Michael Heinrich is an exponent of what is known as the ‘New German Reading of Marx’, which interprets the theory of value that Marx presents in Capital as a socially specific theory of ‘impersonal social domination’. He is a collaborator on the MEGA edition of Marx and Engel’s complete works and has published several philological studies of Capital. He has also authored a work on Marx’s theory of value, The Science of Value, which is forthcoming in the Historical Materialism book series. And recently he has published An Introduction to all Three Volumes of Capital as his first full-length work to appear in English.
I am not going to do a critique of Heinrich’s views on the theory of value, as this has been done by Guglielmo Carchedi in his book, Behind the Crisis (see chapter 2). But I am moved to respond to a recent article of Heinrich’s in the American Monthly Review, entitled Crisis theory, the law of the tendency of the rate of profit to fall and Marx’s studies in the 1870s (monthlyreview.org-Crisis_Theory_the_Law_of_the_Tendency_of_the_Profit_Rate_to_Fall_and_Marxs_Studies_in_the_1870s__Mont).
In this article, Heinrich makes the following points: 1) Marx’s law is inconsistent because its categories are indeterminate; 2) it is empirically unproven and even unjustifiable on any measure of verification; 3) Engels badly edited Marx’s works to distort his view on the law in Capital Vol 3; 4) Marx himself in his later works of the 1870s began to have doubts about the law as the cause of crises and started to abandon it in favour of some theory that took into account credit, interest rates and the problem of realisation (similar to Keynesian theory); 5) Marx died before he could present these revisions of his crisis theory, so there is no coherent Marxist theory of crisis.
I am working with G Carchedi on a more thorough response to Heinrich’s arguments, so I shall deal with just some of these points in this post – and more briefly. First is Heinrich’s claim that Marx’s law of the tendency of the rate of profit to fall (LTRPF) is illogical and inconsistent. In other words, the conclusions that Marx draws do not lead logically from his assumptions. The LTPRF, the ‘law as such’, says that the rate of profit will tend to fall over time because the organic composition of capital (the ratio of the value of constant capital to variable capital) will tend to rise faster than the rate of surplus value (the ratio of surplus value to variable capital). This flows from the basic equation of profitability, s/c+v, where c/v rises faster than s/v because Marx’s value theory argues that only labour power creates value. So if the value of constant capital (machinery, plant, raw materials etc) rises faster than the value of variable capital (the value of labour power and the only creator of value), then the rate of profit will fall, other things being equal.
But other things are not always equal. Marx allowed for counteracting factors to offset the impact of a rising organic composition of capital on the rate of profit. First, a rise in the rate of exploitation could overcome the effect on the rate of profit of a rising organic composition of capital; and second, the ‘cheapening of the elements of constant capital’ (due, for instance, to technical advances lowering the costs of reproducing labour power) would tend to retard the growth of the organic composition itself.
Now Heinrich says that “Marx assumes that the fall in the rate of profit derived as a law in the long-term outweighs all counteracting factors. Yet Marx does not offer a reason for this.” And Heinrich says the ‘law as such’ is unsubstantiated because“contrary to a widespread notion, the increase in the rate of surplus value as a result of the increase in the productivity (of labour) is not one of the counteracting factors but rather one of the conditions under which the law as such is supposed to be derived, the increase in c occurring precisely in the course of the production of relative surplus value that leads to an increasing rate of surplus value”. The rate of surplus value could rise faster than the organic composition of capital and so the law as such does not prove that the rate of profit will tend to fall over time. The law is thus ‘indeterminate’.
Heinrich reaches this conclusion because he does not accept the method by which Marx focuses on the relation between the organic composition and the average rate of profit (ARP) to show that, if the former rises, the latter falls. In the ‘law as such’, Marx holds the rate of surplus value constant. But this is a common scientific procedure. First, we must establish the inverse relation between the capital composition and the ARP. Then we can let the rate of exploitation fluctuate. So the rate of exploitation becomes one of the counter-tendencies.
And, contrary to Heinrich’s claim, Marx does explain why the rate of surplus value cannot permanently outstrip the rise in the organic composition of capital. If two workers can be substituted for 24 workers through mechanisation, total surplus value will eventually be less than the capital advanced, despite the sharp rise in the rate of surplus value from the increase in productivity of the two workers compared the 24 workers. That’s because “the same influences which raise the rate of surplus value (even a lengthening of the working time is the result of a large-scale industry) tend to decrease the labour power employed by a certain capital, it follows that they also tend reduce the rate of profit”. (Marx).
Heinrich rejects this argument:“we cannot exclude the possibility that the capital used to employ the two workers is smaller than that required to employ twenty-four” Heinrich says the numerator (surplus value) in the rate of profit formula may well fall because the variable capital that creates value has shrunk, but so will variable capital in the denominator. Constant capital may have increased due to mechanisation, but the rate of profit only falls if the rise in constant capital is greater than the fall in variable capital in the denominator It depends on “Whichever of the two quantities changes more rapidly – and we do not know that.”
The first thing to say here is that if constant capital rises to at least match the fall in variable capital, then the denominator will not fall. And this will usually be the case in the process of capital accumulation. That’s because increasing the rate of surplus value can only be achieved by methods that also increase the value of the constant capital employed in relation to the number of workers engaged in the production process. So the organic composition of capital will increase. And it will increase faster than the rate of surplus value, the larger that rate of surplus value becomes. So even if the rate of surplus value rises faster than constant capital to begin with, eventually it will increase more slowly as variable capital shrinks as a share of new value. If the capital composition rises, while the variable capital falls by the same amount as the constant capital rises, then the rate of surplus value must rise much more percentage-wise for the rate of profit to remain the same (or to rise). Whether the capital composition grows at an increasing or at a decreasing rate, the rate of surplus value must grow at an increasing rate to keep the rate of profit from falling. This is the reason why, at a certain point, the counter-tendency (the rise in the rate of surplus value) cannot overcome the tendency (the increase in the rate of growth of the capital composition).
To repeat: a rising organic composition of capital will eventually produce a downward move in the rate of profit even when the rate of surplus value is rising faster to begin with. The rate of surplus value rises over time if wages do not rise as fast as the productivity of labour. But as the rate of surplus value rises, it rises at an ever slower rate as it approaches its limit which is the full appropriation of the product of living labour (wages plus surplus value). So no matter how fast the rate of surplus value rises, the rate of profit will eventually fall at a rate asymptotic to the fall in the ratio of the product of living labour (wages plus surplus value) to total constant capital (fixed and circulating). And that is because, as the organic composition of capital rises over time, it reduces the relative amount of living labour produced. So even if surplus value moves towards one and wages move towards zero, the rate of profit will eventually fall.
Now this is not some mathematical trick, although the argument can be spelled out more elegantly using maths. Maths is only as good as the assumptions that you begin with. Maths can take you logically to any conclusions or outcomes that flow from the assumptions. And Marx’s law has two key assumptions: 1) that only labour (or labour power) can create value and 2) as a general rule the value of mechanisation will outstrip growth in the cost of the labour force i.e. the organic composition will rise. Marx draws these assumptions from the reality of the capitalist process of accumulation. So, as long as we assume that the basic trend in capitalist accumulation is for the organic composition of capital to rise, then a rising rate of surplus value cannot permanently counteract any tendency for the rate of profit to fall. If Marx’s two assumptions about the mode of capitalist production are wrong, then Marx’s law is wrong. But starting from these two assumptions, Marx’s law is determinate.
As for Heinrich’s argument that Marx’s law cannot be empirically proved or refuted, this is bizarre. We can measure the rate of profit in capitalist economy using Marxist categories and test the law against its components. I and a host of other scholars have done just that for various national economies and even for the world capitalist economy (see lots of my posts). And that includes Marx himself. He looked for empirical verification for his law. Marx’s law, just like any other scientific law, can be refuted and empirical analysis is necessary to confirm or refute it. Does the rate of profit fall over a long period as the organic composition rises? Does the rate of profit rise when the organic composition falls or the rate of surplus value rises more than the organic composition increases? Does the rate of profit recover if there is sharp fall in the organic composition of capital through the destruction of value of capital? The answers to each of these empirical questions is yes. The statistical correlations and measures of significance between Marx’s variables (organic composition and the rate of exploitation etc) and the outcome (the rate of profit) have been shown to be high and significant.
Here are some examples for the UK and the US economies that I analysed quickly for this post. Between 1963 and 1975, the UK rate of profit fell 28%, while the organic composition of capital rose 20% and the rate of surplus value fell 19%. Between 1975 (when the UK rate of profit troughed) and 1996, the UK rate of profit rose 50%, while the organic composition of capital rose 17%. The rate of profit rose because the rate of surplus value rose 66%, faster than the rise in the organic composition of capital. Finally, from 1996 to 2008, the rate of profit fell 11%, as the organic composition of capital rose 16% but the rate of surplus value was flat. All these three phases are compatible with Marx’s LTRPF. Indeed, over the whole period, 1963 to 2008, the organic composition of capital rose 63%, while the rate of surplus value rose 33%, so the rate of profit fell on a secular trend.
In the case of the US economy, the rate of profit fell 24% from 1963 to a trough in 1982, because the organic composition of capital rose 16% and the rate of surplus value fell 16%. Then the rate of profit rose 15% to a peak in 1997, because although the organic composition of capital rose 9%, it was outstripped by a rise in the rate of surplus value of 22%. From 1997 to 2008, the rate of profit fell 12%, because the organic composition of capital rose 22%, outstripping the rate of surplus value, up only 2%. Again, all three phases fit Marx’s law, when the organic composition of capital rose faster than the rate of surplus value, the rate of profit fell and vice versa. Over the 45 years to 2008, the US rate of profit fell secularly by 21% because the organic composition of capital rose 51% while the rate of surplus value rose just 5%. The rate of profit was negatively correlated with the organic composition at -62%, while there was no significant correlation with the rise in the rate of surplus value.
Second, there are empirical studies of Marx’s law that show that it is a reasonable predictor of future events, including the recent Great Recession of 2008-9. These studies show that when the rate of profit starts to fall, a crisis or economic slump will occur some time thereafter and, even more specifically, the recession begins when the mass of profit falls as a result of the falling rate of profit. This is predictive value is more than we can say about any studies that aim to justify empirically alternative explanations of crises based on the ‘problem of realisation’ (consumption or investment) or on high interest-rates or lack of credit, Keynesian-style.
Again, I looked at the UK economy. Since 1963 there have been four major economic recessions of slumps: 1974-5, 1980-2, 1990-2 and 2008-9. In each recession, the rate of profit peaked and started to decline at least one year before the slump began. And each recession was accompanied by (or coincided with) a fall in the mass of profit in successive years. Similarly, if we look at the US economy, there were five recessions or slumps after 1963: 1974-5, 1980-2, 1990-2, 2001 and 2008-9. In each case, the rate of profit peaked at least one year before, but on most occasions up to three years before. And on each occasion (with the exception of the very mild 2001 recession), a fall in the mass of profit coincided with the slump, with the biggest fall (over 7%) in the Great Recession. So there is a body of evidence to support the view that Marx’s law does operate in a capitalist economy and that it is the key (underlying) factor in booms and busts.
We can derive a coherent theory of crisis from Marx’s works based on his LTRPF, his views on credit and banking (fictitious capital) and on world markets and imperialism. Of course, there is plenty of work to be done in developing Marx’s theory of crisis in relation to modern developments and, as Marx did, we are learning more each day. But Marx’s LTRPF remains the most robust explanation of capitalist crises and something way superior to alternative Keynesian and other mainstream economic explanations, which signally failed to explain the Great Recession.
Michael Roberts Blog 
We should note that Heinrich attacks Marx’s work on the rate of profit by merging two applications of it. One application is explanation of why capitalism inevitably and repeatedly suffers crises, to which your post replies. Heinrich also attacks developments in the rate of profit as an explanation of capitalism arriving at a point where it breaks down or its economic failure drives people to revolution.
The barrier that capitalism reaches, signaling that its relations of production (with the wage relation at the heart) have become an impassable fetter on development, can be explained, but not as a final crisis of the same sort only larger. Arguments that a rising organic composition brings capitalism to this barrier have never held up.
Also, explanations of crisis may differ among Marxists who adhere to the labor theory of value. Some use the organic composition of capital; others find a different path to a rising value composition of capital. (See my From Capitalism to Equality, chapter five, for example.) All, however, are serious about explaining crises.
Not Heinrich. By not sorting out the cycle and arrival at the era of revolution, Heinrich disparages the whole labor theory of value that Marx gave us — along with its results about surplus value, class struggle, and the capitalists’ necessary and inhuman devotion to the rate of profit above all else. Note that Heinrich does not care to offer his own explanation of crises throughout the history of industrial capitalism. He is really about attacking Marx, period: “The construction of Capital as a whole is called into question.” Despicable stuff.
Agreed. The end point of capitalism is not to be immediately found in the theory of its production, even “as a whole”. Rather, it is to be found in the theory of capitalist accumulation *over the long run*, that is, beyond the business cycle and medium run “accumulation crises” such as the one just experienced in 2008 and still lived thru.
The concept of accumulation differs from that of production in that the former also encompasses the “outside” of the capitalist appropriation of the non-commodity, “natural resources”, and especially the all important “inside”, the reproduction of labor power, itself an innately non-commodity, non-capitalist process that also encompasses *all* of labor power, whether it is “productively” consumed in valorization, or non-productively consumed in service provision, or not consumed at all, as in unemployment. The concept of accumulation is emphatically *not* identical with the concept of expanded reproduction, much less simple, though this is the logical basis for launching the general analysis of accumulation in itself. Rosa Luxemburg arrived at some wrong conclusions, but she was on the right track. Too bad she was murdered.
Crisis of capitalist accumulation over the long run == capitalist decay. I believe it was Lenin who first proposed this concept in 1917 in “Imperialism”, but many Marxists have unfortunately have abandoned its substantiation. Even at the level of accumulation, Lenin least of all would have identified this analysis with a concept of collapse. Not even contemporary exponents of Henryk Grossman, such as Rick Kuhn, “Economic crisis and socialist revolution: Henryk Grossman’s Law of accumulation, its first critics and his responses” argue that Grossman’s working of Otto Bauer’s reproduction schemes was no more than a demonstration of the absurdity of Bauer’s own usage, intended to demonstrate that accumulation could proceed indefinitely, by Grossman showing just the opposite on the basis of Bauer’s own scheme.
Rather Lenin stated in the above that “capitalism grows more than ever” in the historical period of its *decay as a mode of production*, “especially in the colonies”, a.k.a. developing countries. But his pamphlet, a hasty effort to counter Kautsky after Bukharin failed in that task, could not comprise a fully developed theory of accumulation. A full analysis would show the contradictions of capital (real vs. fictitious), rent (the “value form” assigned to the appropriation of natural resources, whose capital form is always fictitious) and wage labor, particularly from the side of its (invariably non-capitalist) reproduction, “consumer society” in common classless parlance.
It is this last area that all contradictions from all sources converge as the crisis of the reproduction of labor power. The laws of motion of capitalist crisis transform into a crisis of and for the proletariat. That is the identification of the objective basis for revolution. The remainder is a “subjective” issue.
Need it be pointed out that workers pay no small amount of rent for the land housing sits upon? “Outside” of valorization? Think of that in connection with the “real wage” as a “bundle of commodities”. It ain’t.
Marx clearly had this object in sight as indicated in “The General Law of Capitalist Accumulation” at the end of Vol I. He often ran ahead of himself in the urge to make an important point. Nothing wrong with that per se so long as we keep this in mind.
You seriously misstate Marx’s concept of “organic composition” when you write: “The LTPRF, the ‘law as such’, says that the rate of profit will tend to fall over time because the organic composition of capital (the ratio of the value of constant capital to variable capital will tend to rise faster than the rate of surplus value (the ratio of surplus value to variable capital). This flows from the basic equation of profitability, s/(c+v), where c/v rises faster than s/v because Marx’s value theory argues that only labour power creates value.)…”
But Marx’s definition of organic composition is “a definite quantity of living labor corresponds to a definite quantity of labor already objectified in means of production.” (v.3, p.171) The quantity of living labor is identically (in Marx’s theory) the *flow* of new value produced in the year, consisting of [productive] labor incomes and property incomes. It is symbolized as v+s or, better, v(1+s’) where s’ denotes the rate of exploitation, s/v. The quantity of objectified (“dead”) labor is the value of the *stock* of constant capital (consisting of fixed and circulating capital), symbolized as C. This C can be taken as substantially equivalent to the capital stock as a whole C+V (the denominator of the profit rate) because V, the value of that portion of consumer-goods inventories destined for consumption by productive workers, is a small and constantly decreasing (because of the strong tendency to an increase of unproductive labor as a portion of paid employment as well as improvement in the turnover rate for circulating capital) portion of the social capital. Thus the proper definition of Organic Composition is C/v(1+s’). If we symbolize Organic Composition as “Q” then the rate of profit, s/C approximates to s’/Q(1+s’). When we realize that relative surplus value arises from the increasing productivity of labor which in turn is an increasing function of the Organic Composition (capital per worker), it becomes clear that Heinrich is wrong: relative surplus value cannot compensate for increasing Organic Composition because its expression, s’, appears in both numerator and denominator of the profit-rate formula.
Incidentally, it is also an error to repeat Heinrich’s mistaken formula “basic equation of profitability, s/(c+v).” Because all the symbols denote flow variables, this is a form of the formula for the *profit margin* s/(c+v+s), not of the *profit rate* s/(C+V).
Shane
I dont think we disagree. I realise that Marx’s formula refers to stocks in the denominator and not flows.
Interesting stuff. Heinrich reminds me of the pre-exile Polish philosopher Kolokowski. Weasel words ostensibly rooted in authentic serious Marxism. We’ll see if Heinrich also eventually ends up as a fellow of All Souls and open servant of obscurantism.
And all the white emigre jargon of the Poppers is in place…
Two related points.
1. In his new book Heinrich attempts to disprove the falling rate of profit tendency by giving some numerical examples and manipulating the s/(c+v) formula. But he does so by disregarding fixed capital, as he says on pages 145 and 151. Thus he evades Shane’s correct point here that the denominator of the rate of profit formula must be the capital stock C+V, not the flow, c+v. If there is no fixed capital then the two are equivalent.
Marx, of course, considered fixed capital vital for establishing the falling rate of profit tendency:
“If we consider the enormous development of the productive forces of social labour in the last 30 years alone as compared with all preceding periods; if we consider, in particular, the enormous mass of fixed capital, aside from the actual machinery, which goes into the process of social production as a whole, then the difficulty which has hitherto troubled the economist, namely to explain the falling rate of profit, gives place to its opposite, namely to explain why this fall is not greater and more rapid.” (Capital III, Chapter 14.)
2. Michael, you quote Heinrich as saying that Marx offers no reason why the falling rate of profit tendency outweighs all counteracting factors. You then show that Marx in fact does explain why the tendency does outweigh the increase in the rate of surplus value. But you also bring up the cheapening of constant capital countertendency, and as far as I can see you do not respond to Heinrich on this. As I read Marx, he asserts that the rising organic composition outweighs the cheapening of constant capital but does not give a convincing reason. Such a reason surely must involve taking fixed capital into account, so Heinrich in effect defines the problem in a way so that his claim of indeterminacy is built into his assumptions.
Marx talks about cheapening of the “elements” of constant capital. Fixed capital, by its nature (consisting of whole machines, buildings, locomotives, etc.) has no “elements” but circulating capital consists only of “elements.” The response to Heinrich is that such “cheapening” does not appear all by itself. It results from the increasing labor-productivity in their production. But that increase in productivity is itself the result of the increasing organic composition of the capital producing them. As when an atomic power plant, using very little labor but enormously expensive and long-lived machinery, replaces the coal previously used for generating electricity that came from a mine with depreciated capital and a multitude of workers. The increase of fixed capital (atomic) will far outweigh the decrease in circulating capital as cheaper uranium replaces expensive coal!
Agreed.
Walter
I agree with your point 1. As for 2, I did not deal with this other key counteracting factor because Heinrich in his article did not justify his point. Again, in a more thorough critique (under way), we should. Again, I am thinking along your lines.
Michael,
You write, “…if we look at the US economy, there were five recessions or slumps after 1963: 1974-5, 1980-2, 1990-2, 2001 and 2008-9. In each case, the rate of profit peaked at least one year before, but on most occasions up to three years before.”
Are you claiming each of these recessions were caused by a rise in the organic composition of capital?
A rise in the organic composition is the key tendency, but the outcome of crisis depends on more than that, just as the rate of profit depends on more than that, and an actual fall in the mass of profit does too. Then there are the contingent factors of credit, unproductive spending etc. My book, The Great Recession, tries to cover all this. Here I just wanted to point out the connection between Marx’s law and crisis that Heinrich denies theoretically and says cannot be shown empirically.
As I read Heinrich’s Intro to the three volumes of CAPITAL, I’m struck by his attempt besmirch Marx for being a fool for not calling Engels on his errors throughout their long relationship. Of course, Professor Heinrich has a much better intellect than either Marx or Engels and will set the record straight for his followers or so he promises. Just look at his treatment of value as being mere abstraction and never the amount of socially necessary labour time embodied in a commodity. Too bad Marx didn’t collaborate with Heinrich, instead of that mechanistic Engels then, matters of political-economy would have become much clearer.
You should publish this. I think Critique would be symptathetic. They are about to publish a critical review of Heinrich’s ‘Introduction’.
You should publish this. I think Critique would be symptathetic. They are about to publish a critical review of Heinrich’s ‘Introduction’. They may well be keen on it.
Ill try and get my act together. G Carchedi and I are working on a more thorough critique.
My understanding of the concept of organic composition is this (and I may of course be wrong).
(My reference is volume 3, Penguin edition, pp. 243-5, and volume 1, Penguin edition, p.762.)
Marx identifies the what he calls the technical composition of capital as the physical ratio between labour-power and means of production: as the ratio between a given amount of labour-power (assuming the intensity of labour and the working day as fixed, then the number of workers) and the physical quantity of fixed capital and circulating constant capital absorbed by this labour-power, i.e. transformed into commodity product.
He also identifies the value composition: this is the ratio between variable capital and constant capital: the money laid out on wages and the money laid out on fixed and constant circulating capital for a given period of production. This is a relation between two money values.
The organic composition is the value relation, ‘in so far as this is determined by its technical composition and reflects it.’ (p. 245)
The first thing that this says to me is that you can’t talk about the organic composition of a given capital as a fixed magnitude: it is not a fixed magnitude but a measure of *change*. Second, the change it measures is that of the ratio between the physical quantity of labour-power (number or workers) and the physical quantity of means of production over time. *By definition*, a rise in the productivity of labour means that a given mass of labour (number of workers) will absorb a greater mass of means of production. Hence the organic composition will rise. *All else being equal*, if the organic composition rises then the value composition will too. This rise in the value composition because of the change of the technical composition is what we mean by a rise in the organic composition of capital. In other words, a rise (or fall) in the organic composition is the direct effect of a rise (or fall) in productivity of labour.
But all else is not equal. A rise in the productivity of labour, because labour is the source of all new value, *also* means that the per-unit prices of commodities in general fall: means of workers subsistence and means of production are cheapened. This *also* affects the value composition of capital; and because (in chapter 3) Marx arrived at the conclusion that rate of profit = s’ x v/C (pp. 161-2), a change in the value composition because of reasons other than a rise in the organic composition will also affect the rate of profit, and in the other direction.
But these are effects other than the change in the organic composition: these are not changes in the value composition of capital because of changes in its technical composition, but changes wrought by a cheapening of the elements of production. This is why Heinrich is wrong to say ‘Contrary to a widespread notion, the increase in the rate of surplus-value as a result of an increase in productivity is not one of the “counteracting factors,” but is rather one of the conditions under which the law as such is supposed to be derived.’ The methodological distinction Marx maintains between ‘the law as such’ and the ‘counteracting tendencies’ is a sound one, to my mind (even if it is true that both of these elements are consequences of accumulation itself).
One of the things that is lost if ‘the law’ and the ‘counteracting tendencies’, if the direct effect of a rise in the productivity of labour (rise in the organic composition) and the indirect effects (cheapening of means of subsistence and production) are conflated is this: the former, the organic composition, is an *immediate* effect, while the attenuating effects of cheapening the factors of production (including the value of labour-power) are only realised in *following* production periods, directly, indirectly and iteratively. This is another reason why the rate of surplus-value by rising (or the cheapening of the elements of constant capital) cannot ultimately compensate for the fall in the rate of profit, at least until a general crisis is provoked.
(Incidentally, since the concept of organic composition is to measure not the value composition of capital but *changes* in the value composition (because of certain other changes) it seems to me irrelevant if it is measured as c/v , c/C , (or even their reciprocals, as Marx effectively does in chapter 3). But I don’t think we should think of it as C/v(1 + s’) (i.e. C/(v + s) ), as Shane does above, because this reintroduces the conflation between ‘law as such’ and ‘counteracting tendencies’ that we see in Heinrich).
Walter Daum gives us the following quote: “If we consider the enormous development of the productive forces of social labour in the last 30 years alone as compared with all preceding periods; if we consider, in particular, the enormous mass of fixed capital, aside from the actual machinery, which goes into the process of social production as a whole, then the difficulty which has hitherto troubled the economist, namely to explain the falling rate of profit, gives place to its opposite, namely to explain why this fall is not greater and more rapid.” (Capital III, Chapter 14.)
We should reflect much much more on this. Marx wrote it in the early 1860s. That’s 170 years ago. The “enormous development of the productive forces of social labour” has not stopped since then, let alone regressed, despite the best efforts of the capitalists and their protecting states to restrict this development to what keeps the profit rate high.
Marx himself is very clear that capitalism has reached its ultimate stage of development in the credit system, and Lenin hammered this home in Imperialism. We are in an epoch of transition to a new and superior mode of production.
And yet…
Our theoretical work, our scientific understanding of the economic roots of this transition, is still struggling to keep its footing in the 1860s and 1917. Only Preobrazhensky’s The New Economics and Trotsky’s The Revolution Betrayed attempt to see what is happening as the exhausted capitalist mode of production finally gives way and a proto-socialist alternative emerges empirically. We have nothing equivalent for the post ww2 period with the emergence of the Deformed Workers’ States, especially China.
The theoretical battle we see here – Heinrich versus Mike – is symptomatic of both the necessity of fighting to maintain the constant value of Marx’s understanding, and the necessity of adding our own value to it and realizing it as genuine economic science in the present market-place of ideas.
Mike’s work on the falling rate of profit needs to be supplemented by all of us by a single-minded concentration on the mechanisms counteracting it, to “explain why this fall is not greater or more rapid”. And once we clarify the economic processes devaluing constant capital, and increasing relative surplus value (and contrary to what Shane M says, I’m pretty sure that “an increase in unproductive labour as a portion of paid employment” has little to do with this), we have to look at the political processes allowing the bourgeoisie to get away with it at all in the first place.
Since I’m convinced that the world economic system at the moment is socialized through and through, and has burst through any limits within which the Law of Value is the automatic and uncontested regulator of economic activity, then the bourgeoisie can only keep capitalist relations of production in place by the most frenzied political and ideological exertions, coupled with permanent repressive violence and war against both economic rivals and the working class as a whole.
If the bourgeoisie and its intellectual lackeys (such as Heinrich in the present case) can keep us arguing about 1860 instead of 2010, then we are 150 years of economic development away from where we really should be.
(NB – The Law of Value still operates powerfully as it must when the economic system is forcibly constrained within capitalist limits. The true distribution of necessary social labour-time among the aggregate commodities produced by bourgeois society can only be determined *after* the consummation of production and circulation by Sale in the Market. That is, in a blind and unplanned fashion. When I maintain that the limits concerned have been burst through, I am arguing from the work of Preobrazhensky and Trotsky on the proto-socialist mode of production (as I wish to call it) in the USSR, where Primitive Socialist Accumulation as a directly competitive process of distributing social labour-time was able to resist the pressures arising from the operations of the Law of Value in the commodity producing sectors of that economy, not merely up to 1936 when The Revolution Betrayed was written, but all the way up 1991, when Primitive Socialist Accumulation was stopped by the overt political measures of social counter-revolution.
I think it should be clear what mode of production was doing best in the world (given the respective absolute dimensions of the economies in question) in the period between 1945 and 1990, in economic terms. Primitive Socialist Accumulation was asserting its relative supremacy in the USSR, Eastern Europe, and China, not to mention Yugoslavia, Cuba or Vietnam. Its mere survival in the face of ferocious imperialist hostility tells us this. Further clear indications of its superiority are the necessity for imperialism of attempting total destruction of its means of production in the former workers’ states after 1990. And perhaps the most telling fact of all is the complete incapacity of the most advanced capitalism in Europe, Western Germany, to annexe and absorb the proto-socialist economy of the much smaller, much poorer German Democratic Republic. Not to mention the utter fiasco for capitalism when it comes to claims of economic (let alone political) superiority in relation to the fate of Yugoslavia after the wars and capitalist restoration, or indeed to the whole of Eastern Europe after restoration.
It should also be clear from this perspective that there is no way in hell China can be seriously considered to have restored capitalism and the sole rule of the Law of Value as opposed to the Law of Primitive Socialist Accumulation, unless what is happening in China now is considered equivalent to the social upheavals turning Yugoslavia, Eastern Europe and the republics of the ex-Soviet Union inside out after 1990.
If on the other hand China is considered to have been capitalist since say 1980, then we need to dump Marx and rewrite all economic theory from scratch, since in that case neither Marx nor classical bourgeois economic theory can account for developments there.)
Michael,
Thank you very much for this post. What Heinrich argues is not new. Simon Clarke argued in 1991 that Marx had quietly abandoned the theory of crisis as the basis for revolutionary change in capitalist society after the crisis of 1858 did not lead to a revolutionary crisis of capitalism. Heinrich also argues that Marx began to abandon the theory of capitalist collapse and that Marx had left us no completed theory of capitalist crisis-much as does the blogger Sam Williams. This is mighty strange as it is a nasty neglect on Marx’s part to not have informed poor Engels-his 40 year friend, collaborator, and comrade that what he argues in those incomplete works of capital-vols 2&3 are incomplete and not accurate in there basic argument about the laws of motion of capitalism.
This is what Marx said in the preface to A contribution to the Critique of Political Economy in 1859:
‘At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.’ (1859)Volume 29, Collected Works
And in 1883-the year of Marx’s death -Engels explained what he interpreted the implication of Marx’s economic theory of capitalist accumulation and why capital increasingly becomes a fetter on the development of the productive forces:
‘According to the laws of bourgeois economics, the greatest part of the product does not belong to the workers who have produced it. If we now say: that is unjust, that ought not to be so, then that has nothing immediately to do with economics. We are merely saying that this economic fact is in contradiction to our sense of morality. Marx, therefore, never based his communist demands upon this, but upon the inevitable collapse of the capitalist mode of production which is daily taking place before our eyes to an ever greater degree.’ Preface to the Poverty of Philosophy.
Marx’s theory of capitalist accumulation is an abstract model designed to explain the general laws of capitalist accumulation based on the law of value. His model assumes that capital is already global, so it is useless to try to verify those laws by pointing to the rate of profit in particular countries, as the model permits that there are ways one sector of the capitalist world can capture surplus value from another-as pointed out in John Smith in his thesis Imperialism and the Globalization of Production. It is theoretically possible that one sector can capture surplus value from another and thus have rising or, at least slowly falling, rate of profit. There are numerous passages where Marx talks about the ROP falling in the long run and on an increasing scale-he is referring to the global rate of profit, not to the cyclical, nor to the individual sector, industry or country rate of profit. Michael is quite right to point out that it is the mass of surplus value-and its decline, which is the trigger to crises. It is also the trigger to the aggressive imperialism which we are witnessing right now. We have lived in a world in which capital has been becoming global, which means that the process of capitalist accumulation and its contradictions are approaching the model which Marx left us in Capital and Engels was diligent enough to mold into a presentable form. While Marx’s theory of capitalist accumulation needs to be applied correctly to the actual world as it is developing, Heinrich’s interpretation is incorrect and not useful for explaining what is actually happening in the world or understanding capital’s response to this growing crisis. It is a theoretical detour and a slander of the efforts of Engels.
Michael, you have bravely stirred up a hornets nest and I can not wait to see the responses of Heinrich and company.
Shane’s points are well taken but “relative surplus value cannot compensate for increasing Organic Composition because its expression, s’, appears in both numerator and denominator of the profit-rate formula” is not always the case
Yes it can– at times, periodically, and cyclically even during an overall structural decline. Such is exactly the case with US railroads after 1986. This is accompanied by some dramatic downsizing in the physical dimensions of the capital stock– reduction in track, reduction in freight cars, increased tractive effort of locomotives, but still the ratio of capital per employee in the industry climbs and is accompanied by an increase in profits through about 2000, and a decline in freight rates until about 2001.
Such is also the case with semiconductor fabrication.
Capital remains cyclical even in its asset-stripping mode. I think Heinrich isn’t despicable quite so much as he is “out of touch”– out of touch with how capital really functions, and out of touch of the core of Marx’s critique which is the conflict between labor and the conditions of labor, which expresses itself in and through impaired accumulation.
It is, and is always, the changes between the necessary and surplus labor-times that determine the transformation of expansion into contraction.
“The cheapening” of the means of production that Heinrich hangs his hat on, only comes about through the devaluation of the means of production, the loss of accumulated value. There is no way that this can occur socially throughout all of capitalism without undoing the very notion, concept, basis for accumulation itself, which is the self-expansion of value.
Obviously when such devaluation cannot occur broadly, deeply and quickly enough through “regular” market mechanisms, the bourgeoisie turn to that wholesale ace up their sleeve– war.
Michael, you are to be congratulated. The comments your post has elicited are an extension of the post itself. That’s pretty good.
I think we really do have problems if we believe:
A) Capitalism will self destruct
B) That when it does self destruct the higher form, i.e. Socialism, will replace it automatically!
Now unless I have missed something capitalism has managed to solve profitability problems by moving production to reduce labour costs and then selling the product back to the core at marked up prices. It appears to me that this process has some way to go before it reaches its barriers. The scramble for Africa is probably to do with this process.
Then we need to talk about monopoly……
Finally we need to remind people to cast of their chains, there is a world to be won and it won’t just all fall into your lap as if by magic!
Price is a funny, fuzzy kind of exercise in economic quantum mechanics. Sometimes, it reflects more than the socially necessary labour time embodied in the good or service; sometimes less. Most often, on a macro-scale, it revolves around it gravitational centre, its value as a galaxy revolves around its black hole.
The differences (supposed) between Marx and Engels was taken up in 1975 by the late American Marxist George Novack. In a biting article called In Defense of Engels, Novack said the following : “The unfounded allegation that Marx and Engels held divergent philosophical views sets up Engels as a whipping boy for Marx himself.” This fits Heinrich perfectly. In the same article Novack says: ‘Whatever differences they had on this or that matter, there is no record of diaagreement on any theoretical or political question during their forty-year collaboration.” It is absurd to pit Engels against Marx as Heinrich does. I urge reader’s of Michael’s blog to read Novack’s essay which can be found in his book Polemics in Marxist Philosophy. This essay can not be found yet on MIA, but it is available from Pathfinder Press in the above mentioned book. It does not prove that Marx was right in his political economy, but is does amply refute the idea thatr Engels led the Marxist movemnet away from Marx.
Well, that’s a separate subject, and we don’t want to fall into the reflecting pool of Heinrich’s mistake. I mean I think Engels makes lots of mistakes: I think he “supra-historicizes” the law of value, such that it is the dominant economic organizing principle prior to capitalism and not specific to the organization of labor as abstract labor. That’s a mistake. The “law of value” derives in total from the organization of labor as wage-labor.
But so what? What does that have to do what Marx actually wrote, and what Engels tried to assemble into a coherent outline of Marx’s researches?
Notice, it’s volume 3, and the FROP that gets the focus. Now maybe Engels distorted Marx’s Grundrisse, but the very same arguments, with even more passionate language are made by Marx re FROP in the Grundrisse.
Did Marx produce a single sentence backing away from his evaluation of the significance of the FROP? If so, it would behoove Heinrich to produce that. As it is, he produces speculations based on Marx’s dissatisfaction with what he has presented in…..volume 1.
Whatever Engels’ “mistakes” he certainly did not lead the working class movement away from Marx. What a ridiculous and completely idealistic notion (or “Trotskyist”– the “crisis of humanity is the crisis of the proletarian leadership”?).
I think Heinrich simply thinks it suffices to convert Marx’s analysis from a critique of capitalism to a……..critique of texts.
For the record, I don’t believe capitalism will “self-destruct,” but it is certainly the case that it can only reassemble itself through destroying everything else, through destroying capital, constant and variable, fixed and circulating.
We should be careful when we bring up Trotsky – the quote – the fanfare to the Transitional Programme of 1938 – is actually “The world political situation as a whole is chiefly characterized by a historical crisis of the leadership of the proletariat.” The way you quote it would be OK “among friends” who understand the full force of the qualifications “world political”, “as a whole”, “chiefly” and “historical”. It’s not OK where there are people from the Stalinist or bourgeois traditions who seize any straw to plug the gaping holes in their dykes.
If your own view is that “Trotskyist” is “ridiculous and completely idealistic”, then perhaps you could show us what is ridiculous and idealistic about the idea of Primitive Socialist Accumulation as an economic process opposed to the Law of Value in the Soviet worker’s state.
Or how something other than the “crisis of proletarian leadership” in the USSR led to the collapse of the world’s first workers’ state.
The social relation of Capital can only be destroyed by the workers organised as a class for themselves.
A. Freeman’s latest, anyone?
Click to access b629ee_20b6bcc79e688bee2ab6f94f971f7b06.pdf
All Marxist POVs welcome, of course.
I’ve been discussing with Alan on this one. I don’t think it works for various reasons, but it is certainly innovative. More on another occasion.
Freeman says :”The central issue is this: the value advanced by capitalists is tied up in all
phases of its circuit: not only in machinery, buildings, raw materials and
inventories, but also in money balances, hoards, and financial
investments. This is true even when the capital concerned is idle; money
is in this respect no different from inventories or stocks of unsold goods.
Indeed, this is Marx’s primary reason for rejecting Say’s law, and the
foundation of his proof that capitalism regularly overproduces and fails
to realize its product. ”
I think this is based on a serious misconception. There is no net value in money balances hoards or financial investments once gold money has been abandoned. Gold money actually requires labour to produce it that is proportional to the value of the gold, financial instruments, paper money, and electronic bank records have a price that is independent of the clerical work required to produce them. They are pure information structures and do not represent expended social labour. So Alan’s proposal is subject to two fundamental errors:
1. It adds together things of a different type : quantities of expended social labour represented in the money value of commodities, with pure abstract information in bank records.
2. It is subject to an unavoidable problem of double counting. To every financial asset there is a financial liability. The sum of credit accounts with the banks is balanced by the sum of loans made by the banks – less notes and coins held which in accounting terms are loans to the central bank and the mint respectively.
If he corrected for double accounting there would be no net value in the financial system since the liabilities of borrowers must offset the assets of lenders. What Alan has done is add in the credit side and forgotten the debit side of the balance sheet.
Paul
I see you posted this comment on Alan’s paper at the discussion site for this being hosted by AJPE. http://australianpe.wix.com/japehome#!freeman-finance/cdjh
I also posted there on this question as follows:
Seductive as AF’s analysis is, that it can’t work because there is double-counting. We are not dealing with money capital advanced but credit and debt, which is not the same thing as money. If financial assets are added to the denominator for the ROP, then any financial liabilities should also be deducted. It is incorrect to use just debt in the denominator for the ARP for private sector enterprises.
Also, AF’s data sources appear to contain some errors for the US measure. First, he says that for Figure 7 on the US he uses net fixed assets from the NIPA tables Table 1.1 line 15. But this line is not for private non-residential fixed assets but also includes government fixed assets. In his figure 7, he refers to ‘private enterprise fixed assets’ as the denominator for the ARP and yet his source includes government assets. Not sure which he has used, although the difference is pretty small at $110bn. Second, Alan uses as a measure of financial assets, the Fed FOF table for ALL credit market debt and not just that for the non-financial corporate sector, which would be more correct- and there is a big difference of $16trn here!
However, we can avoid double-counting, I think, if we use the NET WORTH of non-financial enterprises as our denominator. This is the sum of both tangible and financial assets and of financial liabilities. If I divide corporate profits of non-financial companies by the net worth of non-financial companies and then compare it with Alan’s measure (adjusted for the above differences in categories mentioned) I get a pretty different result. The ROP using net worth actually rises from 1982 to 1996, before collapsing in the dot.com bust of 2000-1. Indeed, if I compare the ROP using net worth against the traditional ROP using just tangible assets for the denominator, there is not much to choose. So the traditional ROP story for the US of a rise from 1982 to about 1996 holds.
I have not done this exercise for the UK yet.
So I agree with your main points.
Yes taking net worth avoids double counting within the non-financial companies sector, but if you look at the sectoral balances you will see that for the UK the non-financial firms run a net surplus, so they are in effect lending to the state. To the extent that they have a +ve net financial worth that is and indirect accounting for the amount of government bonds they hold. But I dont think that government bonds can count as capital either. They may represent money spent on real assets but they may also represent money spent on fighting wars which can not count as capital accumulation in any meaningful sense.
Paul C writes: “But I dont think that government bonds can count as capital either. They may represent money spent on real assets but they may also represent money spent on fighting wars which can not count as capital accumulation in any meaningful sense.” The whole question of Money (with a capital M 😉 ) and what it is post-gold needs to be thrashed out between Marxists so we can get some kind of grip on how commodities and value operate in the capitalist economy today.
For instance, Marx in Capital 3 makes it clear that the credit system and Interest transform all money into capital as far as the system is concerned. If it can be used as capital and expand its own value, then it will be, is the idea, and everyone borrowing money is charged interest as if it was being borrowed for use as capital instead of being wasted on wine, women, song or fighting wars. So in this respect government bonds represent capital (by default if you like) and “earn” interest.
Which brings us back to the “where’s the gold?” question. How can a capitalist economy function without a reliable “hard cash” universal equivalent commodity to act as a measure of value and a standard of value? The crucial role of the universal equivalent commodity didn’t just evaporate into thin air when gold did its Indian rope trick… So what ghostly thing is is playing this role when it’s obviously not the dollar or the euro, however much the US and the EU would love to think so.
In other words, perhaps, we need to pose our own questions to answer, rather than let unscientific anti-Marxists like Heinrich usurp our agenda.
Further to this (it wouldn’t let me sleep 😉 ), we have the central question of what exactly are the “mountains of cash” being sat on by corporations like Apple when they refuse to invest. Our money theory has to be able to answer this.
It is obvious to the capitalists at Apple that their cash is capital that is lying fallow. And they have sufficient trust in the system (faute de mieux) that the digital blips in their computers will be duly acknowledged as value and converted into commodities (M-C) when they see fit.
Now, we know that these blips, as Paul C says, have no “net value”, ie they aren’t gold or any other universally acknowledged money commodity containing value qua commodity. But this was equally the case for the ink marks in the bankers’ ledgers in the mid-1800s. Except that then it was possible to chase down the value to gold bullion in a crisis, whereas today it isn’t.
So this leaves us with the contradiction of Moneyless money in a capitalist system. Something that is only conceivable in a mode of production beyond the blind anarchistic operations of the Law of Value.
“The abolition of capital as private property within the limits of the capitalist mode of production” (Cap 3, Section 5, Ch 27) indeed.
So what kind of hybrid mode of production is killing textile workers in Bangladesh and criminalizing the young workers of the USA today?
Imperialism is using all the advanced techniques of a socialist mode of production (science, computing, planning, cooperation and accounting on a continental scale, etc) for the inhuman ends of the capitalist mode of production.
And where is the working class in the midst of all this conceptual turmoil?
If the methods of the new mode of production are forcing themselves on to capitalists, who are constitutionally antagonistic to them, why don’t we just put them out of their agony and run our own mode of production for ourselves?
Using Marx’s historical perspective we can put the Politics back in Political Economy where it belongs.
I agree Choppa, my own take on this is that it is a matter of taking seriously what Marx referred to as ‘laws of motion’, we have to look at what a ‘law’ is and how it constrains things in mechanics to get an idea of this. Since the early 20th century it has been recognised that in mechanics the essence of laws are the pair symmetry/conservation (Noether: to every conservation law there is a symmetry).
Marx’s analysis of the value form is structured around the analysis of a conservation law: value is conserved in exchange. We have to extend the analysis to the conservation laws what apply across the whole financial system in order to dissipate the illusions that it gives rise to. I think that Alan Freeman is falling for one of these illusions. I have been exploring this along with Dave Zachariah in a paper in the physics arXive ; http://arxiv.org/abs/1301.5974 but these are very exploratory stages of the argument.
I see money as a both a commodity which can be traded on the market and which has use-value in the sense that it stores mutually agreed upon amounts of exchange-value. In effect, money works like a promissory note, one which the holder trusts that some commodity which embodies socially necessary labour time or which is found in nature, will be able to be traded for, in future.
While it is true that money as gold had actual socially necessary labour time embodied in it, that type of money’s total value is inadequate in supply to serve as a universal equivalent in the modern, hyper-industrialised world.
Also reject Heinrich’s theory of value in re commodities, money, etc.
In evaluating Heinrich’s theory (or any other, for that matter) it is useful to consider how it deals with actual events in the world – does it help to understand or clarify them?
Heinrich’s book on the Three Volumes was originally written in German in 2004, before the current economic crisis broke out in 2007-2008. The preface to the 2012 English edition mentions the crisis, but does not connect it to the book as a whole except to say that understanding Marx’s Capital is essential. It would have been useful to draw a tighter connection between Heinrich’s interpretation and the roots of the present crisis; that would also concretize Heinrich’s theory. There has been a debate over whether this crisis is rooted in the underlying structure of the system, e.g. the falling rate of profit tendency (FRP), or is due instead to “capitalist greed” or policies like neo-liberalism. Saying something about this debate would help the reader understand the implications of Heinrich’s viewpoint.
Henirich published an article on “The Current Financial Crisis and the Future of Global Capitalism” on the MRZine site in June 2008. As in his book, Heinrich argues against those who believe that capitalism’s crises point to its collapse. In the book he takes on Luxemburg and Grossmann; in this article he tilts against unnamed contemporaries. But this article says nothing about Marx’s theory; it mainly presents a step-by-step view of the crisis up to then, with no overview.
The kernel of truth in Heinrich’s case is that capitalism’s crises in principle are cathartic for the system: they weaken the working class and destroy and devalue obsolete capital, thereby setting the stage for recovery. But he goes further: he seems to think that crises do no harm to capital. The article’s assertions about the “future of capitalism” advertised in the title are, to put it mildly, short-sighted: for the U.S. economy “a cyclical downturn might be unavoidable” (might!); and for the world as a whole, “this downturn has so far had relatively minor effects upon the global economy.” This appeared at a time when the global financial structure was in panic and the deepest downturn since the 1930’s was on its way!
Further: “Meanwhile, there is once again a new crisis as well as new predictions of the imminent downfall of capitalism. By now bourgeois economists and even the International Monetary Fund are also issuing warnings of the danger of an international financial crash with severe consequences for the global economy.”
Well, those who foresaw “an international financial crash” and “severe consequences for the global economy” would seem to have been right on the mark. Yet Heinrich mocks them with the same disdain as he has for his unnamed collapse theorists.
To put this together with his discussion of the falling rate of profit, I get the impression that he is trying to block a chain of implications: FRP theory implies collapse theory implies that the current crisis leads to downfall. Since he doesn’t (or didn’t a few years ago) see the current crisis as especially terrible, he seeks to undermine the theoretical roots of those who hold that it is. This was one article, but it was remarkably uninsightful.
Karl Popper once said that Darwin’s theory of evolution by natural selection was tautological, i.e. always true, not empirically falsifiable (then he seems to have changed his mind). I’m not sure whether Popper’s remark was definitely wrong, from a strictly philosophical point of view, but he missed the productivity of the theory, its ability to generate models that were insightful and, at least some of them, even testable.
In the same spirit, I tend to agree with Heinrich on the view that Marx didn’t actually succeed in demonstrating his law in a rigorous, theorem-like way. But so what? As Michael says, your maths depends on your assumptions about the real world. Marx’s assumptions are pretty realistic, they don’t deal with abstract entities with simple properties. And Marx’s law has generated insightful models and empirical research (which is what scientific theories do). Maybe Heinrich thinks that in order to assess the merits of some research one can look at its foundations and draw their conclusions, but to me this sounds like bad philosophy of science.
And then, even assuming that Marx changed his views about the law, what should we do with this revelation? Dump our models and previous research, just to show we are true Marxists? Find a different intellectual father? Start guessing about what Marx could have seen as more important? I can’t see other options outside these unattractive, unhelpful, and probably unfeasible ones.
Heinrich’s treatment of these subjects is convincing because he subjects the three volumes of Capital to a historical materialist analysis rather than accepting them as the final word on Marx’s thought. This is an important point because Marx died while he was still working on volumes 2 and 3, creating a problem that no editor, however skilled, could solve in trying to publish unfinished work.
This attempt at a refutation is wholly inadequate because it does not respond to the contrary from the same historical standpoint; instead of a historical approach to Marx’s ideas on these questions, we are treated to a series of assertions about what Marx meant in works that he never completed, as if this were at all convincing.
The point of Capital was to discover and untangle the hidden essence of social relationships under capitalism, not provide a superior school of macroeconomic policy to that of bourgeois ideologists.
“The point of Capital was to discover and untangle the hidden essence of social relationships under capitalism, not provide a superior school of macroeconomic policy to that of bourgeois ideologists.”
Discuss!
(A perfect question for a finals exam in economics 😉 )
Thanks for this post! I look forward to seeing the piece you write with Carchedi. I have a few passing thoughts:
One, Heinrich’s thesis that the rate of profit is indeterminate due to all of the factors that influence the denominator and numerator is a common argument and it is silly that he places the argument in the context of the MEGA project, as if the MEGA project somehow gave us this new insight that the rate of profit is indeterminate. All of his footnotes in this section of the paper are just footnotes of Vol 3 of Capital. His argument follows the same structure as Sweezy’s and many other people. It is entirely unoriginal. I feel like there is a bait and switch going on where the reader gets intrigued that there will be some novel new interpretation of the LTRPF based on the MEGA project and then we just get a re-hashing of a very old argument that is not dependent at all on MEGA. It is a positivist reading where each factor influencing the rate of profit is independent. Klimans paper “Contradictions of Capitalist Value Production: Internal, Inevitable and Insuperable” does a good job of countering this positivist approach with a dialectical one. I believe Carchedi’s piece on tendencies in the appendix to “Frontiers of Political Economy” is also a good step toward understanding the LTRPF in a dialectical way.
Two, as much as I’m interested in the MEGA project Heinrich’s piece makes me worry that the project will be used in an overly-academic way to relativize all of Marx’s claims- or worse, to turn away from doing theory about the real world and instead do theory about the history of ideas. It’s all nice for doing Phd theses and writing books but it does very little to advance our understanding of capitalism. I think Heinrich’s use of the MEGA project in this essay is really problematic. There is a lot of speculation about Marx’s motives based on cherry-picked text. Regardless of how many times Marx turned the idea around in his head, regardless of how well or fully he put forward the idea, it is entirely possible to put forward a theory of the LTRPF based on Marx’s writing. In fact the law springs quite naturally from the core of his value theory. I approve of Kliman’s position on ‘interpretation’ from his “Reclaiming Marx’s Capital” which states that the best interpretation of a text is one that makes sense of the text, that makes it internally coherent. Heinrich is reading Marx with the aim of making his text incoherent. He wants us to leave feeling like we known nothing at all, shaking our heads in confusion, waiting for some other theorist (like Heinrich maybe?) to come along and fix it all for us. But the reality is that Marx’s theory of the LTRPF is entirely coherent and doesn’t need to be fixed.
Thirdly, the end of Heinrich’s piece talks about the need to present the rate of profit in some finished form which takes into account the further development of commercial and credit capital that takes place in the later chapters of Vol. 3. Again, this is not original and does not require some deep reading of the MEGA texts to make this argument. David Harvey said this 30+ years ago in Limits to Capital and used it as his basis for constructing his incoherent geographical theory of crisis. I fear that Heinrich’s open-ended call for more “complexity” in talking about the profit rate just enables Harveyish incoherence where complexity just turns into description with no theoretical core. On other hand, what do folks think of Alan Freeman’s recent paper “Monetary Assets and the Rate of Profit” which does argue for a more finished-form of the rate of profit? Freeman argues that we should include credit-money in the denominator of the rate of profit and that doing so solves various empirical anomalies regarding the neo-liberal period.
I’m sorry, but Ortho-Marxists draw totally arbitrary lines of demarcation in terms of what they accept into the canon. Given that the vast majority of Marx’s economic writings consist of unpublished manuscripts, Marxists basically engage in a game of pick-and-choose to determine what manuscripts are allowed to be considered “the” Marxian position. “Oh, the unpublished mountain of manuscripts that Engels worked up into “Vols. II and III are indisputable canon, but not all that stuff in the MEGA that those German pointyheads are putting together.” Sorry, but that’s rank hypocrisy.
PL Ghost,
I understand that there is always interpretation when dealing with unpublished manuscripts. I am not questioning that. That’s why I put forward Kliman’s criteria for an interpretation. I also questioned what was more important: a detailed history of Marx’s thought process, or a coherent theory of capitalism. I am more interested in the later. Does that make me an “ortho-marxist”? I also questioned the structure of Heinrich’s piece where he uses the MEGA project to suggest that there is some new reading of the LTRPF revealed by the MEGA but then only deals with Vol 3 when he actually talks about the LTRPF, and then he just repeats very old critiques of the LTRP with no new ideas at all. This seems to me to be just fluff.
For a big fat F, sure.
I remember concluding that economics was mostly smoke and mirrors in sixth grade thanks to tautological concepts like “opportunity cost” — if you buy X with your money, you can’t buy Y.
It’s too bad most of the comments in this thread follow Roberts’ mistake of piling up assertions about the validity of Marx’s concepts when Heinrich is questioning and contesting those concepts as unfinished work. I suppose this is what happens when you tell a Christian about the history of the gospels rather than treating them as the final word.
My previous comment was a response to Choppa Morph’s May 21, 2013 7:26 am comment but I botched the placement. Apologies.
“Most of these comments” are a bit more than simply assertions about the validity of Marx’s concepts. The comments argue, among other things, that the validity of Marx’s concept withstands Heinrich’s speculations (and indeed, speculations is what they are) because:
1) Heinrich reduces the validity of Marx’s critique to, and exclusively to, a “mathematical” formula that he, Heinrich, detaches from the empirical, social, historical basis for Marx’s analysis of the FROP
2) Heinrich accuses Engels of either misrepresentation of the significance to the FROP to Marx or misapprehension of that significance in Engels’ editing of volume 3 when in fact Marx writes of this significance in manuscripts that Engels never edited
3) the historical data of capitalism since the publication of volume 1, or 2, or 3 of Capital confirms the significance of declines in the rate of profit to the actions of capitalists and the directions of capitalism
4) that nothing Heinrich produces re Marx’s dissatisfaction with his own theory of crisis, or with his own critique produced in Vol 1 speaks directly to the significance of the tendency of the rate of profit to fall as capital accumulates
5) rather than providing a “historical materialist” analysis of Marx’s critique– which would show that Marx is engaged with answering the very question that political economists cannot, and dare not, answer– “how does labor come to be organized as a value, as value producing, as both a use value and an exchange value” Heinrich is providing a speculative inquiry
6) Heinrich in reducing the tendency of the rate of profit to fall to an “iron law” completely ignores the cyclicality of capitalism an understanding of which is essential to Marx’s “immanent critique”– the critique of capital’s development of and AS its own limitation– this ignorance is made painfully clear to the most casual observer when Heinrich claims that increases in relative surplus value cannot be considered a counteracting force when increases in relative surplus value must be the condition of the law’s operation itself. Uh… not to put too fine a point on it, but the extraction of relative surplus value, and increasing rates of surplus value is both– each manifestation counteracting factor, cause factor exists in the other, in the identity of the other, as the negation of the other; as capital every time expansion turns into contraction, every time accumulation turns into the obstacle to accumulation.
“Heinrich accuses Engels of either misrepresentation of the significance to the FROP to Marx or misapprehension of that significance in Engels’ editing of volume 3 when in fact Marx writes of this significance in manuscripts that Engels never edited”
Publishing unfinished work is bound to lead to errors/misrepresentations since the author is not finished developing his ideas. Engels’ skill or lack thereof has nothing to do with that problem.
Marx was very consistent. I would argue that his main views were already there in 1850 and did not change very much (albeit more technical)
Heinrich proves nothing but on the other hand, to find the rate of profit in a Marxian sense takes a lot of purging of data. If the rate of profit in Roberts’ writing has fallen, he does not show the methodology of finding it. How does it relate to the formulae? There is a way of reconciling, viz to say that the rate of profit is more or less equal to ROCE, but that is found business by business. How do you generalize to the rate of profit? Instead of disproving Heinrich’s tired old arguments, it would be good to ask the question if there is one average rate of profit in a globalized world with vertical relations to the producing centers. The Gesamtkapital Marx talks about, where do we find it today? Wasn’t his a national one? It seems so to me. Is it 20 big corporations that are constituting the Gesamtkapital and do they have more or less identical rates? There is the thwarting of the rate of profit by anything financial and so on and so forth. More complicated: there may be a certain national averaging in the developed western countries because of their national relations (workers relations), but elsewhere, how much is fixed capital increased (think of Bangladesh). These are issues that have to be addressed by serious modern Marxism.
Part 3 of Capital Volume III does read as if Marx has found a basis for *cyclical* crises in the falling rate of profit consequent upon capital accumulation itself.
Whether this really was Marx’s position on cyclical crises is not totally clear.
But for Engels to make it such a prominent part of his masterpiece, you would have thought it must have been at some point. Maybe he did had doubts towards the end of his life, & we must remember that he never published Volume III whilst alive.
Marx also state in Part 3 that disproportionality & ‘society’s power of consumption’ (realisation problem) had something to do with crises? But there’s nothing in part3 of Vol. III stating them to be the root causes of crises. It reads as if the falling rate of profit is the cause that lies behind the disproportionality or generalised overproduction. Or to be more exact the rise in the value composition of capital is the root cause.
If this was Marx’s viewpoint, was he right to hold this to be the explanation of cyclical crises?
This is essentially an empirical question. Can crises be explained by a falling rate of profit caused by a rise in the value composition of capital? The weight of evidence doesn’t appear to be there. But that’s not to say all crises have to this singular cause. There may be evidence for some of them, e.g. the current crisis dating back to the fall in profitability in the 1960’s (Andrew Kliman), itself a result of a rise in the value composition of capital.
It could be argued, at least theoretically, that Marx’s law of the tendential falling rate of profit better fits a longer cycle (or wave) now generally referred to as the Krondratieff cycle. (I like Mandel’s argument about it being a wave with a downward tendency that’s endogenous to capitalism, but with no guaranteed upturn, unless gold, or a new more productive basis for production is discovered, e.g. oil).
But I think we need to be careful that we don’t miss the importance of the falling rate of profit for capitalism. It is probably not the basis of the cyclical crises of capitalism over the last 200 years. But it can still be the nature of the ‘final’ crisis of capitalism, even if that crisis takes an outward form of generalised overproduction. Because this would be the natural reaction capitalism would take to an underlying crisis of profitability, especially under a fiat money regime. By which I’m referring to the printing of money & the vast expansion of credit/debt to artificially support recorded profit rates. Profit rates based upon credit/debt are claims on future labour time that may not be realised. It that sense that are fictitious profit rates that delude the capitalists until realisation dawns that the debt can never be repaid. This sounds very much like the crisis of 2007/08. Governments & central banks coming to the rescue & taking some of the bad debts onto their books doesn’t make the profit rates real or resolve the crisis of profitability. But again, all this is up for debate. The empirical evidence is far from conclusive because it’s so difficult to calculate, or even estimate, in terms of Marxist labour values. It may, I accept, be just another crisis of overproduction. My guess though is that there is a profitability issue.
The easy way to look at it is to differentiate cyclical & breakdown crises, at least in terms of theory. Cyclical crises capitalism can always potentially recover from as the law of value brings prices back in line with values. But capitalism will eventually, if it continues, run into the material limits of planet earth. Oil & many other resources, such as fertile land, are limited. Only a certain number of human beings can be supported by earth’s eco-system. When population growth reaches its limit, so too does labour time. This is then where Part 3 of Volume III takes on a particular importance. With labour time limited (as I think Marx assumes, correct me if I’m wrong) to make a profit capitalism has to increase relative surplus value, i.e. it has to steal a growing % of the working day. To do this without making the workers materially worse off requires productivity gains. This can theoretically happen & profit rates don’t fall & workers just get a smaller & smaller % of the value they create, even if this value represents the same level of material well-being. But they would see a vast increase in inequality, even without any increases in profit rates. But given the resource limitations is it not more likely that the increases in relative surplus value at the expense of the workers, actually makes the workers materially worse off? As we can see with oil today, as the price of energy has increased both the labour time going to constant & variable capital can increase at the expense of surplus value. That is the rate of exploitation goes into reverse, workers are materially worse off & profitability suffers (if c increases more than v then we also have the increase in the organic composition of capital, even without new technological improvements). So without increases in absolute surplus value available, the falling rate of profit can go hand in hand with attacks on the workers standard of living & generate the conditions ripe for revolution.
So let’s not forget the importance of the falling rate of profit, even if it’s necessary to make clear the role of credit/debt in crises of overproduction.
Before criticizing Heinrich we need to understand his case. Roberts doesn’t have it right. According to Heinrich, Marx initially holds the rate of surplus value (s/v) constant so that if the organic composition of capital (c/v) increases, then there will be, over the long-term, a fall in the rate of profit (s/c+v); c increases relative to v, and since only v creates s, there will be a decline in the rate of profit.
But Heinrich also attributes correctly to Marx the view that the rate of profit will decline even if there an increase in s/v, which entails that the increase in s/v is part of his theory of the falling rate of profit and not a “countertendency.” That is why Heinrich says that Marx’s falling rate of profit theory, “as such,” contains the idea that s/v may increase, though less fast, than the value composition of capital, c/v. So Marx’s refined theory about the declining rate of profit, because he gave up the idea that the rate of s/v remains constant, cannot be tested empirically because it is theoretically impossible to sort out “increases in s/v” from “s/c+v.” If Heinrich is right about Marx incorporating a rise in s/v into his theory of the falling rate of profit, “as such,” Heinrich is right that the theory, understood as a causal theory, is in deep theoretical trouble. By causal theory is meant that “increase in s/v” is logically separate from “increase in c/v,” so that the calculation of one proceeds independently from the other. But Heinrich says that can’t be done, even though Marx tries unsuccessfully to “indirectly” do this in Capital 3 in his example of different numbers of workers producing the same mass of surplus value. The example fails because Marx is not able to show in it that the amount that c increases is offset by the same amount that v decreases, so that we do not know whether the value composition of capital, c/v, decreases or increases, and therefore do not know whether the rate of profit, s/c+v, has increased or decreased. “So nothing has been proven.” The crucial passage in Heinrich is: the law, “as such,” is unsubstantiated because “contrary to a widespread notion, the increase in the rate of surplus value as a result of the increase in the productivity (of labor) is not one of the counteracting factors but rather of one of the conditions under which the law as such is supposed to be derived, the increase in c occurring precisely in the course of the production of relative surplus value that leads to an increasing rate of surplus value.”
themoor83 clarifies a lot of things in this comment. Among other things a total incomprehension on the part of himself and Heinrich as to how Marx presented the effects of developments in the various proportions of value, elements of capital etc on one another and on the whole.
I’ve just been reading ch 3 of Capital 3, on the relationship between the rate of profit and the rate of surplus value, where Marx’s procedure is crystal clear. He has three variables (constant capital, variable capital and surplus value) and demonstrates what happens when one or more of them vary or remain constant. So rising, constant or falling surplus value is part of the investigation undertaken before examining any specific long-term tendencies for one or the other variable to rise or fall. If a long-term tendency does arise, then the constancy or variability or any element in the equation is in no way given in advance, although the relative behaviour of each element is shown in the equations for any particular tendency thus arising.
Elementary (and probably wilful in the unconscious “natural” way bourgeois ideologues are) misunderstandings and misrepresentations. Quite appropriate foundations (sand) for a whole book or even school of bourgeois theory to be erected on.
“Publishing unfinished work is bound to lead to errors/misrepresentations since the author is not finished developing his ideas. Engels’ skill or lack thereof has nothing to do with that problem”
In part, I agree, Engels’ skill or lack thereof is immaterial. But it ain’t so to Heinrich.
In reference to his discussion of the FROP, Heinrich says, o that Engels, when confronted with a “sea of notes” tried to assemble such a hodge-podge into a publishable whole, and struggle implies that Engels cut and pasted what he thought was important regardless of Marx’s later misgivings. Except Heinrich produces nothing that would cause us to doubt the emphasis he, Marx, placed upon the tendency of the rate of profit decline in the Grundrisse, which Engels did not edit.
So exactly where is the error or misrepresentation especially when Heinrich’s “more accurate” rendition depends equally on UNFINISHED WORK? Why, if “it’s bound to lead to errors and misrepresentations since the author is not finished developing his ideas” should we accept Heinrich’s error/misrepresentations over Engels?
Does anyone seriously think Engels published what he published edited what he edited without referring to the countless discussions he had with Marx over these issues? Now I know I’m assuming that Marx discussed this with Engels, and I can’t be sure that such discussions ever took place, but I am certain that no such discussions ever occurred between Heinrich and Marx.
Which is exactly why the “advance” of Marxism is not dependent upon a critique of texts, but upon a critique of capitalism. So… so the more I read Heinrich, the more I like old Fred, warts, “dialectic of nature,” supra-historical notion of the law of value, “simple commodity production” and all, because Engels never lost sight of that.
Reblogged this on Rawlin'sView Blog and commented:
Just a couple of comments: 1) Heinrich acknowledges the context in which Engels edited Marx’s manuscripts into Capital volumes 2 and 3. Editor-writer relations in the 19th century were different — editors like Engels could “step in” for the authors. See this older article by Heinrich: Engels’ Edition of the Third Volume of Capital and Marx’s Original Manuscript in: Science & Society, vol. 60, no. 4, 1996, pp. 452-466. You can find it on his web site: http://www.oekonomiekritik.de/
2) Additionaly, I think Heinrich nails the issue pretty well in terms of “context”. In a footnote for his MR article, he noted that if an idea falls apart on its own terms, in the abstract, it’s not going to hold true in any concrete context. No amount of in-context applications and countervailing factors can shore up an erroneous idea.
And still, it falls
One critical element that I think Heinrich misses in his discussion of the “cheapening” of the means of production as negating the tendency of the rate of profit to fall is in fact the social dimension of what it means for the the means of production to become cheaper.
IN his discussion in Notebook IV of the Grundrisse, subsection–“Barrier to capitalist production” (p 443-446, Penguin edition, Marx concludes:
“Thus in a crisis–a general depreciation of prices– there occurs upt to a certain moment a general devaluation or destruction of capital. The devaluation, like the depreciation, can be absolute and not merely relative, because value expresses not merely a relation between one commodity and the other, as does price, but rather the relation between the price of the commodity and the labour objectified in it, or between one amount of objectified labour of the same quality and another. If these amounts are not equal, then devaluation takes place, which is not outweighed by appreciation on the other side, for the other side expresses a fixed amount of objectified labour which remain unchanged by exchange. In general crises, this devaluation extends even to living labour capacity itself. In consequence of what has been indicated above, the destruction of value and capital which takes place in a crisis coincides with– or means the same thing as– a general growth of the productive forces, which however, takes place not by means of a real increases of the productive force of labour (the extent to which this happens in consequence of crises is beside the point here, but by means of a decrease of the existing value of raw materials, machines, labour capacity……
[NOW, HERE COMES MY FAVORITE PART]
In the same way, on the other hand, a sudden general increases in the forces of production would relatively devalue all present values which labor objectifies at the lower stage of the productive forces, and hence would destroy present capital as well as present labouring capacity. The other side of the crisis resolves itself into a real decrease in production, in living labour– in order to restore the correct relation between necessary and surplus labour, on which, in the last analysis, everything depends.”
Now I’ve left out the phrases Marx italicized, but clearly Marx is point out that a general increase in surplus value precipitated by the alteration of the ratio between necessary and surplus labour-times must lead to a general devaluation, a general decline in valuations, a reduction in profitability even when the increase is based on a “cheapening” of the means of production, whether that cheapening be as a result of a crisis, or prior to the full blown emergence of the transformation of the expansion into a crisis, through the “progressive” devaluation brought on by improved productivity.
I think it is impossible to grasp the significance of the tendency of the rate of profit to decline separate and apart from the role of the prices of production in the establishment of the general rate of profit, and the need for equalization of profits based on the size of capitals.
And you know what else? I think the above from Marx validates Kliman’s arguments vis-a-vis the way we must calculate the valuation of the means of production.
Sartesian responded about the need to recognize that attacks on Engels are used as a way to indirectly express disagreement with Marx.
“Well, that’s a separate subject, and we don’t want to fall into the reflecting pool of Heinrich’s mistake. I mean I think Engels makes lots of mistakes…”
I disagree that this is a separate subject because Michael is responding to Heinrich’s interpretation of Marx’s theory of capitalism and Heinrich makes five interrelated arguments:
1.Marx’s theory is a monetary theory of value.
2. Marx did have a theory of final collase of capitalism but abandoned it.
3Marx’s theory of the FROP was held by Marx but later abandoned.
3.therefore, Marx did not leave us a complete theory of crisis
5. Engels led the Marxist movement away from what Marx fundamentaaly said about capitalism in Capital.
All five arguments by Heinrich have supporters and detractors in the posts on Michael’s blog. These are the question that ought to be responded to if Michael is going to adecuately answer what Marx ‘really’ was saying about capitalism and its future.
I’ll give a brief response to each of Heinrich’s arguments.
1. Was Marx or any later Marxist really arguing that the value of a commodity reflects the amount of labor concretely used to produce a commodity, other than accidentally? No, but methodogicaly Marx had to assume that they did in order understand the development of capitalism, for you need to understand the effect that changes in the amount of labor needed to repoduce a commodity would have on the future prospects of capitalism.
” The commodity form, based on the separation of purchase and sale, and the money form, in which this separation is developed as value acquires a bodily form independent of the act of exchange, explain the possibility of crisis, and define the form in which a crisis must necessarily appear. However, they still tell us nothing about how any particular crisis might occur, nor do they contain within themselves the explanation for the necessity of crisis’,[My underline]TSV2, p509.
The Russian scientist Ilyenkov had the following to say about Marx’s theory of capitalism:
It is not the commodity concept or value concept that contains in itself the entire diversity of other theoretical definitions of capitalism but rather the real commodity form of links between producers is the embryo from which all the ‘riches’, including the poverty of the wage workers, develop. That was why Marx was able to reveal all the contradictions of modern society in his analysis of simple commodity exchange as an actual, directly observable relation between men. (my underline) Ilyenkov, The Concrete and the Dialectics of the Universal and the Individual
To be able to show where capitalism is going, Marx had to assume that all commodities start off exchanging at their value, and the show what will be the effects of changes in value on the process of capital accumulation. Let Professor Heinrich pursue what is the relation between prices and values at a given moment in time; that has nothing to do with Marx’s purpose.
2. Heinrich, unlike many current Marxist, thinks that Marx did hold a theory of capitalist collapse. Heinrich argues that Marx just abandoned that theory in 1858-without bothering to tell his buddy Engels. “Marx fundamentally broke with the notion of a final crisis of capitalism. (Heinrich in The Current crisis and the future of golbal capitalism.) Simon Clarke also has asserted this. There are two questions involved here-did Marx assume that capitalism would collapse and does his theory support such an assumption. The answer to the first question is yes, and the answer to the second is what this debate is all about.
3. This is an assertion without substance-There was nowhere in Marx’s writings that suggest he abandoned the FROP theory. Here is what he said in 1868: ‘The tendency of the rate of profit to fall with progress in society. This is already evident from what was developed in Book I on the alteration in the composition of capitals with the development of the social productive force.’ P137, Letters on ‘Capital’, Marx to Engels April 30, 1868
4.That Marx never left us a completed theory of capitalis crisis is a very old argument without substance: This is what Grossman had to say:
‘ The Marxist theory of accumulation described here comprises not only a theory of breakdown but also a theory of crises. Previous writings on Marx could not come to terms with the essence of his theory due to their lack of understanding of the method that underlies Marx’s analysis and the structure of his magnum opus. The objection has repeatedly been made that, despite its crucial role in his system, Marx nowhere ever produced a comprehensive description of his theory of crisis, that he made scattered conflicting attempts at an explanation in various passages of the book. This objection rests on a crude misunderstanding. The object of Marx’s analysis is not crisis, but the capitalist process of reproduction in its totality. (my underline) Grossman, p83
To empirically answer whether his theory suggest that capitalism will suffer crises and a collapse, you need to start with an understanding ofwhat that theory is derived from. It is derived from an abstract model which assumes that globalization has taken place. In other words you need to know what the world rate of profit is, and not the rate of profit of a particular entity within the ‘ capitalist process of reproduction in its totality.’ This model was developed to help arm a working class movement, not to aid in endless arguments with the likes of Heinrich, Steedman.
5. This argument that the whole Marxist movement was led astray from Marx by Engels is reidiculous. Lenin, Trotsky, Luxemburg, Propbrashensky were no puppy dogs who were led around on a theoretical leash, but tough skinned people dedicated to leading the working class to abolishing capitalism and saving humanity from barbarism. This is how Lenin interpreted Captital:
‘The position of revisionism was even worse as regards the theory of crises and the theory of collapse. Only for a very short time could people, and then only the most short-sighted, think of refashioning the foundations of Marx’s theory under the influence of a few years of industrial boom and prosperity. Realities very soon made it clear to the revisionists that crises were not a thing of the past: prosperity was followed by a crisis. The forms, the sequence, the picture of particular crises changed, but crises remained an inevitable component of the capitalist system. While uniting production, the cartels and trusts at the same time, and in a way that was obvious to all, aggravated the anarchy of production, the insecurity of existence of the proletariat and the oppression of capital, thereby intensifying class antagonisms to an unprecedented degree. That capitalism is heading for a break-down—in the sense both of individual political and economic crises and of the complete collapse of the entire capitalist system—has been made particularly clear, and on a particularly large scale, precisely by the new giant trusts.
‘The epoch of capitalist imperialism is one of ripe and rotten-ripe capitalism, which is about to collapse, and which is mature enough to make way for socialism. Lenin, Opportunism and the Collapse of the 2nd International, cw vol 22, p108-20’
Notice that Lenin was not ‘fatalistically’ waiting around for that breakdown, but was inbstead trying to build a revolutionary wing in the working class. He understood that capitalism would increasingly need to attack the working class and he was preparing for the expected battles. The importance of the theory of breakdown or collapse is not to suppose it is some single event, but rather a process that is evolving over time. It is a theory of the evolution of capitalism. That is why it is irrelevant whether capitalism has recurrent crisis-be they cyclical, profit, long wave- unless you understand them as taking place under a capitalism that is developing crisis and other contradictions on an increasing’ scale.
The shortening of the periods between great crises is truly remarkable. I have always considered the periods not to be of a constant length, but of a diminishing length; it is particularly satisfying to find that it shows such manifest signs of a descending movement; that is a bad omen for the longevity of the capitalist world. Letters on ‘Capital’ p179 Marx to Lavrov, June 18, 1875
He would have only 8 more years to correct this ‘incorrect’ prognosis..
Horace :” Was Marx or any later Marxist really arguing that the value of a commodity reflects the amount of labor concretely used to produce a commodity, other than accidentally? ”
I think Marx definately argued this in the same sense that the classical economists did : that when supply and demand balance, prices will be proportional to values and hence values are the gravitational point for prices. It is thus perfectly valid for a general analysis of exploitation to take prices as equal to values since if you take a large bundle of goods comprising wage goods their price will, by regression to the mean, be very close t proportional to the labour required to make them. By subtraction from the total working day, it follows that the monetary expression of surplus value as profit interest and rent will be very close indeed to the surplus labour hours.
If prices are not closely correlated to labour values, but determined by something else entirely — subjective utility, energy requirement, land use take your pick — then the analysis of exploitation and the explanation of surplus value would be invalid.
Empirically of course we know that prices are closely correlated to labour content as many empirical Marxist econometric studies have demonstrated. So ‘later Marxists’ certainly have argued that the labour theory of value does hold empirically.
This rejection of the labour theory of value, for what amounts to no more than a supply and demand theory on Heinrich’s part, is a serious misrepresentation of Marx and a flight from science.
I think Paul is right here, but there could well be a problem in Horace’s formulation: “the amount of labor concretely used to produce a commodity”. Marx takes a great deal of trouble to distinguish between the concrete work applied to a commodity (hammering, cutting, sewing for a cobbler making a shoe, say) and the abstract, general, homogeneous social labour applied throughout an economic system to all commodities. This latter, which can be measured in terms of necessary labour-time in every commodity, forms the basis for the theory of value.
If we are clear on this, then it’s easy enough to grasp that an economic system (say the capitalist world market) only disposes of so much such labour-time for any given period, and that the conditions of capitalist exchange compel this labour-time to be doled out proportionately between all the commodities being exchanged in the system. The portion of socially necessary abstract general labour-time in any given commodity is then the value of this commodity.
All the rest follows from this assumption, which was used by Smith and most consistently by Ricardo (“our” classical bourgeois economists, so to say). Marx used the same assumption but worked out its consequences far more rigorously and in far greater detail than Smith or Ricardo. Largely but by no means exclusively because he wasn’t put off by the unpleasant implications it held for the capitalist system and bourgeois society as transient historical phenomena in the way that his bourgeois predecessors were.
Paul and Choppa simply ignore both Marx’s theory of price and capitalist reality when they take labor-time as the “center of gravity” of average price. Any enterprise with a high organic composition of capital (say an electric-power generator), selling power at its price (ie., cost) of production, will receive far more surplus-value in relation to its labor-cost than will a company with average organic composition. Any enterprise with a monopolistic advantage will gain more surplus-value relative to a company of the same organic composition in a competitive market. And since the companies with highest organic composition also tend to be the biggest, most monopolistic, ones, the gap in profit margin between such a one and the “average” lower composition/ higher competitivity enterprise is multiplied accordingly. Actually expended labor-time thus has no necessary relationship to price, whether in theory or in reality.
company
Fosforos is confusing two things here:
a) what actually happens in a capitalist economy
b) what Marx thought happens.
a)As to what happens, Allin Cottrell and I showed as far back as 1995 that for the UK economy actual profit rates in industries are inverseley related to the organic compositions of capital just as would be exepected from Capital Vol I. (see http://users.wfu.edu/cottrell/vol3.pdf) we then verified that the same holds for the US economy ( A note on the organic composition of capital and profit rates
WP Cockshott, A Cottrell – Cambridge Journal of Economics, 2003). Others have subsequently verified this for all of the OECD.
For the USA the classical price of production theory only applies to state regulated utilities like electricity, so for the particular example chosen by Fosforos what he says is valid, but for the generality of industries it is not.
This inverse empirical relation between profit rate and organic composition only makes sense in the light of the labour theory of value.
b) Marx says two inconsistent things on organic composition and profit rate. On the one hand he puts forward the theory of transformation of values to prices of production, but on the other hand he says that industries with a high organic composition like Railways do not earn average profits but only the rate of interest so when confronted with conflicting empirical evidence, he modifies his basic theory.
fosforos17 couldn’t really have put it more clearly. The high tech low-labour corporations do indeed pump home much more surplus value than their low-tech rivals. If fosforos would care to read Capital, especially Book 3, Chs 9 and 10 (The Formation and Equalization of a General Rate of Profit) s/he would see that this is precisely the point of the whole analysis.
The problem to be solved is why different spheres of production with such different rates of surplus-value nonetheless end up with the same average rate of profit. And Marx solves it by demonstrating how values are transformed into prices of production, and the whole of the capitalist market is transformed into one single organ of production and circulation generating an aggregate surplus value that is divvied up as profit between all capitals producing it according to their ownership share in the aggregate capital in the system.
The only condition on the market prices of the commodities is that they cannot fall below the cost of production without bankrupting their producer. But the actual amount of surplus value (surplus general necessary labour-time) contained in the final market prices varies according to the average general rate of profit in the market system as a whole, not according to the rate of surplus value in the particular sphere of production of any given commodity.
Hence the value-pump operating in capitalist society by which the value produced in labour-intensive spheres of production (services – McDonald’s, underdeveloped agriculture, simple manufacturing – garments, etc) gets sucked out of these spheres (often whole countries with low-tech production) and into high-tech, advanced spheres of production (and countries).
Was Marx or any later Marxist really arguing that the value of a commodity reflects the amount of labor concretely used to produce a commodity, other than accidentally? ”
I think Marx definately argued this in the same sense that the classical economists did : that when supply and demand balance, prices will be proportional to values and hence values are the gravitational point for prices.
Paul: Two things could have been said better. I should have said price instead of value and I should have said actual labor expended instead of ‘concrete’ labor, but my point remains true, that Marx realized that on the level of a capitalist economy as a whole the price of a commodity only accidentally (or under certain circumstances) reflects the actual labor expended in production. This in no way detracts from the fact that actually expended labor is the fundamental determinant of the actual price of a commodity and Marx assumed that price equals labor extended=individual value==social value=market value=price of production. Commodities sold at the price of production would be close to the actual labor expended only if the producers composition of capital were the average in society. (For various reasons, even this would not necessarily be true.) Marx was not trying to ‘prove’ that workers were exploited, he was trying to show how changes in the value(labor expended) is fundamental for understanding why capitalism is an historically limited system. To do this, he started out developing a model in which price=value price of production, in order to show the effects of changes in the value of commodities on the process of accumulation. I do not disagree with what you say:values are the gravitational point for prices. But on the surface of society you can not go directly from labor expended to price. Labor expended needs to go on the market and find out how much labor it will actually exchange for. This can vary quite a bit from the individual value,
Horace C writes: “Marx was not trying to ‘prove’ that workers were exploited, he was trying to show how changes in the value(labor expended) is fundamental for understanding why capitalism is an historically limited system.” But this isn’t quite true and anyway it’s beside the point. One of the things he does is prove (if you accept his theory) that workers produce wealth that they aren’t paid for and that the capitalists appropriate for themselves and get paid for. This is a good enough definition of exploitation. Just as much as working for nothing on the seigneur’s estate for half my life is, or working all my (nasty, brutal and short) life for the slave-owner is.
Marx also showed in lots of ways that “capitalism is an historically limited system”, one of the most convincing, theoretically, being the way changes in labour needed in production affect the prime mover of the system, namely profit.
There is so much explanatory power in Marx’s theory of value that it doesn’t make very much sense to argue about which bits of it he was really trying to prove and which bits just happened to fit as part of the general pattern of things.
Choppa Morph says: There is so much explanatory power in Marx’s theory of value that it doesn’t make very much sense to argue about which bits of it he was really trying to prove and which bits just happened to fit as part of the general pattern of things.
Of course there is a great deal of explanatory power in all of Marx’s writing, but Capital was not just written to show of off his analytical power, but to explain to workers why it is objectively necessary to overthrow capitalism. Capital is an essential tool because the contradictions of capital increase over time and will force the working class to attempt to solve those growing contradictions by making a revolution. That capitalism is exploitative is the basis of capitalism, but it is the growing contradictions and not that workers are exploited that will drive working people to make a revolution. Capital is just one tool that Marx made to arm the working class. That is why Engels wrote the following, which I had already quoted above:
‘According to the laws of bourgeois economics, the greatest part of the product does not belong to the workers who have produced it. If we now say: that is unjust, that ought not to be so, then that has nothing immediately to do with economics. We are merely saying that this economic fact is in contradiction to our sense of morality. Marx, therefore, never based his communist demands upon this, but upon the inevitable collapse of the capitalist mode of production which is daily taking place before our eyes to an ever greater degree.’ Preface to the Poverty of Philosophy.
Here is the rub. If Marx is wrong about the contradictions of capitalist accumulation increasingly becoming worse, then capitalism will never be overthrown and exploitation will continue. Then we aught to do what reformers such as Harvey and Wolff: find some band aids to make it better.
Bit late here, but Paul C’s statement here has been nagging inside: “Marx says two inconsistent things on organic composition and profit rate. On the one hand he puts forward the theory of transformation of values to prices of production, but on the other hand he says that industries with a high organic composition like Railways do not earn average profits but only the rate of interest so when confronted with conflicting empirical evidence, he modifies his basic theory.”
I just ran across a passage in Capital 3 that might be the basis for this remark. It concerns the last of the “Counteracting Influences” (chapter 14) to the Law of the Falling Rate of Profit, namely number 6, “The Increase of Stock Capital”, and here it is in full:
“The foregoing five points may still be supplemented by the following, which, however, cannot be more fully treated for the present. With the progress of capitalist production, which goes hand in hand with accelerated accumulation, a portion of capital is calculated and applied only as interest-bearing capital. Not in the sense in which every capitalist who lends out capital is satisfied with interest, while the industrial capitalist pockets the investor’s profit. This has no bearing on the level of the general rate of profit, because for the latter profit = interest + profit of all kinds + ground rent, the division into these particular categories being immaterial to it. But in the sense that these capitals, although invested in large productive enterprises, yield only large or small amounts of interest, so-called dividends, after all costs have been deducted. In railways, for instance. These do not therefore go into levelling the general rate of profit, because they yield a lower than average rate of profit. If they did enter into it, the general rate of profit would fall much lower. Theoretically, they may be included in the calculation, and the result would then be a lower rate of profit than the seemingly existing rate, which is decisive for the capitalists; it would be lower, because the constant capital particularly in these enterprises is largest in its relation to the variable capital.”
First I’d like to ask Paul if this is in fact the source for his remark.
Second, if it is, then we should note that Marx doesn’t write that railways earn “only […] the rate of interest” but “yield only large or small amounts of interest, so-called dividends”.
Third, I don’t think this is Marx modifying his basic theory at all (concerning the formation of the general rate of profit), but rather him thinking aloud about the way the new joint-stock collectivism of capitalist ownership introduces further complications to the “immaterial” (as regards the fundamental theory) division of the general profit into “interest + profit of all kinds + ground rent”.
It does show him, of course, reacting immediately to a new phenomenon affecting the appearance of profit and its distribution at the cutting edge of economic development.
So on the whole, given the tentative character of this passage, “inconsistency” isn’t really the issue.
It is interesting that Marx includes this phenomenon among the “counteracting influences” because of its absence from the profit equation, so to say. If it were taken into account, then it would lower the rate of profit. So the challenge for us is to work out what “portion of capital is calculated and applied only as interest-bearing capital” – all shares? some shares? And exactly what relation is there between dividends and interest?
And since we can see the joint-stock companies with Marx as the abolition of capitalism within the framework of capitalism itself, as pressure on the outworn capitalist mode of production from the nascent socialist mode of production, what political and historical conclusions should we draw from this from the perspective of the working class, whose historical and political interest it is to bring on the birth of the new mode of production and cast off the putrid constricting rags of the old one?
I can partially answer my own question to Paul C here. In a passage in Capital 3 ch 15 (“Exposition of the Internal Contradictions of the Law”) Marx writes in regard to the growing scale of the capital required to successfully run a business:
“Under competition, the increasing minimum of capital required with the increase in productivity for the successful operation of an independent industrial establishment, assumes the following aspect: As soon as the new, more expensive equipment has become universally established, smaller capitals are henceforth excluded from this industry. Smaller capitals can carry on independently in the various spheres of industry only in the infancy of mechanical inventions. Very large undertakings, such as railways, on the other hand, which have an unusually high proportion of constant capital, do not yield the average rate of profit, but only a portion of it, only an interest. Otherwise the general rate of profit would have fallen still lower. But this offers direct employment to large concentrations of capital in the form of stocks.”
(http://www.marxists.org/archive/marx/works/1894-c3/ch15.htm)
So here he expresses himself much more categorically: “Very large undertakings, such as railways […], which have an unusually high proportion of constant capital, do not yield the average rate of profit, but only a portion of it, only an interest.”
The remarks I made above and the same questions still apply.
Monopolistic advantage pretty much accounts for nothing when confronting the necessities of value appropriation. Deloitte & Co. publishes every year a “shift index” analyzing profitability of corporations and changes in profitability. Overall they include that competitiveness in the US economy is much greater than it was 10 or 20 years ago.
Moreover, we need only look at the semiconductor industry to note how irrelevant “monopoly” status is to value production and realization.
When fosforos is talking about “pricing power” all he is describing is the role prices of production play in distributing profits among capitals. “Monopoly” such that it is only generates pricing power to the degree that its appropriation of labor is realized socially through the transfer of surplus value from other less efficient enterprises.
Labor-time– manifested as “cost-price” is indeed the center of gravity. Prices of production are the deviation, variation, manifestation of the laws of capitalist production. Prices of production are so to speak “exceptions” that in fact are the proof of the rule.
When S. Artesian says “Monopolistic advantage pretty much accounts for nothing” he is dismissing pretty much everything about modern capitalism, which for good reason has been known to Marxists as state-monopoly-capitalism for a few generations now. For him, intellectual property (even extending to “trade secret” protection for industrial pollutants), the centerpiece of international trade policy, counts for nothing. And likewise when he says “Labor-time– manifested as “cost-price” is indeed the center of gravity. Prices of production are the deviation” he ignores two things: Marx explicitly recognizes that “production prices” *are* the cost-of-production prices of Smith and Ricardo (and, of course, Marshall and all classical economists) and that they are conditioned on and established through perfect competition which is the only market structure allowing the free entry of capital into all fields where a higher profit can be expected–the condition for the equalization of profit rates. Oligopoly (shared monopoly) or even “imperfect” or “monopolistic” competition, necessarily (by extorting increased amounts of surplus-value over the monopolists’ “aliquot share”) increases the deviation of really-existing market prices over cost-of-production prices
Are you serious? “Marx explicitly recognizes that “production prices” *are* […] and established through perfect competition which is the only market structure allowing the free entry of capital into all fields where a higher profit can be expected–the condition for the equalization of profit rates.”
Where does Marx assume “perfect” competition? Have you actually read Marx or just what the Marxists say Marx said?
Production price is the cost-price plus the capitalists’ assumed profit. There is no such thing as “perfect competition” just as there is no such thing as an “invisible hand” a “free market” etc.– just as in fact, individual prices do not correspond to individual values. However the social process of valorization does amount and account for imperfect competition, visible hands, free-state markets etc. etc.
Does the so-called “state-monopoly-capitalism” change, alter, the fundamental identity of capital? Does it change what constitutes value? Does it change the relations between the organization of labor, and the conditions of labor? Does it change the mode of production?
I think the answer to all of the above is no, so that what Marx analyzed in his economic manuscripts, in Capital, is still valid because the essential organization of capital as the expropriation of living labor through the wage form has not changed. And… that essential organization IS the law of value.
Right. The social relation of Capital is based on the wage system. Only the workers have the power as a majority class to change the mode of production and exchange to one where commodity production has been sublated by production for use with distribution of goods and services based on need….with a possible transitional period where distribution is based on socially necessary labour time put in (with a few deductions for social needs outside the production process).
I’m always baffled by Marxists such as forforos17. They adhere to Marx’s theories in the production sphere such as the value theory. As soon as we enter the circulation sphere they reject some of Marx’s theories specially the price formation. For them prices are somewhat distorted, arbitrary, or fixed by monopolies or other reasons. They fail to make the connection between value and price. I have challenged many to this point. Most of them never come back with a price theory and repeat what they “think” they “observe”. The very few that do come back finally see the connection. Surplus-value manifests itself as profit.
The reason that a discussion of LTPRF leads to arguments over relationship between price and value here is that LTPRF is formulated in the circulation sphere but it’s rooted in the production sphere. If what I pay for has nothing to do with the labor expended in it then what’s the point of LTV? I don’t get it.
I take your point Cameron. I think some Marxists still take the Neo-Classical Economists seriously and relate to reality through its reflection in orthodox economics rather than checking propositions against empirical data.
It’s very simple. In Vol, 1, Marx abstracts from market prices and takes “Moneybags” as the ideal representative of the capitalist system as a whole–in which aggregate values equal aggregate prices. In Vol. 3 he abstracts from market structures (“competition”) and assumes prices corresponding to the classical economics (Smith-Ricardo-Marshall) price theory (in which “profit,” as the return on capital, figures as part of the real cost of production). Since the late 19th century, laws of motion specified by Marx (“concentration and centralization of capital”) haver taken such effect that the “competitive” model, on which the classical cost-of-production price theory
was based, has to be replaced by a model based on
monopolistic pricing. That is why (if you notice) that Marxists describe the real economy by such terms as “imperialism,” “monopoly capitalism,” and “state monopoly capitalism.”
Well, can you point to “monopolistic pricing” in an industry in capitalism, in the advanced “imperialist” “state monopoly capitalist” economies and the ways in which such pricing does not conform to Marx’s analysis of the the relations between cost-price, production prices, and market prices, and the relation of all three of those to the capital values extracted?
Can you point to an example of so-called monopolistic pricing “nullifying” the law of value; suppressing overproduction; overcoming the the tendency of the rate of profit to decline?
How about automobile production? No? Not “monopolistic” enough? OK, how about semiconductors? Iron ore? How about railroads– there’s only 7 class 1 railroads left in the US. Can you show us monopolistic pricing there? Probably not, since rates per ton-mile are about half what they were 30 years ago?
How about airlines? Coal? Oil?
Where was Marx’s critique ever based on, founded on, a theory of competitive pricing? Competition, Marx says, is only the working out, an expression of the inner laws of capital. And exactly where is there NOT competition in the very midst of “monopoly” in capitalism?
Short version: take the Cameron challenge.
And what are the inner laws of capital based on? It’s organization of labor as value, as value producing. So has that changed?
fosforos17: “In Vol. 3 he abstracts from market structures (“competition”)”
This is absolute drivel. Capital 3 is all about the effects of competition on prices, profit and investment, and how it affects different spheres of production whose organic composition aren’t equal to the average within the whole economy, giving rise to all the phenomena we’re discussing here, like the tendency of the rate of profit to fall. The very first paragraph of the book makes the addition of concrete phenomena like competition to the investigation clear: “The various forms of capital, as evolved in this book, thus approach step by step the form which they assume on the surface of society, in the action of different capitals upon one another, in competition, and in the ordinary consciousness of the agents of production themselves.”
f17 continues: ” […] and assumes prices corresponding to the classical economics (Smith-Ricardo-Marshall) price theory (in which “profit,” as the return on capital, figures as part of the real cost of production).” This isn’t just drivel, it’s an outright lie. fosforos, this claim of yours has no basis in Marx’s text or in his theory. It’s a bogie you’ve picked out of your nose and smeared on our screens.
And Marshall might form part of your pantheon of classical economists, but in Marxist terms he’s a pioneering post-classical vulgar economist (“neo-classical” if we’re being polite).
If I were Heinrich, I would be tearing my hair at this level of ineptitude being rolled out in my defence…
Maybe this will help. I see paper money and even gold as being the embodiment of a promissory note. Gold has socially necessary labour time in it and that’s why it has been used as a monetary instrument. One exchanges one ounce of gold today for $1,386.08 USD, 1071.38 Euro and so on. Each currency outside of gold retains a mutually recognised market value reflected in its price. For instance, the AUD is now priced at .96 USD. Prices of the money commodity on the world markets fluctuate all the time. The current head of the Japanese State has told his Central Bank to flood the money markets with yen in a kind of QE (quantitative easing). This has lowered the value perceived in the yen–perception reflected in the price of the yen on the world money market, Tom Frank. The amount of SNLT in the commodities a currency represents is one of the factors which determined how much of it will be in circulation. Another factor is the velocity at which transactions in the marketplace occur. The wage system is at the root of wealth inequality and with that political power inequities. As I keep saying the price of workers’ skills are NOT determined by how much wealth these skills produce when employed. Workers skills, like all other commodities are bought and sold on the labour market on the basis of how much socially necessary labour time are perceived to be embodied in them AND how much in demand a particular skill is. If the skill is in oversupply on the labour market, no matter how much SNLT is embodied in it, the price will be lowered. Nevertheless, as a class the wage workers in general, overall within industrialised division of labour, produces the equivalent of the wealth contained the price of their labour power in the first hour or two of their employment. Thus, the argument for shorter work time makes perfect sense for our own class interests in reducing unemployment and increasing our free-time.
“increasing the rate of surplus value can only be achieved by methods that also increase the value of the constant capital employed in relation to the number of workers engaged in the production process.”
Both you and Heinrich are making some basic errors here. The Marxist formula for rate of profit has nothing to do with the “number of workers.” The whole thing, obviously, is expressed in value terms. Whether there are two workers or 24 is irrelevant; what enters into the formula as “v” is the value of the wage bill.
But perhaps more important, we’re not looking at individual firms that downsize because of machinery. We’re talking, presumably, about the average rate of profit for the whole capitalist economy (let’s leave aside the fact that such a thing is impossible to really calculate accurately, for various reasons). Looking at the economy as a whole, workers are not disappearing. The population, obviously, is growing. What happens is that a growing number of workers operates a mass of machinery that’s growing even faster. But again, numbers of workers and masses of machinery don’t matter for the rate of profit; what matters is the value of the wage bill and of depreciation of plant etc. We can’t say anything a priori about these, they’re indeterminate, and there’s no “law” of a falling rate of profit.
Another consideration: even if s/(c + v) is falling, it can’t do so forever for the simple reason that “c” is a function of “s.” “c” is nothing but re-invested profits, so if the profit rate is falling the growth of “c” will also slow down.
Most important, though, there’s no reason to believe that profits are a function of “surplus value” that only comes from “living labor.” Profits are not consistently higher in labor-intensive sectors. The labor theory of value is simply wrong.
Right, and wrong. If there is no labor theory of value, then there is no “law” or tendency for the rate of profit to decline; economic laws being nothing other than the….relations of class…….uh….the social organization of labor. So either value is a product of the social organization, or it’s a magical, mystical, religious, unquantifiable,evangelical moment– eternal too, requiring our brilliant political economists to bring it to its full secular flowering. It’s a miracle! And capital, like religion, is nothing but a leap of faith..and a con game.
As for: “Another consideration: even if s/(c + v) is falling, it can’t do so forever for the simple reason that “c” is a function of “s.” “c” is nothing but re-invested profits, so if the profit rate is falling the growth of “c” will also slow down.” Nice trick, but that’s not the point.
Indeed, it can’t do so forever… without our capitalists and their governments taking some action in response…kind of like what happens say after 2001, or 2007, or 1970, or 1930.
And of course, no one is arguing that c doesn’t slow down; in fact it does. When we’re talking about slowing, falling.. we’re talking about changes in RATES, in ratios, in relations. Sometimes those become absolute changes in magnitudes; sometimes they turn negative, but overall, the governing rule is, as every capitalist knows, is the rate, the relation, the ratio of profit; of fixed assets; of costs. etc. etc.
Other than that I heartily endorse everything you assert.
Exchange-value is socially necessary labour time embodied in the commodity. It’s use-value lies in the eye of the beholder, it’s buyer in the social relations of the market, even the labour market.
“Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the living. And just as they seem to be occupied with revolutionizing themselves and things, creating something that did not exist before, precisely in such epochs of revolutionary crisis they anxiously conjure up the spirits of the past to their service, borrowing from them names, battle slogans, and costumes in order to present this new scene in world history in time-honored disguise and borrowed language. Thus Luther put on the mask of the Apostle Paul, the Revolution of 1789-1814 draped itself alternately in the guise of the Roman Republic and the Roman Empire, and the Revolution of 1848 knew nothing better to do than to parody, now 1789, now the revolutionary tradition of 1793-95. In like manner, the beginner who has learned a new language always translates it back into his mother tongue, but he assimilates the spirit of the new language and expresses himself freely in it only when he moves in it without recalling the old and when he forgets his native tongue.” Marx BRUMAIRE
A full-length response to Heinrich has just been published:
“The Unmaking of Marx’s ‘Capital’: Heinrich’s Attempt to Eliminate Marx’s Crisis Theory”
by Andrew Kliman, Alan Freeman, Nick Potts, Alexey Gusev, and Brendan Cooney
http://www.marxisthumanistinitiative.org/economic-crisis/the-unmaking-of-marxs-capital-heinrichs-attempt-to-eliminate-marxs-crisis-theory.html
Michael Heinrich’s recent Monthly Review article claims that the law of the tendential fall in the rate of profit (LTFRP) was not proved by Marx and cannot be proved. Heinrich also argues that Marx had doubts about the law and that, for this and other reasons, his theory of capitalist economic crisis was only provisional and more or less in continual flux.
This response shows that Heinrich’s elementary misunderstanding of the law – his belief that it is meant to predict what must inevitably happen rather than to explain what does happen – is the source of his charge that it is unproved. It then shows that a simple misreading of Marx’s text lies at the basis of Heinrich’s claim that the simplest version of the LTFRP, “the law as such,” is a failure. Marx’s argument that increases in the rate of surplus-value cannot “cancel” the fall in the rate of profit is then defended against Heinrich’s attempt to refute it. Finally, the paper presents evidence that Marx was indeed convinced that the LTFRP is correct and that he regarded the crisis theory of volume 3 of Capital as finished in a theoretical sense.
July 22, 2013
Excellent article. Thank you very much!
Disposes both of Heinrich and the tradition he works in – that is, the Monthly Review “Marxism without Marx” tradition, not his day job at Marx-Engels-Gesamtausgabe, where he might well grub away like a mole, but more like Kenneth Grahame’s reactionary bourgeois imperialist Mole than Marx’s revolutionary earth-movers.
Elegant and concise, a precision job, sharp as a razor, with the power of an industrial guillotine.
A classic.
In crises, indeed, as Lucretius wrote: “eripitur persona, manet res” (‘the mask is torn off, the reality remains’ DRN 3.58).
Haven’t yet read the Kliman et al piece, but I’m pretty sure Heinrich is not in the Monthly Review school that says the laws of “monopoly capitalism” are not those of the “competitive capitalism” that Marx wrote about. It’s an alliance of convenience to disparage the falling rate of profit tendency.
Further critique of Heinrich in latest Critique http://www.tandfonline.com/eprint/UKM4X8pW8MCQFj3jyF2d/full
Thanks for this, Paul. I disagree with the interpretation given to Marx in the first part of the piece; but the second part has aspects which I’m grappling with in clarifying my own reading of Heinrich’s INTRODUCTION to wit, yes Heinrich does seem to attach make snlt the form and price the value, just the opposite of Marx. As for ‘energy’ becoming the substance of value, as opposed to applied labour time, this is just the recognition that Marx already had e.g. when he pointed out that ALL wealth does not come from labour; but also natural resources to the SPD’s Goth Programme authors. Value only makes sense within the context of human social relations and the political-economy which issues from same. A gas deposit has no exchange-value outside human recognition and use.