Crisis of Neoliberalism and Challenges before Popular Movements
This is the text of a soon-to-be published booklet authored by Arindam Sen, which will appear in instalments in Liberation.
When the catastrophic financial crisis hit the capitalist world order a few years back and quickly metamorphosed into a great recession, we brought out a slim pamphlet titled “Capital in Crisis: Causes, Implications and Proletarian Response”.
“Capitalism has learnt to live with crises and through crises”, the opening sentences read, “but some of them are epochal. Such was the Great Depression of 1930s. Will the one that is currently unfolding prove to be another?” We hinted it would and quoted veteran Nobel laureate Paul Samuelson: “This debacle is to capitalism what the fall of the USSR was to communism.” However, mindful of the experience of the many convulsions – like the dot-com bubble burst of early 2000s – which threatened to but ultimately did not develop into a global systemic crisis, we resisted the temptation to jump to a very definite conclusion at that early stage.
But today on the strength of evidence of the last four years we can say: yes, it is an epochal crisis in the sense that the structures and strategies of capitalist accumulation in the current neoliberal mode are in crisis, are permanently failing to deliver the way it did since 1980s. We have therefore named it more specifically as a crisis of neoliberalism and expanded our analytical horizon accordingly, starting from Marx and Lenin and drawing substantially on the works of later Marxists as well as heterodox economists.
Whereas in the previous pamphlet the popular struggles engendered by the unfolding crisis were briefly highlighted, in the present one we have also tried to learn how the dynamics of class struggle crucially influenced the specific course of reform or restructuring that followed every structural crisis in history. How, for example, valiant struggles of the American working class in the upbeat international environment of 1930s forced the New Deal on the bourgeoisie and how in an opposite political milieu setbacks in workers’ struggles paved the way for the neoliberal “structural readjustment” following the structural crisis of 1970s.
Such review is important, we thought, for understanding the class dimensions, political implications and possible outcomes of the current crisis – an understanding without which we the global 99% cannot hope to “seize the crisis” (as Samir Amin has put it) for advancement of our own cause as against that of the 1%.
Global experience in the age of imperialism, which Lenin defined as moribund monopoly capitalism under the domination of finance capital, brilliantly confirms and enriches the Marxist-Leninist explanation of business cycles and capitalist crisis. We hope the present publication, which updates and broadens the discussion started earlier, will help activists and observers gain deeper insights into the economic crisis and its political implications.
18 September, 2008. US Treasury Secretary Ben Bernanke put up a sombre face and told the law-makers that if the government did not save the (financial) markets then there might not be any financial markets in the future.
He was speaking the truth. Over 100 mortgage lenders had gone bankrupt during 2007 and 2008. Concerns that investment bank Bear Stearns would collapse had resulted in its fire-sale to JP Morgan Chase in March 2008. The financial crisis hit its peak in September and October. Several major institutions either failed, or were acquired under duress, or were taken over by the government. These included Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG Insurance – establishments hitherto deemed “too big to fail”. So the “Emergency Economic Stabilisation Act of 2008”, which sanctioned a whooping $700 billion for rescuing the fat cats of Wall Street through the Troubled Asset Relief Program (TARP), was passed.
There was tremendous popular opposition, including that of some 400 economists – two of them Nobel Prize winners. The basic point was that the package transferred huge amounts of public money into the hands of private financiers responsible for the catastrophe instead of punishing them, thus creating a bad precedent, a “moral hazard”, for the future. The bankers’ government paid no heed, naturally.
As the contagion spread at electronic speed to other rich countries (actually the rot had started earlier: in August 2007 French giant BNP Paribas had terminated withdrawals from three hedge funds citing “a complete evaporation of liquidity”), the latter too launched their own bailout packages. A total financial meltdown was thus averted by governments rescuing financial corporations with taxpayers’ money1 and a weak, halting recovery phase did start in about two years.
Yet, as we write these lines, the stubborn crisis of capital has spread wider and gone deeper into the soil, displaying new features, throwing up new debates and generating new struggles – as we shall see in the pages that follow .
But how did things come to such a pass?
To put it very simply, titans like Lehman Brothers, AIG Insurance, Fannie Mae and Freddie Mac (the last two Government Sponsored Enterprises) failed because at the hour of need they could no longer raise money from the market to roll over their short-term debt. During 2004–07, the top five U.S. investment banks unscrupulously increased their financial leverage – reporting over $4.1 trillion in debt for fiscal year 2007, about 30% of USA nominal GDP for 2007 – which increased their vulnerability to a financial shock.
Being over-exposed to the sub-prime mortgage market and relying too much on derivatives – instruments derived from the performance of some distant asset (hence the generic name “derivatives”) they suffered huge losses and lost the trust of the market. Investors became reluctant to lend money even to these prestigious financial institutions. Failing to meet their obligations, essentially they went bankrupt, though in most cases (Lehman being the most famous exception) they were rescued by the government.
The “sub-prime mortgage market” or “sub-prime loans” refer primarily to housing loans to those who could hardly afford them and in which the initial interest rate was sub-prime (very low) to begin with, but escalated over the duration of the mortgage on the assumption that as the borrower progressed career-wise there would be an increased capacity to pay instalments. The sub-prime loan instruments were then “diced and sliced” (i.e. mixed up with other more viable loans) and the resultant derivatives were sold on by the original mortgage institutions to other banks and financial institutions.
Thus emerged a shadow banking system. The new breed of derivatives generated by dicing and slicing of sub-prime and other risky loans were expected to distribute the risks among many financial institutions and thereby minimise the risks shouldered by each.
This strategy allowed financiers to circumvent regulations and generate easy credit by taking high risk bets and offloading the risks on to others. When, with the collapse of the housing bubble and an avalanche of defaults by sub-prime borrowers, the ‘bets’ began to go wrong, the pyramid of deals began tumbling down. More than once during 2007 and 2008 financial authorities in US and other countries sought to stem the tide by helping the crisis-ridden banks and, to a lesser extent, also indebted homeowners. But in vain. The whole process snowballed and led to the September 2008 debacle.
Strange as it may seem now, the high risk strategy involving excessive sub-prime loans and an endless web of securitisation or derivatives-creation was not restrained or regulated by any public or private authorities. Rather, this strategy was praised as a sure way to prosperity – both for the corporations and for the country. Announcing its 2005 Annual Awards – one of the securities industry’s most prestigious awards – the International Financing Review (IFR) said, “[Lehman Brothers] not only maintained its overall market presence, but also led the charge into the preferred space by ... developing new products and tailoring transactions to fit borrowers’ needs.... Lehman Brothers is the most innovative in the preferred space, just doing things you won’t see elsewhere.”
Yes, Lehman became too smart and that’s why it met the fate it did. Since the epicentre of the devastating earthquake and its aftershocks lay in the financial sector i.e., the credit network, our investigation into the causes of the crisis should begin from here.
At one time the role of credit – of dealers in credit or financiers – was basically to “grease the wheels” of industry and commerce which turned out real goods, infrastructure and services. But gradually their role expanded and today we find them in dual roles: both as accelerators of growth and harbingers of crisis. US experience under the neoliberal order illustrates this very well.
As a strategy to counter the economic slump that started in 1970s, the working people of America were encouraged to keep up their consumption levels with easy credit made available through aggressive credit card promotions, new and reckless mortgage practices, and other means. This policy had a great political benefit too: the enslavement and immobilisation of the proletariat in credit chains.
As Lenin showed in the article “Imperialism and the Split in Socialism” long ago, the imperialist bourgeoisie had devised the tactic of creating a stratum of workers’ aristocracy in their countries by bribing the latter with small fragments of super profits earned in colonies, i.e., by paying them relatively better wages. Today they have improved the tactic further. They now give out huge loans while restricting wages, imposing on the workers a modern version of debt bondage and, with that, the ideological enslavement of consumerism2. The “American way of life” ensures high demand for all sorts of consumables and the US economy keeps running with astronomical current account and fiscal deficits – with borrowed money, that is.
When the “dot-com” or “New Economy” stock market bubble burst in 2000, the US economy went into recession. It was weakened further by the 9/11 attacks. In order to allay the fears of financial collapse, the Federal Reserve lowered short-term interest rates. But employment kept falling through the middle of 2003, so the Fed kept lowering short-term lending rates. For three full years, starting in October of 2002, the real (i.e., inflation-adjusted) federal funds rate was actually negative. This allowed banks to borrow funds from other banks, lend them out, and then pay back less than they had borrowed once inflation was taken into account.
The “cheap money, easy credit” strategy created a new bubble – this time based in home mortgages. This “great bubble transfer” involved a further expansion of consumer debt and an enormous profit explosion in the finance sector achieved through extension of mortgage financing to riskier and riskier customers. The collapse into recession was thus delayed no doubt, but at the same time and in the same measure the latter was made more inevitable and more intense.
The following passages from Marx, with a bit of updating as suggested in square brackets, may help us understand why the economic catastrophe started as a credit and money crisis:
“In a system of production, where the entire continuity of the reproduction process rests upon credit, a crisis must obviously occur – a tremendous rush for means of payment – when credit suddenly ceases and only cash payments have validity. At first glance, therefore, the whole crisis seems to be merely a credit and money crisis. And in fact it is only a question of the convertibility of bills of exchange [add here the modern credit instruments– AS] into money. But the majority of these bills represent actual sales and purchases, whose extension far beyond the needs of society is, after all, the basis of the whole crisis. At the same time, an enormous quantity of these bills of exchange represents plain swindle, which now reaches the light of day and collapses… The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, [today we would perhaps say the US Federal Reserve] give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values. Incidentally, everything here appears distorted, since in this paper world, the real price and its real basis appear nowhere …” (ibid, p 490, emphasis added).
Marx also speaks of “a new financial aristocracy, a new variety of parasites in the shape of promoters, speculators and simply nominal directors; a whole system of swindling and cheating by means of corporation promotion, stock issuance and stock speculation” and of “fictitious capital, interest-bearing paper” which “is enormously reduced in times of crisis, and with it the ability of its owners to borrow money on it on the market.” (Capital, Vol. III, p 493). If this sounds contemporaneous, so would the anxiety expressed by the British “Banks committee” – a predecessor of various expert committees and monetary authorities of our day – exactly 150 years ago regarding the fact that “extensive fictitious credits have been created” by means of discounting and rediscounting bills “in the London market upon the credit of the bank alone, without reference to quality of the bills otherwise.” (ibid, p 497, emphasis ours).
Junk securities, then, are no invention of the Wall Street-wallahs of our time!
The role of credit in the capitalist system as a whole went on expanding and reached a qualitatively new stage with the advent of modern imperialism, a parasitic and decaying system marked by new features like all-round monopolisation, export of capital outweighing export of commodities, the rise of the financial oligarchy etc. Money capital now metamorphosed into finance capital and attained a much more influential position:
“Imperialism, or the domination of finance capital, is that highest stage of capitalism in which the separation [“of money capital … from industrial or productive capital”] reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means that a small number of financially ‘powerful’ states stand out among all the rest.”
“… [The] twentieth-century marks the turning point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital.” (Lenin in Imperialism; emphasis added)
Now what is finance capital? Basically it is the coalescence of bank capital and industrial capital, said Lenin, and today perhaps we should include commercial capital as well. This coalescence, however, internalises a good amount of tensions and contradictions between the different sectors which maintain their special identities and interests. Modern banks, Lenin showed, concentrated the social power of money in their hands, and began to operate as “a single collective capitalist”, and so “subordinate to their will not only all commercial and industrial operations but even whole governments.” Also important in this context was the three-way “personal link-up” between industry, banks and the government.
Elaborating on the new stage, Lenin wrote:
“The development of capitalism has arrived at a stage when, although commodity production still ‘reigns’ and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the ‘geniuses’ of financial manipulation. At the basis of these manipulations and swindles lies socialised production, but the immense progress of mankind, which achieved this socialisation, goes to benefit... the speculators.”
This separation of money capital from productive capital and this supremacy continued to grow, with the result that today we see “a relatively independent financial superstructure … sitting on top of the world economy and most of its national units”. That is to say, there is now an “inverted relation between the financial and the real”, where “the financial expansion feeds not on a healthy real economy but on a stagnant one” (Paul Sweezy, “The Triumph Of Financial Capital”, Monthly Review, June 1994).
The relative weight of the financial sector in the international economy thus increased steadily all through, but very disproportionately since the 1980s, facilitated by neoliberal deregulation and the information revolution. By far the largest and fastest growing component of this sector has been made up of speculation and other reckless activities: derivatives trade, hedge fund activities, sub-prime loans and so on.
As Martin Wolf of the Financial Times aptly observed, “The US itself looks almost like a giant hedge fund. The profits of financial companies jumped from below 5 per cent of total corporate profits, after tax, in 1982 to 41 per cent in 2007.” According to the Bank of International Settlements, as of December 2007, the total value of derivatives trade stood at a staggering $516 trillion, growing from $100 trillion in 2002.
In other words, this shadow economy was 10 times larger than global GDP ($50 trillion) and more than five times larger than the actual trading in shares in the world’s stock exchanges ($100 trillion).
Trade in derivatives and generally in stock and currencies involves the self-expansion of money capital. As Marx had pointed out, making money out of money without going through troublesome production processes has long been a cherished ideal of the bourgeoisie and in recent decades that ideal has been ‘brilliantly’ put into practice.
In the present context, speculation is trade in financial instruments with the goal of making a fast buck; or to be more precise, buying and selling of risks. Commercial banks, investment banks and insurance companies deal in both industrial financing and speculation. In real life the two categories are thus lumped together, but in terms of specific economic role performed they are different. Traditional credit and production-oriented finance capital serves the real economy – agriculture, industries, services, where wealth is produced and people get jobs – whereas speculative capital produces no real wealth.
As we have seen, top bankers in the mid-19th century cautioned about “extensive fictitious credits” and Marx talked of “over-speculation”. John Maynard Keynes in the mid-1930s warned, “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.” (JM Keynes, The General Theory of Employment, Income and Money).
Despite the warnings, and whatever the social costs, speculation has been highly rewarded by the state and other institutions of the capitalist class. Because decaying capitalism or imperialism discovered in it one of the most – if not the most – lucrative escape routes from the crisis of overproduction/over-accumulation that resurfaced since 1970s. The 1997 Nobel Memorial Prize in Economic Science was awarded to America’s Robert Merton and Myron Scholes, who had just developed a model for pricing “derivatives” such as stock options. This model or technique was expected to help speculate ‘scientifically’ and reap mega profits safely. It was a different story though, that the Long Term Capital Management – a hedge fund where Merton and Scholes were partners and which worked according to the prized technique – found itself on the verge of collapse within a year the prize was awarded, and was rescued by the New York Federal Reserve.
Not that there was no saner voices around. Early in the 2000s billionaire investor Warren E. Buffett had called derivatives “financial weapons of mass destruction” and in March 2007 Ben Bernanke, quoting Alan Greenspan, warned that the GSEs Fannie Mae and Freddie Mac were a source of “systemic risk” and suggested legislation to head off a possible crisis. Then in late 2008 George Soros wrote:
“… [The] current crisis differs from the various financial crises that preceded it. …the explosion of the US housing bubble acted as the detonator for a much larger ‘super-bubble’ that has been developing since the 1980s. The underlying trend in the super-bubble has been the ever-increasing use of credit and leverage. Credit – whether extended to consumers or speculators or banks – has been growing at a much faster rate than the GDP ever since the end of World War II. But the rate of growth accelerated and took on the characteristics of a bubble when it was reinforced by a misconception that became dominant in 1980 when Ronald Reagan became president and Margaret Thatcher was prime minister in the United Kingdom….
“The relative safety and stability of the United States, compared to the countries at the periphery, allowed the United States to suck up the savings of the rest of the world and run a current account deficit that reached nearly 7 percent of GNP at its peak in the first quarter of 2006. …” This inevitably led to the crash, he pointed out. (The Crisis and What to Do About It, The New York Review of Books, December 4, 2008).
So the ace speculator castigates excessive deregulation and dependence on debts and deficits.
Well, he describes the surface froth all right, but fails to relate it to the underlying crosscurrents that work it up. If we are to do that, we must turn to the author of Capital.
Before we proceed, however, we should recall that Karl Marx had to take leave of the international proletariat before he could work out a comprehensive theory of capitalist crisis. Capital Volumes II and III, Theories of Surplus Value and Grundrisse were not made ready for publication in his lifetime; nor could he take up his plans for investigating various other facets of capitalist economy and polity. Naturally there is a wide array of differing interpretations of Marx’s theory, with Luxemberg for example differing with Lenin, and Ernest Mandel arguing against Paul Sweezy and others. Available space does not permit us to review the rich and continuing debate among these schools; we can only present here in barest outline what we believe to be the basic Marxian understanding of capitalist crises.
“For many a decade past” asserted the Communist Manifesto, “the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule. It is enough to mention the commercial crises that, by their periodical return, put the existence of the entire bourgeois society on its trial, each time more threateningly. …In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity – the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism… And why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. … And how does the bourgeoisie get over these crises? On the one hand, by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.”
Marx and Engels talk of an “epidemic of overproduction”. This is overproduction of commodities relative to effective demand: more is produced than can be sold. Thanks to inadequate purchasing power of the masses, a big chunk of commodities remain unsalable and drag their owners (producers/traders) down to ruin. This characteristic feature of capitalism led Marx to remark, “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power [ as distinct from purchasing power – A Sen ] of society constituted their limit.” (Capital Volume III p. 484)
The problem thus appears simply as a realisation crisis and prompts one to ask: why on earth do practical men of business commit the folly of producing more than they can sell?
Going deeper, we find that crises occur not because capitalists are fools, nor do they fall from the blue. They are produced in course of trade/business cycles resulting from a complex interplay of several partially independent variables, the most important being movements in the average rate of profit. As Marx showed in Part Three of Volume III of Capital, over a period of time and in the economy as a whole, this rate tends to fall. Here is how, in brief.
We all know that capitalists are prone to use more and better machinery to boost production and save on labour costs. In Marxist economic theory this is known as increasing the ratio of constant capital (plant and machinery, raw materials, various fixed assets, etc) to variable capital (capital expended on purchasing labour power – “variable” because this part, unlike the “constant” part, grows beyond its own value, i.e., creates surplus value in the process of production) – a ratio which is called the organic composition of capital. Since live labour is the source of surplus value or profit, replacing labour by machinery means a proportionate decrease in the rate of profit for every unit of total (constant plus variable) capital employed. Suppose a capital worth Rs. 100 crore comprised Rs. 60 crore in constant and Rs. 40 crore in variable capital and the rate of surplus value was 50%. The amount of surplus value was therefore Rs. 20 crore (50% of Rs. 40 crore expended on variable capital) and the rate of profit (calculated on total capital of Rs. 100 crore) was 20%. After say 10 years, the organic composition is increased – constant capital is raised to Rs. 80 crore and variable capital slashed to Rs. 20 crore. The rate of surplus value remaining the same, the amount of surplus value would be Rs. 10 crore (50% of Rs. 20 crore) and the rate of profit 10%.
The illustration is deliberately simplified, but the fact remains that increase in the organic composition of capital and a downward tendency of the average rate of profit, conditioned by the former, are the general laws of development of the capitalist mode of production. However, reduced rate of profit can go hand in hand with increased mass of profit if the total magnitude of capital on which profit is earned is sufficiently increased. And that is what usually happens in real life. As Marx puts it,
“…the same development of the social productiveness of labour3 expresses itself … on the one hand in a tendency of the rate of profit to fall progressively and, on the other, in a progressive growth of the absolute mass of the appropriated surplus-value, or profit; so that on the whole a relative decrease of variable capital and profit is accompanied by an absolute increase of both. This two-fold effect… can express itself only in a growth of the total capital at a pace more rapid than that at which the rate of profit falls.” [Capital, Volume III, p 223]
This has another consequence that has acquired much practical-political importance in the current context of the development debate:
“… as the capitalist mode of production develops, an ever larger quantity of capital is required to employ the same, let alone an increased, amount of labour-power. Thus, on a capitalist foundation, the increasing productiveness of labour necessarily and permanently creates a seeming over-population of labouring people. If the variable capital forms just 1/6 of the total capital instead of the former 1/2, the total capital must be trebled to employ the same amount of labour-power. And if twice as much labour-power is to be employed, the total capital must increase six-fold.” (ibid, emphasis added)
We thus see that the tendential law of falling rate of average profit does not operate in a simple, linear fashion. It is realised only in course of cyclical movements of capital, through breakdowns and restorations of equilibriums. It has its own “internal contradictions” and unleashes a slew of countervailing forces or “counteracting influences”, such as more intense exploitation of labour, depression of wages below value, cheapening of the elements of constant capital, relative over-population (the “reserve army” of unemployed), foreign trade (skewed terms of trade and imperialist super profits), expansion of share capital – and to this list prepared by Marx we must add more modern techniques like monopoly pricing. We should therefore view the law “rather as a tendency, i.e., as a law whose absolute action is checked, retarded and weakened by counteracting circumstances” (ibid, pp 234-35). In other words, its effect becomes decisive only under certain particular circumstances and over long periods.
Our stress on the tendency of the average rate of profit to fall – which Marx regarded as “in every respect the most important law of modern economy and the most essential for understanding the most difficult relations” (Grundrisse, p 748) – should not lead one towards a monocausal understanding of economic crises and business cycles. Crucial other causes are also there, such as anarchy of the capitalist mode of production which, inter alia, periodically upsets the conditions of equilibrium between the two main sectors – one producing capital goods and the other producing consumer goods – of capitalist economy. Marx also discussed several auxiliary factors which influence the specific courses and peculiar features of particular crises. More important among them are: movements in wage levels, competition among capitalist concerns, fluctuations in raw material prices, expectations (or “confidence”, to use a more modern term), movements in interest rates and financial turmoil, trends in international trade, and so on.
The exposition of “the internal contradictions of the law” takes Marx to a discussion of certain “contradictory tendencies and phenomena” which “counteract each other simultaneously”. He mentions a number of such contradictory features – such as falling rate of profit alongside the growing mass of capital, enhanced productivity alongside higher composition of capital – and declares,
“These different influences may at one time operate predominantly side by side in space, and at another succeed each other in time. From time to time the conflict of antagonistic agencies finds vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions. They are violent eruptions which for a time restore the disturbed equilibrium. …” (ibid, p 249, emphasis added)
Here we have the most concise description of the essential role of crises as an inbuilt mechanism of capitalism that, up to a point, prepares the way for a new upturn, just as a forest fire can prepare the woodland for a new period of growth. To explain how, Marx makes another move ahead in his exposition.
1. China too launched an economic stimulus package (as distinct from a bailout package for greedy bankers) worth nearly $600 billion with the stress squarely placed on investments in domestic infrastructure.
2. With the onset of the crisis, people from all walks of life are waking up to this new method of exploitation. As David Graeber pointed out recently, “The overwhelming majority of Occupiers were, in one way or another, refugees of the American debt system. The rise of OWS allowed us to start seeing the system for what it is: an enormous engine of debt extraction. Debt is how the rich extract wealth from the rest of us, at home and abroad.
Occupy was right to resist the temptation to issue concrete demands. But if I were to frame a demand today, it would be for as broad a cancellation of debt as possible…”(Can Debt Spark a Revolution? September 5, 2012, see http://www.thenation.com/article/169759/can-debt-spark-revolution#).
3. Increased organic composition of capital entails higher productivity of labour insofar as the same number of workers in the same time period “convert an ever-increasing quantity of raw and auxiliary materials into products thanks to the growing application of machinery and fixed capital in general.” (ibid, p 212) It should be noted that this also means greater intensity of exploitation, i.e., increased rate of surplus value.