Automation is abolishing the source off profit; socialism is becoming an economic and technical necessity for the first time
Since the inevitable evolution of production from mechanisation to automation is abolishing capital’s theft of commodity-producing labour’s labour time — the sole source of exchange-value and profit — capitalism is losing its ability to reproduce the value of capital. The system is therefore sooner or later likely to spiral into a crisis of hyperinflationary and hyperdeflationary episodes.
Socialism (the lower stage of communism), whereby private enterprise owned by the few is turned into social enterprise owned by all, with output based on demand and break-even planning rather than exploitation and profitability — thereby abolishing system-inherent causes of recession — is therefore becoming an economic necessity *for the first time*.
Because the mechanical technological mode of production is a binary one, the *(non-binary) singularity* of the system of fully automated production we are heading towards is also making socialism a technical necessity.
Combined with ongoing technological leaps and a transition to emissions-free, i.e. automated *additive* and non-labour intensive forms of production (3D printing, liquid thorium, microbial fuel cells, hemp bioplastics, etc. — capitalism being dependent on the labour-intensity of extractive, subtractive production) socialism will therefore increasingly enable sustainable abundant material wealth *for all*, leading to higher communism, when the state becomes irrelevant and withers away.
Is worldwide hyperinflation/hyperdeflation (depression) really looming?
➤ A third ‘one in 100 year’ financial bubble in three decades — there had been no equivalent since the 1929 Wall Street Crash — engulfing the world economy has been labelled ‘the everything bubble’ (the previous two being the 2000–01 dot com bubble and the 2007–09 housing bubble) because it now encompasses every asset/debt class for the first time.
➤ Official US national debt-to-GDP — driven by private sector debt heaped onto the backs of the public — hit an all time relative high of 137.2% in 2021, having averaged 64.54% since 1940. The record high aggregate global debt is unsustainable since the tax base needed to repay it is shrinking in relative terms.
Global debt across all sectors increased by over $10 trillion in 2019, topping $255 trillion. At over 322% of Gross Domestic Product (GDP), that put global debt 40 percentage points ($87 trillion) higher than at the onset of the 2007–09 financial crisis. ‘Emerging market’ borrowing, led by China, inflated the global debt mountain to a record $303 trillion in 2021.
Nation-states that fail to push their debt back below 90% of GDP usually eventually go on to default (fail to repay their debt) and go bankrupt. The actual figure has been estimated to be 2.5 times higher (as of July 2019) and 2.5 times higher than the global money supply (as of 2015, up from two times higher in 2013).
The record high debt figures have been matched by an unprecedented explosion in the money supply as central banks have electronically ‘printed’ money to buy up all the corporate debt that is partly responsible for making corporations unattractive to investors. The (US) Federal Reserve’s balance sheet rose from $900bn in September 2008, during ‘the global financial crisis’, to $9 trillion in 2020 — an unprecedented 10-fold increase.
Money printing of course ‘devalues the money supply’ per dollar; but is actually a reflection of the devaluation of capital arising from exponential leaps in absolute productive output and the manifesting shortage of exchange-value being created by commodity-production (i.e. per commodity; see below). For example: 10 commodities produced in 5 hours having previously taken 10 hours to produce cost half as much as they did before.
➤ Lifting the US economy out of recession has required on average since 1958 a baseline interest rate cut of 6% (in order to cheapen capital to incentivise borrowing and thus investment); but since the (worst ever) stock market crash in March 2020, rates were already near zero, having been cut after March 2020 from 0.75% in the UK and 1.75% in the US. Neither country had ever gone below 1% before 2010, but have been more or less stuck at zero since then.
Going lower still into negative rates would require even more money printing and debt purchasing than after March 2020.
It may also involve charges on bank deposits and low dominations of cash; bans on high dominations (to convert them into stocks and bonds in order to lower interest rates, hence the so-called ‘war on cash’); wealth taxes; and ‘bail-ins’ whereby banks stave off insolvency by seizing assets from customers or converting deposits into equity.
All this may reinflate the global bond (debt) bubble for another few years or so, but such options are limited — there is only so much cash that can be converted into stocks; and will also require increasingly massive amounts of central bank money printing to push up the prices of bonds (thereby lowering interest rates). How negative can negative rates go? There must be a limit when offsetting falling profitability with public subsidies becomes exhausted.
The trillions of dollars of sovereign debt already subjected to negative rates, meaning investors are essentially paying for the privilege of lending money to the capitalist state, has been remarkably and increasingly high since 2014. Banks, many of which are already close to going bust, have warned that making base rates too negative would make them unprofitable.
➤ Eventually even the richest countries will default on their debt. Public bailouts just about saved most major banks in the 2007–09 crisis, thanks to a sufficient devaluation and centralisation of capital (the necessary solution to every capitalist crisis/recession), accelerating rises in monopolisation, poverty and inequality.
➤ Eventually central banks will run out of cash to convert into stocks and the debt bubble will burst as profitable investment declines and interest rates therefore start going back up, making government debt increasingly expensive to pay-off and leading to surges in debt-to-GDP and panic selling as investors realise that the government is broke.
➤ Bondholders will dump bonds and instead panic buy hard assets, especially precious metals, adding to the potential for hyperinflation. Central banks may be forced to purchase dumped bonds, sending national (public) debt ever-higher.
➤ Capitalists also use inflation/hyperinflation in a crisis anyway to effectively torch wages, debt and taxes, i.e. in order to centralise capital into fewer hands and rewiden profit margins. They do so partly by distributing money printing disproportionately into the hands of capitalists who use it to invest in assets (such as housing), reinflating asset bubbles; and by imposing artificial scarcity through cuts to production, raising demand relative to supply. (A study published in July 2022 found that, by taking such action, capitalists raise energy prices by 70–80%.)
Automation is abolishing the source of profit? What?!
➤ Of the roughly 750 currencies that have existed since 1700, less than 20% remain.
➤ British pound sterling has lost more than 99.5% of its purchasing power since its adoption as official currency in 1694. The US dollar has lost more than 96% of its purchasing power since 1913, having barely changed in the previous 140 years when the rate of the economy’s growth (relative to its size) was much higher. The vast amount of that figure, 91%, has come since 1949, when the US supplanted Britain as the world’s imperialist superpower.
The figure since 1970 is 85% (93.5% for Britain), when the US, Britain and Europe entered their first major post-WWII recession and the technological (digital/computing/automation) revolution really took off.
(Dropped in the 1970s, the gold standard, pegging the value of the dollar to a fixed value of gold, thus became a restraint on economic growth, since gold’s finite nature, or the relatively slow production of it, limited the number of dollars that could be printed and thus invested in productive expansion and innovation.)
➤ GDP growth rates are trending towards and already closing in on zero, having been around 6% in the 1960s and below 2% since 2000.
Decade-by-decade average GDP growth rates in what the World Bank defines as ‘high income countries’ are trending towards zero.
➤ Interest rates have trended downwards over seven centuries, regardless of the political/banking/legal regime.
➤ The aggregate global rate of profit is also trending historically towards zero, having fallen from an estimated 43% in the 1870s to 17% in the 2000s.
➤ Between 1964 and 2014, the average lifespan of S&P 500 companies shrank from around 60 to 18 years.
➤ The Energy Return on Investment (EROI) on fossil fuel has fallen from above 100:1 (a return of 100 units of energy for every 1 invested) before the 1930s to around 3–6:1 in 2019.
Indeed, in April 2020 the price of US oil fell below zero for the first time ever.
The value of Saudi Arabia’s oil infrastructure is predicted to fall from $900bn to minus-$2 trillion by 2030.
According to Sid Smith, all forms of energy production are becoming unprofitable.
(The fossil fuel industry only remains ‘profitable’ because of its parasitic dependence on public subsidies of $16bn a day.)
➤ Production costs and consumer commodity prices have trended secularly/historically towards zero, since commodities tend to become cheaper the faster and more abundantly they are produced.
For example, whereas the world’s fastest supercomputer in 1975 was worth $5m ($32m in 2013’s money), the price of an iPhone 4 released in 2010 with the equivalent performance was $400. Aerospace companies producing propulsion systems in 2010 for $24m in 24 months are now 3-D printing their engines for $2,000 in two weeks. (Source: Aaron Bastani, Fully Automated Luxury Communism, p. 123).
One gigabyte of data storage, for example, fell from around $200,000 in 1980 to just $0.03 in 2014.
While it took 13 years and billions of dollars to sequence the first human genome, the cost had fallen to below $100 by 2017.
Such developments mean companies are increasingly likely to find it cheaper to produce ‘at home’ instead of exploiting overseas labour and transit workers (who transport commodities).
As Rethink X states: “Our food system is being transformed as we learn how to make affordable high-quality proteins and other molecules [through lab-grown ‘cellular agriculture’ and ‘precision fermentation’ (programmed microbiolisation; a form of automation)] without the need to grow plants and animals. The DNA of a single soy plant or chicken will be enough to create an unlimited quantity of soy or chicken proteins. Our newfound ability to design and produce infinite organic compounds like we design apps or videos will likely distribute the power to engineer our own [i.e. at the local/individual level] food cheaply, sweeping away the industrial dairy and meat industries.”
In 2000, the cost of producing one kilogram of one type of molecule through precision fermentation cost $1 million, but in 2020 the cost had fallen to around $100. In 2020, precision fermentation was on course to become cost-competitive with bulk animal protein, which stood at around $10 per kg for casein and whey, by 2025. It is expected to fall below $10 per kg by 2025, before becoming five times cheaper than traditional animal proteins by 2030, and 10 times cheaper by 2035.
As soon as a company like Nestle starts buying its milk this way — as it must to rewiden its own profit margins — the conventional farming industry will collapse. (Indeed, Nestle is already exploring this innovation.)
➤ Machines cannot sell their labour power (capacity to work) and are therefore unexploitable; i.e. they do not produce surplus value, i.e. surplus labour time, the time the worker (wage-slave/proletarian) works beyond their necessary labour time (the value of their labour power and cost of subsistence). Surplus labour time is thus surplus value that the capitalist appropriates from the worker and realises through the sale of commodities.
The real measure of (exchange) value is labour time, since this is the one thing that all exchangeable commodities have in common that makes them exchangeable (via a third, universal commodity, the money-commodity). The value of all commodities is the same as their combined necessary labour time, driven down to the minimum by competition and innovation.
If the worker creates eight hours worth of value a day, she only keeps what she needs to pay to reproduce herself and her dependents (living costs/necessary labour time); three hours, for example, with the other five (surplus labour time) going to the capitalist.
The capitalist continually needs to increase and maximise surplus value production, i.e., in our example, towards eight out of eight hours. Profit is therefore essentially unpaid (surplus) labour (time).
As productivity rises through innovation, the costs of subsistence tend to fall, and so the rate of exploitation (the ratio of surplus to necessary labour time) can actually rise while living standards rise (at least in terms of the absolute number of commodities consumed).
Capital’s exploitation of labour’s labour time is obscured by the money-wage relation, what Marx called the commodity fetish (gold being the money-commodity).
The trend of increasing surplus labour time cannot, of course, exceed 24 hours a day, making the expansion of surplus value production historically limited. Although workers cannot physically work round the clock, capital’s plundering of personal/private data from smart phones and computers is now moving the dynamic towards 24/7 exploitation (and stealthily reintroducing/expanding child labour). Data is now more profitable than oil.
Furthermore, the necessary labour time of the most productive workers in the automation age — scientists, engineers, coders, etc. — is high, since the character of their labour is increasingly complex. It includes the cost of their qualifications, computers and other equipment. Their surplus labour time is therefore high in absolute terms but increasingly low in relative terms — producing a unit of data invariably takes almost no labour time at all.
Because the value of the means of production is consumed during the production process, their value is only preserved by absorbing the labour time of the workers. (Oil is consumed during the production of oil, for example.) Means of production, or machinery, whether mechanised or automated, cannot produce or reproduce value without exploited workers.
As productivity rises, the amount of surplus value absorbed by the means of production tends to fall, and so the value of the means of production also falls until it becomes unprofitable to retain.
➤ Services workers are relatively unproductive/unexploitable — in terms of surplus value produced per commodity — since they only tend to handle finished/near-finished commodities. Even Africa and Latin America have been deindustrialising (moving from manufacturing to predominantly services-based workforces) over the past decade.
➤ Automation, a necessary development due to capital accumulation’s ongoing need for ever-rising productivity growth and also driven by capitalist competition — not to mention humanity’s natural tendency to innovate to save labour and enhance the quality of life — is therefore abolishing the source of surplus value, exchange value and profit.
To be more precise, automation is the final expression of capitalism’s self-abolishing tendency.
➤ Capital itself is a generally ever-growing fetter (restraint) on investment, innovation and productivity growth, the rate of which spluttered below 1% in the 2010s, since the ever-rising overaccumulation or surplus of capital (that cannot be profitably reinvested) — expressed in debt, money/asset hoarding, speculation, unsold goods (‘overproduction’), and disused means of production (which may be reconverted into productive capital via devaluation) — is an expression of a relatively increasing underproduction of surplus value.
➤ Capital accumulation is approaching a historical limit as capital’s absolute value is only preserved if it grows sufficiently:* an ever-greater proportion of surplus value has to be dedicated to accumulation, meaning the consumption funds for both the capitalist and the worker eventually begin to decline absolutely, compelling capitalists to ramp up attacks on both their competition and the working class. The outlay on wages has to be slashed; workers are replaced by automation to raise productivity (and robots don’t even need pensions or holiday/sick pay, etc.).
In such circumstances, the Canutes who do not fight for socialism can only fight for fascism, slavery and world (probably nuclear) war (since the accumulation crisis is forcing nation-states into intensified competition, as evidenced by the rising trade wars, which hit record levels before Brexit and the presidency of Donald Trump).
➤ Another way of looking at the situation in historical terms: just as the number of slaves in the US declined as a percentage of the population (from approx. 25% in 1790 to 16% in 1860) before slavery ended (via civil war); manufacturing workers have declined as a percentage of the US workforce from 26.4% in 1970 to 8% in 2018.
(The decline of slavery relative to the rise of waged labour, along with its exhaustion of the soil through extensive farming, compelled the slave-owning South to expand and export slavery, compelling the North to fight back to maintain capitalist production. As the civil war progressed, it became clear that abolishing slavery throughout the US was the only way to save the Union and US agriculture. More generally, before this, slavery was unenforcable in urban and factory settings — and the limits of man meant he had to be supplemented by mechanical machines, to raise productivity — necessitating the transition to waged labour.)
➤ The means of production evolve and improve ‘organically’ in order to meet the demands of capital accumulation — although innovation and the tendency for machinery to grow relative to labour is also historical; both continue under any system due to man’s inherent tendency to seek labour-saving and life-enhancing innovations — but eventually demand new relations of ownership.
Just as slavery and feudalism became increasingly inefficient forms of production that not only prevented countries from becoming richer but made the bulk of their populations increasingly poorer, the same is now increasingly true of capitalism and the private ownership of the means of production. (Production is already socialised — goods are produced to make available for sale to all of society — in terms of consumption, including the consumption of labour by capital, meaning labour is also already socialised.)
The commodity, the basis of capitalist society, is dually characterised by exchange value and use value (utility), but the evolving deindustrialisation, servicisation, automation and digitalisation of labour has evolved a new economic-technical basis to society whereby exchange value is withering away, leaving one that demands a new political-legal superstructure based solely on use value; i.e., the public/social/human ownership of all production and services; centrally planned, break-even utility production; and the replacement of money by a (non-transferable) voucher system pegged to labour time.
Put another way: the economic-technical basis to the social formation known as capitalism is both a value composition (constant capital:variable capital, or c:v (the value of the means of production: the value of the outlay on labour power/wages)); and a technical labour composition (means of production:living labour, or MP:L). Constant (dead) capital is withering away due to the dwindling size of and now exponentially rising productivity/capacity of variable (living) labour.
So whereas capitalism has long been a dualistic, mechanised system of production, it is now rapidly evolving into a singular, automated system of production — socialism.
Whereas computing operations, for example, are binary, quantum computing operations are non-binary, existing on a spectrum.
(Hence why sexual, gender, biological (emerging evolutionarily from post-manufacturing labour, (domestic) labour-saving innovations, rising technical capacity, etc.), racial (capital’s need to cheapen and expand the exploitable labour, colonialism, immigration, mixed-raced generations) and national binaries (monopolisation, trade connections, the internet) are already noticeably starting to wither away.
These socially/politically/economically constructed binaries — which emerged only approx. 13,000 years ago with the advent of private property (which in turn emerged out of the neolithic/agricultural revolution and the surplus produce, barter and trade it spawned), before which (approx. 287,000 years of human history!) the state and war also did not exist — will not be ‘abolished’ in the first years of communism but continue to wither away in a natural, historical, evolutionary way over many decades and centuries as new and increasingly ambitious generations embrace increasing amounts of free time and higher technical and productive capacities that enable them to increasingly break free from the confines of binary structures and thought.
Indeed, the quantum sciences are increasingly debunking classical physics and proving Marx’s realisation that matter is a kinetic, fluid process rather than made up of billiard-ball like atoms.)
In socialism, the technical labour process is no longer slowed down — by recessions, surplus capital, commercial secrecy, etc. — or conditioned by the valorisation process.
➤ The problem for capitalism is that it eventually runs out of labour and labour time to exploit; use values to commodify; and industry, land and services to privatise and atomise.
(Re. atomisation: splitting one area or thing into two lengthens the amount of labour time employed and enables you to charge for it twice: so splitting the road up into millions of cars instead of far more efficient trams or trains etc. is far more profitable; making and selling billions of individually-owned wifi is far more profitable than providing wifi for a whole street or area, and so on. (This is not to say that socialism will ban individually-owned cars — just that they could be used a lot less and made more efficiently, cleanly and sustainably. In fact, sports cars have recently become unprofitable to make, other than for a very lucky few, and will therefore need socialism to become viable again. Perhaps roads that become unused because of better public transport could even be turned into recreational racing tracks.))
➤ A fully automated system of production — including the microbiolisation of production of food and fibrous (plant-based) structures that will significantly reduce our dependence on the intensity of intensive farming and mining — will involve so little human labour per unit produced that there will be nowhere near enough surplus labour time for capital to exploit.
So capitalist production will break down all but absolutely before production has been fully automated, necessitating socialist revolution and the public ownership of the means of production.
What makes socialism the economic solution?
➤ Since the private sector is increasingly monopolised and dependent on long-term central planning (eliminated internal markets, forecasts, stock coding, etc.) and state (public) subsidies (including tax cuts) — trending towards 100% of income and therefore nationalisation — taking the means of production under public ownership, a ‘final merger’, and centrally planning the economy as a whole, is becoming, for the first time, an economic necessity.
➤ Since the private sector is losing its ability to employ value-creating (commodity-producing) labour — it does so only if profitable — society, via the state and state enterprises, must take over responsibility for employment, enabling actual full formal employment. (‘Full employment’ in capitalism discounts lumpenised/destitute ‘economically inactive’ workers.)
➤ Since the workforce is now almost entirely services-based, economic stability can only be established by an applicable system, whereby value is created not by for-profit commodity-production but by break-even utility-production.
➤ Since fiat currency is dying a natural death, with cash also disappearing in relative terms — only so much cash can be stored physically; accumulation demands increasing efficiency in circulation and turnover; and cash must be converted into bonds to lower interest rates — it must be replaced by a non-transferable digital voucher system, with the ‘currency’ pegged to labour time.
Workers will therefore receive all the value they create during the working day (instead of having part of it appropriated by capitalists), paid in units of labour time worked; minus contributions to universal public services, defence (while needed), and so on. A grading system will incentivise types of work (night shifts, for example) and productivity rates.
Combined with public ownership and full employment, this system will institutionalise equality of labour, underpinning equal rights (whereas rights under capitalism depend on how much money you have) and limiting economic inequality to a minimum; while consistently raising living standards for all (especially via general falling prices).
Since digital vouchers will be non-transferable, cancelled like train tickets once ‘spent’, the centralisation of wealth into the hands of a few becomes impossible.
➤ In the long run, as full automation, 3D-printing, lab-grown food, etc. become increasingly diffuse and localised, the divide between producer and consumer will increasingly disappear, bringing about economic independence and abundant (extremely plentiful) material wealth for all, meaning class and the state will become increasingly irrelevant — both will therefore wither away.
So, whereas capitalism has a long-term tendency to centralise wealth and power, socialism has a long-term tendency to decentralise wealth and power.
Essentially, socialism completes what capitalism started but could not finish.
➤ Precision fermentation and 3D-printing are forms of additive manufacturing (growing, replicating, layering materials), as opposed to until now extractive and subtractive manufacturing (cuttings shapes out from materials). So:
Subtractive and mechanised production = limited/scarce production (capitalism)
Additive and automated production = unlimited/abundant production (communism)
Ted Reese is the author of: Socialism or Extinction: Climate, Automation and War in the Final Capitalist Breakdown | Humanising Production: The Second (Not Fourth) Industrial Revolution and The Bio-Economic Necessity of Socialism | The End of Capitalism: The Thought of Henryk Grossman