Financial markets may be booming in the expectation that the US economy will grow faster under President Trump. But they forget that the main emphasis of Trump’s programme, in so far as it is coherent, is to make America great again by imposing tariffs and other controls on imports and forcing US companies to produce at home – in other words, trade protectionism. This is to be enforced by new laws.
That brings me to discuss the role of law in trying to make the capitalist economy work better for the interests of capital. It’s an area that has been badly neglected. How is the law used to protect the interests of capital against labour; national capital interests against foreign rivals; and the capitalist sector as a whole against monopoly interests?
Last year, there were a number of books that came out that helped to enlighten us both theoretically and empirically on the laws of motion of capitalism. But I think I missed one. It’s The Great Leveller by Brett Christophers. Christophers is a Professor in Human Geography at Uppsala University, Sweden. His book takes a refreshingly new angle on the nature of crises under capitalism. He says that we need to look at how capitalism is continually facing a dynamic tension between the underlying forces of competition and monopoly. Christopher argues that in this dynamic, law and legal measures have an underappreciated role in trying to preserve a “delicate balance between competition and monopoly”, which is needed to “regulate the rhythms of capitalist accumulation”.
Christophers reckons this monopoly/competition imbalance is an important contradiction of capitalism that has been neglected or not developed enough. It may not be the only contradiction but it is an important one that the law (imperfectly) works on. Indeed, uneven and combined development is an inherent feature of capitalism.
Christophers argues that corporate laws swing from one aim to another, depending on the needs of capital in any particular period. Thus, in certain periods, anti-trust legislation (breaking up monopolies) dominates legal economic thinking; at others, it is patenting and protecting ‘intellectual property’ (monopoly rights). The law is a “great leveller”, aiming to keep a balance between too much competition and too much monopoly.
I’m reminded of the recent period prior to the global financial crash and the Great Recession. The tone of the day was to ‘deregulate’, particularly in the financial sector, to allow new financial products (derivatives) to expand ‘financial diversification’ (competition). The dangers of this ‘excessive risk-taking’ and uncontrolled ‘competition’ were brought to the attention of the ‘powers that be’ at the annual Federal Reserve Jackson Hole central bankers symposium of 2005 by Raghuram Rajam, then a professor at Harvard and later head of the Reserve Bank of India. He presented a paper that questioned the reduced banking controls introduced by Clinton’s advisers, Robert Rubin and Larry Summers in the late 1990s. Immediately he was attacked by Summers as a ‘Luddite’, holding back progress and competition. Of course, after the Great Recession, Summers became a leading supporter of banking regulation and of the Dodd-Frank banking regulation laws.
The balance between competition and monopoly is the main theme of Christophers’ book. In my view, contrary to the view of the Monthly Review school, who follow Paul Sweezy’s characterisation of modern capital as ‘monopoly capitalism’, monopoly is not the dominant order of capitalism: competition is – at least what Shaikh calls ‘real competition’, in his huge Capitalism. The continual battle to increase profit and the share of the market means monopolies are continually under threat from new rivals, new technologies and international competitors. The history of capitalism is one where the concentration and centralisation of capital increases but competition continues to bring about the movement of surplus value between capitals (within a national economy and globally).
Brett Christophers understands well this dialectical dynamic in capitalism. In his excellent theoretical chapter 1 on Competition, he rejects the monopoly capital theory. “Monopoly produces competition, competition produces monopoly” (Marx). The law plays a key role in trying to achieve a balance between the inherently unstable and precarious forces of centralisation and decentralisation that Marx prognosticated.
However, Christopher seems a little ambiguous or ‘soft’ on the theoretical explanations offered for the inherently unstable nature of capitalism. He appears to accept the view that (underlying) causes of capitalist instability cannot be found in the capitalist mode of production but, as Marxist David Harvey has argued, must really be found in the full circuit of capital (production, distribution and circulation). To emphasise, as Marx did himself, the production of surplus value at the core of crises and imbalances is to be “productivist” (Jim Kincaid) and to exclude the “chaotic singularities of consumption” (Harvey). The “anarchy of capitalism” is to be found in competition and exchange, not in the exploitation of labour in production (Bob Jessop).
Well maybe, but this leaves Christophers open to the massaging of Marx’s value theory so that no marks are left. First, he appears to accept Harvey’s view that value can be created in exchange or even consumption (p74). Second, he appears to follow the view of post-Keynesian Michal Kalecki that profits are the result of the degree of monopoly or ‘rent-seeking’, thus dismissing Marx’s clear view that new value only comes from the exploitation of labour, not from monopolistic power. Then there is the reference to the work of mainstream economist Edward Chamberlin’s theory imperfect competition, an extension of neoclassical marginal equilibrium theory. Marx’s value theory as the basis of the laws of accumulation of capital and competition among capitals has been ignored or chipped away by these authors.
But this is perhaps another debate. The theme that Christophers highlights is the role of the law in evening out the anarchic swings between excessive monopoly and ruinous competition in different periods of capitalism. This is a new insight. As Christophers says, this is a “work of levelling not plugging” to achieve “ongoing growth – in a relatively stable fashion”. Even that seems a generous concession to the efficacy of competition law between capitals in maintaining stable expansion and accumulation under capitalism. Do we not note over 50 slumps or recessions in the last 200 years and three huge depressions under the capitalist mode of production, where legislation on banking, corporate monopolies, patents and intellectual property did not work in preserving ‘harmony’?
In a series of well-researched chapters, Christophers outlines the detail in the swings between monopoly and competition according to the conditions of capitalist development. He makes a convincing case for arguing that the first case of ‘legal leveling’ began at the outset of 20th century after a period of excessive competition threatened to drive capitalism into a deflationary spiral. Legal support for monopoly powers to protect profits dominated between the world wars. After the second world war, competition came to the fore in order to help innovation and new industries. In turn, the neo-liberal period from the 1980s, the laws of patent and intellectual property increasingly superseded the anti-trust legislation of Golden Age of the 1960s and 1970s.
This is a powerful narrative but it is also raises questions of causation. Should we not see company and competition laws as reactions to changes in the health of capital accumulation, rather than something that (successfully?) evens out the upswings and downswings of capitalist expansion? Christophers reckons that the profitability of capital has been “remarkably consistent” since 1945, with an average of corporate profits to GDP of 10% in the last 70 years, which “rarely strayed far from this mean” (p2). But profits to GDP are not the measure of the profitability of capital (at least in Marxist terms) and even so there has been a wide divergence (6-14%). All the proper measures of US profitability show a secular decline since 1945, not stability; and in particular, a fall from the 1960s to the 1980s followed by a rise during the neo-liberal period 1980-00 – and a small decline, subsequently to date (see my book, The Long Depression).
This suggests to me that corporate and competition law is more like another counteracting factor designed to react to the health and profitability of capital in the same way as globalisation, attacks on the trade unions and privatisations that we saw from the 1980s – in an attempt (partially successful) to raise profitability of capital as a whole. After all, it is the level of profitability for capital as a whole which is key to the degree and frequency of crises rather than the sharing out of profit among capitals.
Marx argued that, as capital accumulates, it will experience regular and recurring crises of production and exchange, slumps we call them. They occur because accumulation leads, over time, to a fall in profitability and profits, forcing capitalists into an investment ‘strike’. However, Marx also outlined several counteracting factors to this law of the tendency of the rate of profit to fall: greater exploitation, cheaper technology, expanding foreign trade; speculation in financial assets. Law could be seen as another counteracting factor, introduced to curb either the excesses of ‘ruinous competition’ in driving down prices and profitability (i.e. helping to protect super profits from innovation or monopoly power); or to break down too much ‘monopoly control’ that could hamper profitability for more efficient smaller capitals or from new technology.
Indeed, one area of law that is missing from Christophers’ otherwise comprehensive analysis is labour law. One big area of capitalist law is designed to ensure the dominance of capital in the workplace and over the production and control of surplus value. These are even more important to capital than the laws designed to level the playing field between capitalists.
As we approach the 150th anniversary of the publication of Volume One of Marx’s Capital, we can remember that Marx spent much time recounting the role of law and regulation (inspector reports) in the struggle to protect and improve the conditions and hours of workers in Victorian factories and work places. The battle for the 10-hour day and getting children out of dark satanic mills and mines etc.
It is no accident that the Trump administration is looking to deregulate banking and reduce environmental regulations, not to help small businesses against monopolies, but instead business in general against labour and the cost of people’s health. Take the right to work laws of the last 30 years or more. Following decades of declining membership, unions face an existential crisis as right-to-work laws being pushed at state and federal levels would ban their ability to collect mandatory fees from the workers they represent, a key source of revenue for organized labour. In their first weeks in office, the new Republican governors of Kentucky and Missouri have already signed right-to-work laws, making them the 27th and 28th states, respectively, to ban mandatory union fees.
On the first page of his book, Christophers rightly highlights the comments that Keynesian guru Paul Krugman made on his blog back in 2012. Inequality of incomes had risen sharply in the neoliberal period and the average wages of non-supervisory workers had stagnated. The share of value going to capital had risen. “So the story has totally shifted; if you want to understand what’s happening to income distribution in the 21st century economy, you need to stop talking so much about skills, and start talking much more about profits and who owns the capital. Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial.” (Krugman) The amiseration of the working class, as Marx called this relative poverty, appeared to be borne out. As Krugman said, “isn’t that an old fashioned sort of Marxist discussion?”
As Christophers explains, Krugman offered two possible reasons for this amiseration: either growing monopoly profits of ‘robber barons’ (the Kalecki argument) or technology displacing labour with the means of production (the Marxist argument of labour-saving and ‘capital bias’). The latest research on the causes of the long-term fall in US manufacturing employment alongside rising output shows that the Marxist explanation is more convincing than the Kalecki ‘monopoly rents’ one.
It’s not monopoly power or rising rents going to the ‘robber barons’ of the monopolies that forced down labour’s share, it’s just (‘real competition’) capitalism. Labour’s share in the capitalist sector in the US and other major capitalist economies is down because of increased technology and ‘capital bias’, from globalisation and cheap labour abroad; from the destruction of trade unions; from the creation of a larger reserve army of labour (unemployed and underemployed); and from ending of work benefits and secured tenure contracts etc (labour laws). Companies that are not monopolies in their markets probably did more of this than the big firms.
Christophers only deals with international trade law in passing, as his perceptive analysis concentrates on concentration and centralisation within national economies. But “The Donald” is concentrating his enviable skills and focus on international law to revoke trade agreements; control the movement of labour across borders and impose tariffs and restrictions on rival powers’ exports etc. The irony is that this will do nothing to restore manufacturing jobs and incomes in the US – quite the contrary. No great levelling there.
Perhaps the real great leveller under capitalism is not so much laws designed to level the playing field among competing capitals –important as Christophers has shown that it is. The real leveller is capitalist crises themselves. In another new book, also coincidentally called The Great Leveller, Walter Scheidel, a Stanford University historian, argues that what really reduces inequality is catastrophe – either epidemics, wars or massive economic depressions. It is a simple and perhaps crude idea. But it is certainly true that the Great Depression of the 1930s cleansed capitalism of its unproductive and inefficient capitals and massively weakened labour to create conditions for new levels of profitability. And the world war itself destroyed capital values (and physical capital) and introduced new military-induced technologies to exploit new layers of the global working class in the post-war boom. That was a great leveller of the capitalist landscape (in a different sense) – to lay the basis for renewal of the profit making machine from the 1940s through the Golden Age of the 1960s.
So far the current Long Depression has not managed a similar ‘levelling’. As Christophers says, it is unclear whether the law will be applied to reduce monopoly power as it was after 1945. While the depression is unresolved, I doubt it. Indeed, as Christophers confirms, the balance between competition and monopoly has moved to the international plane, with the likelihood of a new imperialist struggle that we saw at the beginning of the 20th century.
Michael Roberts Blog 
Seems like we’re getting closer to some understanding of what Marx might have discussed in the projected but unwritten book of Capital on the State.
As the objective decay of capitalism becomes clearer, the discrepancy between the productive forces (pushing on like a rising tide) and the relations of production (capitalist ownership vs wage slavery, with the capitalists and their states doing their best to order the tide to stop rising, like Canute in the story) has become so great that the historical primacy of the economy in developing society is temporarily subordinated to the political superstructure. Same thing happened during the Counter-Reformation in relation to feudalism vs capitalism.
Which means that we can’t be satisfied with just monitoring the health or debility of the capitalist economy as such. As Marxists we are obliged to focus on the politics of this given the present stage in the development (senile capitalism, rotting imperialism) of human society.
Or, as Marx said, the thing is not just to understand the world, but to change it.
I still have to understand the concept of “real competition”, but I am getting the intuitive idea that it includes aspects of what a leninist view of monopoly and imperialism would also consider as characteristics of imperialism. So, let’s assume that capitalists, big or small, use any kind of means the have available, in order to capture more of the total surplus value produced in their national economy, as well as abroad. I don’t see why the only competition that “matters” in the real of social relations, is the one that related to the organic composition of capital… Reality has states with borders, laws and governments, there are intellectual rights and patents laws, there armies and wars, there are mafias and even pro-capitalistic ways of exploitation as Harvey suggests. Most of all, there are many forms of imperialistic exploitation as the research of John Smith has recently brought again up… What I am saying is that imperialism is the stage of capitalistic development where, due to the concentration of capital, several of these forms change qualitatively, and maybe their relative importance also changes. I would love to see a study of how all these factor “shape” the competition in modern capitalism (=imperialism). This is not to say that there is NO competition, but I would expect that there might be changes that can even be quantified, e.g., in the characteristic times of profit rate equalization, in the frequency of bankruptcies etc This is an open scientific research. What I cannot accept is that everything is qualitatively the same at all levels of description (in the course from the abstract to the concrete), or that whatever has changes is of no or very little importance. Saying that, I fully agree that the inner and more abstract laws of capitalism continue to function, albeit their action in reality is more and more mediated by the phenomena of imperialism. At the same time, it could be the case that if you isolate the biggest capitals, and maybe the more unified an unregulated markets, one could possible also observe the basic laws of capitalistic competition in their purest and direct form…
I’d love a review of Walter Scheidel’s ‘The Great Leveller’.
Here we go again!! Michael, when will you acknowledge the importance of Marx’s statement at the end of the first section of capital that “nothing can be a value without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.” The implication is that the realization of value (as opposed to its production) is contingent on the state of wants, needs and desires as registered in the market place. Later Marx makes clear (in chapter 3) that it is wants, needs and desires backed by ability to pay that fix the conditions for the realization of value. In Volume 1 of Capital Marx assumes throughout that all commodities (apart from labour power) exchange at their value so the problem of value as “the contradictory unity of production and realization” is assumed away. The market plays no role os useless labour never occurs. Whenever I reintroduce this problem (which appears in a different form in volume 2 of Capital) you accuse me of saying that value can be produced through market exchange. NO!!! I am saying that the conditions of realization of value in the market are of importance and that the history of the creation of wants, needs, and desires (e.g. consumerism including “compensatory consumerism” within the working class) is as important to study as the conditions of production of value so convincingly and beautifully (if horrifically) laid out in volume 1 where Marx clearly states that he is leaving all questions of realization to volume 2 and problems of distribution (e.g. finance and credit) until volume 3. For Marx the totality of the system of production, realization, distribution and revaporization is what counts, If value cannot be realized for any reason then there is no value to be circulated let alone accumulated.
david harvey
David, thanks very much for your comments. I don’t know if we are going at it again… but it’s good to go over these points,if only briefly. Yes, I accept Marx’s statement that a thing must be useful to somebody to have value. Using labour to produce some thing or service that nobody wants can have no value. And yes, the ability to pay is required to buy. Indeed, that must be the case in a capitalist market economy. I don’t think I said in this post that you reckoned value can be created through exchange. I said that you argue that the underlying cause of crises under capitalism are not just to be found in the production of value and surplus value but “must really be found in the full circuit of capital (production, distribution and circulation).” (my words). Let me know if that is a misunderstanding or wrong interpretation of your view. Using your schema of Capital (Vol 1 – production), Vol 2 (circulation) and Vol 3 (distribution), crises can be caused or found in any part of the circuit of capital – I think that is how you see it, no? If so, then we are in a different debate about the causes of crises (underlying or proximate), which we have had before; and on the way of looking at the structure and method of Capital. These are different issues from whether value is ONLY created by the exploitation of labour in the production process (but realised in the market). We seem to agree on that.
yes you correctly interpret my interpretation of Marx’s position.
I don’t know why anyone would deny that “crisis” can emerge in capitalism due to any number of different factors, and be made manifest in different “sectors” of capitalist reproduction. But a “crisis” is just that, a crisis, and is different from the secular, structural, long term tendencies, trends, and limits to the reproduction, that is to the revalorization of capital; the recapitalization of surplus value.
Marx identifies potential sources for crisis in capital’s separation of production from consumption; in the separation of production from circulation; in obstacles to turnover, etc.
And he traces, or at least gives the method for tracing all these separations, to the antagonism, the opposition of labor to the condition of labor.
It’s one thing to point out that if there is no longer any use-value to a commodity, the value of the commodity is unrealized, lost, essentially non-existent. Given the essence of the commodity, as both an useful article and a means of exchange, given that this duality is the existence of the commodity, we have a tautology.
It’s quite another thing to make the tautology the basis for claiming ” The implication is that the realization of value (as opposed to its production) is contingent on the state of wants, needs and desires as registered in the market place.”– without recognizing, that the the “state of wants, needs, desired registered in the market place” is itself determined by that very same production process of value.
All of uneven and combined development, the history of capital’s inability to revolutionize agricultural relations of production in its encounters with “less developed” countries proves that the “size” of the market, the expansion of the market, the realization of value, depends upon the creation of and access to labor power as a commodity, as value producing; and that “effective demand” or realization, or however you want to describe it, is determined by the all-important index to capital’s “success”– that is to say, its profitability.
yes
“in its encounters with “less developed” countries proves that the “size” of the market, the expansion of the market, the realization of value, depends upon the creation of and access to labor power as a commodity”
My view on the history of colonial relations is that some element of theft and/or enslavement are a way to resolve issues around profitability and as soon as the ability to thieve and enslave are reduced we are at last on the grounds Marx spelled out.
In other words only now is Marxism becoming really relevant to the advanced world.
Given that I have lately been excommunicated by Saint Sartesian from his fundamentalist church of scriptural marxology, it is with a considerable anxiety of being damned for heresy that I venture to express some scepticism about his latest doctrinal assertions, uttered as they are with his customary presumption of papal infallibility; but the claims of science demand comradely, albeit critical, comment in the hope of further elucidation.
He asserts,” Given the essence of the commodity, as both an useful article and a means of exchange, given that this duality is the existence of the commodity, we have a tautology.”
Surely the essence of a commodity is its objectification of abstract human labour?
It is not clear to me at any rate why the dual character of a commodity should result in a tautology.
A commodity is not a means of exchange, which is money, but an object of exchange.
‘without recognizing, that the the “state of wants, needs, desired registered in the market place” is itself determined by that very same production process of value.’ On what grounds does Sartesian presume that so distinguished a Marxist as David Harvey does not comprehend this?
‘that “effective demand” or realization, or however you want to describe it, is determined by the all-important index to capital’s “success”– that is to say, its profitability.’ But the profitability of capital is dependent on the realisation of value.
Good review of this book and accurate criticisms. During periods of expansion where market prices are set by the less efficient producers within a given industry the entry threshold is reduced and more capitals emerge. During periods of contraction where market prices are set by the most efficient producers the opposite is the case, here centralisation dominates. In the period of globalisation up to 2007 the churn of companies making up the S&P 500 was at its highest historically with new entrants like Apple, Cisco etc rising to dominate. The final point which I address in my recent article on China is a less considered aspect of capitalism, the separation of ownership and control of capital. While all eyes have been focused on the centralisation of capital (monopolisation) this area has been neglected. This is a methodological error as it is the interaction between the forces driving centralisation and the separation of control from ownership that yields the final and concrete resolution of these contradictions. Also without understanding the conflict between ownership and control of capital we cannot understand one of the two most important economic developments of our age – the emergence of China with its phlethora of new capitals. (Chapter 27, Book 3 is one of the most important chapters Marx wrote and certainly his most perceptive.) Nor can we understand the differential response to the crisis of profitability between say the US in the early 1980s and Japan in the late 1980s.