Returning to Heinrich

Back in May, I did a short post (https://thenextrecession.wordpress.com/2013/05/19/michael-heinrich-marxs-law-and-crisis-theory/) outlining my rejection of the arguments of Michael Heinrich, a Marxist scholar.  He recently wrote an article in the US journal, Monthly Review, arguing that Marx’s law of profitability was faulty, empirically unproven or even unprovable and anyway, Marx decided to drop it in his later works and only editing distortions by Engels have left us epigones with the impression that Marx still supported the law (see monthlyreview.org-Crisis_Theory_the_Law_of_the_Tendency_of_the_Profit_Rate_to_Fall_and_Marxs_Studies_in_the_1870s__Mont).

Well, since then there have been several more responses to Heinrich’s arguments.  Andrew Kliman et al has published a long reply (http://www.marxisthumanistinitiative.org/economic-crisis/the-unmaking-of-marxs-capital-heinrichs-attempt-to-eliminate-marxs-crisis-theory.html).  Sam Williams has also started a two-part response on his blog (http://critiqueofcrisistheory.wordpress.com/2013/07/07/michael-heinrichs-new-reading-of-marx-a-critique-pt-1/) and more recently Ed George has delivered a very clear and perceptive defence of Marx’s law (http://edgeorgesotherblog.wordpress.com/2013/07/04/but-still-it-falls-on-the-rate-of-profit/).  And as promised in my May post, G Carchedi and I have produced a joint piece in reply to Heinrich.  I attach our draft here (Heinrich paper 22 June 2013 NEW-4)   And we are working on an even more comprehensive paper dealing with not just Heinrich’s arguments but also other criticisms of Marx’s law of profitability and its role in crises. So readers who want to follow this debate now have plenty to read!

I am spending quite of bit of effort with Heinrich’s arguments because in doing so I think it will help to develop our understanding of Marx’s theory of crisis and the eventual demise of capitalism.  But now in this post, I just want to spell out the implications for crisis theory and for the future of capitalism in accepting Heinrich’s position and rejecting Marx’s law.  In my view, if Heinrich’s view is accepted, it would be crippling for a coherent theory of capitalist crises, but also for the key Marxist concept that capitalism is not an eternal economic system that can last forever but is a transitory mode of production like the slaveholding economy of the ancients, feudalism or Asian despotism.

In other words, the law is central to Marx’s materialist conception of history.  If it is believed that, in the long run, the rate of profit might just as easily rise as fall or that it will tend to oscillate forever around some average value, as Heinrich suggests, then the capitalist mode of production takes on the character of a permanent ongoing system.  Instead, Marx’s law of the tendency for the rate of profit to fall over the long run most convincingly demonstrates the transient nature of capitalism.

The more the world’s population is drawn into the capitalist mode of production, the more the law exerts its power of prediction.  As the reserve army of labour globally is used up in new rounds of exploitation to create more value and surplus value, the more the law will begin to operate because the rise in the organic composition of capital (even after the cheapening effects on constant capital from new technology) will outstrip the rise in the rate of surplus value.  Indeed, the more there develops a world rate of profit, the more the law of the tendency of the rate of profit to fall will operate (see my paper roberts_michael-a_world_rate_of_profit.). The rate of surplus value, among other counteracting factors, may change in such a way as to cause the rate of profit to rise for a certain time but the world rate of profit must fall in the long run.

As Jim Miller put it in his critique of the attack on the law by one of the founders of the Monthly Review school, Paul Sweezy: “If the rate of profit has not yet fallen, or its direction is not yet definitely demonstrated, nonetheless it must inevitably fall eventually.  The rate of profit must fall in life or the theory is incorrect.  The law is unidirectional and irreversible.  The law is the law of the tendency of the rate of profit to fall, not the law of the tendency of the rate of profit to rise, fall or go whichever way it pleases.”  (http://www.marxists.org/subject/economy/authors/miller/frop.htm).  This same argument drove Henryk Grossman to his groundbreaking book on Marx’s law of breakdown and crises.  As Marx says, the counteracting tendencies to the law “do not annul the general law.  But they have the effect that the law operates more a tendency i.e. whose absolute realisation is held up, delayed and weakened by counteracting factors.”  Marx 1981, p341-2.

The point is that increasing the rate of surplus value and thereby the amount of surplus value in relation to the advanced capital can only be achieved by methods that also increase the mass and value of constant capital employed in relation to the number of workers engaged in the production process (the technical composition of capital).   This is key: Marx again: “Moreover, it has been demonstrated – and this constitutes the real secret of the tendency of the rate of profit to fall – that the manipulations to produce relative surplus value amount, on the whole, to transforming as much as possible of certain quantity of labour into surplus value on the one hand; and employing as little labour as possible in proportion to the invested capital on the other, so that the same reasons which permit raising the intensity of exploitation rule out exploiting the same quantity of labour as before by the same capital”  Marx 1962, p228

The organic composition of capital must increase and this unavoidable growth in the organic composition ultimately sinks the rate of profit, no matter how high the rate of surplus value may climb.  The more advanced the organic composition of capital, the less effect a rising rate of surplus value can have in overcoming a dwindling profit rate.  With fewer workers employed, the product’s value becomes increasingly composed of value reflecting constant capital.  “With the absolute amount of living labour newly incorporated into individual commodities decreasing enormously as production develops, the absolute mass of unpaid labour contained in them will likewise decrease, however much it may have grown as compared with the paid portion.”  Marx, 1962, p221.

Sure, mathematically, the rate of surplus value could tend towards infinity (where workers live on air), as could the organic composition of capital, but well before that, the rate of profit would have fallen.  That’s because each increase in productivity (hours of unpaid labour to paid labour) has less and less an effect on the rate of surplus value: “the smaller already the fractional part of the day falling to necessary labour, the greater the surplus labour, the less can any increase in productive forces perceptibly diminish necessary labour, since the denominator has grown enormously.”  Marx 1973, p340.

Moreover, there is a social limit on the reduction in variable capital and thus the maximum rate of surplus value, set by the class struggle over the distribution of the value created between labour and capital.  So the rate of profit will fall well before the rate of surplus value moves towards infinity.  The tendency for the organic composition to rise is stronger because the rate of surplus value can only rise “within certain definite limits”, Marx 1981 p 333.

So the former tendency is the law and the latter is a weaker countertendency.  The organic composition of capital and the rate of surplus value are not independent variables, either one of which might overpower the other.  One rises as a tendency and the other as a countertendency – and by definition and reality, the latter is weaker.

Marx considered the law of the tendency of the rate of profit to fall as the most important law of motion of capitalism.  And it is because it explains and predicts crises and slumps under capitalism.  And it also explains why and predicts that capitalism cannot last.  Either the working class will remove the capitalist class and introduce a democratically planned economy using the resources of the globe in common to develop socialism, or capitalism will descend into barbarism just as the ancient slave society of the Roman empire did or the Asian absolutist states.

78 Responses to “Returning to Heinrich”

  1. vallebaeza Says:

    Reblogueó esto en Econo Marx 21.

  2. Boffy Says:

    There are three obvious problems, and many more not so obvious ones with this argument.

    1) If we take the argument that capitalism must collapse because of the falling rate that leads us towards the argument of Bernstein and others. It is teleological. Capitalism must collapse of its own contradictions so no need for us to do anything then, so we might as well enjoy the ride while it lasts.

    2) The argument that the rate of surplus value cannot simply keep expanding is based on the idea that the working-day is limited in length to 24 hours. But it isn’t. It is only limited to 24 hours of any particular concrete labour! For example, a bricklayer can only work for 24 hours. But, value and surplus value are measured in abstract labour not concrete labour. There is essentially no limit to the number of abstract labour hours in a day, because an hour of any particular concrete labour, as complex labour, might be the equivalent of 10, 100, 1000 hours of abstract labour, depending upon what consumers are prepared to pay for the product of that abstract labour. On that basis the argument that the number of hours available to be surplus becomes ever proportionately smaller falls.

    3) Although, it is possible to argue that for any individual capital there is a noted tendency for the organic composition of capital to rise with the increasing magnitude of the capital – though as Marx demonstrates even this is limited by all those countervailing forces that reduce the value of constant capital – there is no reason why this should apply for Capital in General or indeed across many capitals.

    If economies consisted only of the same capitals that just continually got bigger that would be so, but that is not the way economies develop. As Marx describes in Volume 1, capitals continually fragment as well as concentrate and centralise. Indeed some even very big capitals, that had high organic compositions of capital, like motor car makers, go bust, whilst other new capitals with relatively low organic compositions of capital, like high technology companies, take their place.

    If more old companies with high organic compositions go bust, but more new companies with low organic compositions (and high rates of profit) take their place, maybe utilising some of the now defunct capital from the former, then for the economy as a whole, the organic composition of capital will fall, and the rate of profit will rise,m even without any consideration of whether such a process has also raised the rate of surplus value.

    But, it does not have to be technology companies or even high value production. Marx noted that one of the biggest growth areas resulting from mechanisation in his day was in the number of domestic servants. Such labour, of course does not produce surplus value, but today we see that one growth area is precisely in companies providing such facilities, and the workers they employ do produce surplus value, yet by its nature such production has a low organic composition of capital.

    The same is true of much service production, though neo-fordism is entering there too. If we look at the money consumers are prepared to spend for designer labels and so on, again the value is arising not from the constant capital component, but the complex labour component. 90% of the value of Apple products is generated in the US, and most of that is due to the high value complex labour employed, not the fixed or circulating constant capital.

    Some of the biggest producers of value are not producers of physical commodities at all. Entertainment of various kinds has become a massive industry, and nearly all of the value created is attributable to the complex labour employed not to constant capital. In fact, a similar argument could be made in respect of the financial services industry to the extent that they act as producers of financial commodities sold to customers rather than simply as sharers in the surplus value created by productive capital.

    Another example would be transport and communications. The Internet has replaced vast amounts o constant capital previously required to communicate around the globe, and in some ways that is true of transport of goods too, because it can be used to instantly link together transport networks so that goods move over shorter distances.

    All of these things have acted to raise the rate of profit. But, there has also been a massive rise in the rate of turnover of capital with the same effect. But, more than that. Marx and Engels in the relevant sections of Capital dealing with the rate of turnover, point out that it not only raises the rate of profit, but it also releases large amounts of previously tied up capital.

    Finally, Marx makes the point himself that the rate of profit changes only over very long periods of time, and then only as a consequence of many fluctuations, up and down of individual rates of profit, and rates of profit in different spheres. In discussing the rate of interest Engels makes the point that the rate of interest remains stable because the rate of profit itself remains stable for very long periods. As they both point out, the rate of interest falls as the rate of profit rises.

    Perhaps noting this latter point then the fact that interest rates have been falling for the last 30 years, is one of the clearest indications of the extent to which the rate of profit globally has been rising during all that time!

    • Systemic Disorder Says:

      Boffy argues above:

      “1) If we take the argument that capitalism must collapse because of the falling rate that leads us towards the argument of Bernstein and others. It is teleological. Capitalism must collapse of its own contradictions so no need for us to do anything then, so we might as well enjoy the ride while it lasts.”

      Not so. Socialism is not an inevitable outcome of the collapse of capitalism, however desirable. Capitalism was not the inevitable outcome of the contradictions of feudalism. Social forces, movements and actions will determine what form the post-capitalist world will take.

      Moreover, we can’t make any predictions on when capitalism collapses, but it is not likely to be a sudden bottoming out — a decline with the occasional uptick seems much more likely. Immanuel Wallerstein, when he spoke at the Left Forum in New York City this year, predicted we’ll be living under a different economic system in 2050 — but note he did not say what system. The end of capitalism might well be later than that, but it seems to me that it’ll be during the current century.

      If the working class gives up, doesn’t organize, allows a decaying bourgeoisie to maintain the initiative, humanity could descend in a brutal fascistic type of society in which the population drops significantly under the impact of a hopelessly polluted world with depleted resources. If we organize and act, then a socialist better world is in our grasp.

      Bernstein’s argument was based on the absurd idea that the bourgeoisie would sit back and allow an orderly takeover by the working class. I don’t see anybody here arguing for that. Capitalism will collapse, but what follows is up to us.

      • Boffy Says:

        I’m sorry, but this argument makes no sense to me. You start by saying,

        “Socialism is not an inevitable outcome of the collapse of capitalism, however desirable. Capitalism was not the inevitable outcome of the contradictions of feudalism. Social forces, movements and actions will determine what form the post-capitalist world will take.”

        I entirely agree with that, which is one reason I think the arguments of the catastrophists are so dangerous! All history, as Trotsky argued shows that economic weakness leads to disarray amongst the working class, demoralisation, decay of organisations, atomisation, lack of economic and social weight and so on. It may cause workers to feel more resentful and bitter, but with no means of doing anything about it. It is economic growth that strengthens the position of workers as he sets out in “The Curve of Capitalist development” and “Flood Tide”.

        But, you end by saying.

        “Capitalism will collapse, but what follows is up to us.”

        But, that by definition means that workers will not have organised themselves to have brought forward their own replacement for it! Under those conditions of workers not having taken advantage of the more conducive conditions of capitalist growth to organise themselves, to develop their own worker-owned and controlled sector of the economy, in the way Marx and Engels described, and which Draper talks about in “The Two Souls Of Socialism”, then the inevitable collapse will almost certainly mean that workers will NOT be in a position to impose our solution, and things WILL then descend into barbarism of one sort or another.

      • Systemic Disorder Says:

        I’m not so sure Trotsky argued the point you attribute to him. Let us set that aside, and address your response.

        One need not be a “catastrophist” to believe that capitalism will one day end. And as I explicitly said, I don’t think there will be a sudden, total collapse — more like a downward trajectory with periods of stability (muddling along) punctuated by further declines of the sort we had a few years back and the occasional uptick.

        “Capitalism will collapse, but what follows is up to us” is completely consistent with the earlier quote to which you say you are in agreement. Workers organizing themselves is the very social force, the very movement, that would bring about a socialist future. That is certainly what I wish to see, and the potential for it is there.

        I also have to point out that when economic conditions are (relatively) good, there aren’t millions of people fomenting rebellion. It’s when times aren’t good that large social movements arise. Russia in 1917 wasn’t exactly a picnic, nor was Germany at the end of World War I nor was the capitalist world during the Great Depression. (And the 1960s are not an exception — those were not movements that threatened capitalism.)

        You are arguing, intentionally or not, that capitalism will go on forever until, and if, workers overthrow it. That is ahistorical and against the body of work produced by Marx and Engels. Once again, everything of human creation has its limits and its time, and capitalism will go the way all preceding systems did. What will follow is not written in the stars.

      • Boffy Says:

        Trotsky wrote in “Flood Tide” against the ultra lefts who thought that some kind of economic catastrophe was a short cut to revolution,

        “With such political and psychological premises, a prolonged crisis, although it would doubtless act to heighten the embitterment of the working masses (especially the unemployed and semi-employed), would nevertheless simultaneously tend to weaken their activity because this activity is intimately bound up with the workers’ consciousness of their irreplaceable role in production.

        Prolonged unemployment following an epoch of revolutionary political assaults and retreats does not at all work in favour of the Communist Party. On the contrary the longer the crisis lasts the more it threatens to nourish anarchist moods on one wing and reformist moods on the other.”

        He goes on that a boom,

        “In contrast, the industrial revival is bound, first of all, to raise the self-confidence of the working class, undermined by failures and by the disunity in its own ranks; it is bound to fuse the working class together in the factories and plants and heighten the desire for unanimity in militant actions.

        We are already observing the beginnings of this process. The working masses feel firmer ground under their feet. They are seeking to fuse their ranks. They keenly sense the split to be an obstacle to action. They are striving not only toward a more unanimous resistance to the offensive of capital resulting from the crisis but also toward preparing a counter-offensive, based on the conditions of industrial revival. The crisis was a period of frustrated hopes and of embitterment, not infrequently impotent embitterment. The boom as it unfolds will provide an outlet in action for these feelings. This is precisely what the resolution of the Third Congress, which we defended, states:”

        You do not need to be a catastrophists to believe that one day Capitalism will end, that is true but besides the point. The point is that there are a whole swathe of people on the Left who perpetually argue that Capitalism is either always in some kind of serious crisis, or that some catastrophic crisis is just around the corner. That is what is meant by catastrophism. Its a lazy alternative to actually analysing capitalism as it really is, in the hope that somehow history will do the job for us.

        And, if you think that the future resides in some kind of continual downtrend with the occasional up tick, then an honest analysis does not give much hope for that scenario at the moment does it? We are experiencing probably the biggest boom and development of the productive forces in capitalist history yet. One that is not just deep but increasingly wide, as it has already created millions of new workers in China and other parts of Asia, and is now doing the same thing in Africa.

        “Capitalism will collapse” means it falls rather than being pushed. Far from being of the view that Capitalism will last for ever, I am very much of the camp that beleives it will only go on our terms if pushed! But, pushing in my opinion means not the kind of romantic student revolutionary politics that the Far Left have confined themselves to, when they haven’t been just attacking each other, but means actually building here and now a socialist alternative based on workers ownership and control of the means of production.

        “I also have to point out that when economic conditions are (relatively) good, there aren’t millions of people fomenting rebellion.”

        That’s true, and I would point out to you, that Marx argued that Socialism would arise first in Britain, precisely because it was the most industrialised country. I’d also point out that there is a big difference between people being pissed off with the current situation and rioting in the streets, and actually having a commitment to building some new and progressive in place of what they have knocked down. Russia in 1917, an after is a good example of precisely that fact.

        The biggest developments of the working class have coincided to periods of Long Wave Boom, both in the earlier 19th Century, but most notably in the Long Wave Boom that ran from around 1890 to 1914-20.

        By contrast, if we look at the periods of greatest economic weakness such as the 1930’s or 1980’s, or indeed during the First Great Depression in the late 1870’s, they are periods of reaction and considerable weakness of the working class, as their economic and social weight deteriorates, the economic competition between them rises, they become susceptible to all kinds of individualist ideas, etc.

        I am not at all arguing that Capitalism will go on forever, and as I pointed out – in fact I’ve written in the past that I think the current situation has many of the same characteristics as the period from 1890 to 1914, but on a much larger scale – it could easily simply blow the world to smithereens long before it collapses due to any terminal economic crisis.

        Marx and Engels thought that it was going to collapse in 1848, and they later said such a view had been ridiculous, because in 1848, there was only one country, Britain that had a working-class of any size. Much of their view earlier was based on the fact that during much of that period Britain was going through a long wave downturn. Lenin made the same mistake when the next Long Wave downturn started.

        Trotsky recognised that there was absolutely no reason that capitalism in the 1930’s could not recover and experience a new period of growth, though he too was over influenced by witnessing a Long Wave downturn, and not having the benefit of seeing the post war Long Wave Boom.

        But, his successors did have that advantage and flunked it. The Stalinists throughout the 1950’s tried to claim that the West was really in a crisis, and that workers were being impoverished, in similar terms to those who make the argument about a falling rate of profit and capitalist crisis today. They just succeeded in making themselves look ridiculous and irrelevant.

        But, many Trotskyists adopted a similar position that the next big crisis was just around the corner, ebcause after all Lenin and Trotsky had claimed long ago that it was in its death agony. Ironically, some of them like Mandel, only accepted that it wasn’t, and started to argue a version of Keynesian underconsumption theory, and a crisis free capitalism, just at the moment when the Long Wave boom was coming to an end, and a period of crises really was about to start!!!

    • Thomas Weiß Says:

      “…the fact that interest rates have been falling for the last 30 years, is one of the clearest indications of the extent to which the rate of profit globally has been rising during all that time!” – This proves that the general rate of profit has declined. Even some bourgeois economists now claim that the “equilibrium rate of interest”, equaling saving with investment, is now below zero due to overaccumulation. Due to the low rate of profit zero interest rates of central banks are not enough, in addition, quantitative easing is required.

      • Boffy Says:

        According to Marx it is high and rising rates of profit that cause interest rates to be low!!!

        “If we observe the cycles in which modern industry moves — state of inactivity, mounting revival, prosperity, over-production, crisis, stagnation, state of inactivity, etc., which fall beyond the scope of our analysis — we shall find that a low rate of interest generally corresponds to periods of prosperity or extra profit, a rise in interest separates prosperity and its reverse, and a maximum of interest up to a point of extreme usury corresponds to the period of crisis.[3] The summer of 1843 ushered in a period of remarkable prosperity; the rate of interest, still 4½% in the spring of 1842, fell to 2% in the spring and summer of 1843;[4] in September it fell as low as 1½% (Gilbart, I, p. 166); whereupon it rose to 8% and higher during the crisis of 1847.”

        That is so, because the high rate and volume of profit means that Capital can finance itself without resort to the money markets, and to the extent that it does, it finds there available money hoards, themselves built up as a result of the high levels of profit! Pretty much a good description of the situation we have seen in the last 30 years!

        The fact that these huge levels of profit have created a situation in which not all of it could be immediately invested in productive activity is not at all an indication of a falling rate of profit, but bthe very opposite. It is exactly the same kind of situation that Engels describes as arising from the prosperity and high rates of profit of the late 1840’s.

        “At the close of 1842 the pressure which English industry suffered almost uninterruptedly since 1837, began to lift. During the following two years foreign demand for English manufactured goods increased still more; 1845 and 1846 marked a period of greatest prosperity. In 1843 the Opium War had opened China to English commerce. The new market gave a new impetus to the further expansion of an expanding industry, particularly the cotton industry. “How can we ever produce too much? We have to clothe 300 million people,” a Manchester manufacturer said to this writer at the time. But all the newly erected factory buildings, steam-engines, and spinning and weaving machines did not suffice to absorb the surplus-value pouring in from Lancashire. With the same zeal as was shown in expanding production, people engaged in building railways. The thirst for speculation of manufacturers and merchants at first found gratification in this field, and as early as in the summer of 1844. Stock was fully underwritten, i.e., so far as there was money to cover the initial payments.”

        In fact, again a very similar situation to that we have seen over the last 30 years.

        I’m surprised at a Marxist talking about QE and official interest rates as a means of obtaining low rates of interest, because Marx is quite clear that interest rates are determined in the market as a result of the demand and supply for money-capital, not money itself. Central Banks can print money, but they cannot create capital. Interest rates are low for the same reasons Marx and Engels describe above, huge volume of surplus value produced globally that even with the massive amounts of accumulation that have occurred, could not be fully absorbed, which then pushed down interest rates, and led to speculation.

        That is only the other side of the reason that Central Banks have been able to engage in huge amounts of money printing without causing hyper inflation i.e. a massive increase in the volume of commodities produced and circulated to absorb that money, and at massively reduced values compared to the past.

      • Thomas Weiß Says:

        Do not confuse rate of surplus with rate of profit.

        If the organic composition of capital (OCC) would have been low, the capitalists could have expanded strongly. But due to a high OCC surplus value was not enough to expand strongly. This creates an abundance of profits seeking investment opportunities which drives down rates of interest, followed by low “official” rates of interest.

        The central banks have not “been able” to print much money, they had to.

      • Boffy Says:

        But, the rate of profit has been high and rising for the last 30 years as I have demonstrated here – http://boffyblog.blogspot.co.uk/2013/07/the-rates-of-profit-interest-and_12.html.

        The OCC was falling because of the revolution in production, the massive rise in productivity, and the shift in production and consumption. It was compounded by the effect of the increase in the rate of turnover of capital.

        That is why vast amounts of new capital was created to establish vast new economies in China and elsewhere, and why whole new industries that did not exist 30 years ago in the developed economy have become today’s giants. It is why fixed capital formation doubled in the first decade of this century, and why the production of use values exploded, and their values were slashed to such a degree that states were forced to massively print money to prevent that resulting in a global deflation.

        The growth in profits similar to the situation described by Engels was such that even after all of this huge expansion of capital, there was still large amounts of surplus value left over to form giant money hoards.

  3. Boffy Says:

    Errata:

    “depending upon what consumers are prepared to pay for the product of that abstract labour.”

    should obviously read that “concrete labour”.

  4. sartesian Says:

    Just a word:

    “Another example would be transport and communications. The Internet has replaced vast amounts o constant capital previously required to communicate around the globe, and in some ways that is true of transport of goods too, because it can be used to instantly link together transport networks so that goods move over shorter distances.”

    If you study exactly these industries, transport and communications, the “replacement” of constant capital by more advanced constant capital, in this case the replacement of fixed assets by more advanced fixed assets is exactly what has driven the decline in the the rate of profit in these sectors.

    We can look for example at the maritime freight industry, and in particular bulk carriers and container-ships (hardly a “buggy-whip” industry); and we can look at almost any facet of the communications/IT sector– from semiconductor fabrication to fiber optic networks.

    The move to 300mm wafer production in semiconductor fabrication drove the rate of profitability down in the 1990s. And at the end of that same decade it was estimated that 97% of the fiber optic networks in the US were “dark.”

    Similarly the explosion of investment in new deadweight tonnage in the maritime industry has created an overhang that still depresses profit in the industry– and with the delivery of EEE class container-ships is only getting worse.

    The tendency of the rate of profit to decline is part, parcel, product and producer of the overproduction of capital– of the means of production as capital.

  5. H. A. Cox Says:

    Michael,
    This is the first blog that present in a clear way what are the issues about Marx’s theory of capitalist development. I agree with 99.9% with what you say. There is one important question that I would like to address. You say:
    The more the world’s population is drawn into the capitalist mode of production, the more the law exerts its power of prediction. As the reserve army of labour globally is used up in new rounds of exploitation to create more value and surplus value.
    This seems to imply that the reserve army is the independent variable and accumulation is the dependent variable. If there was no technical change, then the spread of capitalism could spread to absorb the world reserve population, but with technical change there is a decreasing demand for labor-labor is the dependent variable, depending upon the current technical composition. As capitalist accumulation takes place, relatively less labor is demanded because of technical change. When technical change reaches a point where the mass of surplus value extractable begins to decline, this will happen long before capitalism can absorb the world population. Of course, capitalism can continue to spread to other parts of the world, but this means a shifting of the productive apparatus to the South and an increase in parasitism in the North, something John Smith has pointed out. But technical change has been so swift that even those southern countries are beginning to witness too much productive capacity.
    Victor, a commentator on Sam Williams blog, gives a wonderful presentation on the OCC and ask the question of what limits the effect of technical change in the production has on rise of OCC. You do not address this issue here, so I would be interested in your answer.
    Finally, your article puts you in the camp that does not see capitalist crises as just recurrent, but as recurrent on a declining plane. This is an inevitable deduction from Marx’s theory of a rising TCC and OCC.

  6. Boffy Says:

    The fact that prices for transport etc have fallen is precisely what reduces the cost of constant capital for those firms and industries for whom these are inputs. The same is true of the massive falls in the costs of microprocessors etc.

    • sartesian Says:

      Absolutely true, which is why it is a tendency for the rate of profit to fall as the fixed asset component increases and not an immediate occurrence.

      And moreover, we are talking about transportation and communication sectors as representative of capital accumulation. There is a cycle to that accumulation, and the cycle is driven by profitability.

      We could say that –“The fact that prices for transport etc have fallen is precisely what reduces the cost of constant capital for those firms and industries for whom these are inputs. The same is true of the massive falls in the costs of microprocessors etc.” — for the transport and semiconductor industries themselves.

      In fact we do. Such investment reduces their unit costs, which is why it provides a initial boost to profitability. At a certain point, as the means of production accumulate as expanded value, that rate declines, because the relations between necessary and surplus labor “on which everything depends” according to Marx has changed and that change is no longer sufficient. . .

      • Boffy Says:

        According to Marx the fixed capital component declines relative to the circulating constant capital not vice versa. The circulating constant capital rises he says, because more efficient fixed capital processes more of it. He goes on to say that increases in productivity reduce the value of fixed capital, whereas it is more difficult to quickly reduce the value of the circulating constant capital i.e. it takes time to establish new agricultural production etc.

        This also explains the situation in respect of transport more generally, and indeed microprocessors. Sharply rising profits eventually encourage additional investment in production, which then tends towards overproduction. Marx cites in Vol III the effects on foreign producers of agricultural products in this respect, which causes volatility in these prices. The same thing can be seen today in relation to copper. Despite hugely higher prices and profits for copper producers, it took several years before they used their increasing money hoards to invest in additional production.

        The same thing happens with microprocessor production.

        However, it is, as Marx sets out in discussing the investment in these kinds of additional production sharply rising rates and volumes of profits which bring this about not a falling rate of profit! Marx points out that cotton prices rose sharply precisely because of investment by textile companies in new machines that increased demand sharply.

        It has been the massive increase in the production of a wide range of technologies using microprocessors that boosted the profits of microprocessor producers – Intel recorded its highest profits ever in 2Q of 2008, for example – which then caused a big increase in production.

        The fact that these types of industries are susceptible to swings in their production, which result in alternating periods of overproduction and shortage is nothing new.

        “In fact we do. Such investment reduces their unit costs, which is why it provides a initial boost to profitability. At a certain point, as the means of production accumulate as expanded value, that rate declines, because the relations between necessary and surplus labor “on which everything depends” according to Marx has changed and that change is no longer sufficient. . .”

        I wouldn’t disagree with that. However, I would argue that this process of reducing the value of capital proceeded from the 1980’s until recently, and thereby increased the rate and volume of profit. It is precisely my thesis that this period has now come to an end, and the rate of profit is likely to fall from here, because falling productivity will mean more capital has to be employed to obtain the same amount of profit.

        The difference is I don’t see any reason why that causes a crisis in the near future, in the past this part of the long wave continues to be a boom for another 12-15 years, or that when that turns to a down phase that spells the end of Capitalism any more than such periods have in the past.

        Capitalism will recover from such a period as it did several times in the 19th and 20th centuries, and probably on the basis of even more powerful forces than we can comprehend today, just as the current boom has been based on forces that could not have been comprehended 50 years ago.

        It will not collapse from its own contradictions – though it might end in barbarism if it is led into another global war – socialists have to end it, and that involves building a socialist alternative to it now, in the way Hal Draper suggests in “The Two Souls of Socialism”.

      • sartesian Says:

        Again absolutely true. Circulating capital increases because the fixed capital only gives up its value incrementally and only completes that “transfer” when its use value is extinguished. Or.. to put it another way, the point of capital is to turn an expanding mass of accumulated values in the means of production into even a greater mass of commodities.

        I think that capital has truly worked at reducing the value of capital through leveraged buy outs, liquidations, technical advance. I don’t think it has nearly been “successful enough,” which makes me shudder a bit to think about what is ahead of us.

        I also agree “crisis” does not mean capital is going to collapse under its own weight; or disappear. I certainly don’t think that such “crisis-mongering” is inherent in agreeing that the rate of profit has a tendency to decline.

        First, crisis itself is one of those “offsetting tendencies” to the decline in the rate of profit. Secondly, there is no “threshold” rate of profit below which capital simply cannot exist– as it can find some means to attempt to counter that level. At the same time, there is (almost) no decline in the rate of profit that any capitalist/all capitalists can ignore.

        If the law of value is nothing other but the social relations between classes, when labor is organized as wage-labor, then the fall in the rate of profit becomes nothing but the “law” the tendency to increased class struggle. The bourgeoisie can win that struggle, and suppress workers (as they have done pretty effectively over the years), but they can’t ignore the struggle.

        It doesn’t die. It has to be killed.

      • Boffy Says:

        “Again absolutely true. Circulating capital increases because the fixed capital only gives up its value incrementally and only completes that “transfer” when its use value is extinguished.”

        No, that is not why circulating capital increases relative to fixed capital. Marx says it occurs because 1 newer more efficient machine always replaces several older machines. The one newer machine always processes more material than the several older machines. So, physically circulating constant capital increases relative to fixed capital.

        But, furthermore, its not only science and technology that bring about – in some periods like the last, very rapid – development in the efficiency of these machines, that brings about rapid moral depreciation of the capital, the same processes revolutionise the production of the machines themselves, so that their production costs fall. Marx says that happens in relation to the fixed capital far more than with the circulating capital.

        In Volume II of Capital, discussing the circulation of capital, Marx describes three causes of crises each particular to the three stages of its circuit. The first is in relation to the inability to convert money-capital into productive capital due to the absence of some part of the productive capital. In Volume III discussing the effects of Price Fluctuations, Marx examines that further.

        Rapid improvement in machinery brought about a rapid increase in demand for cotton from the US. It caused cotton prices to rise, and indeed cotton shortages, because the supply of materials cannot respond quickly in the same way that industrial production can. To the extent that cotton was not available at all, a problem that Marx describes in relation to the situation during the Civil War as “The Greatest Example of an Interruption in the Production Process through Scarcity and Dearness of Raw Material”, (so much for the Falling Rate of Profit Being the ONLY cause of crises!)it is itself a cause of crisis, because without material, the other elements of productive capital cannot be put to work, the circuit of capital is broken, causing it to break down at its other stages too, as set out in Volume II.

        Capital sought to locate other sources of cotton using Indian cotton instead. But, as Marx also describes the high price of material can itself be a cause of crisis even when it is available in sufficient quantities. Because its value is passed on to the end commodity, high prices of material cause high prices of the end commodity. Marx describes how these high prices then choke off demand. But, capital relies on high levels of demand so that the value of fixed capital can be recovered in it at miniscule levels.

        If demand drops, either capital has to lower prices to maintain demand at high level so that it can recover the valu of fixed capital within it, or else it cuts back production, which means the pro rata proportion of wear and tear rises, thereby pushing prices even higher, or it allows fixed capital to stand idle, thereby imposing a different kind of cost.

        That, of course, is the third kind of cause of crisis he discusses in Volume II, the inability to convert commodity-capital into money-capital. And, of course that has nothing to do with a falling rate of profit or underconsumption either. In fact, the reason he describes for the increase in investment bringing about the higher material prices, is the exact opposite, a period of prosperity and high and rising rates of profit.

        In fact, very similar conditions that have applied over the 13-15 years, which brought about a large increase in the rate and mass of profit, and which accelerated the process of the previous 15 years when the rate of profit was also rising.

      • Boffy Says:

        “If the law of value is nothing other but the social relations between classes, when labor is organized as wage-labor, then the fall in the rate of profit becomes nothing but the “law” the tendency to increased class struggle.”

        According to Engels, of course, the Marxian Law of Value only operated from around 7,000 B.C. to the 15th Century, i.e. the period when commodities exchanged at their value.

    • sartesian Says:

      And I think Engels is wrong. The law of value is not operating from around 7000 BC. How can the law of value be operating when labor is not organized as abstract labor? When in fact, as Marx points out, even a genius of the stature of Aristotle cannot tease out the threads of what truly determines exchange value?

      Yes, Engels argues that way, and in so doing he completely undermines the historical specificity, and limitations, of capital and capitalism; and the “precision” of Marx’s critique as a)an “immanent critique” of capital and b) leading to the necessity for the overthrow, the abolition, of capitalism.

      • Choppa Morph Says:

        Careful here. Engels is referring to commodity production and exchange which were in progress with markets and separate producers etc among the Mesopotamians and Egyptians. The scope was local but prices were determined by the law of value. Not as crushingly as in capitalist society, of course, but in the sense of an impersonally reached value equivalence of the labour input by the commodity producers decided in the market. This was simple exchange among immediate producers, not much “free labour” involved, but the important first chapters of the Contribution to the Critique and of Capital make it clear that this was indeed the case.
        It wasn’t Engels arbitrarily proclaiming this against Marx, it was a view shared by both as economists and historians.

      • sartesian Says:

        “If demand drops, either capital has to lower prices to maintain demand at high level so that it can recover the valu of fixed capital within it, or else it cuts back production, which means the pro rata proportion of wear and tear rises, thereby pushing prices even higher, or it allows fixed capital to stand idle, thereby imposing a different kind of cost.”

        The above statement contains several problems that I think undercut its argument. First and foremost, if production is cut back, there can be no pro-rate proportion increase of wear and tear. Such a conception actually violates Marx’s conception/analysis of fixed capital as capital that can only transfer its value incrementally over time to the mass of commodities, and only by incrementally extinguishing its use value. No production, no wear and tear, no increased increment of value to be recovered thought the increased increments of the consumed use value. No recovery of the “sunk” investment.

        In addition the statement argues that ” or it [capital, capitalist] allows fixed capital to stand idle, thereby imposing a different kind of cost.” This posits a self-contradictory distinction between “cutting back production” and “allowing fixed capital to stand idle.” The cutting back of production and allowing fixed capital to stand idle are almost by definition, and certainly by capitalist reality, the same thing.

        The bourgeoisie try to offset that identity– for example “slow steaming” in the maritime freight industry– but still that involves essentially reducing TOWARDS idle part of the accumulated fixed capital, by increasing the turnover time of the process by which the value of fixed capital is transferred into the product or service marketed.

        You can lay up 10% of your fleet; increase the % of fleet going to “break-up;” and you can slow steam around the capes of Good Horn and Hope, avoiding the fees of the Panama and Suez Canals,( accruing some benefit BTW of lower fuel consumption). All are “same-same” as we used to say back in the day.

        Part of the problem with Boffy’s formulation here, and in his claim that the cause of circulating capital “outstripping” fixed capital is because 1 machine replaces many, rather than the compulsion to convert value accumulated as the means of production into value as commodities, is that Boffy is not viewing the fixed capital as accumulated value.

        What has occurred with overall expansion of capitalS, plural, is that the mass of the mean of production,. not simply as things like deadweight tonnage, or locomotive horsepower, increases but ALSO that the value mass of the means of production increases. After all capital IS the means of production organized as private property, as value, which requires expansion through engagement with value-producing wage-labor.

        Consequently capital’s expanded reproduction requires exactly that, converting the already existing mass of expanded value embodied in the means of production into an ever greater value mass of commodities.

      • sartesian Says:

        First I need to correct a mistake I made– certainly is the case that says operating fixed assets at a reduced rate cannot increase the costs of production. Certainly it can. Operating a locomotive at a speed of 10 mph certainly does increase the costs of production. More time is involved in providing the unit cost or service. Operating at the reduced rate can even increase wear and tear on locomotives that are designed to operate at maximum efficiency at higher speeds. However, recovering those higher costs is very, very problematic…. as again, using the example of maritime freight, the slow steaming strategies etc. cannot effectively prevent the decline in daily hire rates for containerships, bulk carriers, and tankers.

        The whole point to idling fixed capital, or slowing it down, are that its operating costs cannot be recovered, leading to asset devaluation.

        So consequently, we see in the semi-conductor industry the shuttering of the 200mm wafer production lines, and the running of the 300mm lines pretty exclusively.

        We see in railroad industry, the largest Class 1s retiring or scrapping or selling off to smaller Class 2 and Class 3, older locomotives with HIGHER not lower operating costs. The smaller railroads, with smaller total fixed costs and usually lower labor costs can make better “use” of the locomotives with the higher unit costs of operation.

        Now as regards Egypt etc. that commodities exchange, and that every merchant is out to buy low and sell high is much different than a society that reproduces itself through a process where commodities exchange at values determined by the social time necessary for the reproduction of the commodities.

        I find it startling, a bit, that Marxists can argue that the law of value governs societies where: 1) the society is organized around and dominated by production for SUBSISTENCE 2) where exchange is the exchange of surplus PRODUCT, and not of products produced as/for/by labor itself organized as a value.

      • Boffy Says:

        I think Engels is wrong too, or to be more accurate he is talking about the Law of Value in a restricted sense.

        Marx makes clear, for example, in his Letter to Kugelmann – http://www.marxists.org/archive/marx/works/1868/letters/68_07_11.htm – that the Law of Value exists through all societies, and only its form changes,

        “Natural laws cannot be abolished at all. The only thing that can change, under historically differing conditions, is the form in which those laws assert themselves. And the form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products.”

        The law of Value is nothing more than the law that the value of things is determined by the labour required for their production, and as Marx makes clear in this letter in every society things have to be produced, and labour-time has to be allocated for that purpose. The only thing that changes is the method by which that allocation occurs.

        In Volume I, Chapter 1, Marx makes clear that it is not just commodities that possess values, every use value produced by labour has value. That is why he sets out the way Robinson Crusoe on his island in his actions of measuring the time taken to produce the various things he needs provides everything that needs to be understood about Value.

      • Boffy Says:

        “The scope was local but prices were determined by the law of value. Not as crushingly as in capitalist society, of course, but in the sense of an impersonally reached value equivalence of the labour input by the commodity producers decided in the market.”

        I think Engels’ point is that by the 15th Century, the prices of commodities was NOT being determined by the Law of Value, in the sense that they exchanged at their Exchange Values! His whole point here is to point out that the transformation of Exchange Values into prices was a very long drawn out historical process, and as soon as capital begins to invade some area of production, Exchange Values are replaced by Prices of production. Moreover, because the output prices of these capitalist producers are at the same time the input prices of other producers, including non-capitalist producers, those prices of production become the cost prices of those other producers, so automatically, even for non-capitalist producers, their own output prices are no longer Exchange Values in the pure sense.

      • Boffy Says:

        “The above statement contains several problems that I think undercut its argument. First and foremost, if production is cut back, there can be no pro-rate proportion increase of wear and tear. Such a conception actually violates Marx’s conception/analysis of fixed capital as capital that can only transfer its value incrementally over time to the mass of commodities, and only by incrementally extinguishing its use value. No production, no wear and tear, no increased increment of value to be recovered thought the increased increments of the consumed use value. No recovery of the “sunk” investment.”

        The argument is not my argument it is a summary of what Marx himself says! Firstly, wear and tear is never proportional to use. Secondly, there is the question of moral depreciation. But, in addition, if machinery etc. simply stands idle because production has been cut back, it also suffers physical depreciation.

        “The cutting back of production and allowing fixed capital to stand idle are almost by definition, and certainly by capitalist reality, the same thing.”

        I wouldn’t particularly disagree, but again I’m summarising Marx, who writes,

        “This shows again how a rise in the price of raw material can curtail or arrest the entire process of reproduction if the price realised by the sale of the commodities should not suffice to replace all the elements of these commodities. Or, it may make it impossible to continue the process on the scale required by its technical basis, so that only a part of the machinery will remain in operation, or all the machinery will work for only a fraction of the usual time.”

        And again it is not my argument that fixed capital outstrips circulating constant capital, but Marx’s!

        “Further, the quantity and value of the employed machinery grows with the development of labour productivity but not in the same proportion as this productivity, i. e., not in the proportion in which this machinery increases its output. In those branches of industry, therefore, which do consume raw materials, i. e., in which the subject of labour is itself a product of previous labour, the growing productivity of labour is expressed precisely in the proportion in which a larger quantity of raw material absorbs a definite quantity of labour, hence in the increasing amount of raw material converted in, say, one hour into products, or processed into commodities. The value of raw material, therefore, forms an ever-growing component of the value of the commodity-product in proportion to the development of the productivity of labour, not only because it passes wholly into this latter value, but also because in every aliquot part of the aggregate product the portion representing depreciation of machinery and the portion formed by the newly added labour — both continually decrease. Owing to this falling tendency, the other portion of the value representing raw material increases proportionally, unless this increase is counterbalanced by a proportionate decrease in the value of the raw material arising from the growing productivity of the labour employed in its own production.”

        And, as Marx points out, there are indeed periods in which that reduction in raw material prices occurs, but generally it takes longer and is not on the same scale as the decrease in the proprtion attributable to fixed capital.

      • Boffy Says:

        “I find it startling, a bit, that Marxists can argue that the law of value governs societies where: 1) the society is organized around and dominated by production for SUBSISTENCE 2) where exchange is the exchange of surplus PRODUCT, and not of products produced as/for/by labor itself organized as a value.”

        Yet, in Capital I, Chapter 1, where Marx describes the actions of Robinson Crusoe in measuring the time he takes to produce his needs, as being everything that is needed to know to understand Value, does precisely that. Indeed, having done so, he goes on to explain that those relations, as with those of the primitive commune, or of the peasant household allocating its available labour-time, expose the true relations of value that commodity production and exchange obscure!

      • Boffy Says:

        Errata:

        “And again it is not my argument that fixed capital outstrips circulating constant capital, but Marx’s!”

        Should read,

        “And again its not my argument that the relative reduction of fixed capital outstrips…”

      • Choppa Morph Says:

        I’m afraid Boffy is too delirious and rhapsodic in his approach for me to want to go into any kind of theoretical clinch right now. He chucks a handful of Marxoid gobbets into a mixer and splodges the result on a plastic table-cloth.
        Sartorius however says something in relation to Engels and the Law of Value that needs a comment:
        “I find it startling, a bit, that Marxists can argue that the law of value governs societies where: 1) the society is organized around and dominated by production for SUBSISTENCE 2) where exchange is the exchange of surplus PRODUCT, and not of products produced as/for/by labor itself organized as a value.”
        The point is not that the law of value governs these societies. He needs to provide chapter and verse to show the Engels or Marx thought this was the case. The law of value determined the quantities in which commodities were exchanged within the jurisdiction so to say of their market. In other words their prices (Boffy is off the rails here, of course, as the exchange value of any commodity in any commodity-producing and exchanging entity (group, tribe, federation, village, regional community, city, whatever) is expressed in its price in the market, whether that price is expressed barter-like in some other arbitrary commodities, or in more developed form in some equivalent tending towards the universal equivalent, money.)
        The Law of Value begins to determine the socio-economic behaviour of whole societies when these become capitalist rather than feudal, and when a free class of wage-earning labourers makes its appearance.
        The Grundrisse discusses the general movement of this process in the section on pre-capitalist economic formations. Commodity-producing social entities existed within and alongside pre-capitalist modes of production without forming whole societies. And of course even though the Law of Value operated to determine the prices at which commodities were exchanged, it was obviously distorted by political pressures and violence from the ruling classes – they wanted their unearned cut of the value produced by the living labour of the commodity producers. In our days this distortion is caused by the political and social forces of imperialism, back then it was caused by the coercive forces of slave-owners or feudal lords.

      • Boffy Says:

        When someone says, as Choppa does, something like,

        “I’m afraid Boffy is too delirious and rhapsodic in his approach for me to want to go into any kind of theoretical clinch right now.”

        You know they realise they have lost the argument!

  7. H. A. Cox Says:

    Sorry, Victor asks the question of why the OCC would have to rise when technical change takes place in the production of constant capital on the tcc and occ.

  8. Alan Freeman Says:

    Thanks to Michael for drawing readers’ attention to several responses to Heinrich including our own. We dissect at critical flaw in Heinrich’s case, his misunderstanding of what the law of the tendential fall in the profit rate (LTRPF) really is: “Heinrich’s … 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.” As we point out, “the law is not a prediction of what must inevitably happen, but an explanation of what does happen; it explains why the rate of profit does tend to fall in the long run. By demanding a proof of inevitability, Heinrich makes a scientifically unacceptable demand: that Marx should provide a proof of a false statement.”

    It is unfortunate therefore that Michael defends the law in such a way that, were his defence accepted, Heinrich’s charges against it would have to be acknowledged as true.

    Today, as in Marx’s day, the rate of profit in the US has indeed been falling for some considerable time (see my What Makes the US Profit Rate Fall, Andrew Kliman’s Persistent Fall in Profitability Underlying the Present Crisis, my recent Profit Rate in the Presence of Financial Markets and also the Deloitte Shift Index – thanks to Gavin Mendel-Gleason and Bruce Wallace for drawing attention to this under-reported evidence. Robert Brenner’s painstaking work also deserves mention)

    The real failure of Marx’s opponents is that they cannot explain why this is happening. Mainstream economics certainly can’t. But nor can the ‘Marxists without Marx’ as I explained at Marxism 2013 (http://www.youtube.com/watch?v=SJZkmtFqeBY). Their theory predicts the rate of profit must inevitably rise with technological change. No wonder Marx’s detractors wrongly accuse him of asserting the diametric opposite, that the profit rate must inevitably fall.

    The evidence of Marx’s own work shows he entertained no such simplistic view. Just as the law of gravity explains why objects fall to the ground when they do, so the LTRPF explains why the profit rate falls over long periods when it does. It concerns causes not predictions. The cause of the fall is capitalism. That is why as Michael writes “capitalism is not an eternal economic system that can last forever but is a transitory mode of production”

    This insight is fundamentally undermined if we convert it into a fatalistic law as I try to explain in Positivist Marxism. Michael endorses Miller’s view that “If the rate of profit has not yet fallen, or its direction is not yet definitely demonstrated, nonetheless it must inevitably fall eventually. The rate of profit must fall in life or the theory is incorrect. The law is unidirectional and irreversible.”

    This is simply false. The law is not unidirectional, and it is not irreversible. At definite times in history, the fall in the rate of profit has been spectacularly reversed – for example between 1942 and 1947 in the USA. It depends on what the capitalists do, just as the law of gravity depends on what else is going on.

    Michael appears slightly schizophrenic. On the blog I referred to, he rejects my case that the rate of profit should include financial assets in the denominator. But in that case, he cannot possibly claim that the rate of profit in the UK must inevitably fall, since on his own measure of it, this rate has risen systematically since 1974.

    Marxism needs to pass beyond the endeavour to reduce a general social law to a mathematical formula. The contradictions of capitalism are worked out on the streets, not in the classroom.

    • H. A. Cox Says:

      Alan Freeman makes three criticisms about Michael Roberts critique of Heinrich. Michael holds the view that the rate of profit must inevitably fall; that it is wrong to argue that Marx held such a view; and that Michael Roberts own statistics can be shown that the rate of profit in Great Britain do not verify the falling the rate of profit.
      (1)’ The evidence of Marx’s own work shows he entertained no such simplistic view. Just as the law of gravity explains why objects fall to the ground when they do, so the LTRPF explains why the profit rate falls over long periods when it does. It concerns causes not predictions. The cause of the fall is capitalism. That is why as Michael writes “capitalism is not an eternal economic system that can last forever but is a transitory mode of production”
      This insight is fundamentally undermined if we convert it into a fatalistic law as I try to explain in Positivist Marxism. Michael endorses Miller’s view that “If the rate of profit has not yet fallen, or its direction is not yet definitely demonstrated, nonetheless it must inevitably fall eventually. The rate of profit must fall in life or the theory is incorrect. The law is unidirectional and irreversible.”
      This is simply false. The law is not unidirectional, and it is not irreversible. At definite times in history, the fall in the rate of profit has been spectacularly reversed – for example between 1942 and 1947 in the USA. It depends on what the capitalists do, just as the law of gravity depends on what else is going on.’
      “The cause of the fall is capitalism”. Wow, that is a very useful explanation for the fall of the rate of profit? So let us be a little more specific. Productive capital tends to increase the productivity of labor through technical change. This results in rise of the tecnical and organic compositions of capital. This means that labor is being rendered relatively less essential to the production process of commodities-be they means of production or consumer goods. If the value of labor power is held constant, this means that the rate of profit inevitably falls. If you lower the value of labor power by increasing the rate of exploitation by cheapening wage goods, you also raise the OCC in the wage good industry by doing so. For the given capital, with this technical change, you would have a decline in the rate and mass of profit, unless you accelerate accumulation, which will mean that the mass of profit will grow, but the rate will decline. (Again, we are talking about what happens to productive labor).This means that technological change forces capital to accelerate accumulation in order to preserve the existing capital. The fall in the rate of profit forces individual capitalist entities to increase the productivity of labor and this raises the OCC and forces capitalism to accelerate accumulation even faster. Cyclical crises are generated because the technological laggards need to dump their commodities to preserve what little capital they can and these crises are cyclical because of the decline in demand for technology changing goods decline-productive capacity will be under utilized, hence the downward spiral until enough capital is wiped out. And then the shit starts all over again, but with a higher OCC and TCC. As the TCC and OCC become higher, accelrated accumulation becomes more difficult because there will not be sufficient sv to be able to valorize the existing capital. This process is unidirectional unless you have a war-such as WWII and destroy physically masses of capital. Even with this destruction, capitalism did not return to a the OCC and TCC of 1825. This is the only exogenous means for lowering the OCC and TCC. There are other exogenous means for delaying the breakdown of capitalism: expansion of debt, unproductive investment such as military buildup, investments in other parts of the world-which only transfers the contradictions on a wider scale. But these means disguise the falling the rate of profit and cause an increase in productive enterprises expanidng beyond what they could have and encourage technogical change and a rise in the TCC and OCC, and so on.
      (2)The evidence of Marx’s own work shows he entertained no such simplistic view
      Hinerich and Clarke are right that Marx supported such a view, but they are wrong to say he was indecisive about or abandoned it. Freeman argues that he never held such a view. I have never read any such passages in Marx contradict what I stated above. And I can give ample quotes from Engels,Lenin, Rosenburg, Preobrashensky where they interpret Marx this way.
      (3)Michael appears slightly schizophrenic. On the blog I referred to, he rejects my case that the rate of profit should include financial assets in the denominator. But in that case, he cannot possibly claim that the rate of profit in the UK must inevitably fall, since on his own measure of it, this rate has risen systematically since 1974.
      I must say that Alan shows a massive confusion in those sentences. Financial assets in what denominator?Marx’s whole theory is focused on the development of the productive forces to produce consumable goods.. Those productive forces are the means of production in the form of commodities used to produce those consumer commodities. And the labor needed to produce those commodities. Because finance capital gets surplus value, does not mean it produces it. Secondly, Marx’s model was developed as if capitalism was spread throughout the world. He used Great Britain as the model, but he assumed it encompassed the whole capitalist system-it did not then and it certainly does not now. To theoretically use Great Britain to empirically verify or disabuse Marx’s theory is nonsensical. How much surplus value does Great Britain still capture by being a major capitalist center of finance and how much of its productive apparatus is actually located in the South. The same applies to all the industial-o I’m sorry, declining industrial economies from the South where so much of productive capital has moved-tho its ownership and control have not completely done so. It may be imposible to compute a world rate of profit on productive capital-which is what the Marxian rate of profit would be, but it is impossibel to verify theorticaly (or not) Marx’s theory of the rate of profit by measuring the rate of profit of any single country-even the US and Great Britain.
      The whole problem with Kliman and Freeman is they do not view capitalism as evolving-as developing and running into a barrier-capital itself. Instead, capitalism is messy, it runs into recurrent crisis. Therefore there is little substantial difference between their interpretation and that of Clarke, Weeks, Harvey, etc. Except sometimes that old rate of profit falls.
      As for being a fatalist, it did not stop Marx, Engels, Lenin, Luxemburg from being damn committed revolutionis throughout their lives. They did not spend their time waiting for the collapse of capitalism. There is somethng ironic about an academically trained Marxist economist describing another as a fatalist.

      • Shane Mage Says:

        H.A. Cox writes:The rate of profit must fall in life or the theory is incorrect. The law is unidirectional and irreversible.”
        This is simply false. The law is not unidirectional, and it is not irreversible. At definite times in history, the fall in the rate of profit has been spectacularly reversed…
        The Law, as formulated by Marx, states that it “turns into an antagonism of this mode of production at a certain point and requires, for its defeat, periodic crises.” So the operation of Marx’s Law not only permits periods of rising profitability but absolutely requires them. That is what makes it a powerful explanation of the capitalist economic cycle, to which crises are integral.

      • Andrew Kliman Says:

        IMO, Shane’s point is right, excellent, and extremely important. One of the foremost merits of Marx’s crisis theory is that it is able, unlike a variety of other crisis theories, to explain, without any ad hoc gimmicks, why “we go round the whole circle once again,” as Marx put it, and why “Permanent crises do not exist,” as he also put it.

      • alanfreeman3 Says:

        So far I have not seen a coherent response to refutation of Miller, which Michael Roberts and I think H. A. Cox both endorse. Miller had written that “The rate of profit must fall in life or the theory is incorrect. The law is unidirectional and irreversible.”
        To this I responded, as Shane Mage rightly notes:
        “This is simply false. The law is not unidirectional, and it is not irreversible. At definite times in history, the fall in the rate of profit has been spectacularly reversed…”
        Cox responds: “This process is unidirectional unless you have a war-such as WWII and destroy physically masses of capital. Even with this destruction, capitalism did not return to as the OCC and TCC of 1825. This is the only exogenous means for lowering the OCC and TCC. There are other exogenous means for delaying the breakdown of capitalism: expansion of debt, unproductive investment such as military build-up, investments in other parts of the world-which only transfers the contradictions on a wider scale. But these means disguise the falling the rate of profit and cause an increase in productive enterprises expanding beyond what they could have and encourage technological change and a rise in the TCC and OCC, and so on.”
        In short,
        (1) The rate of profit does not always fall in life since under definite circumstances, which appear in life, it does not fall
        (2) The law is not unidirectional since, on occasions, it moves in the opposite direction
        (3) The law is not irreversible, since under definite circumstances, it is reversed.
        Miller’s statement is therefore false, by H.A. Cox’s own admission. You cannot on the one hand say that the fall reverses under certain circumstances, and then say ‘however it is unidirectional and irreversible’. This is not a logically tenable position. It is equally untenable to argue that it is really falling, even though it is in fact rising, because various means “disguise” the falling rate of profit. If it is disguised, then precisely it “did not fall in life”. This is like saying somebody is really dead, but their death has been disguised by the fact that they are living.
        Such presentations of “Marx’s theory” do not defend the law at all but expose it to ridicule. Marx undoubtedly held that capitalism contained within it contradictions that it could not resolve, and that the law of the tendential fall of the rate of profit explained the cause of the observed historical trend of the rate of profit and repeated explosions or ‘crises’ to which this gave rise.
        If however you express this scientific discovery incorrectly, for example by claiming that it allows us to predict a ‘unidirectional and unconditional’ fall where in fact no such fall is observed, the consequence will be that you cannot defend that discovery. Worse still, Marx’s many detractors including the ‘Marxists without Marx’ will lose no opportunity to point to the failure of your defence as yet more evidence that Marx’s theory is indefensible.
        That is to say, precisely in order to defend Marx’s discoveries, it is necessary to present those discoveries correctly. That is my profound objection to the mis-statement of those discoveries which we find in the paper of Carchedi and Roberts.

    • Charles Andrews Says:

      If we know the laws of motion of a thing, we can make predictions – not the exact course of events, but something about where things must go.

      Marx predicted that the capitalist economic order would end and be succeeded by a non-exploitive order, call it socialism, communism, what you will. It will, of course, take human action to do it; there is no contradiction in that.

      However, Marx did not base this prediction on any particular level or course of the rate of profit nor even the successive occurrence of crises (a series of events that the law of falling profit rate does predict). A country goes into an era of revolution, among other causes, when a breaking point is reached in a more general contradiction between capitalist economic relations – wage labor at its core – and qualitative changes in new productive powers. No Rich, No Poor.

  9. Thomas Weiß Says:

    a) “…mathematically, the rate of surplus value could tend towards infinity (where workers live on air)…”
    The workers continue to live with a certain amount of commodities, their real wage in terms of commodities does not fall, but the amount of labour time needed to produce them falls towards zero. Only because of this, not because workers live on less and less products, the rate of surplus could tend towards infinity.
    b) Mistakes of Heinrich are, I think, that he overlooks fixed capital by claiming that all fixed capital can be regarded as circulating capital if only one takes the period of accounting long enough. After, say 10 years, most of fixed capital is productively consumed, so it is, if you look at 10-year-periods, kind of circulating capital. That is the claim of Heinrich, which allows him to abstract from the whole dynamic associated with fixed capital investment.
    c) Heinrich and the Okishians assume, that after every introduction of new technology, a new steady state equilibrium with an equal general rate of profit amongst branches is reached. By this comparative-static method they get the result that the rate of profit rises. This assumption might be based on some remarks from Marx in volume III. There is, however, no market mechanism, which leads to such equilibria, on the contrary, capitalist production is an ongoing accumulative process in which concepts of equilibrium do not make much sense (again, perhaps contrary to some remarks from Marx, who occasionally talks about “equilibrium”).

  10. Choppa Morph Says:

    Two things:
    1) Thanks for the article! Very useful for anchoring the discussion in a scientific approach and perspective. Empirical evidence and the “truth” are not our enemies. They are very much the enemies of bourgeois economists of all schools and colours, including our friends the Marxists without Marx TM.
    Pace Alan Freeman I tend to agree with Michael on the “inevitability” front. Given the conditions stipulated, the fall is both unidirectional and inevitable “in the long term”. As is the tug of gravity. Counter-acting factors (like motion and velocity in the case of gravity eg moon round earth) appear to negate the law if it’s taken to mean “always downwards, never upwards”, but both Marx and Michael are clear over the interrupted non-linear shape of the graph. We could use the cancer-causing effects of tobacco as a parallel or indeed anything statistically true but overdetermined and multi-factorial. Tobacco is inevitably carcinogenic. Alan F and Andrew K argue that Marx only explains what happens and not what must happen – this is disingenuous and kowtowing to a false Kantian understanding of what science does. Hegel is a better guide to the logic of science than Kant, but that discussion is something that is even further from today’s scholarly horizons (and poltical debate) than Marx’s ideas.
    2) Mike, in your article you and Carchedi write: “variable capital (the value of labour power and the only creator of value)”.
    While it does indeed have the value of labour power IF this commodity is sold at its value, it doesn’t otherwise, and I think you should have made this clear given that value is such a central and misunderstood category in Marx’s Capital. Competition and the distortions of the prices of production caused by it require this distinction to be made.
    More importantly your second apposition, “the only creator of value” is completely wrong and very misleading. As it stands you are arguing that value is the creator of value, since you are saying that variable capital is value and at the same time creates value.
    Let’s separate some things out here.
    First, capital and value are dead things. They are created, and create nothing. Marx calls them congealed labour. Dead labour embodied in commodities.
    Second, labour power is a commodity and as such dead, a repository of congealed labour.
    So there is an opposition between dead and living labour to be taken into consideration. Living labour is what creates value in the labour process. Value is its result and its quantity is validated in the sale and realization of the commodity in terms of money, the value equivalent.
    The confusing thing is that labour power is identical with living human beings even though as a commodity it is dead value. Labour power is the inescapable vehicle of living labour, but its role as a commodity subordinates it to capital in the capitalist production process. This is what allows people like Heinrich to wriggle and squirm around in the materiality of surplus value and its production and consequences – they only see the fetishized aspect of labour, its dead carcass. They are like the worms in the meat fed to the sailors on the Battleship Potemkin😉
    We, the working class, own the commodity labour power, of course, and as we all know it’s our only asset. And it’s in the historical and political power struggles over the fate of this commodity – more exciting even than the fate of gold or oil! – that human society develops from one mode of production to another.
    And once we gain this perspective we see why you are justified in insisting on the inevitability and uni-directionality of Marx’s central law. When capitalism succumbs to its inner contradictions under the blows of historical and political forces it will in no way revert to feudalism or slavery, the modes of production that preceded it. It cannot go back. It will either be raised to socialism in a a world society of freely associated producers or crash into a state of barbarism we can’t conceive of now, although the brutality and atrocities of the past century or two give us some hints. That is, if human society isn’t wiped out altogether.
    Thanks again for the article, and thanks for raising this particular point, however inadvertently. The discussions here are becoming more and more focused and indispensable – and the reason is that the falling rate of profit is exactly as you say the “most important law of motion of capitalism”, around which all the phenomena of capitalist society revolve.

    • michael roberts Says:

      Choppa
      Thanks for this. I agree very much with your analysis and thanks for correcting my ‘shorthand’ on variable capital – we cannot always get things dead right inb a quick blog.

  11. allan harris Says:

    It seems to me that what Marx meant in Volumes II and III is that the tendency of the rate of profit to fall is due to the fact that the capitalist always tries to eliminate as much human labor as possible from the production process. Expanding use of technology makes this not only possible, but absolutely essential. Profit, however, cannot be made off a machine; only a human being can produce a profit (or surplus value.) Thus, for instance, if a product contains $25 of labor paid in wages, $25 of unpaid labor (the surplus value) and $50 of machines, raw materials, etc. (i.e. constant capital) then the total produced value will be $100 and the rate of profit would be (100-75)/100 = 25%, or price less costs divided by price.

    If the amount paid in wages drops to, say, $10, the unpaid labor will also drop, but not exactly at the same rate, but it will necessarily drop because it is labor paid with wages which creates the surplus-value/profit. The increase in the use of technology allows the capitalist to produce the same total value, $100, by paying $10 in wages, but receiving only $10 in unpaid labor-value. The constant capital value of machinery, etc. rises to $80. Now the rate of profit is: (100-90)/100 = 10%.

    Thus the rate of profit will inevitably fall. This is not to say, however, that aggregate profit will also fall, in fact, it will continue to rise. This is due to the monopolization of capital. The big capitalists destroy the smaller ones because of the efficiency of size. A big monopoly can stay in business on a much smaller rate of profit than can a small enterprise.

    As Marx showed, this tendency can be interrupted by, for instance, the increased exploitation of labor. Instead of using high-cost machinery, the capitalist can simply force workers to work more and pay them less. This is happening right now in China and parts of the West. Sooner or later, and it may be a long time, the tendency will make itself felt, because it is impossible for the capitalist to ignore advances in technology. And because, in my view, profit can only be made off the skin of a human worker.

    But, if the tendency is real, there should be empirical (objective) economic evidence of it. There have been several studies over the last 10 yrs or so showing that, in fact, the rate of profit over the past 200 yrs has indeed shown a tendency to fall. One study was done by Paul Cockshott and his graduate students in Scotland. I even recall a study done by Goldman, Sachs, of all people, showing the same tendency when comparing western economics to China. China, being less industrialized than the west, has more human labor to exploit and, therefore, produces a higher rate of profit, but, of course, a lower aggregate profit per capita. And China, therefore, attracts huge investments in capital. Obviously China is catching up with the west in its use of technology. When China finally does catch up, then western interests like Goldman, Sachs, will have to look for somewhere else to exploit surplus value.

  12. sartesian Says:

    Boffy writes: ” Secondly, there is the question of moral depreciation. But, in addition, if machinery etc. simply stands idle because production has been cut back, it also suffers physical depreciation”

    1) “moral depreciation” is by definition not “wear and tear” and consequently has little if anything to do with the rate or intensity of usage of the fixed assets.

    2) whatever the physical depreciation of idle equipment, it is almost impossible to recover that cost in the markets…. so consequently no matter how of the container fleet was idled, the depreciation of that fleet could not be captured in the daily hire rates of the ships, or in the rates charged for transporting containers on the in service fleet– this is why sooner or later, capital has to destroy accumulated assets

    Other issues: I think Marx’s explanation of the increase of circulating capital over fixed capital is simply saying what I’m saying– more dead labor absorbs proportionately, or in units, less living labor; or we can put it that more relative surplus value is appropriated while necessary labor is reduced and it requires more more accumulated dead labor to circulate the proportion of surplus value…

    Regarding this:“Natural laws cannot be abolished at all. The only thing that can change, under historically differing conditions, is the form in which those laws assert themselves. And the form in which this proportional distribution of labour asserts itself in a state of society in which the interconnection of social labour expresses itself as the private exchange of the individual products of labour, is precisely the exchange value of these products.”

    The “natural law” Marx is referring to here is NOT the law of value. The “natural law” is the social necessity to organized and reproduce a proportional distribution of labor. Exchange value is the way the law, or better to say, that social necessity is expressed, or mediated, under the conditions of private exchange of the individual products of labor.

    What distinguishes capital, what makes the law of value what it is– the expression, the mediation of the need to socially distribute labor in proportion– is that the exchange of commodities is determined by the socially necessary labor of the commodities’ reproduction. Social.

    That specific expression is only possible because all labor is reduced to a “shared asset”– time. “Time is everything, man is nothing; or at most, time’s carcass” wrote Marx. That, IMO, is the key.

    In the Grundrisse (? not sure) Marx writes. “All economy is the economy of time.” Indeed, all economies are about the organization, distribution and the reproduction of labor-time. Not all economy(ies) of time is/are economy(ies) of value.

    I do not think we can take the example of Robinson Crusoe– which Marx was using to point to the flaw and the blindspot of bourgeois political economy (a theorist of which Defoe fancied himself) as evidence that Marx thought the law of value was timeless, or governed pre-capitalist societies (other than “at their fringes”).

    I’ll defer to Choppa’s interpretation of Engels’ historicizing the law of value, while I try to track down chapter and verse. I’ll reread those passages from Engels. And I confess, the more I read Heinrich, the more I like Engels.

    • Boffy Says:

      Sartesian says,

      ““moral depreciation” is by definition not “wear and tear” and consequently has little if anything to do with the rate or intensity of usage of the fixed assets.”

      It is not “wear and tear” that is true, but it is absolutely not true to say that it has nothing to do with the rate or intensity of usage of fixed assets. Marx says the attempt to avoid such moral depreciation was THE biggest factor in capital extending the length and intensity of the working day! The fact, that such depreciation is not transferred into the VALUE of the commodity is no reason why the capitalist will not try to recoup that depreciation in the price if they can. And, if they cannot then as Marx points out that is a cause for some of them that have borrowed money to buy that fixed capital going bust. In other words, the rise in raw material prices that causes a reduction in demand, that causes a reduction in production that increases unit costs, is a cause of crisis.

      “whatever the physical depreciation of idle equipment, it is almost impossible to recover that cost in the markets…. so consequently no matter how of the container fleet was idled, the depreciation of that fleet could not be captured in the daily hire rates of the ships, or in the rates charged for transporting containers on the in service fleet– this is why sooner or later, capital has to destroy accumulated assets”

      It depends. In Capital II, Marx describes the situation in agriculture where because of seasonality, equipment lies idle for a large part of the year. The depreciation of the equipment that results is a natural part of the production process – he compares it to the natural waste of cotton in production – and therefore forms an integral part of the cost of production. It is then recovered in the price of production.

      “Other issues: I think Marx’s explanation of the increase of circulating capital over fixed capital is simply saying what I’m saying– more dead labor absorbs proportionately, or in units, less living labor; or we can put it that more relative surplus value is appropriated while necessary labor is reduced and it requires more more accumulated dead labor to circulate the proportion of surplus value…”

      No one denies that physically more circulating constant capital absorbs proportionately less living labour. The value relations are, of course another matter. But, your original point was that fixed capital increased proportionate to the circulating constant capital. It doesn’t it declines both in physical and value terms, though not in a linear fashion.

      “The “natural law” Marx is referring to here is NOT the law of value. The “natural law” is the social necessity to organized and reproduce a proportional distribution of labor. Exchange value is the way the law, or better to say, that social necessity is expressed, or mediated, under the conditions of private exchange of the individual products of labor.”

      That law IS the Law of Value! And all you have said here is that Exchange Value, which is based on the idea that Value = labour-time, is the form that this law assumes under commodity production. If you look at what Marx says at the start of that letter to Kugelmann, it is undeniable that what he is talking about is Value. He says,

      “As for the Centralblatt, the man is making the greatest concession possible by admitting that, if value means anything at all, then my conclusions must be conceded. The unfortunate fellow does not see that, even if there were no chapter on ‘value’ at all in my book, the analysis I give of the real relations would contain the proof and demonstration of the real value relation. The chatter about the need to prove the concept of value arises only from complete ignorance both of the subject under discussion and of the method of science. Every child knows…”

      How do you think he goes seamlessly from talking about Value and its meaning to this description if the law he was describing were not indeed the law of value?

      “is that the exchange of commodities is determined by the socially necessary labor of the commodities’ reproduction.”

      Except, of course, under capitalism it isn’t! That is precisely Engels’ point. Under Capitalism the exchange of commodities is NOT determined by the socially necessary labour-time required for their production as it was under petty commodity-production, precisely because they exchange at Prices of Production not Exchange Values! The price of Production will always be more or less than the socially necessary labour-time required for the production of that particular commodity, precisely because it includes a bigger or smaller share of the total surplus value, which in itself represents a portion of social labour-time!

      “In the Grundrisse (? not sure) Marx writes. “All economy is the economy of time.” Indeed, all economies are about the organization, distribution and the reproduction of labor-time. Not all economy(ies) of time is/are economy(ies) of value.”

      Actually its Chapter 2 of the Poverty of Philosophy, in the same section as the “Time’s Carcase” quote. But, you are wrong because time is value, value is time, and that is precisely the point Marx is making here. Read Volume I of Capital. Marx gives the historical and logical evolution of the commodity and of exchange value. He talks at length about use value, and value. He describes how some use values are not commodities and so on. But, he talks at length about how the “product” becomes a commodity. In the same passages he talks about “products” having value, precisely because they are the products of labour. It is precisely because products, use values that are the product of labour that they have value, and it is precisely because this individual value does and must exist historically and logically prior to it taking on a social form, that products can become commodities, and individual values can become subsumed in social value.

      A class of schoolchildren can have an average height, and it can be gauged by measuring them all totalling and dividing by the number of children. But, it is chronologically and logically impossible for that average height to be formed prior to or without each of those children each having their own height completely independently of all the others. It may not have been a “social” height, it could not be compared with the average, but it nevertheless existed and had to exist.

      “I do not think we can take the example of Robinson Crusoe– which Marx was using to point to the flaw and the blindspot of bourgeois political economy (a theorist of which Defoe fancied himself) as evidence that Marx thought the law of value was timeless, or governed pre-capitalist societies (other than “at their fringes”).”

      I think we can take it as exactly that, particularly given the other illustrations from the peasant family and primitive commune he gives there of exactly the same point! But, he gives exactly the same historical analysis of the development of value into exchange value elsewhere. In that regard I think Engels comment is correct, but only in the context of the Law of Value as an expression of Exchange Value.

      The other clear example from Marx is his statement about the payment of rents by the peasant etc. These were clearly payments of “Value”, even though they were nothing to do with the production or sale of a commodity. Yet, as Marx points out, they are as correctly measured by labour-time as any product of a commodity producer.

  13. Andrew Kliman Says:

    For the record, I endorse what Alan Freeman said above about Michael Roberts’ post. The post is irresponsible and it thereby provides ammunition to the opponents of Marx’s LTFRP and theory of capitalist crisis. I say it is iresponsible because it makes an extremely strong statement that “the world rate of profit *must* fall in the long run” (emphasis added) that it does prove and cannot prove. I note that Roberts has not tried to defend his endorsement of the claim that the rate of profit “must inevitably fall eventually” against Alan’s contention that “[t]his is simply false,” much less defend it *successfully*, i.e. by providing an honest-to-goodness proof.

    I’m almost certain that I know why no such defense has been offered—there is no such defense. (Notice that I do not claim that it is “inevitable” that this is the reason. That too would be irresponsible.)

    I can prove and am prepared to prove that the following conditions alone do NOT guarantee that the rate of profit s/(c+v) wll eventually fall: (1) value is determined by labor-time, and (2) c/v rises continually. If we add ALL of the following additional conditions, then we can guarantee an “eventual” fall in the rate of profit if said conditions obtain: (3) total capital (c + v) increases continually, (4) the increase in total capital is unbounded, and (5) the increase in c/v is unbounded.

    Even if all 5 conditions obtain, the “eventual” fall that is guaranteed means little. If we pick *any* specific (finite) moment in the future, and ask whether the 5 conditions guarantee that the rate of profit will have fallen, even ephemerally, by that moment, the answer is “no.”

    I suggest that people think twice before treating us to hand-waving and hollow, unproved, fatalistic, and quasi-religious assertions of inevitability that just end up heaping a lot of debris on Marx’s legacy and giving ammunition to the opponents of his LTFRP and theory of capitalist crisis.

    Also for the record: There is a crucial distinction between what Marx wrote and what the LTFRP is. When our paper says that the LTFRP is an explanation of why the rate of profit does tend to fall, not a prediction (much less a prediction that it must fall), we mean exactly what we wrote. It’s a statement about the LTFRP. If anyone can DISPROVE this, I’d like to see the DISPROOF. Otherwise, please refrain from nonsense about us supposedly being disingenuous.

    Hic Rhodus, Hic Salta.

    • sartesian Says:

      You may be correct in your argument that there is a distinction between what the LTFRP is and what Marx wrote, but Marx wrote of such a law and expressed it thus: (Grundrisse, The Chapter on Capital, Notebook 7 -p 763 Penguin):

      “The second great law is that the rate of profit declines to the degree that capital has already appropriated living labour in the form of objectified labour, hence to the degree that labour is already capitalized and hence also acts increasingly in the form of fixed capital in the production process, or to the degree that that the productive power of labour grows. The growth of the productive power of labour is identical in meaning with (a) the growth of relative surplus value or of the relative surplus time which the worker gives to capital; (b) the decline of the labour time necessary for the reproduction of labour capacity; (c)the decline of the part of capital which exchanges at all for living labour relative to the parts of t which participate in the production process as objectified labour and presupposed value…..In other words the second law is the tendency of the profit rate to decline with the development of capital, both of its productive power and of the extent in which it has already posited itself as objectified value; of the extent within which labour as well as productive power is capitalized.”

      This certainly is a statement not of “inevitability” but of a tendency inherent in the development of capital, as it develops itself across and through global exchange, and the world markets.

      You can claim that such a law should not be, or has no predictive power, but then why even refer to it as a “law”? Why, if it is inherent to the development of capital should we say, “we cannot predict, on the basis of this law, what will tend to happen with capital over the course of its development”? and as evidenced through the different phases of its cycles?

      Because it cannot be proven mathematically? Because capital is always, at every point, involved in devaluation of some capital, concentration of capitals, intensification of exploitation? That’s the point where historical truth, and mathematical proof diverge. Proof is not truth.

      It seems to me Andrew that your argument really boils down to– “we can only use the law to explain what has happened after it has already happened. However what has happened is not always “active” in capital, and thus the law is not a prediction. ”

      I think, in fact, Marx is making a prediction. He is predicting what happens as capital develops and runs into the barrier of its own development. That’s what the immanent critique is. That’s why Marx places such stress on the tendency of the rate of profit to fall– such a decline is the expression, and creates the shock of recognition among capitalists, of the self-limitations of capital by capital, of profitability by value production; of the conflict between the labor process and the value process– that the synchronicity between the two is not permanent, natural, or eternal.

      Does that mean that “the world rate of profit must inevitably decline”? I think inevitably is really the wrong word. I would think we would phrase it– as capital develops, and develops itself globally, it must continually strive to offset the tendency for the rate of profit on the accumulated capital to decline. Sometimes doing that is easier than other times. Sometimes it can be accomplished in devaluation of capital. Sometimes it can be accomplished by crisis.

      Sometimes the mechanisms of crisis are inadequate, insufficient to offset the tendency of the rate to decline. Only the destruction of capital will suffice. And THAT is an inevitability.

      • Andrew Kliman Says:

        We don’t say that the law has no predictive power. Obviously anything that can explain the past successfully can also successfully predict the future, if the future is like the past.

        But (a) this isn’t a matter of what *must* happen–inductive arguments don’t provide guarantees, and (b) the law itself is an explanation of what occurs, not a prediction, and especially not a prediction that a fall in the rate of profit must occur in the long-run come what may.

        In *some* contexts, it might be splitting hairs to say that the law doesn’t predict, but not in the context of responding to Heinrich’s MR article. In any case, the law doesn’t say what **must inevitably** occur. That’s the distinction our paper focuses on–explanation vs. assertion of what must occur–not past vs. future (explanation vs. prediction).

        I’m happy to predict and do predict that capitalism is subject to recurrent crises in the future as well as the past, due in part to a tendency of the rate of profit to fall that is inextricable from any and every value-producing economy in which capital accumulates without bound and the ratio of constant to variable capital increases without bound. This prediction of course draws heavily on the LTFRP and other aspects of Capital, but it’s not the law itself.

        So I don;t think that you disagree with us, Sartesian, or we with you, though my co-authors can speak for themsevles. But we certainly do disagree with those who wrongly claim that “the world rate of profit must* fall in the long run” or “must inevitably fall eventually.” If they now want to say that they don’t mean it, I’ll be overjoyed!!!

      • sartesian Says:

        In general, Andrew, I don’t disagree with you. I think Marx is expressing the FROP as a continuous barrier that capital continually strives to overcome– sometimes the barrier becomes more acute; sometimes it’s, and its mitigation, are less acute.

        The condition, however is chronic, whether in its remission phase or its acute phase.

        I do not agree with Michael that after some time all counter-tendencies are exhausted, or exhaust themselves. If that were the case, then indeed we would have a theory of irremediable collapse and we’d either have to say… the theory is wrong… or “we haven’t reached that point when the counter-tendencies are completely exhausted.”

        The latter explanation reminds me of the arguments of some, very few, “Luxemburgists” who say– capitalism hadn’t run out of pre-capitalist formations to exploit … until now. NOW, capitalism has. The world markets are complete, fully developed, and without further room for expansion..” confusing, IMO, geography with value production.

        But that’s a whole other thread….

  14. carchedi Says:

    As Andrew Kliman and Alan Freeman well know, that when Michael and I say that the ROP must ‘inevitably fall’ we mean that after some time (which is the meaning of ‘in the end’) the counter tendencies, by their own nature, will start growing less and less strong, eventually exhausting their capacity to stop the tendency (the fall in the ROP).

    What does ‘after some time’ mean? Can we compute it mathematically? No. In the case of the rate of exploitation, as shown by Marx’s example of 2 workers having to do what 24 workers previously did, this counter tendency cannot go on forever because there are socially determined limits to the increase in the rate of exploitation. The limit is determined not by a mathematical formula but by the class struggle. We can predict that it will be reached, only to be shifted again in favour of capital.

    As for the political consequences of the position that the law ‘explains’ but does not ‘predict’, or in Kliman’s more recent formulation, ‘if the ROP has fallen in the past, it may fall in the future’, this is politically disastrous for revolutionary marxists. If we cannot predict that the ROP will inevitably fall (not might fall), in the sense just specified above, then we cannot predict that crises will return to visit us cyclically, and so we implicitly hold that crises might be avoidable. To deny that crises are inevitable means to embrace (perhaps implicitly and unconsciously) reformism. Neither Michael nor I are particularly happy about this.

    Now Heinrich says: “If the rate of profit has fallen in the past, this does not constitute a proof—since the law purports to apply to future development, and the mere fact of a fall in the rate of profit in the past says nothing about the future”. Heinrich is right that something will happen in the future only because it has happened in the past. But he is wrong because he wants a proof that something will fall in the future. Since this is impossible, some argue that the law can only ‘explain’ and not ‘predict’. But future developments cannot be ‘proved’, not even that the apple will fall to the ground because it has fallen in the past. Future developments can only be ‘predicted’. If the prediction comes true, the prediction has been proved correct after it has been made. The point is not that the ROP might fall in the future because it has fallen in the past (on this Heinrich is right). The point is that we can predict that the ROP will inevitably and tendentially fall in the future because the same forces that caused its tendential fall in the past will continue to operate in the future, i.e. as long as capitalism survives.

    • sartesian Says:

      “The point is that we can predict that the ROP will inevitably and tendentially fall in the future because the same forces that caused its tendential fall in the past will continue to operate in the future, i.e. as long as capitalism survives.”

      Inevitability and tendency are two different “motions” so to speak and are not necessarily linked in or by Marx’s expression of the law.

      We can predict, that “inevitably” it’s going to rain outside. That doesn’t tell us anything regarding the future likelihood of rain, or flooding, or of the size of puddles, or whether you should carry an umbrella with you. In making such an assertion, IMO, you are reproducing Heinrich’s error in a mirror image form. “Is it raining out?” “Not yet, but it will.” “When?” “I can’t tell you. I can only tell you it’s inevitable.” “Prove it.” “It’s inevitable.”

      And then we have a condition where the lack of a current occurrence, a relation, an event, is proposed as the evidence for the future occurrence, relation, event. “Thank you for the information. You won’t be offended if I turn on The Weather Channel, will you?”

      That the forces that caused the ROP to fall in the past, since they are inherent in the organization of capital, will TEND to operate in the future, is quite a different assertion.

      The forces that operated in the past did NOT lead to condition where all countervailing tendencies exhausted themselves. That too is inherent in both the tendency of the ROP to fall, and inherent within your own recognition that those forces operated in the past.

    • Edgar Says:

      “To deny that crises are inevitable means to embrace (perhaps implicitly and unconsciously) reformism”

      2 problems with this, 1. You assume all crises stem from the ROP and 2, you assume that we are happy to see wage slavery go on and on as long as it doesn’t lead to a crises. Imagine applying this reasoning to the slave!

      • Andrew Kliman Says:

        A third thing wrong with it is the absolutism. Let’s say that one’s subjective probability that crises will recur is 0.999, i.e. 99.9%. For reasonable people (those who make no pretense of being absolutely certain about anything), that’s more than sufficient reason to reject reformist attempts to try to create a crisis-free capitalism. They ALMOST CERTAINLY won’t work.

  15. carchedi Says:

    Reply to Sartesian, 27 July, 12:20 pm. “Inevitability and tendency are two different “motions” so to speak and are not necessarily linked in or by Marx’s expression of the law”. I disagree. The assertion of the tendency is inevitable.
    “We can predict, that “inevitably” it’s going to rain outside”. Theoretical arguments cannot be disproved by specific examples. And in any case, this example is not pertinent. No weather forecaster would say that rain is inevitable.
    “And then we have a condition where the lack of a current occurrence, a relation, an event, is proposed as the evidence for the future occurrence, relation, event.” If you refer to my position, you must have misread it. I never said that the lack of a current occurrence is evidence for future occurrence. For me this is nonsensical.
    “That the forces that caused the ROP to fall in the past, since they are inherent in the organization of capital, will TEND to operate in the future, is quite a different assertion”. This is what I am saying. Only, I am adding that they will necessarily tend to operate in the future.
    “The forces that operated in the past did NOT lead to condition where all countervailing tendencies exhausted themselves”. I said: the limit is determined not by a mathematical formula but by the class struggle. We can predict that it will be reached, only to be shifted again in favour of capital.Or, the counter tendency exhausts itself but then the tendency re-creates the conditions for the counter tendency to emerge again, perhaps in different forms.

  16. CB Says:

    Carchedi, this is most assuredly a non sequitur (by formal and dialectical logic standards): “To deny that crises are inevitable means to embrace (perhaps implicitly and unconsciously) reformism.” This implies that the only reason to resist capitalism is because of crisis. Why can’t we support revolution on others grounds too (e.g., alienation, exploitation, pollution, democracy, more leisure time etc)?

  17. carchedi Says:

    this is far from being non sequitur. it shows a logical relationship between denying the inevitability of crises and reformism. it must be seen within the context of the present discussion, the nature of the Law. Of course we should support revolution for a host of other reasons. But this is a different story.

    • CB Says:

      It does not show a logical relationship though. Because one can take ANY stance on the LTRPF, or no stance at all, and still be a revolutionary.

      You literally claimed that because Kliman has not said crises are inevitable he must support reformism “implicitly” because it’s possible for a crisis-free capitalism to exist.That’s dubious, because again, one can be a revolutionary about capitalism regardless of their position on the LTRPF.

      Although you say you show a necessary logical connection I have not seen one. At least not by the standards of formal logic, nor from the standards of your dialectical logic (which I am only just now reading).

  18. Andrew Kliman Says:

    Sartesian, you write,

    “In general, Andrew, I don’t disagree with you. I think Marx is expressing the FROP as a continuous barrier that capital continually strives to overcome– sometimes the barrier becomes more acute; sometimes it’s, and its mitigation, are less acute.

    “The condition, however is chronic, whether in its remission phase or its acute phase.”

    Is this a disagreement with me? If by “FROP” you mean the tendency for the rate of profit to fall, then it isn’t. I agree that Marx is expressing this tendency as a continuous barrier etc. If, however, you mean “fall in the rate of profit,” then I disagree, since Marx did not argue that the fall in the rate of profit is continuous, i.e., that the rate of profit falls monotonically or continuously.

    • sartesian Says:

      No, it’s not meant as a disagreement with you on that point. The law, IMO, is not a law of the rate of profit to fall,or to fall no matter what. The law is that he determinants of capital accumulation determine also a tendency for the rate of profitability to fall.

      I disagree with Michael’s formulation in this matter. I think Marx is looking at the tendency of the rate of profit to fall in two senses so to speak– immediate, as in the necessity for capitalist to counteract the tendency; and “world-historical”– in that it speaks directly to the specificity of capital and the “world-historical” limits to capital as a mode for the organization of social labor-time and to amplify the productivity of labor.

      To Carchedi: You said “we mean that after some time (which is the meaning of ‘in the end’) the counter tendencies, by their own nature, will start growing less and less strong, eventually exhausting their capacity to stop the tendency (the fall in the ROP)”

      If that’s the case, then that implies, at least to me, a form of catastrophe, at least for the bourgeoisie, where in their “19th Nervous Breakdown” “nothing I do, don’t seem to work.”

      We’ve had at least 150 years where what the bourgeoisie does does reverse periodic, inherent declines in profitability– it just costs a lot–, arms, legs, stomachs, brains… and that price is always paid by other people.

      I agree that the limit to capital is in the class struggle, in that capital does not disappear, does not extinguish itself, but must be abolished. At the same time, I think we need to examine if there are examples where class struggle becomes part of an eventual restoration of the profitability of capitalism. That last one just being something that pops into my head occasionally when drifting off to sleep.

  19. Choppa Morph Says:

    Carchedi writes: “As for the political consequences of the position that the law ‘explains’ but does not ‘predict’, or in Kliman’s more recent formulation, ‘if the ROP has fallen in the past, it may fall in the future’, this is politically disastrous for revolutionary marxists. If we cannot predict that the ROP will inevitably fall (not might fall), in the sense just specified above, then we cannot predict that crises will return to visit us cyclically, and so we implicitly hold that crises might be avoidable. To deny that crises are inevitable means to embrace (perhaps implicitly and unconsciously) reformism. Neither Michael nor I are particularly happy about this.”
    Basically the Kliman position (and Heinrich and apparently Sartesian too) is agnosticism. “We can’t know”. Well, thank you, Kant. This is what I was talking about in my earlier comment. Kant’s scepticism and agnosticism was a necessary and extremely sharp weapon in his revolutionary war on feudal philosophy and Catholic metaphysics. Voltaire proclaimed “Ecrasez l’infame!” (Crush the abomination ie the Catholic Church), and Kant did just this – leaving the Church a trembling pile of flayed flesh without any intellectual clothes, or crutches or even skin. But Kant’s war was against tradition and the weight of all the past generations on our minds etc. He was clear-cutting the jungle so healthy living and cultivation could replace the snakes, spiders, scorpions, mosquitoes and quagmire.
    His deliberate refusal to proceed beyond the antinomies and open up the Ding an sich meant an historical dead end as far as science and philosophy were concerned. Hegel proceeded to tackle the antinomies and demystify the Ding an sich, albeit in an idealist and religious fashion. And Marx completed the job of taking philosophy and scientific perspective beyond the anti-feudal revolution. The trouble was that the bourgeoisie no longer had any interest in this new perspective and after the revolutions of 1848 (as Marx said) Hegel was regarded as “a dead dog”. The Revolution with a capital R was over and done with, bourgeois society was established, and metaphysics and mystification were now serving new masters. Scepticism and agnosticism were turned against new ideas and social development in the service of bourgeois obscurantism. Hence Kant’s growing popularity, the cult of the white emigre know-nothings (Wittgenstein & co), post-modernism – you name it. And Marxism without Marx for the more daring and flamboyant (petty-bourgeois) flank of bourgeois obscurantism.
    Now, where this leaves us at the moment is with a revolutionary theoretical tradition (Marxism with Marx) with a hole in its heart where the dialectic (Hegel’s Logic) should be. Our respect for Marx should include a respect for his philosophical and scientific nous in relation to the fundamentals of thought. Unfortunately this isn’t the case when Marxists (with Marx) leave Marx aside and shudder like Pavlov’s dogs when the danger signal is given – “Dialectics!!” – shudder…
    Kliman and his collaborators seem to me to be shuddering in just this way. When I called their prevarications regarding law-bound and inevitability “disingenuous” it implied a certain deliberate avoidance of academic trouble (defending Hegel’s Logic and the dialectic) on their part. Perhaps it is less dramatic, and they are just treading the primrose path of scepticism and agnosticism because everyone else in the scholarly world does. However, if they really think Hegel and the dialectic are such crap, then they are bound to admit that all of Marx that is rooted in this revolutionary post-Kantian tradition is also crap.
    Since they don’t, they either want to have their cake and eat it (in this case trying to turn Marx into a good boy and Kantian sceptic while exploiting the Mephistophelian treasures he mined using the anti-Kantian dialectic) or they don’t yet realize how contradictory their position is in this respect.
    Over and over again we are being forced back to basics with regard to the fundamentals of scientific thought when we deal with the theory of value and its consequences.
    I should make it clear that I think, as I already said, that the Kliman et al. article is brilliant in the job it does on Heinrich’s pretentious misrepresentations. This present discussion takes us way beyond Heinrich and his futile attempts to gouge the Marx out of Marxism. But with the Marx still in Marxism, we need to be very serious about where he stood on the principles of science and philosophy. E nihil nihilo – nothing comes from nothing – and Marx didn’t come from Kant but from Hegel turned the right way up, not from the thin anemic gruel of sceptical idealist positivism god help us all, but from the rich creamy broth of materialist dialectics.

    • sartesian Says:

      Lumping me with Heinrich? Them’s fighting words, comrade. The issue is not one of agnosticism. It’s one of confusing “tendency” with “immediate” “future” (how’s that for an oxymoron?) actuality.

      The argument made is that Heinrich is asking for the proof of a future occurrence, and not just of “A” future occurrence but of every and all future occurrences. We get to a point where the “law” to be a law must govern all possible manifestations. We get the supposed “anti-” version of this demand from Heinrich in the formulation that says “eventually, inevitably ALL countervailing forces exhaust themselves.” And then? And then what? Capital collapses? The rate of profit continues to plummet even when losses have reached catastrophic portions…. like say in Greece, which like the next blockbuster film release will soon be playing in a theater in your neighborhood?

      The materialist dialectic you refer to, Marx’s dialectic, is not one of “knowing” or “not knowing” of belief or agnosticism. It is the dialectic of the labor process and the social conditions mediating, governing that labor process. It is the conflict between labor and the conditions of labor. In the case of capital, the conflict between the labor process and the valorization of process.

      Since the valorization process is one of appropriating and revalorizing surplus value, the conflict here is not one where the appropriation of surplus value itself eventually ELIMINATES wage-labor; eliminates the prospects for future organization of wage-labor.

      It is the case where the conflict, as it expresses itself as the tendency of rate of profit to decline, and then materializes in such a decline, “articulates” the “unnecessity” for the organization of labor as wage-labor. The articulation however is not its social realization. The social realization can only be in the activity of the subject that is the source of the historical process which is the human species and the need for the emancipation of labor.

      The tendency of the rate of profit to decline does not inherently, or inevitably, bring about the abolition of wage-labor. It will inevitably bring about class struggle.

      .

    • Andrew Kliman Says:

      I don’t say “we can’t know.” Of course we can. But we can’t know what will happen in the future with CERTAINTY. Morph is confusing knowledge with certainty, or certain knowledge. To say that an EVENT is inevitable is to say that one has certain knowledge that it will occur. And that’s not possible.

      Recognizing the difference between knowledge and certainty isn’t disingenuous, or an attempt to stay out of academic trouble, or scepticism, or agnosticism. And the dispute between Kant and Hegel regarding whether only appearances are knowable is not at issue either.

      The one thing a Hegelian should recognize is that knowis never certain because it is gained without secure axiomatic or self-evident foundations.

      Please stop guessing at my motives. If you want to know my motives, you could ask me, or better yet, read the paper. because everyone else in the scholarly world does.

  20. allan harris Says:

    Two questions:

    1. Since 1929 (as far back as most Bureau of Economic Analysis statistics go) has the rate of profit shown a tendency to fall?

    2. If yes, then what is the explanation? If not, then Marxists might as well give up on the law of the tendency of the rate of profit to fall.

    I use the BEA figures because they are the official statistics of the capitalist state.

    • Boffy Says:

      The problem here is that its impossible to derive a Marxist Rate of Profit from BEA figures. The data provide figures for National Income and Expenditure, but that means they only provide data on (v+s). To calculate a Marxist rate of profit you require c+v+s, and that information is not available.

      The whole point being that if increases in productivity have reduced the value of c, over time, and more importantly, if the fact that the largest part of the economy now consists of services rather than industry means that the overall physical quantities of c have fallen, then this would lead to a rise not a fall in the rate of profit.

      In fact, you only have to think about large amounts of modern production to see that the amount of c has fallen both physically and in value. A modern mobile phone, which replaces not just the old landline, but numerous other devices, requires only a fraction of the materials that a 1960’s telephone did! Large amounts of the value of things like designer clothing have little to do with the material in them, and everything to do with the complex labour of the designers (and no doubt of the advertisers who persuade people that they are higher value than the average).

      But, if you calculate the rate of profit on BEA figures of c+v, then you are calculating the rate of surplus value not the rate of profit. If you add in the fixed capital, on an historic price or current reproduction cost basis that does not change the fact that you are missing out the value of the circulating constant capital.

      It also takes no account of the increase in the rate of profit arising from an increase in the rate of turnover. Using the growth in productivity as a proxy for the increase in the rate of turnover, I have calculated that with an average 2% p.a. rise in productivity, the rate of turnover trebles between 1950 and today. That means whatever the current rate of profit for the US it should be multiplied by 3 to get a fair comparison with the rate of profit in 1950.

      Finally, just as the organic composition of capital is perpetually reduced as new industries develop with lower rates and higher profits, so the ever increasing extension of capital across the lobe, means that globally the occ will have powerful reducing forces. To the extent that economies like China, with lower organic compositions of capital occupy a more significant portion of total capitalist production, so they will act to increase the average global rate of profit.

  21. Andrew Kliman Says:

    carchedi: “As for the political consequences of the position that the law ‘explains’ but does not ‘predict’, or in Kliman’s more recent formulation, ‘if the ROP has fallen in the past, it may fall in the future’, …”

    Please supply a source for this quote, or retract it.

    Moreover, the characterization of our position as “the law ‘explains’ but does not ‘predict’” is incorrect. We say that the law is an explanation, not a prediction of what must inevitably happen. That statement is part of a *definition* of the law. It does not refer to the potential *uses* of the law. As I have said, “Obviously anything that can explain the past successfully can also successfully predict the future, if the future is like the past.”

    Let me spell this out for the hard of Kliman: if the LTFRP successfully explains why the rate of profit does tend to fall in the long run, and if the future is like the past in the relevant ways, then the LTFRP can be *used* to predict that the rate of profit will also tend to fall in the future, in the long run.

    carchedi: “… this is politically disastrous for revolutionary marxists. If we cannot predict that the ROP will inevitably fall (not might fall), in the sense just specified above, then we cannot predict that crises will return to visit us cyclically, and so we implicitly hold that crises might be avoidable.”

    This is a red herring. Your ability to make a prediction that the rate of profit must inevitably fall is NOT at issue here. Of course you can make that prediction. I can make a prediction that carchedi’s head must inevitably explode when he reads this. The issue is whether those who make such a prediction can PROVE that their prediction must inevitably be correct, i.e., prove that the rate of profit must inevitably fall. I say they can’t. And if they can’t, then we have been given insufficient grounds for accepting the claim that the rate of profit must inevitably fall, and we shouldn’t accept it, and they shouldn’t make it, and having made it, they should withdraw it. It is intellectually and politically irresponsible not to do so. It provides ammunition to the MR, Heinrich, and other opponents of the LTFRP and Marx’s theory of capitalist crisis.

    It is also false. “If we cannot predict that the ROP will inevitably fall … then we cannot predict that crises will return to visit us cyclically.” We can indeed predict the latter and our prediction can indeed be correct. The only thing we can’t do is prove that our prediction MUST INEVITABLY be correct. But the inevitabilists (carchedi, Morph, et al.) ALSO cannot prove that their prediction MUST INEVITABLY be correct.

    carchedi has just conceded that they cannot!!! “[F]uture developments cannot be ‘proved’, not even that the apple will fall to the ground because it has fallen in the past. Future developments can only be ‘predicted’. If the prediction comes true, the prediction has been proved correct after it has been made.” So the revised, carchedi-lite, claim reduces to “The rate of profit must inevitably fall, IF future developments prove that it must inevitably fall. But IF future developments prove that it it need not inevitably fall, then it need not inevitably fall.” Or as Doris Day put it, que sera sera. The revised, carchedi-lite claim just ISN’T a claim that the rate of profit must inevitably fall, much less a substantiated one. Nor does it tell us anything we didn’t already know. But it does have the advantage of not being wrong.

  22. michael roberts Says:

    Guys

    Just to add to concoction on this debate, I have just received some words from Prof Michael Lebowitz on Heinrich and his opponents. Michael has given me permission to post it here:

    The game’s afoot again now that Kliman and team have accused Michael Heinrich of attacking Marx’s Capital (“The Unmaking of Marx’s ‘Capital’: Heinrich’s Attempt to Eliminate Marx’s Crisis Theory”). It’s a curious game because Kliman et al have created a particular avatar to represent Marx’s Capital through their single-system reading (TSSI) of Capital and then have proceeded to substitute that earthly presence for Capital in all their work. It seems to generate interesting and fruitful results, and that is to be lauded.

    Nevertheless, as I commented here earlier (13 May 2013), ‘for me, it is not consistent with Marx (however inventive its mathematical and empirical exercises may be). However, if the practitioners of TSSI were to demonstrate their consistency with Marx’s distinction between form and essence [as in ‘the price of production is already a completely externalized and prima facie irrational form of commodity value, a form that appears in competition’ and profit is a ‘transformed form of surplus value, a form in which its origin and the secret of its existence are veiled and obliterated’], I might think differently.’

    In effect, the TSSI practitioners place the category ‘Fruit’ and the peach pit on the same level and then choreograph their dance. Now, as devotees of the so-called ‘transformation problem’ will recognise, they are not at all alone in this. What makes them unique, though, is that Kliman et al then proceed to substitute their avatar for the original ‘deity’, Capital, in all their discussions. Thus, if they can demonstrate the consistency of their avatar with a conclusion of Marx, they announce– Marx was right! And, if someone is critical of some of their conclusions, they announce that Marx is under attack.

    Such substitutionism is familiar: we have seen it displayed dramatically recently in a political organisation which substituted its own practice for ‘Leninism’ and then announced that any criticism of its practice was an attack on ‘Leninism’.

    In contrast, Heinrich does offer a reading of Marx far more sensitive to what Marx actually wrote— what has now been labelled a ‘philological’ exercise. In my view, his recent Monthly Review Press introduction to Capital offers the best understanding of what Marx was doing, and I would assign it to my classes in Marxian economics (if I were still peddling my wares in classrooms). Heinrich’s failing, on the other hand, is his lack of economic analysis of those texts. Thus, in his recent Monthly Review article on the ‘law’ of the tendency of the rate of profit to fall, he stresses the post-1870s drafts of Marx as the basis of his ultimate conclusion that Marx would have abandoned the ‘law’ [and indeed did]. However, aside from the meaning of ‘law’ [which, as Lenin understood, never leaves the sphere of appearance], the unique condition necessary for the rate of profit to fall was already set out by Marx in the Grundrisse, amplified extensively in the 1861-3 Mss and noted in Vol.3 of Capital as constructed by Engels— and the sensitivity of that condition to relative rates of productivity increase can be demonstrated analytically. Similarly (although less germane to the immediate issues), Heinrich is prepared to conclude from the texts that there was no missing book on ‘wage-labour’ but doesn’t consider the implications of removing the assumption of the given level of necessity upon the economic results [including the basis for relative surplus value]. Through pure philology, we are left with a reproduced artifact but not much to work with. It is an important starting point but if it is the endpoint, it is a dead end.

  23. allan harris Says:

    Kliman says that Heinrich claims Marx said that there MUST be a fall in the rate of profit and that the law not only explains but also predicts the fall. Kliman points out that Marx never used the word MUST in this context.

    Yet, Kliman quotes the following text from Marx: “The law operates therefore simply as a tendency, whose effect is ‘DECISIVE’ only under particular circumstances and over long periods”

    This is quibbling over words. To say a law must operate and that its effect is decisive is a distinction without a difference. A law which claims to be scientific but which cannot explain and predict future events is not a scientific law. The law of relativity predicts that time travels slower the closer its measurement is to a large source of gravity. It is exactly for this reason that clocks in orbit around the earth have to be periodically slowed down so that the GPS system on cell phones will work.

    Kliman explains the reason for the decline: “…The theory explains the cause of this fact: the accumulation of invested capital has outstripped the growth of employment..” This, more or less, is the same reason given by Smith, Ricardo and Marx.

    Why not just accept that the law is real, there is a real basis for it in theory and evidence and then defend it?

    • Andrew Kliman Says:

      Allan Harris: You write, “A law which claims to be scientific but which cannot explain and predict future events is not a scientific law.” I have already answered this. We do not say that the law cannot be used to explain and predict future events. I have said the opposite in comments above. There is a distinction between what the LTFRP is, its definition, and its uses.

      Note that Marx says that the “effect is decisive ONLY UNDER PARTICULAR CIRCUMSTANCES” (MY CAPS). There’s a big difference between that the claim that the rate of profit must inevitably fall.

      You write, “Why not just accept that the law is real, there is a real basis for it in theory and evidence and then defend it?” Sure, that’s what we’ve done.

      • allan harris Says:

        But is there really a difference in saying that the rate of capitalist profit has a tendency to fall over possibly a very long time and saying that the rate of profit must fall? If there is a difference then the capitalists are well justified in saying that capitalism only needs to be adjusted every now and then to keep going.

        On another aspect of the problem, if the rate of profit is a function of the change, over time, in the relation of accumulated capital investment and employment then it would seem the decline in the rate of profit could be expressed as a function equation: R = f(cap. invest, emp). Modern economists love this type of math. Has anyone ever tried to work it out?

      • Shane Mage Says:

        allan harris writes:”On another aspect of the problem, if the rate of profit is a function of the change, over time, in the relation of accumulated capital investment and employment then it would seem the decline in the rate of profit could be expressed as a function equation: R = f(cap. invest, emp).”

        Except that the shape of your “f” is itself constantly changing, and that change is itself very irregular, All a model can do (and that is itself crucial) is to direct our attention to the most important variables. But all the other variables (ie., historical reality) must be taken fully into account in any fully accurate presentation of any contemporary actuality.

      • sartesian Says:

        “But is there really a difference in saying that the rate of capitalist profit has a tendency to fall over possibly a very long time and saying that the rate of profit must fall?”

        Andrew can answer for himself. As for me, the difference is between how capitalism concretely accumulates, devalues, and restores itself AND an abstraction that insists that capital must collapse– never recognizing that “collapse” as such then replaces class struggle as the “agent,” the subject for the abolition of the system.

        That capitalism can restore itself is no justification for the notion that capitalism only requires tweaking or “adjustment.” It’s the content to that category of “adjustment” that declares capital socially obsolete, socially unnecessary; not the fact that capital can adjust itself that declares it, capital, the once and future king.

        That “adjustment” involves something more than we’ve already seen– it involves the incineration of massive portions of the accumulated capital, and living labor-power.

    • Andrew Kliman Says:

      Ok, I’ll answer for myself: I agree entirely with sartesian’s answer to allan harris. Well said! Marx’s LTFRP and his theory in general don’t say that the rate of profit must inevitably fall, but this just doesn’t imply that minor tweaking of the existing social relations can eliminate the tendency of the rate of profit to fall, the manifestation of that tendency as a decline in the rate of profit, or the recurrence of economic slumps and crises. And that is what the issue actually is vis-a-vis bourgeois theory.

      Inevitabilism is unnecessary to everything that matters. Strong warrant for the inductive conclusion that the LTFRP will continue to operate and that capitalist crises will recur is all that’s needed. Of course, some people WISH that capitalism will just collapse on its own, and some of them like to express that wish in a way that masks the fact that it’s just a wish, by saying that a secular decline in the rate of profit is absolutely inevitable. But they can’t prove that it’s absolutely inevitable and they know they can’t (see carchedi’s admission), and they can’t even provide a decent argument that it is absolutely inevitable. So it’s just a dolled-up wish.

      • sartesian Says:

        This from Andrew: “Inevitabilism is unnecessary to everything that matters”

        Precise, concise, and IMO, the essence of the disagreement among us who think Marx’s emphasis on the significance of the tendency of the rate of profit to fall was not misplaced.

        Meanwhile, I’d like to point out a, so far, overlooked part of the Kliman, Freeman et al. paper– and that is the argument that while only volume 1 of Capital was published, Marx considered volumes 2 and 3– “the book”– to be complete although in unpolished form. That, I think, is a very important argument. I think that makes sense, given what Marx had written previous to volume 2 and 3 in his Grundrisse and other portions of the Economic Manuscripts.

        If Kliman et al are correct, and I think they are, it goes part of the way toward correcting the argument that implies Engels “manipulated” Marx’s notes to get the results he, Engels, wanted in volumes 2 and 3.

  24. Andrew Kliman Says:

    I meant to write: “There’s a big difference between that AND the claim that the rate of profit must inevitably fall.

  25. Choppa Morph Says:

    Empirical proof of a theory presupposes that it satisfactorily explains events that have already happened. Scientific prediction of an event using a theory states that it will happen, if relevant preconditions are fulfilled. If sufficient relevant conditions are met, the occurrence will have been inevitable. To pretend that the sun won’t rise tomorrow until it empirically does so is evasive claptrap. Social-historical events quite naturally have a more complicated set of preconditions to them than astronomical, but that only requires more circumspection in taking them into account, and a greater readiness that things might not go as expected. As it happens though, our obscurantist mainstream economists are completely unprepared for things to go tits-up, although they have no grasp of the preconditions involved in economic events, while Marxists like Kliman et al. while having a grasp of the preconditions involved in economic events thanks to their openness to Marx’s theory, seem ideologically committed to things going tits-up for the theory regardless. This is contradictory and the reason I spoke of disingenuousness and/or refusal to grasp nettles, and invoked the spirit of Hegel and the dialectic, and exorcised the temporizing, sceptical, agnostic spectre of Kant.
    In our case, to bring in the distinction between machines and people, so to say, where economic systems are concerned, as Sartorius makes clear enough, there’s a big difference between capital collapsing and capitalism collapsing. The capitalist process of production and circulation is fundamentally a mechanical system of dead inputs and outputs – elements of congealed labour, value. However, all these elements arise from and are attached to living people, so these people have to submit to the discipline of the machine before it will work. The process of forcing submission to capitalist discipline is what Marx analyses in the Grundrisse and in his study of primitive capitalist accumulation in Capital I.
    A consequence of this is that the operation of the capitalist machine – and the Law of the Tendency of the Rate of Profit to Fall relates directly to this – has no necessary end-point. The end-point for capital comes when human society no longer submits to its discipline, for whatever reason.
    The operation of the capitalist mode of production, however, is a different kettle of fish and has a necessary end-point, which we usually summarize as socialism or barbarism. Lots of factors will be in play in the process of ending capitalism, and one of the most important will be the fall in the rate of profit – for at a certain point the fall will be so great that the capitalist class is driven to desperate social measures to get its machine back working the way it wants it to. And even so the measures won’t succeed, increasing the pressure and desperation.
    We’re pretty close to that stage now. In fact the whole epoch of imperialism is pretty much that stage – capitalism having reached the peak of its social-historical performance in developing the productive forces of human society and being incapable of making any further qualitative progress thanks to the contradictions between the private appropriation of social wealth and its collective social production. All the potential categories latent in the embryo of capitalism, the commodity, have unfolded and are now growing back in on themselves, like ingrowing toenails or parasitical creepers strangling and suffocating themselves.
    All this is one reason why the chapter in Capital I on Commodity Fetishism might well be the most important chapter in the whole work, philosophically speaking. It throws into brilliant relief the distinction between capital as a dead thing, and living labour as the source of all social wealth, and the intimate relationship between this state of affairs and the problems caused by the necessarily distorted and inverted surface appearance of capitalism in contrast to its underlying reality of simple and all-pervading exploitation.

    (Which incidentally is why I think Geoff Pilling’s book on Marx’s thought and capital – http://www.marxists.org/archive/pilling/works/capital/ – is so fundamental to our discussion in general, especially chapter 5, “Some aspects of Marx’s notion of commodity fetishism”.)

    • sartesian Says:

      This:

      “All this is one reason why the chapter in Capital I on Commodity Fetishism might well be the most important chapter in the whole work, philosophically speaking. It throws into brilliant relief the distinction between capital as a dead thing, and living labour as the source of all social wealth, and the intimate relationship between this state of affairs and the problems caused by the necessarily distorted and inverted surface appearance of capitalism in contrast to its underlying reality of simple and all-pervading exploitation.”

      Total agreement. Everything follows from chapter 1. If you “get it,” you can get, you build for yourself, everything that follows. If you don’t……

  26. sartesian Says:

    So actually, I’m really happy with this discussion. Learned a lot, got reined in a bit by Choppa on Engels, not a bad thing. Found certain points of convergence among those I disagree with in some areas, as well among those I agree with.

  27. alanfreeman3 Says:

    My comment on Shane Mage’s comment on H.A. Cox’s comment on my comment (pause for breath) didn’t appear in the chronological sequence of the blog. So with the blog owner’s permission I am reproducing it below.

    So far I have not seen a coherent response to refutation of Miller, which Michael Roberts and I think H. A. Cox both endorse. Miller had written that “The rate of profit must fall in life or the theory is incorrect. The law is unidirectional and irreversible.”

    To this I responded, as Shane Mage rightly notes:
    “This is simply false. The law is not unidirectional, and it is not irreversible. At definite times in history, the fall in the rate of profit has been spectacularly reversed…”

    Cox responds: “This process is unidirectional unless you have a war-such as WWII and destroy physically masses of capital. Even with this destruction, capitalism did not return to as the OCC and TCC of 1825. This is the only exogenous means for lowering the OCC and TCC. There are other exogenous means for delaying the breakdown of capitalism: expansion of debt, unproductive investment such as military build-up, investments in other parts of the world-which only transfers the contradictions on a wider scale. But these means disguise the falling the rate of profit and cause an increase in productive enterprises expanding beyond what they could have and encourage technological change and a rise in the TCC and OCC, and so on.”

    In short,

    (1) The rate of profit does not always fall in life since under definite circumstances, which appear in life, it does not fall
    (2) The law is not unidirectional since, on occasions, it moves in the opposite direction
    (3) The law is not irreversible, since under definite circumstances, it is reversed.

    Miller’s statement is therefore false, by H.A. Cox’s own admission. You cannot on the one hand say that the fall reverses under certain circumstances, and then say ‘however it is unidirectional and irreversible’. This is not a logically tenable position. It is equally untenable to argue that it is really falling, even though it is in fact rising, because various means “disguise” the falling rate of profit. If it is disguised, then precisely it “did not fall in life”. This is like saying somebody is really dead, but their death has been disguised by the fact that they are living.

    Such presentations of “Marx’s theory” do not defend the law at all but expose it to ridicule. Marx undoubtedly held that capitalism contained within it contradictions that it could not resolve, and that the law of the tendential fall of the rate of profit explained the cause of the observed historical trend of the rate of profit and repeated explosions or ‘crises’ to which this gave rise.

    If however you express this scientific discovery incorrectly, for example by claiming that it allows us to predict a ‘unidirectional and unconditional’ fall where in fact no such fall is observed, the consequence will be that you cannot defend that discovery. Worse still, Marx’s many detractors including the ‘Marxists without Marx’ will lose no opportunity to point to the failure of your defence as yet more evidence that Marx’s theory is indefensible.

    That is to say, precisely in order to defend Marx’s discoveries, it is necessary to present those discoveries correctly. That is my profound objection to the mis-statement of those discoveries which we find in the paper of Carchedi and Roberts.

    • Ed George Says:

      With regard to ‘prediction’ and ‘explanation’, is it not the case that if I have a theory of the occurrence of a phenomenon, then this theory will explain (allowing me to predict) the conditions under which the phenomenon occurs when it does and also the conditions under which the phenomenon does not occur (or occur differently). So, to pursue the gravity analogy, if I have a theory of gravity, that allows me to explain (and hence predict) why things fall when they do and also why things do not fall (because something is holding them up) or even why they fall differently (through different media, through air and water, for example). So if I hold, say, a pen in my hand, I can predict that if I let it go it will fall, but I can also predict that if the pen is also resting on the table and I let it go it will not fall (because the table is holding it up).

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