581774

research-article2015

CNC0010.1177/0309816815581774Capital & ClassBin

Article

Fiscal superstructure and

the deepening of labour
exploitation

Capital & Class

2015, Vol. 39(2) 221241
The Author(s) 2015
Reprints and permissions:
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DOI: 10.1177/0309816815581774
c&c.sagepub.com

Daniel Bin

University of Brasilia, Brazil

Abstract
This article analyses the expropriation of workers incomes through public debt and
taxation, in a fiscal system that is capable, more than of enabling a redistribution
of surpluses, of deepening future labour exploitation. Based on recent Brazilian
experience, the paper shows that the increase of both public debt and interest
on that debt has led to increased taxation, whose burden is eventually levied
on workers. Combined with a decrease in state spending on social wages, this
has led to an increase in the aggregate rate of labour exploitation, revealing the
exploitative character of the state fiscal superstructure.
Keywords
Financialisation, fiscal policy, labour exploitation, public debt, taxation

Introduction
The aim of this study is to investigate how public debt can serve as a privileged mechanism for the potential deepening of class exploitation. I call attention to the necessary
mediation by the state economic apparatus for the development of a specific process of
financial expropriation that may eventually lead to the deepening of labour exploitation.
Based on recent Brazilian experience, the paper explores the public debt and tax system
since the launching of the Real Plan (1994), which sought to stabilise the countrys
economy. Since then, workers incomes have been expropriated through a combination
of interest on public debt and taxation that assumed an exploitative character. More than
enabling redistribution of wealth, this combination of public debt interest and taxation

Corresponding author:
Daniel Bin, University of Brasilia, Brazil.
Email: daniel.bin@uwalumni.com

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is capable of deepening future labour exploitation through a state-mediated social relation of expropriation realised in the context of financialisation of the economy.
This hypothesis engenders the claim that taxes, as well as profits, interest and rent, are
different forms that surpluses may take during the processes of capital production and
circulation. Each of these forms is a means of appropriation of surpluses that depends on
the role of the respective appropriator in capital accumulation. It follows that capitalists
do not carry any tax burden, given that taxes are portions of surplus-value that are
directed to the state. Therefore an increased tax on capitalists may bring about a further
tax on labour exploitation. Nevertheless, the economic and political conditions required
to allow increased taxes on profits are not always available, driving the state to eventually
increase public debt. Because the state may have to increase taxes at some time in the
future to service this debt, this increase in debt engenders a potential labour exploitation
in the future as deep as the real interest to be paid by the state to lenders. This makes the
financial system, its agents and mechanisms, as well as the state, organic to the entire
labour exploitation process.
Therefore, fiscal policy in general, and taxation in particular, are elements of class
struggle in which appropriators are not only the owners of the means of production. The
surpluses to be appropriated by each agent also result from the mode of regulation, in
which the capitalist state is the main actor. Whether the state will spend or collect more
(or less), how it will do so, and who will cede (or appropriate) the relevant portions of
the surpluses in dispute will depend on the correlation of forces acting on the state
budget. Fiscal policy thus plays a critical role in capital accumulation, which has increasingly relied on neoliberal financialisation. Brazil whose case this paper draws on confirms the worldwide neoliberal pattern whose results have continuously been unfavourable
to workers and other individuals living under domination of what Harvey (2010: 48)
calls the state-finance nexus.
In this paper, I discuss how this debt-tax-finance nexus may deepen future labour
exploitation. I begin in abstract terms, to which the two next sections are devoted. The
following section concerns the financialisation of labour exploitation, which has placed
finance in a privileged position in the appropriation of surplus-value. The third section
specifies the argument by discussing how credit for workers may establish class relations
that assume an exploitative character, even beyond the limits of production. This opens
the way to approaching public debt as a mechanism that brings about a similar exploitative process that, now through the state, also deepens labour exploitation. The two sections preceding the conclusion use data about Brazils fiscal system, namely public debt
and taxation, to illustrate these theoretical claims.

The financialisation of class exploitation

According to classical Marxist thought, capitalist exploitation is based on the relation
between the owners of the means of production and those who own only their labourpower. The latter is sold in the labour market and, at the outset, no exploitation takes
place. However, after the worker is hired, the relations move inside the workplace, where
labour-power is turned into labour, whose value exceeds the value of the labour-power.
When the fruits of labour are exchanged for money in the commodity market, that

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surplus-value is realised as the profit of the capitalist who thus appropriates the relevant
portion of others labour. In this sense, the entire capitalist process, including both production and circulation, establishes a concept of class based on the notion of exploitation, which takes place within a given class structure.
In previous modes of production, masters exploited slaves and lords exploited serfs.
In the currently dominant mode of production, capitalists exploit workers. Thus,
although Marx recognised the existence of other classes, the fundamental distinction is
between exploited and exploiter (Johnston & Dolowitz 1999). It follows that social
classes are groupings of social agents, defined principally but not exclusively by their
place in the production process, i.e. in the economic sphere (Poulantzas 1978: 14).
Although it is within production that the fundamental process of capital develops, this
economic sphere must nevertheless be comprehended in a broad sense. It includes not
only production, but also the whole cycle of production-consumption-distribution,
and, as such, comprises all forms of capital, namely, productive capital, commodity capital, money capital (Poulantzas 1978: 18; emphasis added).
This consideration of class as defined by the relations of exploitation, which is realised
within a given class structure, indicates an empirical complexity beyond the understanding that capitalists exploit workers in production. The economic sphere is composed not
only of the processes that are capitalist sensu stricto, i.e. those that produce surplus-value.
In current capitalist society, other processes are relevant to the social relations among
economic agents. In fact, people do not live in capitalism, but in in life-worlds, often
overlapping, which opens the way to conceptualising its coexistence with other modes of
production, other modes of doing things and relating to each other (De Angelis 2004:
67, 60; emphases in original). If we confine ourselves to modes of production in the
abstract, we see that each of them involves two fundamental classes masters and slaves,
lords and serfs, bourgeois and workers however, a concrete social formation involves
more than two classes insofar as it is composed of various modes and forms of production (Poulantzas 1973, 1978).
Although these other classes are not fundamental, they may assume a leading position
in accumulation, depending on the conditions of the specific historical development
phase of capitalism. This occurs because some processes may assume greater importance
in the reproduction of capital, at least for some class in its pursuit of accumulation. This
has happened, for instance, during the so-called financialisation of the economy of the
past several decades, involving the growing importance of financial activities as sources
of profits (Krippner 2011) whose magnitudes have meant a shift in gravity of economic
activity from production toward finance (Foster & Magdoff 2009; Lapavitsas 2011).
This has eventually led financial institutions and mechanisms, and their corresponding
assets and debts, to reach levels that have placed finance at the top of the hierarchy of
those who earn profits (Dumnil & Lvy 2011).
This raises the importance of class fractions for comprehending the present regime of
capital accumulation. Bourgeois domination operates through an alliance between its
fractions industrial, commercial, financial which are all dominant and share political
domination (Poulantzas 1973, 1978). Nevertheless, Poulantzas affirms that this alliance
only functions regularly under the hegemony of one of these class fractions, which unifies the class power under its leadership. It is broadly recognised that the hegemonic

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fraction in the past several decades has been finance the upper fractions of capitalist
classes and financial institutions in any social arrangement in which these fractions of
capitalist classes control financial institutions (Dumnil & Lvy 2011: 13). This calls
our attention to the possibility for the current hegemonic fraction and the related financial processes to alter the terms under which surpluses are generated and distributed, thus
influencing the entire exploitation process.
Capitalist exploitation means that one category of economic agents works more than
is necessary for their own reproduction and that the fruits of their surplus labour are
appropriated by another (Therborn 1999: 9-10). In a more relational approach, Wright
states that the welfare of the exploiter depends upon the effort of the exploited (2000:
10, emphasis in original). For Wright, this very notion of dependency is what differentiates exploitation from oppression,1 given that in the latter there is no material dependence between agents. The end of a relation of oppression does not lead to any material
loss for the oppressor, but the end of the exploitative relation does so for the exploiter.
This distinction is in some way present in Poulantzass (1978) framework of the structural determination of classes, which is brought about by relations of economic exploitation and also by relations of ideological and political domination.
Wrights distinction between oppression and exploitation is useful in an abstract level
for understanding how capital accumulation can be explained. For Poulantzas, these
social relations appear in an integrative way, and as such, they serve an empirical need to
understand the present regime of accumulation, where finance has been organic to the
entire accumulation process. As the hegemonic fraction of capital, finance exerts its own
logic over production. It follows that the organisation of work and labour relations is a
limited framework for analysis, given that the extraction of value takes place through a
variety of mechanisms inside and outside the workplace (Appelbaum et al. 2013). Thus,
both Wrights and Poulantzass approaches allow exploitation processes to be conceived
in a broader way, considering the possibility that exploitation rates are altered through
the capitalist superstructure, e.g. in the financial realm.
This does not mean that exploitation occurs without actual material production, but
rather that exploitation may have its very terms altered by what happens outside of
production. As noted by Jessop, capital accumulation has major extra-economic conditions of existence in other social forms, institutions, organisations and social practices
(2013: 7, emphasis in original). This is the case of relations that develop in financial
markets, where money operates as a commodity whose corresponding form of revenue
is interest. These are extra-economic relations, because in the case of interest-bearing
capital the return is simply the result of a legal transaction (Marx 1991 [1894]:
470). This turns our attention to the states role in financialisation. As in the prior
Fordist accumulation regime, the state has taken a central place in the corresponding
mode of regulation.2
In the Fordist growth regime, the sites of dominant contradictions were wage relations and money form, with the latter regulated by the steady expansion of credit and the
state budget and the former through mass production and mass consumption reinforced
by the Keynesian welfare state (Jessop 2013). In this regime, the state had strict regulation over finance including the overall mass of credit, interest rates, and financial
operations to create mechanisms that could ensure full employment and limit

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business-cycle fluctuations (Dumnil & Lvy 2001). In later times, under neoliberalism,
the main role of the state has been to create and maintain an institutional framework
characterised by strong individual private property rights, free markets, and free trade
(Harvey 2005). Compared to Fordism, in the financial-dominated accumulation regime,
money became the most abstract expression of capital, disembedded in the space of
worldwide flows, with the social wage privatised and recommodified, including private
consumer credit (Jessop 2013).
Financialisation thus increased the relative weight of circulating money-capital, which
was freed to seek profitable outlets worldwide. As money and financial debts and assets
became central to capital accumulation, inflation became a critical issue, because it was
one of the mechanisms for distributing the costs of Fordism and the Keynesian welfare
state (Jessop 2013). Controlling inflation then became a priority in the neoliberal era,
giving it a strong class content (Dumnil & Lvy 2011). Inflation is thus not exclusively
an economic problem, but also a political one (Krippner 2011). In the realm of monetary policy, financial interests were assured that inflation would not be tolerated
(Papadatos 2012). The main result is that the owners of finance capital have gained
prominence in the appropriation of surplus-value, now also by extracting real interest
revenues from workers incomes.

Exploitation beyond labour exchange

Besides acknowledging that labour exploitation takes place in the entire accumulation
process, the previous section draws attention to means for the activation of capitalist
production and the distribution of its fruits that develop beyond the production sphere.
Since capital is only reproduced in motion (Harvey 2010), the sphere of circulation is
critical for the analysis of the entire exploitation process that capital engenders. It happens that the capitalist mode of production conceals the exploitation of direct producers
more than other modes. In feudalism, for instance, exploitation is clearly noticed through
the part of serf s production that is appropriated by the lord, whereas in capitalism the
output is not divided between capitalist and worker, but taken to the market (Cohen
1979). There, a variety of social relations can affect the sharing of surpluses that, besides
making labour exploitation less obvious, points to a potential future intensification of
this exploitation.
The fact that socially produced wealth is brought to market adds appropriation processes and actors that were hitherto absent. According to Marx, the separation of sale
and purchase makes possible not only commerce proper, but also numerous pro forma
transactions, before the final exchange of commodities between producer and consumer
takes place. It thus enables large numbers of parasites to invade the process of production
and to take advantage of this separation (1971 [1859]: 98, emphasis in original). For a
variety of superstructural arrangements, each of these actors, now via markets, is qualified as a recipient of part of the surplus-value. The functioning capitalists i.e. industrialists and merchants who earn profit are joined by the state, which collects taxes, and
by money capitalists, who earn interest, and by all sorts of professionals, bureaucrats,
middlemen and brokers who receive salaries, commissions, etc. Rephrasing Cohens
(1979: 358) proposition about capitalist exploitation, it can be said that the proletarian

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produces the whole product, but the capitalist [and other unproductive agents appropriate] part of the value of the product.
Taking this path is not to deny that the object of capitalist exploitation is the others
labour, but that its terms may also be determined by social relations that take place elsewhere. One may see that other types of relations, distinct from the direct hiring of labour,
can lead in some measure to the deepening of labour exploitation. This possibility is
clearer in Roemers (1982a: 263) proposition that even the Marxian class structure can
be produced without any institution for labor [sic] exchange. He was not denying that
class exploitation is bound to labour, which is the very criterion that distinguishes
exploiter and exploited (Roemer 1982a, 1982b). For Roemer, the latter is someone who
works more than is socially necessary and the former is someone who works less than is
socially necessary. What Roemer sought to demonstrate is how exploitation based on
inequalities not necessarily related to the selling of labour-power may take place. To make
his point, he envisions three hypothetical economies: a competitive market with unequal
ownership of the means of production, a labour market, and a credit market.
For Roemer, all of his hypothetical economies would be able to produce the Marxian
class structure, even without the existence of the sale of labour-power. In his credit market which is of special interest in this paper labour-power is replaced by capital to be
loaned by the potential exploiter to the potentially exploited. These statuses exploiter
or exploited as well as their class positions are defined by interest on debt, which allows
the former to work less and push the latter to work more than is socially necessary. Marx
(1991 [1894]: 477) made a similar analogy by saying that money, and likewise commodities, are in themselves latent, potential capital, i.e. can be sold as capital; in this
form they give control of the labour of others, give a claim to the appropriation of others
labour. Referring to secondary3 exploitation in 1848-50s France, he wrote, the exploitation [of peasants] differs only in form from the exploitation of the industrial proletariat.
The exploiter is the same: capital. The individual capitalists exploit the individual peasants through mortgages and usury; the capitalist class exploits the peasant class through
the state taxes (Marx 1972 [1850]: 111; emphases in original).
Despite all the controversies4 related to Roemers approach, it is possible to perceive
that the true extent of exploitative relations is the whole of society, not just those relations within capitalist production (Dymski 1992). This broadens the sociological meaning of exploitation by recognising that it may have its terms altered through relations that
take place outside production, e.g. in the realm of financial markets. One notion of this
is given by Bowles & Gintis (1990), who, in criticising Roemers idealisation of markets
in equilibrium, insert the concept of contested exchange. For them, market exchanges are
contested, i.e. there is no guarantee that the agents will comply with the terms of the
contracts. For example, even if a given amount of time to be devoted to work can be
contracted, its effective realisation in quantity and quality cannot be guaranteed a priori.
Similarly, although the conditions of a loan can be the object of a legal contract, future
actions of the borrower or others who influence the probability of the loans repayment
cannot be guaranteed a priori.
One may then notice that financial markets are not realms of equilibrium, but of class
struggle. Therefore, the identification of subjects with classes is not restricted by their
relations within production, but is broadened by the relations that develop in

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the financial markets (Williams 2001). Money capitalists, for instance, in addition to
owning loanable capital, are able to draw extraordinary income through their position
relative to the financial system (Lapavitsas 2012). The critical point for this relation is the
interest on money, which is the commodity itself circulating in this system. It must be
emphasised that just as surplus-value does not come from the mere circulation of commodities its source is labour within production neither does it come from the mere
circulation of money-capital because of debt. Nonetheless, interest acts to establish class
relations that develop beyond the limits of direct production relations.
In qualitative terms, interest is a mechanism for redistribution of surplus-value, and
in quantitative terms, it can be an expression of the value of the additional effort to be
executed by workers. Interest is nothing but a part of the profit, i.e. the surplus-value
(Marx 1991 [1894]: 493), which does not arise from the objective conditions underlying
the essential characteristic of capitalism the separation between labour and the means
of production but from the circumstance in which not only productive capitalists own
money (Hilferding 1981 [1910]). However, even if that which Marx (1991 [1894]: 732)
characterised as interest-bearing capital has capitals mode of exploitation without its
mode of production, the fact that money is not only in the hands of the functioning
capitalists means that finance, by being nourished by labour, interferes with employment
and income and in the means of domination of labour (Salama 1998). In this sense,
financialisation has a clear class content established by its potential to support, or even
deepen, labour exploitation in a scenario mounted to confront an accumulation regime
that had revealed serious limits.
Since the late 1970s, real accumulation has had mediocre and precarious growth;
meanwhile, capitalists have found new sources of profit through financial markets
(Lapavitsas 2012). This has in part been brought about by both the stagnation of real
wages and retreating social wage, which have been pushing working people to increasingly rely on borrowed money to meet basic reproduction needs (Dos Santos 2012;
Lapavitsas 2011). This has opened up ways for modes of appropriation of value that have
had a very exploitative character insofar as they developed through an organic relation
between production and finance. This exploitative character of finance also fits the
Marxian distinction between secondary and primary exploitation.5 Appropriation of
value through financial processes can actually engender a potential deepening of the rate
of exploitation insofar as workers are led to substitute credit for wage income. This is the
case of consumption- and mortgage-credit whose exploitative social content is brought
about by the fact that their interest-payments are generally made from subsequent wagereceipts by borrowers (Dos Santos 2012: 94).

Public debt, taxation and redistribution of

surpluses
An exploitative relation may involve different social and institutional arrangements
according to the regime of accumulation. The exploitative character of relations in the
financial realm may take place in the very context in which workers are pushed into debt
and to eventually transfer shares of their income to finance. Nonetheless, the factors that
make social relations in the financial realm exploitative are also present in another

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Capital & Class 39(2)

mechanism that has become critical for financialisation. This is public debt, which has a
similar exploitative character insofar as the capital to be accumulated by bondholders
depends upon the debtors effort. This is a mode of indirect financial expropriation in
which the state plays the twofold role of reducing tensions and redistributing wealth
between classes. It is indirect in comparison to the one through which private creditors
loan money directly to workers who are, nevertheless, the actual debtors in both kinds of
relations.
Actually, state mediation between social classes is not particular to financialisation. If
we consider capitalism in its historical dimension, we notice that the state has always
played a mediating role in its different phases. Since the welfare of one class occurs at the
expense of another, the relation between them is necessarily conflictual (Johnston &
Dolowitz 1999). It is up to the state apparatus to provide the material means to connect
classes in an asymmetric relationship of domination and exploitation (Therborn 2008:
220). According to Therborn, since the centralisation of the state often leads to the
assumption that it and its leaders are not directly responsible for immediate exploitation,
this exploitation can be concealed through state interventions. This has been critical to
the financial expropriation that has been taking place during the current neoliberal
financialisation phase.
In terms of accumulation, the main achievements of neo-liberalism have been redistributive rather than generative (Harvey 2006: 43). Thus, capital has faced a contradiction given that the income redistribution from working people towards the upper classes
undermines the legitimacy of the whole system. Nonetheless, since the consequences of
contradictions take time to erupt, in the meantime, capital may profit from them. In this
finance-led accumulation regime, capital has probably relied less on legitimacy provided
by the state and more on its ambiguous position among classes. Since the state is relatively independent from particular classes, it may present itself as an agent of the interests
of the entire society when redistributing funds collected via taxes. It therefore acts not
only as a buffer of class conflict generated by financial expropriation, but also serves to
redistribute surpluses that arise in this kind of accumulation.
Lets see how this has worked by considering the recent evolution of the Brazilian
economy.
If in the most developed countries the growth of both state revenues and expenditures
have stabilised within the past two decades (Vernengo 2007), in Brazil there has been a
continuous increase in the tax burden. Not able to count on as much trust as richer
countries, the Brazilian state has had to offer, in addition to high interest rates, assurances that it would meet repayment conditions. Thus, a fiscal system capable of guaranteeing sufficiently high levels of taxes to meet the debt interest payments had to be
established. This system was complemented with the institution of the primary fiscal
surplus, whose goals have explicitly been set in budgetary laws since the early 2000s.
Since this surplus is the difference between non-financial revenues and non-financial
expenditures, its very existence provides a budgetary provision to pay interest on public
debt (Bin 2014).
The system is as simple as that described in the concept of primitive accumulation, in
which Marx (1990 [1890]: 921) saw the modern system of taxation [as] the necessary
complement of the system of national loans. One notices this in Brazil today in Figure 1,

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60

15

50

12

40

30

20

10

1992

1994

1996

1998

2000

2002

Federal public debt (at right)

2004

2006

2008

2010

2012

Federal taxes

Figure 1. Public debt and taxes as percentages of GDP, 1992-2012.

(i) Yearly average outstanding domestic and gross external public debt; (ii) taxes do not include
social security contributions.
Source: Instituto de Pesquisa Econmica Aplicada (IPEA).

which shows a significant increase in the public debt and federal taxation. One may notice
that the rise of the latter has in large part occurred to support the increase of the former.
During a significant portion of the 1990s, public debt was kept relatively stable and so
was federal tax collection. When the average public debt rose from 27.3 per cent of GDP
during the 1992-7 period to 52.3 per cent in 1998-2002, federal taxation rose from 11.2
per cent to 13.5 per cent of GDP.6 This latter period coincides with the eruption of several
global financial crises in Southeast Asia, Russia, and Brazil itself that pushed the government to raise interest rates7 and eventually the debt service. Public debt started to fall
in the early 2000s and, after a time lag of several years, so did federal tax revenues.
This situation has guaranteed the sustainability of public debt levels, considering
both the states capacity to pay it back as well as the need to guarantee returns on the
private capital invested in it. Both the debt and interest rates on it have been low enough
so that the debt may be serviced and, at the same time, high enough to offer satisfactory
returns to financial investors. It is relevant that while Brazils federal domestic debt rose
from an average of 18.9 per cent of GDP during the 1994-8 period to 41.2 per cent during the 1999-2012 period (see Figure 2), the foreign debt dropped systematically to such
a low level that since 2006 it has been more than offset by foreign exchange reserves. The
critical point is that the relatively more expensive domestic debt has financed repayment
of the cheaper foreign debt. Whereas the latters annual average implicit interest rate was
5 per cent during the 2002-12 period, the formers was 14.8 per cent.8 This same expensive internal debt has also funded foreign exchange reserves, returns on which reached an
annual average of 4.7 per cent during the 2003-11 period.9
Both these spreads have meant huge transfer payments from the state to finance,
which makes obvious the answer to the rhetorical question raised by Wilson (2002): why
would anyone give up charging extortive rates to an entity that cannot go bankrupt when
all that is needed to perpetuate this situation is an outstanding debt high enough not to
be significantly reduced by the instruments available to such an entity? Marx had already

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20

40

15

30

10

20

10

1992

1994

1996
Interest rate

1998

2000

2002

2004

2006

Federal domestic public debt

2008

2010

2012

GFCF (at right)

Figure 2. Interest, public debt and investment, 1992-2012.

(i) Interest rates in ex post real terms; (ii) debt and gross fixed capital formation (GFCF) as percentages of GDP; (iii) yearly average outstanding domestic public debt.
Source: IPEA.

said that public credit rests on confidence that the state will allow itself to be exploited
by the wolves of finance (1972 [1850]: 40, emphasis in original). The Brazilian state has
been able to meet all these conditions, maintaining the magnitude of indebtedness and
safely defining who should support both debt services and the tax burden. Since debt
services are eventually supported by taxes, who shoulders the tax burden is of critical
importance.
Bourgeois economic analysts and the media have been able to convince the general
public that the countrys tax burden is very high. These analyses are commonly presented
without any parameter of what a high tax burden actually is. Almost always constructed
in a non-relational fashion, this discourse reproduces the mistaken notion that, despite
economic inequality, there are policies and decisions whose outcomes are experienced
equally by classes. This is not the case, even within a single class, as we saw in Brazils last
big debate on taxation, which eventually led to the abolishment of the contribution on
financial transactions (CPMF). In a congressional hearing in 2007, while the president
of the leading industrial federation argued lets abolish it, the representative of the main
banking federation stated that the CPMF could continue, but with a clear trend towards
reduction.10 It is thus critical for understanding political action around fiscal issues to
consider the class dialectics behind this complex social relation that develops through the
states economic apparatus.
Taxation as well as interest or rent is just a form of appropriation of surpluses
generated by labour in each historical context.11 It only alters the proportion in which
that surplus-value is divided between the capitalist himself and third persons (Marx
1990 [1890]: 658). Since surplus-value actually the entire value is produced by
labour, it follows that capitalists do not carry any actual tax burden; they only transfer to
the state coffers under the name of tax a portion out of that surplus. For this reason
workers are the ones who actually bear the tax burden. Nevertheless, one cannot assure
that taxes collected today are exclusively deductions from past profits nor that, as such,

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15
12
9
6
3
0

1986

1988

1990

1992

1994

1996

1998

Indirect taxes

2000

2002

2004

2006

2008

2010

2012

Direct taxes

Figure 3. Indirect taxes and direct taxes as percentages of GDP, 1986-2012.

(i) Federal taxes, except social security contributions, plus countrywide state sales tax; (ii) the taxes
used to prepare this figure represented an average of about 90% of total revenues across all levels
of government during the 2002-9 period (Gobetti SW and Orair RO (2010) Estimativa da carga
tributria de 2002 a 2009. Nota Tcnica IPEA n. 16. Available at <www.ipea.gov.br> (accessed 2
November 2013); (iii) the dotted lines show linear trends.
Source: IPEA.

they will not be deferred to future production. Workers cannot defer their reproduction
needs, but capitalists may divert some capital from present production towards more
profitable alternatives in the future.12 This is exactly what they do when they divert
money-capital to either private or public credit as a substitute for a productive investment that is potentially less profitable in the present. Figure 2 displays transactions that
are in some measure consistent with this hypothesis.
By dividing the timeline of Figure 2 according to the changes in gross fixed capital
formation (GFCF), which represents investment in production, one may notice a negative correlation between GFCF and both interest rates and federal domestic public debt.
While GFCF fell from an average of 18.3 per cent to 16.2 per cent of GDP between the
1992-8 and 1999-2005 periods, domestic public debt rose from 16.4 per cent to 40.9
per cent, and remained at that level during the 2006-12 period. In this last period, when
interest rates fell to an average of 5.9 per cent they had averaged 10.6 per cent during
the 1999-2005 period and 24 per cent during the 1992-8 period GFCF rose to the
same level as in the first period. In sum, when interest rates increased, potential investments in production were diverted to interest-bearing capital, returning only when interest rates started to fall.
Current taxes may engender future labour exploitation insofar as capitalists are able to
transfer the tax burden to workers future production. A complement to what was presented in Figure 2 can be brought about by the tax system in terms of its pro- or regressiveness. As we have said, the entire actual tax burden is ultimately levied on workers, but
this does not eliminate the possibility for that burden to be deepened through changes
in the tax structure. This happens, for example, when indirect taxation e.g. on workers
consumption grows faster than direct taxation e.g. on income and property. This is

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15

60

12

50
40

30
6
20
3
0

10

1995

1997

1999

2001

Federal public debt (at right)

2003

2005

Welfare

2007
Interest

2009

2011

Investments

Figure 4. Public debt and selected expenditures as percentages of GDP, 1995-2012

(i) Yearly average outstanding domestic and gross external debt; (ii) Welfare: federal expenditures
on social security, healthcare, sanitation, education, culture, housing, urbanization, and labour
(mainly unemployment insurance).
Sources: (i) IPEA (public debt and interest, except for the 2010-2 period, whose source is Banco
Central do Brasil); (ii) Secretaria do Tesouro Nacional (welfare and investments).

what has been observed in Brazil in the last several decades. Figure 3 indicates that indirect taxation has been increasingly higher than direct taxation. While the annual average
of the latter rose by 1.6 percentage points (from 4.7 to 6.3 per cent) of GDP between the
1986-93 and 1994-2012 periods, the former rose by 3 percentage points (from 11.6 to
14.6 per cent). The overall picture is that indirect taxation has been almost two-and-ahalf times higher than direct taxation.
A consideration should be made of the possibility that public debt serves to produce multipliers through state expending in a Keynesian fashion that would lead to
growth. One could also envisage a potential reduction of labour exploitation through
social wages state welfare expenditures. Theoretically, there is no objection to these
possibilities, mainly to economic growth funded by public debt. Nevertheless, economic growth is no guarantee of reduced exploitation. Since exploitation is a relational concept, it depends not only on the overall output to be distributed, but also
on both capitalists and workers shares of this output. Only a rising workers share
would indicate reduced exploitation, and that has not been the Brazilian trend since
the mid-1990s. While GDP grew an annual average of 3.2 per cent during the 19942012 period, labours share of GDP declined during most of the 1994-200913 period
(see Figure 6).
Since economic growth per se does not lower exploitation, increasing the social wage
through welfare expenditures seems to be a theoretically more plausible way to reduce
exploitation. But the Brazilian fiscal superstructure has not presented evidence that supports this hypothesis. For instance, as shown in Figure 4, there has been a negative correlation between changes in welfare expenditures and outstanding debt. While the latter
rose continually during the 1995-2002 period, the former was kept virtually stable at an

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15
12
9
6
3
0
-3

1995

1997

1999

Gross taxes

2001

2003

Net taxes

2005

2007

Gross taxes on I&P

2009

2011

Net taxes on I&P

Figure 5. Gross taxes and net taxes as percentages of GDP, 1995-2012

(i) Federal taxes, except social security contributions; (ii) net taxes: gross taxes minus interest on
public debt; (iii) I&P: income and property.
Source: IPEA.

47
45
43
41
39
37

1990

1992

1994

1996

Labor income share

1998

2000

2002

2004

2006

2008

Capital, self-employed, and mixed income share

Figure 6. Functional distribution of income as percentages of GDP, 1990-2009

(i) The data disregards taxes minus subsidies on production and imports, which represented an
annual average of 14.3% of GDP; (ii) Capital, self-employed, and mixed income: profits, dividends,
rents, interest, other capital gains, income of self-employed and mixed income, which is that which
cannot be identified as arising solely from labour or capital.
Source: Instituto Brasileiro de Geografia e Estatstica.

average of 11.8 per cent of GDP. It was only when debt began to fall that welfare expenditures began to rise, reaching an average of 12.9 per cent of GDP during the 2003-12
period. Nevertheless, federal government investment took the opposite path, falling
from an average of 0.8 per cent to 0.5 per cent of GDP between these periods. This,
combined with the fact that an annual average of 4.6 per cent of GDP accrued as interest

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Capital & Class 39(2)

on outstanding debt during the 1995-2012 period, suggests that new public debt issuances have been used more to sustain interest payments than to produce economic
multipliers.

Public debt and the deepening of labour

exploitation
Taxation has always been critical to the superstructure of capitalism, but it became even
more so during neoliberal financialisation. Governments, similarly to businesses and
households, have been thoroughly financialised insofar as finance has increasingly been
able to create and market legal claims on shares of all sorts of future income flows,
including future tax revenues (Radice 2010). The states involvement with finance has
thus encouraged the creation of financial mechanisms that combine with the tax system
in an organic complex of expropriation and exploitation as well. Thus, beyond the question of tax as a form of redistribution of surplus-value, one may consider the hypothesis
that taxation elevates the very magnitude of future surplus-value. As Therborn (2008)
points out, in the dynamics of any specific mode of exploitation of production, the
working class should generate surpluses for its exploiters and, additionally, fund the
states domination over the working class itself.
Wright (1999) affirms that due to the weight of state legitimacy it is reasonable to
assume that the working class might accept a level of taxation on wages higher than the
corresponding wage reduction that would otherwise occur in an eventual context in
which these taxes were lacking. One explanation for this could be that, owing to the distance of the state from both the immediate exploitative process and local traditions of a
just rent or fair wage, it is usually easier to increase the amount extracted for public
purposes than it is directly to raise the profits of individual members of the ruling class. A
rise in state taxation has tended to encounter less resistance than rent increases or wagecuts (Therborn 2008: 227). If this is correct, taxation can thus be seen as, in part, a
weapon in the class struggle by which the state appropriates a certain amount of surplus
labor that is unavailable to private capitalists (Wright 1999: 129; emphasis in original).
Wright opposes the thesis that capitalists would invariably appropriate the presumed
value of tax in a hypothetical situation without taxation, i.e. that the capitalists would have
reduced wages to the minimum necessary for the reproduction of labour-power. For him,
this reasoning is, at best, dubious if real wages and taxes are seen, at least partially, as results
of class struggle instead of resulting from an extracted portion of a wage that is supposedly
higher than that necessary for the reproduction of labour-power. To sum up, taxation has
the capacity to increase the aggregate rate of surplus value (Wright 1999: 129). By so doing,
he considers that exploitation can take place in the sphere of circulation, as do Roemer and
other scholars cited in this work. Lapavitsas (2012: 33), for instance, though using the term
financial expropriation to [avoid] confusion with exploitation at the point of production,
warns this does not preclude the existence of exploitative processes in circulation.
Making an analogy based on the states legitimacy to distribute, it is reasonable to
assume that it also has the legitimacy to redistribute to the exploiters e.g. through interest part of the surplus labour to be collected through taxes. Through taxation, the state
may increase the aggregate rate of labour exploitation, which may be raised as far as

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public debt is able to elevate the tax level. The states ability to incur debts may increase
its power of taxation insofar as, by taking this path, it is actually raising the amount
equivalent to expenditures not met by taxes. In the same sense that interest-payments
are generally made from subsequent wage-receipts by workers who were pushed to substitute credit for wage income (Dos Santos 2012: 94), tax increases used for servicing
public debt may have a similar exploitative character. This new taxation may alter the
terms of further labour relations within accumulation processes, changing the aggregate
exploitation rate to recover a given profit level (to be) undermined by taxation.
We saw earlier that the Brazilian tax structure is more onerous for the working classes
than for the proprietary ones because the indirect taxation is higher than direct taxation
(see Figure 3). But this regressiveness is not confined to the tax realm: it is a reality of the
fiscal structure in a broader scope, also considering public debt. In the period under
analysis, the Brazilian state has been managing a system of redistribution of wealth that,
combining debt and taxation, became even more regressive than the tax system on its
own. The public debt is not just a temporary replacement of taxes that, for some reason,
are not available for collection in the present. It offers the possibility of a real increase in
taxation as large as the size of interest payments. Figure 5 presents an example of what I
mean by the regressive fiscal structure established by the organic combination of tax and
interest on public debt. It reveals that federal taxes have not been as high as generally
claimed by right-wing analysts who, drawing on aggregate level of analyses, say the burden levies on the whole society.
Beyond the fact that capitalists effectively do not carry any actual tax burden they
only transfer to state coffers a portion of surplus-value the amounts they have been
delivering to the state are even lower than is claimed, due to the interest on public debt.
During the 1995-2012 period, the total of federal taxes averaged 13.9 per cent of GDP,
but when interest on public debt is subtracted, they account for 9.4 per cent of GDP.
Considering only direct taxes on income and property, they accounted for 6.3 per cent
and 1.8 per cent of GDP respectively. Logically, in both cases the differences between
gross and net taxations are the same, namely the 4.6 per cent of GDP that interest on
public debt amounted to during that period (see Figure 4). However, since this interest
is paid to virtually the same people who pay taxes on income, they were the ones who
received the higher benefit.14 It turns out that this interest works as a negative tax, since
the state returns it to the very money capitalists and other individuals who buy public
debt securities.
When one realises that interest on public debt is a negative tax, that this tax is negative for the proprietary classes, and that the positive tax that which funds state spending comes from the producing classes, the complex of public debt and taxation reveals
itself to be a system that deepens labour exploitation. This does not occur in the sense
of the compression of necessary labour and the corresponding amplification of surplus
labour that takes place in a finished capitalist production process. It is rather in a sense
of a class struggle that takes place in the circulation sphere, which nevertheless points to
a potential rise in the aggregate rate of surplus-value in the future. This portion may be
higher or lower not only because of economic aspects sensu stricto production process
but also because of sociological aspects related to the class struggles carried out
through the state.

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This fiscal realm can then be characterised as a sub-field of the socially constructed
economic field, where actors confront each other with different endowments, where the
effectiveness of actions in attaining their goals will depend on the position of each one
within the structure of capital distribution (Bourdieu 1997). A significant result of this
confrontation has been the increased financial profits at the expense of reduced profits
from the production of goods, which has depressed real wages and raised the rate of
exploitation of labour-power (De Oliveira 2006), a reality that has been observed in
Brazilian industry since the mid-1990s (Boito 2007). Thus, since finance is organic to
the entire capitalist accumulation process, which also encompasses the system of public
debt and taxation, this system allows increasing the aggregate rate of exploitation of
labour similarly to what private credit does in the financialisation of workers income.
Actually, the whole superstructure of the finance-led regime of accumulation is composed of an intricate web of financial mechanisms that involve both private and state
credit and assets, as well as both private and state agents whose relations are mediated by
these financial mechanisms.
It is difficult to empirically analyse the ability of taxation to increase the rate of exploitation, which has been discussed on a theoretical level. This is also true of the public debt
and taxation system. One will never be able to specify how much of the social wealth
distributed refers to portions of either necessary or surplus labour or how the latter may
be increased in the next cycle of capitalist production. Nonetheless, if it is correct to
assume that taxation itself may increase the rate of future exploitation, even though it is
not possible to precisely indicate to what degree, at least the general trend can be grasped.
In the Brazilian case, what can be affirmed is that the results of the neoliberal and financial changes have been continuously unfavourable to the working classes. The gap
between the workers share and the capitals share of the total output has considerably
increased in favour of the latter, as indicated in Figure 6. This supports the claim that,
judged by its own class objectives, neoliberalism was an unquestionable success
(Dumnil & Lvy 2011: 25).
Figure 6 shows the percentage distribution of income, represented by GDP,
between the main appropriators of the wealth produced annually. One can see that
in the early 1990s, shortly before the Real Plan (1994), there were regular alternations between labour and capital in terms of which appropriated the larger portion
of GDP. Since 1994, this has no longer occurred, and labour did not appropriate the
largest portion again until 2009. During the 1994-2008 period, the income appropriated by owners and self-employed individuals exceeded labours share by an
annual average of 3.8 per cent of GDP. It is worth recalling that interest on public
debt, which is eventually transformed into income to money capitalists, amounted
to an annual average of 5.3 per cent of GDP during the same 1994-2008 period (see
Figure 4). Labours reduced share of GDP and the interest appropriated by money
capitalists combined have in some measure led to an increase in the aggregate rate of
labour exploitation. This whole movement confirms Amins (2008) analysis of how
high interest rates and oligopolistic financial markets have allowed finance to appropriate significant portions of value roughly GDP minus labour income in the last
several decades.

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200

150

100

50

1992

1994

1996

1998

2000
Hours worked

2002

2004

2006

2008

2010

2012

Real output

Figure 7. Labour productivity in industry, 1992-2012.

1992=100.
Source: IPEA.

This phenomenon cannot be fully explained by the configuration of the system of

public debt and taxes, but this configuration has a share in the explanation. In a scenario
of rising interest rates, agents react accordingly. In high interest rate environments, companies demand higher returns on investments and seek to pay them off in shorter time
periods (Krippner 2011). They tend to increase the pressure on labour to extract enough
surplus-value not only to attain a certain profit rate target for functioning capitalists, but
this rate must now be high enough so that an additional amount can be appropriated by
finance. Even if functioning capitalists do not divert capital to financial investments,
they rely on finance to fund production. Moreover, since interest rates set the opportunity costs of either functioning or money capital, any raise in these rates will raise the
minimum level of profitability of productive activity. Functioning capital does this by
making labour-power cheaper, and, as Marx (1973 [1844]: 107) affirmed, this occurs
the more commodities [the worker] creates.
As shown in Figure 7, labour productivity in Brazilian industry has risen considerably
throughout the period analysed, in relation to sales revenue. These revenues grew at rates
considerably accelerated relative to the amount of hours worked, which, after having
declined from 1992 to 1999, remained relatively stable from 2000 to 2012. Meanwhile,
hours worked declined about 11 per cent, while output rose about 108 per cent between
1992 and 2012. Pastor and Dymski (1991) observed an analogous increase in foreign
debt interest accompanied by a reduction of the share of wages in industrial production
in several Latin American countries between 1970 and the mid-1980s. Since then, Brazil
has followed a fiscal strategy that has recently spread through the global North: the
working classes, directly through wage repression to boost international competitiveness,
and indirectly through tax increases and public sector cuts, should pay for the crisis and
for the restoration of the economic viability of capitalist control over the financial system (Albo & Evans 2010: 286).

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Conclusion
This paper analysed the state fiscal system composed of the public debt and taxation
based on the hypothesis that more than enabling a redistribution of wealth, this fiscal
structure has deepened the aggregate rate of labour exploitation. One of the most important achievements of the superstructural configuration analysed has been a system of
expropriation that released some capitalists from the drawbacks of direct labour exploitation at the point of production. Through this system, money capitalists may exert pressure on the working class via financial markets and eventually appropriate increasing
shares of the fruits of their labour. A scenario of high interest rates increases profit expectations and consequently the pressure on workers.
The Brazilian state has become an important competitor for capital circulating in financial
markets, with the ability to arbitrate rules and thus attract capital more easily than other
institutions. Companies do not have the same conditions as the state does when borrowing;
for instance, the latter does not disappear as easily and frequently as the former. One consequence is that higher public debt has led the state to tax more. By so doing, it has increased
the rate of aggregate surplus-value, relying on its legitimacy to levy taxes to pay interest on the
public debt and present this tax bill to the working classes. In the old Marxian terms, it follows that the workers, besides working a part of the day for themselves, work part of the day
without pay for the functioning capitalists, another part of the day without pay for the state
and must also work an additional part of the day without pay for the money capitalists.
All in all, the system composed of public debt and taxation, backed by the institutional guarantees provided by the state, has been an important mechanism for redistribution of the fruits of labour. This format has led to several historical phenomena to be
observed in Brazil today: a peripheral economy in which one of the most important
mechanisms of both early and late capitalism provides relevant magnitudes of what Marx
characterised as primitive accumulation. Nevertheless, in the era of financialisation, this
primitive character has become organic to the entire accumulation process, to which the
fiscal superstructure has become of critical importance as capitalism has faced limits created by its general logic and particularly by its neoliberal variation.
Acknowledgements
This is a revised version of a paper delivered at the 107th American Sociological Association Annual
Meeting, Denver, August 2012. The author is grateful to the editors and reviewers of Capital &
Class for their comments and for their insightful advice on how to revise the earlier drafts. The final
version has benefitted from thoughtful comments by Alfredo Saad Filho and Erik Olin Wright, to
whom I am grateful. All remaining errors of omission and commission and one-sidedness are my
own. The work was supported by CNPq, Brazil (grant number 471535/2011-7).

Endnotes
1. Wright uses the notion of oppression as a resource in a comparative methodological approach
to make his point about exploitation.
2. A mode of regulation is an ensemble of norms, institutions, organisational forms, social networks, and patterns of conduct that can temporarily stabilise an accumulation regime (Jessop
2013: 8).

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3. The working class is exploited by the petty trader who supplies the workers with means of
subsistence. This is a secondary exploitation, which proceeds alongside the original exploitation that takes place directly within the production process itself (Marx (1991 [1894]: 745;
emphases added).
4. Roemers model has been severely criticised by Marxists. For Dymski (1992), it pushes aside
exploitation for it is based entirely on differential ownership of productive assets, dismissing
effort. Lebowitz (2005) goes further, charging that it places presuppositions absorbed from
Marx within an anti-Marxist framework, namely that of methodological individualism.
5. Primary exploitation involves the direct extraction of surplus labor [sic] Secondary exploitation
occurs in distribution and exchange, and rests on capitalists property power alone; it takes the form
of housing rent, interest, dividends, monopoly price differential, etc. (Dymski 1992: 295).
6. All amounts presented in this paper without reference are based on authors calculations using
standard databases whose underlying data source is cited in the relevant figure under analysis.
All amounts are updated to the latest available data. Any aspect not made explicit will be
communicated on request.
7. This refers to the Selic rate, which rose from an ex post real average of 18.6% in 1997 to
26.7% in 1998. During the 1995-2012 period, the rate had an ex post real average of 11.2%
per annum (see Figure 2).
8. Banco Central do Brasil. Net public sector implicit interest rate historical series. Available
at <www.bcb.gov.br/?NPDRATE>, accessed 19 November 2013.
9. Banco Central do Brasil. International Reserves Management Report, June 2012. Available at
<www.bcb.gov.br/?RESERVES>, accessed 8 November 2013.
10. Dirio do Senado Federal, 15 November 2007 LXII (185): 40616; 40640.
11. Logically, some portions of taxation may return to workers in the form of tax-financed goods
and services, i.e. the social wage. Thus, I refer here to that portion of taxation that is not
diverted by the state to the reproduction of labour-power.
12. Surely, workers may rely on credit as a substitute for wage income, but this, more than a mere
postponing of payment, tends to place even more pressure on labour in terms of real wages
due to the interest payments.
13. This is the latest available official data.
14. During the 2000-12 period mutual funds, banks, and other financial companies held an average of 89.7% of the federal public debt bonds, and non-financial corporations and individuals, 10.3%. As of December 2012, about 12% of all these bondholders were non-residents
(Banco Central do Brasil. Detentores dos ttulos federais em poder do pblico. Available at
<www.bcb.gov.br>, accessed 26 February 2012).

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Author biography
Daniel Bin teaches public policy at the University of Brasilia, where he runs the Group for Study and
Research on Labour. He has been a visiting scholar at Yale University and at the University of
Wisconsin-Madison. His recent work focuses on economic policies and their implications for labour
and class relations. He is presently conducting research into dispossession of means of subsistence and
production.