is the source of new value creation and technology is removing labor from the production then the source of new value creation is also being removed.
A commodity is a useful thing that is bought and sold. It has two aspects — it is a useful thing and it has a value in exchange — it can be bought and sold. Labor gives the commodity its value in exchange. When labor is removed from the source of value is removed. As human beings are liberated from the production process capitalism will enter into increasing crisis. How we handle these crisis and the political solutions is the open question. What is predictable is that capitalism will enter into worse crisis until it is overcome.
In the Grundrisse Marx explains what we are experiencing today in concise albeit technical language.
“But to the degree that large industry develops, the creation of real wealth comes to depend less on labour time and on the amount of labour employed than on the power of the agencies set in motion during labour time, whose ‘powerful effectiveness’ is itself in turn out of all proportion to the direct labour time spent on their production, but depends rather on the general state of science and on the progress of technology, or the application of this science to production…
Labour no longer appears so much to be included within the production process; rather, the human being comes to relate more as watchman and regulator to the production process itself…
As soon as labour in the direct form has ceased to be the great well-spring of wealth, labour time ceases and must cease to be its measure, and hence exchange value [must cease to be the measure] of use value….
With that, production based on exchange value breaks down, and the direct, material production process is stripped of the form of penury and antithesis. The free development of individualities, and hence not the reduction of necessary labour time so as to posit surplus labour, but rather the general reduction of the necessary labour of society to a minimum, which then corresponds to the artistic, scientific etc. development of the individuals in the time set free, and with the means created, for all of them.
Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth. Hence it diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition — question of life or death — for the necessary. On the one side, then, it calls to life all the powers of science and of nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labour time employed on it. On the other side, it wants to use labour time as the measuring rod for the giant social forces thereby created, and to confine them within the limits required to maintain the already created value as value. Forces of production and social relations — two different sides of the development of the social individual — appear to capital as mere means, and are merely means for it to produce on its limited foundation. In fact, however, they are the material conditions to blow this foundation sky-high.”
Marx. The Grundrisse. Page 706. Penguin Classics.
