Some of the big questions about modern capitalism are taken on here.
Michael Roberts is an Economist in the City of London and a prolific blogger.
Cross-posted from Michael Roberts’ blog
You can read part 1 of Michael Roberts’ report from the Historical Materialism conference here.
In this part two, I resume my review of the Historical Materialism conference in London with a look at some of the sessions on climate change, ecology and the impact of artificial intelliigence – as well as on the state of the world economy.
As the climate crisis worsens globally, naturally there were several sessions on how capitalism is destroying humanity, other species and the planet itself. There was a staggering turnout for the launch of a new book by Alyssa Battistoni called Free Gifts: capitalism and the politics of nature. Battistoni was there to present the ideas in her book, along with some expert discussants.
I have to say that I found it difficult to follow Battistoni’s arguments, although I was obviously in a minority as there appeared to be rapt attention to her presentation and with her answers to questions. But let me see if I can summarise what I think she was saying. Battistoni says that capitalism treats nature as a ‘free gift’ by default. Natural resources can be used without payment or replenishment, so they need not be priced. But capitalism, by treating nature as a free gift, stops us recognising that nature does have value. Critics of capitalism’s commodification of the world have misidentified the problem: it’s not that capital has ‘absorbed’ (commodified) all of life, but that it has ‘abdicated responsibility’ for so much of it.
This sounds profound, but I’m not so sure. Battistoni is puzzled by why capitalism has not commodified all of nature and some ‘gifts of nature’ remain ‘free’. I think the answer is clear. Nature is only commodified by capital if it is profitable to do so, and some parts do not look profitable (yet). Digging up coal or drilling for oil is very profitable, but using the sun or wind to generate electricity is not so much – the result is that fossil fuel production and use will continue under capitalism until it is no longer more profitable than renewable energy generation (see the latest IEA report).
I think probably the most insightful point made by Battistoni was her observation that, in fighting to save the planet and its species from uncontrolled destruction wrought by capitalism, we cannot return to “natural cycles” or patterns, or ‘reproduce the old’. “A constructive view of ecological reparations cannot be rooted in the appeals to an originary (sic) nature that lurk beneath many calls for the restoration of natural balance—or even for reconciling humanity and nature by suturing the “metabolic rift.” Even if carbon is removed from the atmosphere and temperatures stabilized, the disruption that warming has wrought on the planet and its beings is irreversible. If this is daunting, it is also unavoidable. There is no other planet on which we can make a world.”
In another session, Joel Wainwright launched a new book called The End: Marx, Darwin, & the Natural History of the Climate Crisis. I’m not sure what ‘the end’ referred to, but the gist of the book aimed to reveal the affinities that Darwin’s evolutionary theory of nature by adaptation had with Marx’s view of history. According to Wainwright, Marx dispensed with a teleological (ie inevitable) view of history, as expounded by Hegel, and instead reckoned that human social development was just as much dependent on ‘contingent’ human action as on objective laws. Darwin’s 1859 Origin of the Species was taken up by right-wing theorists to argue that human ‘progress’ was based on the inexorable ‘survival of the fittest’. Darwin repudiated this interpretation of his theory in his second great work of 1871, The Descent of Man. Similarly, Marx and Engels firmly rejected the Malthusian theory of overpopulation as an inexorable law that would keep the ‘unfit’ poor for always. Poverty was not due to ‘too many people’, but to workers being condemned at regular intervals to a ‘reserve army of labour’ as capital shed labour.
Over the years, we have been told by some Marxists that capitalism has changed its spots (unlike the leopard). It is no longer mainly to do with the exploitation of labour in production to get profits, but instead finance had taken over as the dominant mode of production, ie money makes more money without any exploitation of human labour. So now there is ‘financial capitalism’, not capitalism. Alternatively, there is ‘rentier’ capitalism or ‘extractive’ capitalism or ‘dystopian’ capitalism.
In one session at HM, rentier capitalism was the theme. Ryuji Sasaki, whom I believe is a student or colleague of Kohei Saito, the rock star Japanese Marxist ecologist, supported the concept of ‘rentier capitalism’. As he put it: “Most Marxist arguments are based on a narrow understanding of capitalism, which has led them to overlook the theory of rent.” Instead, Sasaki argued that “rentier capitalism represents the latest and most contradictory form of capitalism.” Apparently, profit in the form of rent extraction comes from ‘scarcity’, including ‘scarcity of labour'(?). To me, this theory seemed close to neoclassical marginalism, which argues that ‘factors of production’ (labour, capital, land), each get returns due to their relative scarcity. Sasaki did reject the alternative theory of rent extraction proposed by the self-proclaimed ‘erratic Marxist’, Yanis Varoufakis, who has recently argued in a book that capitalism in any form is ‘dead’ and has been replaced by what he calls ‘techno-feudalism’. This feudalism concept was repeated at the HM, with one session modifying it into ‘neo-feudalism’.
In my view, the theory that rent has replaced profit in modern capitalism as exemplified by the American tech and AI giants (which it is argued get most of their gains from monopoly rent rather than profits from exploitation) is false. It misunderstands Marx’s theory of rent. Capitalists are continually searching for more profit. They invest in technologies and sectors that can deliver surplus profits ie above the average rate of profit. But if capital can move freely into sectors, then any profit rate differentials in sectors will tend to disappear. However, if it is possible to monopolise a part of constant capital (it could be property or land traditionally, or now intellectual property rights, IPR), then surplus profits can be ‘permanently ‘ siphoned off by the monopoly owner (landowner or patent holder).
But rent merely modifies the law of value and tendency to equalise profit rates. The capitalist mode of production has not been abolished. Yes, putting up barriers to access to new technologies or drugs enables the property owners of these ‘rights’ to take a share of the surplus value appropriated from productive labour. But is that permanent and how much is this ‘rent’ as a share of the total surplus value in an economy? Undoubtedly, much of the mega profits of the likes of Apple, Microsoft, Netflix, Amazon, Facebook are due to their control over patents, financial strength (cheap credit) and buying up of potential competitors. But the rent explanation goes too far. Technological superiority explains the success of these big companies, not just monopoly power.
Moreover, by its very nature, capitalism, based on ‘many capitals’ in competition, cannot tolerate any ‘eternal’ monopoly, namely a ‘permanent’ surplus profit deducted from the sum total of profits divided among the capitalist class as a whole. The battle among individual capitalists to increase profits and their share of the market means monopolies are continually under threat from new rivals, new technologies and international competitors. Take the constituents of the US S&P-500 index. The companies in the top 500 have not stayed the same. New industries and sectors emerge and previously dominant companies wither on the vine. The substitution of new products for old ones in the long run will reduce or eliminate monopoly advantage. The monopolistic world of GE and the motor manufacturers of the 1960s and 1990s did not last once new technology bred new sectors for capital accumulation.
Indeed, rents from ‘permanent surplus profits’ are no more than 20% of value-added in any major economy; financial profits are even smaller a proportion. Richard Kozil-Wright at UNCTAD made an attempt to measure the size of rents as defined. He found that rents were about 20-25% of total operating profits. In another attempt, Mariana Mazzucato and colleagues used export revenues from IPR and found that these had risen sharply in the last 30 years. Cedric Durand and colleague made a similar calculation, showing that cross-border IPR receipts had reached $323bn in high-income economies in 2016. That sounds large, but IPR receipts are actually just a tiny proportion of US receipts of all profit repatriations, dividends and interest income from overseas. I did a quick update calculation from World Bank data and found that cross-border income from IPR is no more than 10% of all income received globally from trade and investment (profits, interest, dividends etc).
Source: World Bank
US corporate profits have been elevated since the onset of the COVID-19 pandemic. As of the last quarter of 2024, they were $4 trillion—2.3 percentage points higher as a fraction of national income than they were prior to the pandemic. The increase was entirely driven by traditional capitalist nonfinancial industries, particularly in retail and wholesale trade, construction, manufacturing and health care.
At HM, there was a session with presentations that rejected ‘rentier capitalism’ or ‘techno-feudalism’. US tech workers, AK Norris and Tavo Espinosa, argued that technology facilitates and makes possible a process of intensification of labour that generates surplus value as profits, similar to earlier forms of manufacturing. Stephen Maher and Scott Aquano of the Socialist Register showed that there was no evidence that the tendency toward the equalization of the profit rate has been suspended, or that ‘platform companies’ like Amazon consistently capture above-average profits. The income of these firms, therefore, cannot be categorized as “rent,” but rather just traditional industrial and commercial profit.
That brings me to the political economy of AI itself. Just how many jobs will be lost by the adoption of AI? And how quickly will it be adopted? Cristóbal Reyes Núñez disputed the techno optimist view that AI is coming fast and will step-change labour productivity. Based on information from the 2023 US National Business Survey of 300,000 US firms, Reyes found that the overall average adoption of AI so far was just 2.9% and even in the small number of mega firms at the top, it was still under 25%. This parallels the estimate by OECD economists of 5% adoption by firms, which at current rates of growth would mean it would take around 20 years before there was a critical mass infusion of the AI usage – assuming that AI actually works. And as Eleni Papagiannaki said in the same session, adoption does not just depend on whether AI actually works to boost productivity of labour, but on whether it becomes profitable.
Rate of adoption (% share of firms using technology)
Source: OECD
AI will only become infused across the capitalist economy if it can help the owners of the means of production to replace, or supervise and control human labour to increase profitability. Matteo Pasquinelli was the winner of last year’s Isaac Deutscher book prize with a book called In the eye of the master. He opened a plenary session at HM this year, where he argued that, whereas in the past labour was supervised and controlled by the masters (the owners and their agents, the managers), now supervision will be increasingly automated. So, instead of AI and automation being used collectively by us all, machines will rule our lives for the benefit of the master and profit.
But right now, AI is not profitable. ChatGPT may have over 400m users, but only 5% pay any regular subscription. And the huge increase in constant capital investment (data centers etc) is fast sucking up the existing profits of the Magnificent Seven tech giants.
That brings me to the session in which I presented a paper on the current state of world economy and on whether AI will be the saviour of capitalism over the next decade or so. In my presentation, I argued that the major capitalist economies are stagnating: real GDP, investment and labour productivity growth have slowed significantly since the Great Recession of 2008-9; and again after the end of pandemic slump of 2020. In other words, the major economies are still in a Long Depression.
Source: IMF
This is intensifying what can be called a ‘polycrisis’ of rising poverty and inequality of wealth and incomes, both globally and within countries; an uncontrolled rise in global warming; and increased geopolitical conflict that threatens more wars.
But can AI deliver a new golden age for capitalism of high profitability and productivity? The classic Marxist answer is that capitalism can get a new lease of life only if there is ‘creative destruction’ of old capital and unprofitable firms. But governments are desperate to avoid such ‘shock therapy’ because of the political backlash that could follow. So the capitalist system is stagnating, and time is running out to fix things. In the session, Kim Moody of Labour Notes made an insightful critique of AI as a saviour of capitalism. There is no sign of any sharp rise in productivity and adoption rates are low. Moreover, AI is not a dependable new technology that can bring to an end the supply chain crisis that has developed since the end of the pandemic slump.
The only alternative to end the polycrisis is socialist one where, instead of investment being dependent on the profitability of private owners of the means of production, the means of production are commonly owned and investment is planned for social need. Right now, in the major economies, private investment that is dependent on profitability is five times larger (15% of GDP) than public investment (3%). Only when that ratio is reversed can we start to get economic growth aimed at social needs; deal with climate change and global warming; and reduce inequality, both within and between rich and poor countries.
Addendum: This year’s winner of the Isaac and Tamara Deutscher Prize was Bruno Leipold’s “Citizen Marx: Republicanism and the Formation of Karl Marx’s Social and Political Thought” https://press.princeton.edu/books/hardcover/9780691205236/citizen-marx?srsltid=AfmBOoq4CKmdNfg-FzHhetsU0XNYh7ErO69f0pX1qLNw67GNN74BnygO
“Leipold shows how Marx positioned his republican communism to displace both antipolitical socialism and anticommunist republicanism. One of Marx’s great contributions, Leipold suggests, was to place politics (and especially democratic politics) at the heart of socialism.”
It all comes down to political action in the end.
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