Ian Gough’s article on ‘State Expenditure in Advanced Capitalism’ (nlr 92) concerns a subject which has been conspicuous by its absence from Marxist theoretical work: the question of the capitalist state’s location with respect to the economy. What are the effects and laws of development of the state’s intervention in economic practice? Specifically, what is the significance of the growth of state expenditure which has been experienced by all mature capitalist societies in this century? In addition, Gough considers several related issues, including the concept of the social wage and the nature of the recent crisis in Britain. Elsewhere we have developed an analysis of the state’s intervention in crisis which bears on some of the same issues.
footnote1 But our approach is fundamentally different from Gough’s, which in our view gives rise to serious errors. In the present article we seek to demonstrate that Gough’s wrong conclusions arise both from his dependence upon the neo-Ricardian school of economic
Gough’s argument applies to the problem of State expenditure analyses developed within a Ricardian problematic. Basing itself on Sraffa’s approach to the problem of distribution and prices, footnote2 neo-Ricardianism emphasizes the non-correspondence between prices of production and values, denies the validity of the law of the tendency of the rate of profit to fall, and considers the distribution of values between labour and capital to be a matter for class struggle—which is itself seen as quite separate from the sphere of production. footnote3 The concrete analysis to which this theoretical approach leads is that of Glyn and Sutcliffe, which views crisis as the resultant of the forces of class struggle, while these forces themselves are not located in relation to the law of value. footnote4 Gough embraces all the propositions and methods of the neo-Ricardian school. From this base, he attacks the view—defended by Yaffe and others—that not only is the law of the falling rate of profit central to the laws of development of capitalism, but also State expenditure necessarily involves a drain on surplus value. footnote5 Indeed, this last point is Gough’s central theme: ‘It is quite wrong therefore to regard the growth of the state as an unproductive “burden” upon the capitalist sector: more and more it is a necessary precondition for private capital accumulation.’ footnote6
Now, few would deny that capital requires and in many ways benefits from the expenditure of the welfare state; indeed, the proposition is so common that it is not clear why Gough goes to such lengths in attempting to establish it anew. What we dispute, however, is the notion that this indirect productiveness of state expenditure invalidates the pro
The law of value consists of propositions developed at a level of abstraction where all commodities exchange at their values as measured by socially necessary labour time. The movement of the capitalist economy is determined by the development of productive capital under such conditions footnote8 and accumulation necessarily proceeds along a path of combined and uneven development punctuated by crises (since crises are necessary to stimulate the restructuring of capital). This pattern of accumulation is a necessary part of the operation of capital and the capitalist state’s economic intervention is fundamentally determined by capital’s economic requirements. This view does not reduce politics to economics by a crude determinism; for the state, in preserving capitalist social relations, has political and ideological as well as economic roles. Therefore, its economic intervention is conditioned by the political and ideological balance of forces. Further, in the period of monopoly capitalism, the state must increasingly intervene to raise the production of surplus value and not merely to affect distribution.
We start from the fact that central to Marx’s analysis of the capitalist mode of production is the concept of capital. Whether the concept is epitomized by the idea of capital in circulation, capital as a social relation, or capital as self-expanding value, it is the circuit of capital which is the framework for the analysis of capital. The complete circuit of capital, as analysed in Volume II of Capital, a circuit through the spheres
In analysing capital, Marx developed the law of the tendency of the rate of profit to fall, characterizing accumulation as a process involving a rising organic composition as the circuit of capital expands. This law was, for Marx, fundamental to the ensemble of the laws of motion of capitalism; with the counteracting influences which develop coterminously, the tendency of the rate of profit to fall is fundamental to the concept of crisis in Marx’s system. Since Marx concluded that the tendency of the rate of profit to fall ‘breeds over-production, speculation, crises, and surplus-capital alongside surplus population’ and ‘testifies to the limitations and to the merely historical, transitory character of the capitalist mode of production’, footnote10 Gough is making a serious attack on all of Marx’s conclusions with his statement that ‘the “law” of the falling tendency of the rate of profit has been subject to definitive criticism following advances in Marxist political economy’. footnote11 Several errors in Gough’s analysis follows from this and from the rejection of the concept of the circuit of capital as a whole.
First, Gough’s analysis is left without a theory of economic crisis. The state’s intervention in the economy is analysed primarily in the context of a smoothly accumulating capitalist system; hence, the rationale of state intervention is divorced from the fact that capitalist reproduction is necessarily punctuated by crises. In general, for the capitalist mode of production the ability of crises to lay the foundations for renewed accumulation depends upon the ability of capital to restructure itself or be restructured in the direction of greater concentration and centralization, and greater international specialization. The other recuperative mechanisms elaborated by Marx are of a second order of priority compared to this restructuring of capital. footnote12 In the current phase of capitalism, however, capital does not completely carry out this restructuring by itself. It does, of course, partially do so; but it also requires the intervention of the state and this intervention takes several forms. The state, though it can never abolish economic crises, can, through its demand-management and distributional policies, affect the conditions of realization to precipitate or postpone them, in an attempt to moderate their effects. The state also intervenes to encourage the restructuring of capital; this takes the form partly of financial assistance, involving greater supervision of industry, and partly of nationalization. These forms of supervision are directed toward assisting capital in the production of relative surplus value, based on the renewal of accumulation that follows the expulsion of living labour in the crisis and slump.