Tony Smith

In the Marxian theory of capital the term "dialectics" refers primarily to three endeavours: the systematic reconstruction of the essential determinations of capital (systematic dialectics), the reconstruction of the main lines of capitalist development (a species of historical dialectics), and the dialectics of theory and practice. In the first section of this paper I shall discuss some essential features of systematic dialectics in Capital, and explore how they are related to historical developments in capitalism. I shall then attempt to show the relevance of systematic dialectics to the comprehension of the historical dialectic of our present era, the so-called ‘age of globalization’. This will require extending the systematic dialectic past the point where Marx left off in Capital. The paper concludes with a brief remark on the relevance of the expanded systematic account of capital to the question of praxis today.

The categories derived in the course of the systematic progression in Capital define the essential social forms that make capitalism distinct from other modes of production. These categories are thus historically specific. But the theoretical ordering of these categories is not historical. Early categories need not have appeared earlier in history; later ones need not map more recent developments.

What, then, determines the systematic order? The starting point is a given totality, the capitalist mode of production. Each categorial level is an attempt to comprehend this totality, beginning with the simplest and most abstract manner of categorizing it. Early stages in the dialectical ordering necessarily fail to define this whole. This provides a theoretical warrant for moving to another categorial level, defined by a more complex and concrete way of comprehending the same totality. The methodology of systematic dialectical social theories thus involves both a ‘push’ and a ‘pull’ movement. The shortcomings of a particular categorial level, that is, the inability on that level of abstraction to account adequately for the self-reproduction of the given totality, ‘push’ the theory forward to the next stage. The theoretical imperative to not conclude the systematic ordering until the given totality has been fully comprehended in thought ‘pulls’ the theory to its end point.

The simplest and most abstract manner of depicting capitalism as a totality is as a society of generalized commodity exchange. Within the commodity form labour is undertaken privately and must subsequently prove its social necessity through the successful sale of produced commodities. Under the commodity form any particular concrete act of labour may prove to be socially wasted; only socially necessary labour produces a commodity with ‘value’. And so the socially necessary labour that produces value is conceptually distinct from concrete exertions in time, and may thus be termed ‘abstract labour’. Neither abstract labour, nor the value produced by it, can be measured with a stopwatch or any other concrete form of measurement. And yet a socially objective measure of value is a necessary precondition for generalized commodity exchange. Money, a ‘real abstraction’, is this socially objective measure of value. In this manner Marx establishes the systematic necessity linking the commodity form and the money form.

Once money has been explicitly introduced, any attempt to comprehend generalized commodity production as a system designed to meet human needs must be abandoned. The valorization imperative – Money must beget money! - is the dominant principle of this system, and the satisfaction of human needs occurs only in so far as it is compatible with this dictate. In other words, the next most concrete and complex manner of comprehending the capitalist mode of production is as a system in which the sum total of money accumulated at the conclusion of a given period exceeds that invested at the beginning of that period. There is thus a systematic necessity connecting the money form and the capital form, M-C-M’. ‘Value’ now takes on the form of an objective social power, standing above and beyond individual commodities and society as a whole, subjecting every nook and cranny of the social world to its rule.

Any adequate theory of capital must explain the mystery of capital. How exactly does money, an inert thing, beget money? Marx begins his answer by explicitly noting what had previously been merely implicit: in a society of generalized commodity exchange labour power is itself a commodity. Marx assumes that wages are sufficient to purchase the commodities required for the reproduction of wage labourers. Once labour power has been purchased, however, wage labourers are forced to produce an amount of economic value exceeding what they receive back in the form of wages. The capital form is explained by surplus labour, a surplus labour that takes on the historically specific form of surplus value. Capital, as Marx vehemently insists, is not a thing, but a social relation, the social relation of exploitation. The generalized circulation of commodities, and the alien power of the value form, are both systematically reproduced on the level of total social capital through the class exploitation of wage labour by capital.

Volume II explores how this thesis remains in force after we have introduced various forms of circulation necessary for the systematic reproduction of the capital form. And Volume III explores how this thesis continues to hold after the introduction of various systematically necessary forms of intra-capital competition (competition between sectors of industrial capital with different turnover times and compositions of capital, competition within sectors of industrial capital between firms with different levels of productivity, and competition over the distribution of surplus value between industrial capital, on the one side, and merchant capital, financial capital, and landlords, on the other). These determinations enable us to comprehend capital in ever-more concrete and complex ways. But they do not establish an independent source of surplus value apart from wage labour. They instead explain how surplus value produced in a given period by wage labourers is redistributed through the various circuits in a manner allowing the systematic reproduction of the capitalist mode of production.

As already noted, the categories in this systematic progression refer to historically specific social forms. Systematic and historical considerations are related in Capital in another way as well: Marxian systematic theory is revisable. Historical developments in capitalism may reveal that something previously taken as necessary to the logic of capital does not in fact have this status. And historical developments may lead us to discover systematic necessity in previously overlooked areas. At this point, however, the gap between the systematic logic of capital and historical developments in capitalism appears immense. Marx’s systematic dialectic consists of a progression of social forms defining the ‘inner nature’ of capital, that is, social forms in place in any given period of capitalism. In themselves, these social forms tell us what capital is, but not what it might become.

Capital, however, provides not just a theory of social forms, but also a theory of the necessary structural tendencies inherent in these forms. These tendencies underlie the transition from any given period in the history of capital to the next. In Volume I, for example, the social form defined by the capital/wage labour relation is the main theme. On this level Marx derives a tendency for technological and organizational innovations at the point of production that increase the rate of surplus value. In Volume II Marx shows that the drive to introduce innovations reducing circulation time is no less inherent in the capital form than the drive to introduce innovations in the production process proper. A systematic tendency towards innovations reducing constant capital costs is derived at the beginning of Volume III. And one of the most important implications of the later parts of this third volume is that the drive for innovation in the commercial, financial, and agricultural sectors is no less intense than in the industrial sector.

These sorts of tendencies are in place always and everywhere the capital form is in place. On the other hand, these tendencies refer to historical processes extending over time. They further our comprehension not just of what capital is, but of what it necessarily tends to become. In this manner they provide a bridge between systematic dialectics and historical dialectics. But they hardly remove the gulf between the two. There is no a priori principle dictating how the various tendencies derived on different levels of the systematic ordering relate to each other in concrete historical circumstances. In other words, there is no way to argue from the various tendencies that are necessarily given with the social forms defining capital to the dominant trends in place in any particular historical context.

In specific cases one set of tendencies may modify another, while itself operating in a relatively straightforward fashion. In other cases matters may be reversed. In yet different cases each set of tendencies may modify the workings of the others to a considerable extent. Or one set of tendencies may even put another out of play completely in certain circumstances, while at other times and places it is itself put out of play. Further, we cannot assume that the tendencies arising on early stages in the systematic dialectic necessarily have more weight in a given historical conjuncture than those derived on subsequent levels, nor can we assume that the reverse holds. For all the systematic necessity of the various tendencies, there is thus an ineluctable element of contingency, path dependency, and human agency in the determination of the dominant trends of any concrete historical context. This gulf between (systematic) tendencies and (historical) trends cannot in principle ever be completely bridged.

Nonetheless, it is possible to narrow the gap between the systematic and the historical dimensions of Marx’s theory of capital somewhat further. Besides the tendencies derived with systematic necessity from the social forms defining capital, it is sometimes possible to derive a ‘meta-tendency’ with a comparable claim to systematic necessity, that is, an overarching tendency conjoining two first-order tendencies. The classic example of such a meta-tendency is found in the discussion of the rate of profit in Volume III, where tendencies for the rate of profit to fall are derived with systematic necessity from the social forms defining capitalism alongside counter-tendencies pointing in the opposite direction with no less force. In any given concrete set of circumstances either set of tendencies may modify, dominate, or be dominated by the other in countless contingent ways. It does not follow from this, however, that Marx’s systematic theory has nothing further to offer to the comprehension of historical developments regarding profit rates. A ‘meta-tendency’ uniting the two sets of tendencies can also be derived with systematic necessity: the joint operation of the tendencies and counter-tendencies itself tends to form a cyclical pattern.

Suppose the set of tendencies leading to a falling rate of profit comes to dominate in a specific period or region for some set of contingent reasons. Once it is in place, it is necessarily the case that at some point or other the other set of (counter) tendencies will tend to become of increasing importance. The inverse pattern holds as well; historical periods in which tendencies to higher rates of profit dominate tend to alternate with epochs in which the tendencies to a falling rate of profit come to the fore. All things considered, the longer the set of tendencies to a falling (rising) rate of profit form the dominant trend, the greater the probability that the set of tendencies leading to a rising (falling) rate of profit will come to dominate.

It is surely not the case that the simultaneous operation of any two sets of tendencies always generates a ‘meta-tendency’ of this sort. But a generalization can be proposed: whenever two sets of tendencies with equal claims to systematic necessity are derived such that the continued dominance of one set necessarily tends to increase the probability of a shift to the dominance of the other set, a pattern of alternation necessarily tends to emerge. This meta-tendency, derived within the systematic dialectic of capital, provides a general heuristic framework for comprehending the historical dialectic of capital.

Once again, not all sets of tendencies derived with systematic necessity from the capital form have a set of counter-tendencies opposing them in this manner. For our purposes the most important one lacking ‘symmetrical’ counter-tendencies are those underling the ever-increasing scale of capital accumulation, the tendencies to the concentration and centralization of capital. These determinations account for the strong element of linearity superimposed on top of the alternating patterns of capitalist development. The return to the beginning part of a cycle never brings us precisely back to the point of departure. Each new commencement of a profit cycle tends to begin at a higher point of accumulation than the previous one.

In section 3 I shall attempt to apply these methodological considerations to the globalization debate. First, however, a brief statement of the relevant portion of this debate must be provided.

Are contemporary processes of globalization are fundamentally transforming the relationship between states and global markets? On one pole of the debate are those who believe that globalization vastly expands the exit options available to financial and industrial capital, and thus places states in an ‘electronic straightjacket’. International flows of finance capital in currency markets, bond markets, and equity markets tend to shift away from countries that maintain high levels of government deficit spending or steep corporate and income taxes. Globalization also significantly heightens the ability of industrial capital to engage in capital flight, through either foreign direct investment or subcontracting arrangements.

The presence of such exit options does not in itself logically rule out any particular state policy. But defenders of what we may term ‘the hyperglobalization thesis’ assert that these options necessarily tend to make many forms of state activity much less feasible. In an age of global capital flows it becomes less and less feasible for the state to engage in deficit financing in order to stimulate demand and secure full employment, or to use taxes to lessen inequality significantly and maintain traditional welfare state protections. Neoliberals argue in effect that the historical dialectic of capitalism has entered a new stage, characterized by a qualitative shift of power from states to global markets. They applaud these developments on the grounds that they remove distortions brought about by state economic intervention.

At the other end of the spectrum we find those who deny that globalization has essentially eroded state capacities. These theorists insist that the most significant fact about globalization is that it has been and will continue to be a state project, pursued by central banks, departments of the treasury, and other sections of the state apparatus. These state agencies, representing the interests of finance capital and multinational producers and distributors, have shifted the balance of power between capital and wage labour through deregulation, privatization, and the liberalization of markets. The concept of ‘globalization’ has been an important ideological weapon in this political project, deployed to persuade the public that technological and economic developments eliminate all alternatives to neoliberalism. But the term does not accurately describe some new stage in capitalist development in which the state is all but powerless in the face of global markets. ‘Globalization’ is, in brief, ‘globaloney’. If the political will were present to pursue an alternative progressive agenda of full employment and lesser inequality, this agenda in principle could be effectively implemented.

An adequate Marxian perspective on the historical dialectic of globalization must be informed by Marx’s systematic theory. The globalization debate, however, involves determinations not developed in Capital. At one point, at least, Marx planned to conclude the systematic dialectic of capital with volumes on the state, foreign trade, and the world market. He later abandoned this idea, and it would be ludicrous to attempt to complete the project here. Nonetheless, some central themes of a Marxian account of these social forms must be introduced as we proceed.

I argued above that three crucial notions connect a systematic ordering of social forms with historical dialectics: 1) the derivation of the tendencies necessarily given with these social forms, 2) the meta-tendency of alternation, and 3) the tendency for this alternation to be played out on an ever-increasing scale of accumulation. The remainder of the paper will be devoted to an application of these three notions to the dialectics of globalization.

One of the biggest advantages of systematic dialectics is that it provides a methodology able to accommodate one-sided and apparently inconsistent perspectives, each of which possesses an element of the whole story. The mere fact that Marx insisted that further volumes devoted to the state, foreign exchange, and the world market were necessary to complete his systematic project implies a very important claim: there is both a necessary tendency for capital to operate within a territory administered by a state and a necessary tendency for trade, foreign direct investment, and flows of finance capital to extend beyond territorial limits. Both sets of tendencies are in place always and everywhere the capital form is in place. This implies a rejection of extreme formulations of both the ‘hyperglobalization’ thesis and the ‘globaloney’ thesis.

In the global economy today the state is at one and the same time increasingly significant and increasingly insignificant. It is increasingly significant in that the tasks of the state whose necessity can be derived in a systematic dialectic are if anything more pressing in the age of globalization. It is increasingly insignificant in that the law of value operating on the systematic level of the world market now operates with ever more force vis-à-vis the states and national economies subsumed under this law. Any adequate historical account must grant equal force to both dynamics. Both points are worth developing further.

A Marxian theory of the state must explore the role of the state in furthering capital accumulation. This role includes a) enforcement of property rights, b) regulation of money, c) crisis management, d) provision of infrastructure, R&D, training, and other ‘public goods’, and e) maintenance of access to necessary raw materials, markets, and so on. Globalization hardly erodes these essential state functions.

a) All the main forms of economic globalization – foreign direct investment (FDI), international trade, and flows of financial capital – require the enforcement of property rights. This remains the responsibility of states. FDI will occur only if states extend the same sorts of protections guaranteed under their system of jurisprudence to the holders of foreign investments. Regarding trade, in a world of rapid technological innovation the scope of intellectual property rights acknowledged and enforced by states becomes a matter of increasing importance. In the realm of finance capital, the state retains the capacity of decreeing which contracts are enforceable and which are not, a power that can affect which financial transactions occur in the global economy and which are not. The globalization of economic activity, and the specific paths taken in the course of globalization, are thus to a considerable extent a function of the power of states to define and enforce rights to property and exchange.

b) Money has always been the Achilles heel of the neoliberal dream of a self-sufficient free market. The reproduction of capitalist markets requires state activity regarding money. On the level of the global economy the same point holds. Even neoliberals hold that the satisfactory reproduction of the global economy over time requires appropriate monetary decisions by states, especially their central banks.

c) Of course defining what counts as an ‘appropriate’ monetary decision in a given context is a matter of great dispute. What is hardly in dispute, however, is that when crises break out in the global economy, governments must assume special responsibility to ‘restore investor confidence’. In the continued absence of an international monetary agency with the power to create credit money, the responsibility for increasing liquidity in the global economy ultimately rests with national governments. Some states, at least, also retain a capacity to intervene to prevent losses to particular players from threatening global markets as a whole, as Alan Greenspan’s organization of the bailout of Long Term Capital Management suggests. Further, investors continue to call on the state to ‘socialize’ the costs of global downswings by displacing them onto working men and women, the unemployed, the elderly, and so on. One mechanism for socializing these costs is through the state taking over private debts, as both the Japanese and Korean states have recently done.

d) The extent to which particular regions enjoy success in the global economy today is to a considerable extent a function of their governments. Governments help create the conditions for regional success through support for education and training, funding for infrastructure and research, the formation of formal and informal networks of elites, government/business partnerships for specific projects of importance to regional growth, etc.

e) In the global economy access to foreign supplies of needed raw materials, foreign labour power and technologies, foreign markets for exported goods and services, foreign sources of capital, and so on, regularly requires state negotiation. Continued access may also regularly require military intervention by the state, or at least an effective threat of military action. Here too there is not the least sign that the globalization of economic activity is leading to the historical obsolescence of the state.

If the state were as irrelevant as many neoliberals suggest, we would expect those who own and control capital to become increasingly indifferent to its workings. Nothing of the sort is occurring. The extent to which holders of economic power employ legal, quasi-legal, and outright illegal methods to influence state policy is, if anything, increasing. The conclusion appears clear. Certain types of state activity and even certain types of state may be disadvantaged in the epoch of globalization. But the systematic necessity of the state form is not put out of play in the present historical period.

But neither does the present stage of history undermine the claim that the law of value necessarily operates in the world market over and above individual states. This is, I believe, the culminating claim of a Marxian systematic dialectic of social forms. To my knowledge the clearest account of why Marx placed the categories ‘foreign trade’ and ‘the world market’ at the culmination of his theory is found in the following passage:

With foreign trade and the world market the initial determinations of Marx’s systematic ordering (‘abstract wealth, value, money, hence abstract labour’) are finally grounded adequately. The circle completes itself, the presuppositions are posited, the initially implicit becomes fully explicit. The final necessary conditions of the possibility of the systematic reproduction of capital as a totality are derived.

This implies that there is a necessary structural tendency for circuits of capital to extend beyond any given geographical restriction. The above passage speaks mainly of cross-border trade in commodities. But other tendencies can be derived as well. In Volume I Marx discussed tendencies for the concentration and centralization of capital. This implies a tendency for units of capital to expand to the point where their geographical range of operation exceeds any given territorial limit set by the state form. Cross-border trade is only one example of transcending this limit. Foreign direct investment, cross-border mergers and acquisitions, and the establishment of cross-border production chains are other tendencies of industrial capital necessarily given with the social form, ‘world market.’ Similarly, flows of finance capital necessarily tend to exceed the territorial limits set by the state form, whether these flows occur within the circuits of currency markets, equity markets, or bond markets.

The elements of systematic necessity associated with the social forms of the state and the world market thus remain in place in the present historical stage of capitalism. This is surely relevant to our assessment of the historical dialectic of globalization. Capital requires the state, and so there is a good reason to reject theories neglecting the continuing importance of the state form. It is also the case, however, that the world market necessarily tends to subsume particular states under it. And so there is a good systematic reason to reject perspectives ignoring how state capacities are restricted or eroded by the world market in the course of capitalist development. There is both a systematic tendency for the state to assert itself over the market, and a systematic tendency for the world market to assert itself over the state. Both tendencies are given simultaneously always and everywhere the capital form is in place. The ‘hyperglobalizers’, who speak of the fundamental erosion of state capacities, and those who affirm the unchecked power of the state, equally defend one-sided, and hence mistaken, viewpoints.

Unfortunately, this line of thought does not get us all that far. Most neoliberals grant the systematic necessity of the state form; very few speak of ‘the death of the state’. They hold nonetheless that in the present historical context global markets are eroding state power in a fundamental and irreversible fashion. Similarly, most defenders of the ‘globaloney’ thesis grant the systematic necessity of the world market, while insisting that progressive policies on the level of the state can still be effectively implemented in the contemporary era. Most adherents of each perspective, in other words, fully acknowledge the tendencies emphasized by the other, while insisting that today they are (or can be) trumped by the set of tendencies they themselves emphasize.

Systematic dialectics cannot rule out either of these historical possibilities. There are many ways different sets of tendencies may operate simultaneously, and it is surely possible that in a given historical context one set of tendencies trumps another. At this point it may appear that systematic dialectic has nothing more to contribute to debates regarding the historical dialectic of globalization. Its resources, however, are not yet exhausted.

In Marx’s discussion of rates of profit he did not merely point out that there are two sets of tendencies pointing in opposite directions, each with an equally valid claim to systematic necessity. He went on to derive the systematic necessity for a meta-tendency, a cyclical pattern in which periods dominated by tendencies to a falling rate of profit tend to alternate with periods in which counter-tendencies hold sway. In this manner he derived a framework for comprehending the historical dialectic of capital from systematic considerations. Might a similar move be made regarding the state and the world market?

Whenever two sets of tendencies with equal claims to systematic necessity are derived such that the continued dominance of one set necessarily tends to increase the probability of a shift to the dominance of the other, a pattern of alternation necessarily tends to emerge. This appears to be the case here. On the one hand, the more effective the state is at fulfilling the functions necessary to capital accumulation, the more units of capital will tend to grow, and the more they grow, the more they tend to participate in circuits of cross-border capital flows. The extension and intensification of flows in global circuits of capital eventually undermine the very state projects whose success led to that extension and intensification. Any particular set of state capacities is thus inevitably restricted in scope, fragile in nature, and reversible in practice, however successful it might be in a given era. On the other hand, the more the tendencies built-into the social form of the world market hold sway, the more social disruptions are imposed on national economies, including disruptions in the capital accumulation process. Past a certain point these disruptions necessarily tend to generate a search for state policies that effectively lessen them, thereby establishing the preconditions for further capital accumulation.

There is thus a close parallel here to the relationship between the tendencies and counter-tendencies of profit rates. Here too the necessary result of the domination of a given set of tendencies in a particular context is to increase the odds of a shift to a state of affairs in which the opposing set of tendencies comes to dominate. If this line of thought is accepted, then we can once again derive a general heuristic framework for the study of the dialectics of capitalist development from the systematic dialectic of social forms: periods in which the state asserts its sovereignty in relatively effective ways regularly tend to alternate with periods in which state sovereignty is more effectively subordinated to the imperatives of the world market.

Far more argumentation would be needed to derive the systematic necessity of this meta-tendency satisfactorily. That, alas, must wait another day. Here I shall simply mention some possible illustrations of this working hypothesis in the hope of making it somewhat more plausible.

Arrighi’s masterful study of the rise and decline of hegemonic powers in the world economy over the course of capitalist history provides a first example. While each case involves numerous historically specific and contingent matters, a general pattern can nevertheless be perceived. The rapid economic expansion of an incipient hegemonic power tends to begin with expenditures far exceeding what could be justified in narrow calculations of profit and loss. State prestige and military strategy (‘territorial logic’) provide a spur to investment in infrastructure, research and development, and so on, far beyond what could be justified in terms of a narrow ‘capital logic’. Hegemonic regions in the history of capitalism thus win and retain their hegemonic status through the effective exercise of state capacities. The decline of these powers reveals a common pattern as well. When profit opportunities in the given regions eventually begin to decline, capital increasingly flows elsewhere in search of surplus profits, undermining the hegemonic position of the state.

The same general pattern can be used as a framework for interpreting key threads of development in the twentieth century. In the beginning of the century the tendencies associated with the world market dominated empirical trends. By some measures "globalization" even reached levels surpassing those today. This period concluded with the financial crises and depression of the 1920’s and 30’s. A long period then commenced in which the tendencies associated with the assertion of state sovereignty dominated empirical trends, beginning with state-engineered competitive devaluations, protectionism, and rearmament. Out of the rubble of world war the Keynesian state emerged in the industrialized West, with its social programs, regulated currencies and closed capital accounts. The emergence of ‘the developmental state’ in Japan (and later the ‘four tigers’ and ‘four dragons’of East Asia) paralleled this development. But the very success of the Keynesian states of the West and the developmental states of Asia contained the seeds of their demise. Both state forms successfully nurtured multinational industrial and financial corporations that became increasingly effective at evading state regulation. In Marxian terms, both nurtured units of capital that extended their participation in global circuits of industrial and financial capital in the hope of appropriating surplus value produced beyond national borders. Leading firms in both the industrial and financial sectors increasingly pressured states to agree to greater and greater levels of ‘freedom’ for capital. The last decades of the century can thus be interpreted as a return to a period in which the tendencies associated with the world market dominate historical trends. And once again the dominance of global markets has led to severe and recurrent financial crises. In the near future the severity and regularity of these crises may generate another historical reversal and renewed assertions of state sovereignty. Of course there are no guarantees this will occur; history remains a domain of contingency, path dependency, and social agency. But state responses to financial crises in Asia suggest that there is a strong tendency in this direction. The same sort of responses can be expected if (when) financial crises of comparable magnitude break out in the U.S. or Europe.

A similar pattern of alternation appears to hold in poorer regions of the global economy as well. Many regions of the so-called South began the twentieth century subordinate to economic imperatives imposed by colonizing states. Decolonization involved assertions of state independence and a commitment to state-led industrialization. This industrialization, however, tended to rely on extensive borrowing from industrialized countries in order to purchase expensive capital inputs (as well as fund the luxury consumption and foreign accounts of local elites). Eventually these debts forced structural adjustment programs on these countries, which furthered the integration of their economies into the world market at the cost of considerable erosion of state capacities. Even neoliberal academics and policy makers now concede that this erosion of state capacities has gone too far, and that more effective state institutions must somehow be forged.

State and world market; world market and state. The historical dialectic of capital is a spirit-numbing con game in which nationalists and globalists take turns promising a humane and just form of capitalism, and waiting for the promises of the other to prove illusory. As they invariably do.

In the capitalist mode of production it is necessarily the case that any meta-tendency of alternation tends to be played out over a linear process of ever-increasing accumulation. The discussion thus far of the historical dialectic of globalization has abstracted from this. How might it be incorporated?

How is the historical dynamic of globalization played out on an ever-increasing scale of capital accumulation? A systematically informed Marxian account of this dynamic must be based on tendencies whose systematic necessity can be derived on the level of the world market. These include the tendencies to uneven development, overaccumulation crises, and financial crises.

Marxian theorists widely agree that there are mechanisms in the world market that necessarily tend to enable capitals at the ‘center’ of the global system to reproduce and expand their advantages over regions at the ‘periphery.’ A quick summary of some of the mechanisms underlying uneven development must suffice here. Investment funds by definition are disproportionately found in wealthy regions of the global economy. These funds tend to flow predominantly to regions with extensive consumer markets, high levels of labour and management skills, adequate infrastructure, access to state of the art research and development, and so on. This implies that capital investment generally tends to flow from wealthy regions to other wealthy regions, where all these factors are generally present to the greatest extent. As a result the 20% of the world’s population located in the wealthy countries of the North consumes 86% of global output.

The funding of research and development is of special importance. Successful process and product innovations allow the appropriation of surplus profits. Units of capital with access to advanced R&D thus tend to win surplus profits in the course of exchange. This establishes the possibility of a virtuous circle; surplus profits can be plowed back into further R&D, providing the preconditions for future surplus profits. For units of capital without access to advanced R&D, however, the circle is vicious. Lower levels of profits tend to lead to lower levels of R&D, severely limiting opportunities to appropriate surplus profits in the future. The virtuous circle tends to be found in wealthy regions of the global economy, while the vicious circle pervades poorer regions. In this manner the drive to appropriate surplus profits through technological innovation, the most fundamental feature of intercapital competition, systematically reproduces uneven development in the global economy over time.

Many other determinations of the world market reinforce the tendency to uneven development, including the remission of profits resulting from foreign direct investment in poorer regions, capital flight undertaken by local elites desiring to escape currency risks and/or protect the fruits of corruption, the ability of units of capital in wealthy regions to play off subcontractors in poorer regions against each other, the ability of firms to manipulate the ‘prices’ of commodities ‘exchanged’ in intra-firm transactions, the tendency for poorer regions to fall into ‘the debt trap’, and so on. Rather than explore these themes here, however, I shall simply note that as the scale of concentration and centralization of capital has proceeded, the scale of uneven development has worsened, as the following ratios of per capita income in the richest and the poorest regions of the global economy reveal:

1820: 3 to 1

1913: 9 to 1

1950: 11 to 1

1973: 12 to 1

1992: 16 to 1

A systematic tendency for overaccumulation crises in the world market can also be derived from the drive to appropriate surplus profits through innovation. The logic of inter-capital competition necessarily tends to lead to the introduction of new, more productive, plants into an industry, since these new entrants are in a position to win surplus profits. But established plants do not automatically withdraw when this occurs. Given that their fixed capital costs are already ‘sunk,’ their owners and managers may be happy receiving the average rate of profit on their circulating capital. They also may have relations with suppliers and customers impossible (or prohibitively expensive) to duplicate elsewhere in any relevant time frame. Or their management and labour force may have industry-specific skills. Or they may have access to state subsidies for training, infrastructure, or R&D that they would not be able to obtain in other sectors. Their failure to withdraw results in a tendency to an overaccumulation of capital, manifested in excess capacity and declining rates of profit. In more traditional Marxist terms, insufficient surplus value is produced to valorize the investments that have been made in fixed capital, leading to a fall in profit rates for an extended historical period. Marx himself discussed this tendency on the relatively abstract theoretical level attained at the beginning of Volume III. But it holds on the concrete level of the world market as well. Robert Brenner has provided considered empirical evidence that the lower rates of profit and growth that afflicted the world economy beginning in the late 1960’s was primarily due to excess capacity in the leading sectors of the global economy.

When overaccumulation crises break out, previous investments in fixed capital must be devalued. At this point the entire system becomes convulsed in endeavours to shift the costs of devaluation elsewhere. Each unit, network, and region of capital attempts to shift the costs of devaluation onto other units, networks, and regions. And capital as a whole attempts to shift as much of the cost as possible onto labour by increasing unemployment, lowering wages, and worsening work conditions. As the concentration and centralization of capital proceeds, the overaccumulation and devaluation of capital necessarily tends to occur on an ever-more massive scale. Global turbulence and generalized economic insecurity increasingly become the normal state of affairs.

Financial capital plays a central role in setting off overaccumulation crises. Temporarily idle profits, depreciation funds, and precautionary reserves are pooled in the finance sector and allocated to firms and sectors with high rates of growth due to surplus profits. With credit money the extension of credit to these plants and sectors can be a multiple of the pooled reserve funds. In this manner financial capital ‘appears as the principal lever of overproduction and excessive speculation in commerce’.

Once an overaccumulation crisis commences, the rate of investment in sectors suffering overcapacity problems slows significantly. A large pool of investment capital forms, seeking new firms and sectors with a potential for high future rates of growth. If the flows of investment capital to these new sectors are high enough, capital market inflation results. The expectations of future earnings – rational or otherwise – eventually becomes a relatively secondary matter, as financial assets are purchased in the hope of profits from subsequent sale of these assets. Throughout the course of this speculative bubble, however, financial assets ultimately remain claims on the future production of surplus value. When it becomes overwhelmingly clear that the prices of these assets do not correspond to likely future profits the speculative bubble collapses and a financial crisis ensues.

The intertwining of the tendencies to overaccumulation crises and financial crises implies that the impact of concentration and centralization on the former extends to the latter as well. The devaluation of credit and fictitious capital necessarily tends to occur on an ever-more massive scale. Units, networks, and regions of capital attempt to shift the costs of devaluation elsewhere on to other units, networks, and regions. Most of all, capital attempts to shift as much of the cost as possible onto labour. Global turbulence and generalized economic insecurity increasingly pervade the world market.

The practical conclusion that follows from the systematic necessity of the tendencies to uneven development, overaccumulation crises, and financial crises should be clear. Neither the capitalist state nor the capitalist world market can resolve the fundamental irrationality and social antagonisms at the heart of capitalist social relations. Further deregulation of global capital flows will not reverse this state of affairs. A resurgence of nationalism will not reverse this state of affairs. A ‘new international financial architecture’ will not reverse this state of affairs. And attempts to institute social democracy on the global scale will not reverse this state of affairs. Only a revolutionary rupture from the capital form can accomplish this world historical task. This is, I believe, the main conclusion of a systematically informed Marxian account of the historical dialectic of globalization.