David Harvey on monocauses, multicauses and metaphors

Back last October, Professor David Harvey, presented an essay to the University of Izmir, Turkey in October. You can see a You tube screening of that presentation at https://www.youtube.com/watch?v=-ZJrNgb-iiY&spfreload=10.

Professor Harvey then drafted a paper sent to me called David Harvey, Crisis theory and the falling rate of profit; to be published in 2015 in The Great Meltdown of 2008: Systemic, Conjunctural or Policy-created?, edited by Turan Subasat (Izmir University of Economics) and John Weeks (SOAS, University of London); Publisher: Edward Elgar Publishing Limited. Here is the draft, Harvey on LTRPF.

Last December I did a reply on my blog,
and presented my response in more depth in a paper reply-to-harvey, that Professor Harvey (from now on DH) kindly posted on his own website, http://pcp.gc.cuny.edu/.

I won’t repeat the arguments presented in DH’s paper and my reply – you can read them yourself. Suffice it to say that DH was arguing that in essence, that Marx’s law of the tendency of the rate of profit to fall (LTRPF) is not the only or even the principal cause of crises. Thus it cannot be the basis of a Marxist theory of crisis. Indeed, “there is, I believe, no single causal theory of crisis formation as many Marxists like to assert”.

It’s not monocausal
Harvey argues that we proponents of Marx’s law as the basis of a theory of crises are one-sided and monocausal in our approach because: “proponents of the law typically play down the countervailing tendencies”.  Moreover, Professor Harvey pours cold water over the “array of graphs and statistical data on falling rates of profit as proof of the validity of the law”. He doubts their validity because there is plenty of evidence in the ‘business press’ that the rate of profit, or at least the mass of profit, in the US has been rising, not falling.

Professor Harvey prefers other reasons for capitalist crises than Marx’s law. There is the effect of credit, financialisation and financial markets; the devaluation of fixed constant capital in the form of obsolescence; and, above all, the limits on consumer demand imposed by the holding down of real wages relative to capitalist investment and profits. He wants us to consider alternative theories based on the “secondary circuit of capital” i.e. outside that part of the circuit to do with the production of value and surplus value and instead look at that part concerned with the distribution of that value, in particular ‘speculative overproduction’.

As I say, my reply to these arguments is outlined in my post and in my longer paper. But more recently, Professor Andrew Kliman (from here called AK), Marxist economist and author of two great books, Reclaiming Marx’s Capital and The failure of capitalist production (see my post, https://thenextrecession.wordpress.com/2011/12/08/andrew-kliman-and-the-failure-of-capitalist-production/), has entered the fray. In a two-part reply to Harvey published in the New Left Project
AK has delivered an effective and enlightening rebuttal of DH’s arguments.

As AK says “The real issue is not that anyone has advocated a mono-causal theory, but that Harvey is campaigning for what we might call an apousa-causal theory, one in which the LTFRP plays no role at all (apousa is Greek for ‘absent’). He is the one who is trying to exclude something from consideration. In light of his emphasis on capitalism’s ‘maelstrom of conflicting forces’ and its ‘multiple contradictions and crisis tendencies’, one might expect that he would urge us to consider all potential causes of crisis, excluding nothing. However, Harvey is not merely suggesting that other potential causes of crisis be considered alongside the LTFRP. He seems determined to consign it and the theory of crisis based on it to the dustbin of history.”

AK quotes Harvey “those who attribute the difficulties of contemporary capitalism to the tendency of the profit rate to fall are, judging by this evidence of labour participation, seriously mistaken. The conditions point to a vast increase and not a constriction in surplus value production and extraction.”

Then AK makes the point that I also make in my reply that “the data do indeed suggest that the mass—the absolute amount—of surplus-value or profit increased. But the issue here is what happened to the rate of profit, the amount of surplus-value or profit as a percentage of the volume of invested capital. An increase in the numerator of a ratio (rate) is not evidence that the ratio as a whole has increased. If the percentage increase in the denominator of the rate of profit, the invested capital, was greater than the percentage increase in the numerator, then the rate of profit fell. Given that Harvey does not show, and does not even suggest, that the denominator failed to increase by a greater percentage, the statistic he cites is just not evidence that the rate of profit rose”.

And as I said in my reply to DH (and DH is open about this), AK points out that DH is really just backing the view of Michael Heinrich that Marx’s law is not a law at all; that any way it is ‘indeterminate’ and was eventually dropped by Marx as the ‘most important law’ in political economy because it did not work (see my post, https://thenextrecession.wordpress.com/2013/05/19/michael-heinrich-marxs-law-and-crisis-theory/).

Both G Carchedi and I (http://gesd.free.fr/mrhtprof.pdf) and AK in recent papers (http://gesd.free.fr/klimanh13.pdf) have dealt with Heinrich’s arguments. But of course, that has not ended that attack on the relevance of the LTRPF as the underlying causal explanation of recurrent crises under capitalism. Indeed, only recently, Saso Furlan, a Marxist student from the Slovenian Institute of Labour Studies and a prominent member of the Initiative for Democratic Socialism party that recently won seats in the Slovenian parliament, has written an article accepting Heinrich’s position in full (http://drustvenaanaliza.blogspot.de/2015/03/on-law-of-tendency-of-rate-of-profit-to.html?m=1).

The battle of metaphors
DH has now replied to AK’s rebuttal of his arguments in a new paper, Capital’s Nature: A Response To Andrew Kliman

In a very eloquent response, full of interesting observations, DH takes up the metaphor used by AK and, of course, used by Marx himself on several occasions, that the Marxist theory of value and the LTRPF is really like Newton’s law of gravity. The law of gravity means that on earth objects will tend to fall to the ground. Of course, such a fall can be delayed by wind, or by constructions, etc, but the tendency is there and explains the ultimate movement of objects.

As AK puts it “If I appeal to the universal law of gravitation in order to explain why apples have a tendency to fall off trees, without mentioning other factors that can make them fall, like the blowing of the wind, or counteracting factors like air resistance, I am not assuming that these other things do not exist. Much less am I constructing a mono-causal model that excludes them and which is therefore severely restricted in applicability.”

Marx’s metaphor is, DH admits, a “clever and beguiling metaphor”. The metaphor shows that “capital can never escape the tendency for profit rates to fall. It is inherent in capital’s nature, even as the conditions under which the law operates vary widely. The competitive search for relative surplus value ultimately undermines and destroys the capacity to produce and realize that surplus value. This is the primary contradiction of capital around which a host of secondary contradictions (e.g. those embedded in the credit system or deriving from insufficient aggregate demand) cluster. No amount of tinkering with the secondary contradictions (e.g. financial reform or basic income redistributions) can abolish the tendency for profit rates to fall and crises to form. Only a revolutionary politics that addresses this primary contradiction will suffice.”

Indeed. But DH does not like this Marxist metaphor. After all, metaphors have their limitations and often are exhausted by reality. He wants us to consider others, some of which Marx also used. DH reckons the one that impresses him most is “that of capital as an organic whole sustained by the internally differentiated circulatory flows of value that absorb from capital’s milieu the energies of human labor as well as the raw materials to be found in capital’s social and natural environment.”

DH quotes from the introduction to the Grundrisse to support his alternative metaphor: “The conclusion we reach is not that production, distribution, exchange and consumption are identical, but that they all form the members of a totality, distinctions within a unity….A definite production thus determines a definite consumption, distribution and exchange as well as definite relations between these different moments. Admittedly, however, in its one-sided form, production is itself determined by the other moments. For example if the market, i.e. the sphere of exchange, expands, the production grows in quantity and the divisions between its different branches becomes deeper. A change in distribution changes production, e.g. concentration of capital, different distribution of the population between town and country, etc. Finally, the needs of consumption determine production. Mutual interaction takes place between the different moments. This is the case with every organic whole.

Using this quote, DH wants us to think that Marx saw crises as a result of ‘mutual interaction’ between different parts of the circuit of capital: production is determined by ‘other moments’. Thus the causal sequence is not ‘mono-causal’ or one-way: from the profitability of capital to investment and production and then consumption, but is one of ‘mutual interaction’.

But if we look closely at the quote, we can see that this is not the correct interpretation. Marx says “a definite production thus determines a definite consumption, distribution and exchange as well as definite relations between these different moments”. Only in a “one-sided form” is production determined by other moments. Production leads and sets off a chain reaction that feeds back on production in a crisis.

But DH likes the ‘organic whole’ metaphor because he reckons it shows that crises under capitalism are multi-causal: “In the same way that the human body can fall sick and die for all sorts of different reasons other than sheer old age, so there are multiple points of stress and potential failure within the organic whole of capital. A failure at one point, moreover, typically engenders a failure elsewhere.”

The trouble with his metaphor of a human body that gets sick, in contrast with Marx’s metaphor of gravity, is that DH replaces a clear causal sequence from profitability to crises that can be tested and measured with a view of a vague variety of contingent forces within the organic whole that move one way or another depending on the interplay of multiple but correlated contradictions. There is no explanation of where these crises come from.

DH tries to contrast his metaphor of a “chaotic mishmash of possible causes for breakdown and crises that I typically invoke without any necessary directionality of change with the mechanical certainties of that Newtonian world in which the clock was wound up at the outset through the extractions of absolute surplus value only to gradually be wound down under the competitive impetus to create relative surplus value. As the ratio of capital to labour employed shifts ineluctably in the former’s favor so the profit rate trends down. To me, this mechanical model appears too deterministic, too unidirectional and too teleological to fit how I see and experience capital evolving as an organic whole”.

But DH invokes chaos because he does not see Marx’s law as a dialectical law, i.e. because he does not see the tendency and the countertendencies. Thus he cannot discern any theory of crisis. So we have no idea what is going on. Every crisis is different with different causes and so “the job of the Marxist diagnostician is to figure out what ails capital this time around” – without reference to any previous crisis. And we can’t do any better than this because what causes illness in a human body can change with time e.g. genes mutate, environments change and diets and healthcare vary etc

Not in my lifetime!
DH also resurrects the old argument that even if the LTRPF is relevant to crises under capitalism, it is really only relevant to a long term apocalyptic end or breakdown. “Yes indeed the sun will eventually run out of gas and given the second law of thermodynamics energy will dissipate. But there is nothing to stop the increasing concentration and, in the earth’s case, storing of energies in one part of the universe for a time so that species as well as whole civilizations can be constructed through increasing order.” But “in the here and now the second law of thermodynamics means very little to us at the macro-level struggling to reproduce in our little corner of the universe, even as it is a universal feature of the world in which we live (and has lots of localized uses in closed systems such as in steam engines)”.

This metaphor that Marx’s law only operates at the same level as the laws of physics that predict that the sun (like other stars) will eventually burnt out in a billion or more years, so that it is irrelevant to crises in human life times is pinched from Rosa Luxemburg, who adopted an underconsumptionist theory of crises (as does DH in some places – see mattick on harvey).

Luxemburg addressed a ‘mono-causal’ LTRPF supporter of her day in ironic tone, as follows “there is still some time to pass before capitalism collapses because of the falling rate of profit, roughly until the sun burns out!” Rosa Luxemburg Anti-Critique, p. 76n.

In quoting Luxemburg’s remark in his book, Imperialism and the accumulation of capital, M Bukharin commented “It would be ridiculous to demand that the process should reach its logical conclusion. The objective tendency of capitalist development towards this end is quite sufficient. Long before the ‘end’, this tendency (LTRPF – MR) will sharpen the struggle for any possibility to gain an additional profit to such an extent, and will be accompanied by such a centralization of capital and sharpening of social relations, that the epoch of a low rate of profit will become the epoch of catastrophes.”

Bukharin goes on to point out that Luxemburg’s alternative theory of crisis based on too much surplus value that cannot be realized except through expansion into the third world also meant that “not only can one not draw any revolutionary conclusions from Rosa’s theory but, on the contrary, conclusions that make revolution appear impossible for a long time.” https://www.marxists.org/archive/bukharin/works/1924/impacck/ch05.htm

Where’s the evidence?
DH offers no evidence to test his ‘multi-causal chaos’ theory of crises while proponents of the LTRPF as the underlying causal driver of recurrent crises can and do just that. AK provides powerful evidence in the second part of his reply to DH. And I and others like G Carchedi, Esteban Maito, Alan Freeman, Tapia Granados and more have also generated empirical evidence to test and confirm or falsify Marx’s law. The result is that Marx’s LTRPF does fit the facts as the best explanation of recurrent crises.

As AK explains in his second part, we can decompose the movement in the rate of profit to see if it matches the assumptions of the law in reality. Thus Marx’s law says that the rate of profit will fall if the organic composition of capital rises faster than the rate of surplus value. Marx’s law says that if the rate of surplus value rises faster than the organic composition of capital, then the rate of profit will rise. But this latter countertendency is just that – it will be weaker than the tendency for the organic composition of capital (OCC) to rise. So over time (and not time as long as it takes the sun to burn out!), the rate of profit will fall.

The evidence presented by AK and others for the US is conclusive on this. Here is some more evidence from my calculations on the latest data on the US rate of profit (see my post, https://thenextrecession.wordpress.com/2015/03/27/profit-warning/).

US rate of profit decomp

So there is a secular decline in the US rate of profit from 1946 to 2014. The rate of profit did fall well before the sun burnt out. The reason is clear. Between 1946 and 2014, the organic composition of capital rose 47%, while the rate of surplus value actually fell 8%, so the rate of profit fell 29%. In the neo-liberal period after 1982, the rate of profit fell only very slightly, because the ‘countertendency’ of a rising rate of surplus value was nearly enough to match the rise in the organic composition of capital.

G Carchedi in an unpublished paper looked at just the productive sector of the US economy. He found that, from 1947 to 2010, the rate of exploitation actually fell, which shows the limits of growing exploitation as a counter-tendency.  And the rate of profit (ARP) fell.  In the graph below, the wages to profits ratio (W/P) – the opposite of the rate of surplus value – rises up to 1985 and then reverses (modestly).   And the rate of profit consolidates.

The rate of profit and ratio of wages to profits (W/P)


The increase in the rate of profit from the mid-1980s was really just a slowing down of its secular fall. And the decrease in W/P since the mid-1980s (increase in the rate of exploitation) is actually a slowing down of its secular increase, i.e. of a decrease in the rate of exploitation. This shows that, given the persistent increase in the OCC, (i.e. given the persistent fall in surplus value relative to the capital invested) over the long run, the rate of exploitation cannot but decrease.

LTRPF and crises
But does a falling rate of profit lead to crises as Marx argued and we mono-causals also reckon? Well, again the evidence is strong. Indeed, I know of no Marxist economist, except perhaps DH, who does not doubt that it was a crisis of profitability in the 1970s in the major economies that led to the first simultaneous international slump in 1974-5 and the double-dip recession of 1980-2. And that includes those economists like Gerard Dumenil, Michel Husson, Sam Gindin etc who reckon that the LTRPF had nothing to do with the Great Recession. It even includes the so-called post-Keynesian economists who reckon that the slumps of the 1970s and 1980s were ‘profit-led’ (ie wage share rose and drove down profits), although this school now reckons the current crisis is ‘wage-led’ (i.e. wages are too low for effective demand). See my post, https://thenextrecession.wordpress.com/2014/03/11/is-inequality-the-cause-of-capitalist-crises/.

And we can refute the argument that the ‘underlying’ cause of the Great Recession was not a crisis in profitability but something else. Tapia Granados has shown that profits have led investment and thus growth up and down: “available empirical data for 251 quarters of the U.S. economy… supports the hypothesis of causality in the direction of profits determining investment and, in this way, leading the economy toward boom or bust.”

Click to access does_investment_call_the_tune_may_2012__forthcoming_rpe_.pdf

And I have also shown how changes in the mass of profit will be followed (not led) by changes in investment.

US corporate profit and investment

DH recognizes the need to look for empirical evidence that might lead to an alternative explanation for crises than that of the LTRPF. He notes that “One of my favorites, for example, is to look carefully at how investments in the fixed capital and consumption fund of the built environment both absorb surplus capital and ultimately become the locus of a crash (as happened in 2008 and as is now threatened in China). This corresponds, as I pointed out, to Marx’s comment that “the cycle of interconnected turnovers embracing a number of years, in which capital is held fast by its fixed constituent part, furnishes a material basis for the periodic crises.” And he goes on to say: “Why, then, are we not investigating this with the same intensity and tenacity as is devoted to the falling rate of profit?”

Well. some of us have done just that. In various papers I have looked at the connection between the time of the turnover of fixed capital and the regularity of cyclical crises. I argued in my book, The Great Recession, that the 13-16 year period for a change in the direction of the rate of profit does correlate with the age of US fixed assets. Esteban Maito and Peter Jones have also considered in detail the role of the turnover of capital in recent papers.

It’s a pinball wizard!
DH concludes that “I would claim my organic metaphor for understanding capital’s nature works far better for understanding what is happening to us in the here and now.” Well, let’s raise another metaphor: that of a pinball machine. The ball could represent the accumulation of capital. It whizzes round hitting various obstacles in a chain reaction. They light up, representing various crises, each slightly different. One crisis bounces onto another (from housing to stocks to banks etc), as in Harvey’s metaphor. But the pinball machine’s raison d’etre is that its level slopes down so that gravity takes over; that is the essence of its working. The ball is always tending to drop to the bottom and even intervention by levers from the outside (government action) cannot stop that tendency which eventually overrides the obstacles and levers and the ball drops into the hole at the bottom. Accumulation stops.

Of course, metaphors have their limits but, I think, this one works well to understand the ‘here and now’ of capitalism.

29 thoughts on “David Harvey on monocauses, multicauses and metaphors

  1. Since David Harvey is keen on biological metaphors, it would be entirely appropriate for him to recollect his namesake’s work and start thinking of production as the beating heart of capital, driving its circulation.

    Without this his preferred way of thinking about science looks uncomfortably like pre-modern theories that attribute ill-health to the balance of four alleged humours of equal causal efficacy. To quote the Wikipedia entry on humoralism:

    “The humoralist system of medicine is highly individualistic, for each individual patient was said to have their own unique humoral composition. Moreover, it resembled a holistic approach to medicine as the link between mental and physical processes were emphasized by this framework.”

    1. Read the prologue to Harvey’s The Enigma of Capital. You don’t have to be a fan of Harvey to enjoy it; it’s very well-written and I can’t remember reading a metaphor of political economy that I enjoyed so much.

  2. I must say that Paul Krugman and Larry Summers are doing better better job of defending the Marxian idea that low rates of return on new or marginal investments than self-proclaimed Marxists. Harvey is actually much behind them.

    In a remarkable and brilliant comment, Summers says:

    “One of the puzzles of our economy today is that on the one hand, we have record low real interest rates, ones that are expected to be record low for 30 years if you look at the index bond market. And on the other hand, we have record high profits. If you tend to think record high profits would mean record high returns to capital, which would mean really high interest rates. And what we actually have is really low real interest rates. The way to think about that is there’s a lot of rents in what we’re calling profits that don’t really represent a return to investment, but represent a rent”

    And Krugman:
    “So what is really going on? Corporate profits have soared as a share of national income, but there is no sign of a rise in the rate of return on investment…, it’s what you would expect if rising profits reflect monopoly power rather than returns to capital… — all the big gains are going to a tiny group of individuals holding strategic positions in corporate suites or astride the crossroads of finance. Rising inequality isn’t about who has the knowledge; it’s about who has the power.”

    Of course neither understands the historic meaning of what they are observing just as Ricardo could not understand the implications of falling profitability on new investments. Here is Marx:

    “The rate of profit, i.e., the relative increment of capital, is ***above all important to all new offshoots of capital seeking to find an independent place for themselves***. And as soon as formation of capital were to fall into the hands of a few established big capitals, for which the mass of profit compensates for the falling rate of profit, the vital flame of production would be altogether extinguished. It would die out. The rate of profit is the motive power of capitalist production. Things are produced only so long as they can be produced with a profit. Hence the concern of the English economists over the decline of the rate of profit. The fact that the bare possibility of this happening should worry Ricardo, shows his profound understanding of the conditions of capitalist production…What worries Ricardo is the fact that the rate of profit, the stimulating principle of capitalist production, the fundamental premise and driving force of accumulation, should be endangered by the development of production itself. And here the quantitative proportion means everything. There is, indeed, something deeper behind it, of which he is only vaguely aware. It comes to the surface here in a purely economic way — i.e., from the bourgeois point of view, within the limitations of capitalist understanding, from the standpoint of capitalist production itself — that it has its barrier, that it is relative, that it is not an absolute, but only a historical mode of production corresponding to a definite limited epoch in the development of the material requirements of production.”

      1. Put a distinctive phrase into a Web search engine, for example, “the vital flame of production” . Use the quote marks.

  3. Regarding the disputed passage from the Grundrisse, it is quite clear that Marx is arguing for the predominance of production, but the details of what he means by this are somewhat fuzzy. Given that he admits that production “in its one-sided form” is determined by exchange insofar as its extent and variety are conditioned by market demand, we have to wonder what production in its “all-sided form” might be referring to. After all, Marx is the originator of the concept of a “mode of production” and is not much known for preaching the importance of the “mode of distribution” or “mode of consumption.”

    In the following methodological section of the introduction, Marx comments that “the concrete is concrete because it is the concentration of many determinations, hence UNITY of the diverse” (101, My emphasis added). In what sense can we think of production as a “concentration of many determinations” and “unity of the diverse?” It would be insufficient to take production in “its one-sided form” as this candidate, because Marx seems to be describing here the way in which production is determined by exchange and consumption. This one-sided form of production is a “concentration of many determinations” but it is not a “unity of the diverse” because it excludes the way in which production determines the other moments of the circuit of industrial capital.

    What then, if we consider the reproduction of the capitalist economy? In simple reproduction it seems arbitrary to assign any particular importance to any one moment of the circuit of industrial capital. Because we are dealing with a static system we can argue that any one moment is just as important as any other. However this is no longer possible when we consider expanded reproduction because expansion MUST originate in production (production is by definition the site of expansion). Expanded reproduction is both a “concentration of many determinations” (It comprises all the moments of the circuit of industrial capital without exhausting their contents in its own definition) and a “unity of the diverse” (It unites these moments in an intelligible whole). It also demonstrates the predominance of production, and therefore I believe it is a reasonable candidate for the “all-sided” form of production that Marx is referring to.

    Harvey seems to have realized the problem that this poses for him, because he explicitly denies the priority of production in his discussion of the reproduction schemas in his commentary on Capital Vol. II, where he strongly criticizes Marx for placing the site of expansion in his expanded reproduction schema in Department I (Means of production) instead of Department II (Means of consumption). He argues that this is a mere “bias”, and that “Marx does not prove the necessity of this priority as a universal truth” (359). He argues that at the most, this bias is a result of the capitalist drive for the accumulation of surplus value, and that it strongly “underpins” the thinking of socialist governments in prioritizing the development of heavy industry. It may be the case that an over-prioritizing of HEAVY INDUSTRY has a negative influence on the well-being of the working class and on development, but this says nothing whatsoever about the relative priority of production. Harvey here seems to be arguing against placing a priority on economic expansion, which makes perfect sense given that simple reproduction appears to render the priority of production arbitrary (As I mentioned above).

  4. Gravity explains why the apple falls to the ground, not why it leaves the tree!

    Here is my take

    The falling profit rate is a factor, among others, of a capitalist system. Obviously.

    Marx looked at the very reliable stats of his day that showed the organic composition of capital. Those stats showed, I think I am correct in saying that during the 18th century constant capital went from being 50% to more like 85% and during this period the rate of profit fell. Marx made the link. I think he does this in capital volume 1.

    The problem is that during this period the power loom replaced the hand loom (and other things), and the affect was incredible, i.e. technology had a dramatic effect.

    The problem is that subsequent technological affects have been more marginal, and therefore Marx backed off from raising falling profits as a law to more of a tendency.

    Of course the computer revolution could be another period where the technological affect becomes massive, but I don’t think it compares to the conditions of the 18th century.

  5. “Marx’s law says that if the rate of surplus value rises faster than the organic composition of capital, then the rate of profit will rise. But this latter countertendency is just that – it will be weaker than the tendency for the organic composition of capital (OCC) to rise. So over time (and not time as long as it takes the sun to burn out!), the rate of profit will fall.”

    You can’t conclude this from the law as such – that is a definition – that one tendency will weaken in relation to another over an undefined period of time. Another relationship between the rate of surplus value and the OCC is needed – I know some have concluded that the rate of surplus value is limited (by hours available) whereas there is no such limit to a rising OCC but this is at the limits that are never reached.

    It comes down to how you measure the Marxist ROP and the empirical data plugged in – interpretation and assumption

  6. Re: Heinrich, he just doesn’t get the point that socially necessary labour time (snlt) is embodied in ALL commodities, including the individual worker’s skills, skills which are being sold to an employer for their market price. He does see that commodities are exchanged on the basis of their snlt; but his emphasis on the act of exchange makes him deny the fact that without snlt the good or service would not exist in the first place to be compared for exchange. Thus, he does not take into account the fact that an electrical engineer’s skills sell for a higher price than a worker who has no skills and only a high school education because the engineer’s skills have more socially necessary labour time embodied them than the unskilled high school graduate does. This error leads to many, many errors in his INTRODUCTION TO MARX’S THREE VOLUMES OF CAPITAL. He seems to confuse the abstraction of price with value, the socially necessary labour time embodied in a commodity, pretty consistently.

    “The owner of labour-power is mortal. If then his appearance in the market is to be continuous, and the continuous conversion of money into capital assumes this, the seller of labour-power must perpetuate himself, “in the way that every living individual perpetuates himself, by procreation.” [8] The labour-power withdrawn from the market by wear and tear and death, must be continually replaced by, at the very least, an equal amount of fresh labour-power. Hence the sum of the means of subsistence necessary for the production of labour-power must include the means necessary for the labourer’s substitutes, i.e., his children, in order that this race of peculiar commodity-owners may perpetuate its appearance in the market. [9]

    “In order to modify the human organism, so that it may acquire skill and handiness in a given branch of industry, and become labour-power of a special kind, a special education or training is requisite, and this, on its part, costs an equivalent in commodities of a greater or less amount. This amount varies according to the more or less complicated character of the labour-power. The expenses of this education (excessively small in the case of ordinary labour-power), enter pro tanto into the total value spent in its production.”

    “The value of labour-power resolves itself into the value of a definite quantity of the means of subsistence. It therefore varies with the value of these means or with the quantity of labour requisite for their production.” Karl Marx CAPITAL
    full: http://wobblytimes.blogspot.com.au/2013/08/wobbly-times-number-168.html

  7. I must be missing something but on that last chart it appears that investment turned up before profits circa late 2009. Just saying.

    1. Paul You are missing something. I have pushed the corporate profits line one year ahead so that you can see whether it is likely that the investment line will start to fall too, one year later. If I kept both lines at the same time point, then the red corporate profits line turned up before the blue investment line in circa 2009. But because the gap between the two then was less than one year, the graph in the post has misled you.

  8. “DH replaces a clear causal sequence from profitability to crises that can be tested and measured”

    It would be nice if Marxists could agree on whether profit has exploded or gone down before we can say this for sure! And you guys have access to the same data!

    If we want the use the evidence we can conclude this, capitalism can endlessly reform itself despite of, or perhaps because of the tendency of profit rates to fall. So even if the theory is true, so what?

    My own view is that when Engels said their socialism was built on the inevitable demise of capitalism, they were not talking about profit rate but about the systems gravediggers, the proletariat. After all history if not the history of technical aspects of a system, but a struggle of classes.

    1. The point I think is that system of gravediggers, the CLASS, embodies the condition of labor,– wage-labor– which is at the core of capitalist accumulation. Does the aggrandizement of relatively more surplus labor time; the reduction of necessary labor time lead to, over time, a reduction in the ratio of “new value” to the total capital deployed?

      The evidence clearly confirms that tendency.

      There is a material reality to the conflict between means of productions and relations of production which drives the class struggle. To preserve the latter, the bourgeoisie have to “attack” the former.

      The issue is not “does the tendency of the rate of profit to decline in and of itself determine the end of capitalism?” But rather, does the condition of labor that leads to that decline compel the class of laborers to seek the abolition of that very condition?

      1. “But rather, does the condition of labor that leads to that decline compel the class of laborers to seek the abolition of that very condition?”

        It probably has an affect but one among many?

  9. Thanks for this interesting post. What I’d like to ask is how the debate is proved either way by these graphs?
    A lot depends on what time period you choose. For instance, from 1960 onwards – maybe a quarter of world historic capitalism – the long term trend lines in the w/p and ARP graph would be fairly flat, albeit with plenty of ups and downs, and you could argue that the raised bit before 1960 is down to the exception of postwar reconstruction. Similarly, take the dotted line projection out of the profit and investment graph and that would be fairly flat too, excepting the two crashes.
    Add in all the usual qualifications about differently collated statistics and margins of error and I can’t see how these graphs and the numbers behind them can be conclusive evidence.

  10. The thesis of the LTRPF implies that the crisis are the result of the process of increasing composition of capital along the say 7 or 10 or 15 years between them.
    Now, I was reading Marx and he also referred to recurrent overinvestment/overproduction. So, is there a relation between them? Because, for example, the standard view is that the past crisis was the result of a boom or bubble in housing.
    Secondly, some may think that there is some confusion between overinvestment and underconsumptiom. It seems to be two different things: Overproduction in housing does not imply underconsumption in housing.
    Now as I say I was reading some Marx and I saw this interesting paragraph:
    The rate of self-expansion of the total capital, the rate of profit, being the goad of capitalist production, its fall checks the formation of new independent capitals and appears as a threat to the development of the capitalist production process. It breeds over-production, speculation, crises, and surplus-capital alongside surplus-population.
    Does Marx then connect the fall in the rate of profit with overproduction, speculation, etc.? How? He does not specify.
    Hypothesis: The increment in the composition of capital is united with the increment with the productivity and the mass of invested capital so that contributes to such fact.

    1. In truth, Marx does– link LTRPF with overproduction, and then again he doesn’t. He regards overproduction of “multifaceted”– that is it can appear in isolation, in one sector of the economy, and it can appear in its “epidemic” form.

      I can remember reading Marx’s passages on overproduction and wanting, wishing, almost willing him to make the connection to the LTRPF, and being, for the most part disappointed that he doesn’t– but then there’s always Chapter 15, Volume 3 of Capital– Development of the Law’s Internal Contradictions where he discusses the overproduction of capital, refuting the notion that somehow can be distinct and distinguished from the overproduction of commodities.

      He writes: “It [overproduction of capital] is an oveproduction of the means of production only in so far as **these function as capital**, and hence have to produce an additional value in proportion to their value that has expanded with their mass; i.e. have to valorize their values.
      It is still overproduction, for all that, since the capital is unable to exploit labour at the level of exploitation that is required by the ‘healthy’ and ‘normal’ development of the capitalist production process, at a level of exploitation that at least increases the mass of profit along with the growing mass of capital applied; that therefore excludes a situation in which the rate of profit falls to the same degree as capital grows, or even falls more quickly than this…
      Overproduction of capital never means anything other than overproduction of means of production– means of labour and means of subsistence–that can function as capital, i.e. can be applied to exploiting labor at a given level of exploitation; a given level, because a fall in the level of exploitation below a certain point produces disruption and stagnation in the capitalist production process, crisis and the destruction of capital. It is no contradiction that this overproduction of capital is accompanied by a greater or smaller relative surplus population. The same causes that have raised the productivity of labour, increased the mass of commodity products, ext4ended markets, accelerated the accumulation of capital, in terms of both mass and value, and lowered the rate of profit, these same causes have produced and continue constantly to produce a relative surplus population, a surplus population of workers who are not employed by this excess of capital on account of the low level of exploitation… or at least on account of the low rate of profit they would yield at a given rate of exploitation.”

      And then there’s this: “Moreover, capital consists of commodities, and hence overproduction of capital involves overproduction of commodities.”


  11. While I realize that AK and MR are much ‘truer’ to Marx than DH (who seems more interested in expounding his own ideas than interpreting those of Marx) and that they better understand their subject matter (LTFRP), I think DH does, at times, make some very valid arguments, many of which are ignored by Marxists angry at him for not being Marxist enough (his celebrity status has something to do with this).

    MR and AK seem to work too much in a vacuum and don’t do enough to contextualize the LTFRP in terms of the current historical and economic conditions. There are real indications, manifestations, consequences, and, perhaps, causes of the LTFRP over the past 70 years. Even if we buy the argument that the LTFRP is the sole cause of capitalist crises, this tells us little of the contours of the LTFRP over the past few decades and why it has spawned the second most severe depression in history. I believe that there are two key points here, well documented by DH:

    1. Urbanization and industrialization are possibly the key engines of economic growth, and they can only happen once. ‘Urban redevelopment’ and gentrification is the only way to try and replicate this process, and it’s a topic of particular interest to DH. The first world economies finished these developments decades ago, and since then, have either had to rely on external demand, labor cost-cutting, or asset bubbles for economic growth. Additionally, these processes are very far on their way in India, China, and the rest of the developing world. Only Africa has yet to undergo them on a wide scale, but its entire population is less than that of India’s. (Robert Gordon is another author who notes that certain developments can only occur once–in this case, he focuses on technological revolutions–but MR doesn’t seem to comment on this idea in the posts where he discusses Gordon’s work).

    2. After the reconstruction of western Europe and Japan, by the 1970’s, the world reached a crisis of overproduction and under-utilization of capacity in manufacturing, best chronicled by Robert Brenner’s work. Since then, developed economies have only been able to achieve growth by cutting labor costs and blowing asset bubbles. But MR has never even mentioned Brenner other than once in passing last year.

    It seems obvious that both of these points play a key role in the current crisis. And they can be reconciled with the LTFRP; those who want to see the current crisis in terms of the LTFRP can simply note that these developments played a key role in exacerbating the LTFRP in this era and explain why the current crisis is so severe.

    Another argument that DH discusses at length is that capitalism requires infinite growth while the amount of people and resources on earth are finite. And at a 2-3% growth rates, the global economy will double in the next few decades, and continue to double at an ever increasing rate (compound interest). With China and India already quite integrated into the global economy, there seems to be little evidence that there is enough potential to realize growth at such a pace. From what I’ve read on this blog, MR believes that after a long depression, capitalism is bound for another boom. I don’t think long-term, sustained growth rates at 3% are possible without a great bout of creative destruction (e.g. a massive war). As DH notes, the world is already awash with capital that has no profitable destination for investment (also in part thanks to financialization, trends that I think AK and MR could pay more attention to), and the continual growth of capitalism at normal rates would mean these problems would only worsen exponentially.

    One other thing that I think AK and MR get wrong is their insistence that real wages have not declined in this era. I think they’re pretty much the only people aside from right-wingers who think so. The fall of organized labor, the disappearance of the middle class, the rise of finance capital, and the entrance of billions from India and China to the labor market are some pretty big clues, as is the fact that cheap, easy credit has been taken on by the popular classes on such a large scale (DH rightly notes that this is capitalism’s mechanism to compensate for the fall in their purchasing power). I don’t see how this is irreconcilable with the LTFRP; in fact, I always thought that it was an inherent part of the process. Automation and increases in productive capacity mean that less labor is required to produce the same amount, and since we must assume that demand is constant, this means less employment (and an ensuing fall in wages and demand). Perhaps MR or one of his followers of this blog can fill me in on that one.

    1. Very interesting points:
      My upcoming book on this Long depression and many posts here, I think, suggest that I have considered the current historical conditions and their specific characteristics in relation to the LTRPF. See my paper, Tulips, triggers and tendencies 2014 Amsterdam, for one. see https://thenextrecession.wordpress.com/2014/02/16/tendencies-triggers-and-tulips/ Also my paper, A world rate of profit also goes into the role of globalisation (re your para no 1). My paper on Debt matters, deals with the role of credit in this current crisis.

      Re para 2 on Robert Brenner, I think RB makes an important contribution and he too argues that the cause of crises is to be found ultimately in profitability, although he does not accept the LTRPF as the theoretical basis, I think. Yes, both 1) and 2) can not only be reconciled with LTRPF but can be explained by it.

      My argument about a capitalist recovery after this long depression is open to discussion but, exactly, it wont be possible without another bout of capital destruction (not necessarily achieved by world war though).

      Real wages have not fallen in absolute terms for the average in the last 30 years, although they have stagnated in some countries. But they have been augmented somewhat by the ‘social wage’, transfers etc. What has happened is a rise in the rate of surplus value in the neoliberal period counteracting the LTRPF with relatively brief and limited success.

      As you say, all these recent developments are compatible with LTRPF and indeed are explained by it. The point is that David Harvey does not agree and argues that LTRPF has nothing to do with it. Instead he looks for anything but the LTRPF to explain things. Perhaps you could ask him again to fill you in on that one.

  12. My article in the Review of Radical Political Economy, March 2015, on the materialized decomposition of capital, C/(v+s), presents data that it has been stable around two (2) in the U.S. since 1955. Unproductive labor is included in the calculations. The implication is that C/v would be rising over that time period due s/v raising since C/v = C/(v+s) times (1 + s/v).

  13. Would you comment on this from an article in Monthly Review 2015, Volume 66, Issue 11 (April) / If You’re So Smart, Why Aren’t You Rich? by Michael Lebowitz?

    “…how much time has been spent by Marxist economists on the inexorable fall in the rate of profit, when Marx was so clear in indicating that the course of the profit rate depended upon the relative rates of productivity change in Departments I and II. Or consider all the discussions of the development of relative surplus value that are oblivious to the fact that the conclusion that capital is the beneficiary of productivity increases flows from an assumption, namely that workers are precluded from gaining because the standard of necessity is given for a given country and a given era, an assumption that Marx intended to relax in his unwritten book on Wage Labor. As I have argued in my book, Beyond Capital, once you remove that constraint, then the effect of productivity increase, all other things equal, is rising real wages.3

  14. Reblogged this on Taking Sides and commented:
    Also as recommended by Michael Roberts, you would likely benefit from reading both parts (i.e., Part One & Part Two) of Andrew Kliman’s “Harvey Versus Marx On Capitalism’s Crises [Part 1 & Part 2]: Getting Profitability Wrong.”

    And don’t neglect the comment section(s) of both Michael’s and Andrew’s pieces. Thought provoking, all.

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