THE RELEVANCE OF MARX TODAY
I consider the book of Ben Fine and Alfredo Saad-Filho (« Marx’s Capital ») as an outstanding contribution along with the beautiful book of Michael Henrich (« Comment lire le capital») and some few others which present what Marx indeed offered in his major work. I felt agreeing to the extent that I could simply praise the work and add nothing more.
The fundamental reason for this convergence of views is that the authors understood (in my humble similar opinion) that Marx was interested in and focused on the internal contradictions specific to capitalism conceived therefore as a stage in history, not as the end of history.
This handling of the challenge appears in particular in Book 2 of Capital where Marx proceeds with an abstract pure capitalist mode of production and identifies the conditions which make possible the working of extended reproduction. By doing so, i.e. identifying those conditions, Marx brings to the forefront the fundamental contradiction of that system, since its internal logics does not permit these conditions being materialized.
The authors write (p.57) : « Marx never draws the implications as in general equilibrium theory that different producers and consumers are harmoniously coordinated through the market at high levels of employment of resources ».
Indeed, the equations which permit the materialization of the equality of global supply and demand in a dynamic system, characterized by increase in the productivity of social labour, show that this equilibrium implies that the price paid for the labor force (the « real wage ») increases at a rate which can be calculated, itself being related to the rates of increase of productivity in each of departments I and II. The algebraic model I offered in my book (The law of worldwide value, p. 58) indicates how this precise relation can be quantified.
But Marx was certainly not an « economist of the system » keen at proving that capitalism provides the frame producing that « harmonious » society. Translated into the jargon of conventional economics (« vulgar » economics as Marx writes) : that generalized markets (of commodities, capital and labor) produce the harmony associated with a stable long run equilibrium. Nor was Marx an economic expert advising the ruling class with what they ought to do in order to have the system working, as Keynes did. Marx is a revolutionary interested exclusively in understanding how the exploited classes could seize this fatal contradiction of the system to push their anti-capitalist strategy.
Marx never subscribed to the nonsense of bourgeois economics, which is part of its ideological effort to convince the general opinion that generalized markets tend to reveal a stable equilibrium, and therefore that capitalism constitutes the « end of history », with the triumph of trans historical rationality. In contrast Marx shows how the system moves from one stage of disequilibrium to another stage of disequilibrium, in response to class struggles and counterstrategies deployed by bourgeoisies (including though orientation technological innovations) without the system tending to that imagined (and in fact impossible) stable harmony. But as long as the general opinion believes in that witchcraft, the bourgeois ideology remains the dominant ideology in society.
Indeed the fundamental contradiction disclosed in Book 2 of Capital : i.e. the contradiction between the growing social character of production and the private property of the major means of production, and its showing up through the distance which separates the rate of growth the productivity of social labor force (higher) from the rate of growth of the price of labor (lower), should be « fatal » and lock capitalism into a permanent crisis. Yet this contradiction is continuously overcome, as long as capitalism rules. How ? Through different successive and/or associated practices, such as for instance the expansion of capitalism absorbing pre capitalist forms of production. These practices cannot be formulated in « theory », since they are expressions of the deployment of historical capitalism.
Vulgar economics, and in particular its contemporary extreme formulation (« neo-liberalism »), ignores history. It offers a construction of a macro-economics fully derived from a micro-economics, itself built as the produce of the imaginary interaction of free individuals operating on markets in a similar way i.e. as rational homo-oeconomicus), independently of their belonging to distinguished collectives (i.e. capitalists and workers, nationals of different countries etc.).
The nonsense of this approach which implies that each and all of these individuals are clones (represented by the single Robinson who materializes the average homo-oeconomicus) should be obvious for anybody who is respectful of the elementary rules of rationality . As the author writes (page 59) “recent mainstream economic theory have given so called rational expectations a considerable enhanced role in determining the path of the economy ». This absurd formulation (for which Stiglitz got his Nobel prize !) is at best a tautology – the play of expectations determines the path of development, i.e. the short run fluctuations around the stable final harmonious equilibrium – in fact it is closer to witchcraft than to any scientific analysis . The « expectations » are imagined to be those which will produce the desired result !
Those bourgeois economists who did consider that history matters nonetheless disregarded real history of class struggles and inter-nations conflicts and reduced the historical dimension to mere uncertainly . Keynes for instance considers the direction of the path being ruled by « waves of optimism or pessimism, rich or poor expectations about business profitability which become self-fulfilling prophecies » (as the authors of the book noticed p. 59). The sense of history developed by Marx and many Marxists after him (such as Rosa Luxemburg, Lenin, Mao and others) is far more fertile. And realistic. The reason is simply that bourgeois economists have to convince themselves and others that capitalism is the « end of history », while Marxists are free from that absurd ideological unrealistic constraint.
The authors offer us also outstanding presentations of the major issues treated in Capital, such as the composition of capital, the tendency for the rate of profit to fall, the transformation problem, the theory of interest, the agricultural forms of rent. My reading of Marx on these issues is rigorously similar to that of the authors who, additionally, draw our attention to the most essential with respect to the method at stake in these areas.
The distinction suggested by the authors between the organic composition of capital, derived from its technical composition, and the value composition is worth being pointed out. It helps understanding that the tendency for the rate of profit to fall is an abstract truth derived from the logic of capital, and not an empirical proposition. Competition, selection of innovations, practices impacting on the rate of exploitation of labor are means by which capital may continuously overcome – partly or in totality – the fall of the rate of profit. But in their turn these responses of capital to the challenge create not only uncertainly, but indeed disruption in the pattern of apparent equilibrium (in fact disequilibrium) in place, and therefore results in a crisis of accumulation. The system moves towards another stage of apparent equilibrium (in fact a new disequilibrium), and that movement is endless.
With respect to the transformation problem, they write (p. 114) that “the awkward presentation of Marx can be corrected easily : it is merely a matter of transforming the inputs as well as the outputs simultaneously through a simple algebraic procedure. Commodities have values as well as prices of production and the two distinct accounting systems are possible ». This is exactly what I have done in my algebraic model (ref. « The law of worldwide value » p.55 and following).
With respect to the theory of interest Marx rejects the conventional economics in which competition reduces the rate of profit to the rate of interest, thus opening the road for the integration of money, credit and banking capital as active operators in the process of accumulation.
With respect to the study of the agricultural absolute rent they remind us that according to Marx agriculture tends to have a lower organic composition of capital than industry because of the barriers imposed by landed property on capitalist development in agriculture.
All that is fine as long as the target of the authors is merely to offer a panorama of what Marx said in Capital, and nothing more.
Yet this does not exclude completing the reading of Capital and other writings of Marx and eventually correcting its shortcomings and expanding the uses of the Marxist method for the understanding of the transformations of capitalism after Marx. That is precisely what I tried to offer to the reader in my two books (« The law of worldwide value » ; « Three essays in Marx’s theory of value » ; also, Reading Capital, reading historical capitalisms, Monthly Review, July-August 2016).
Those who rejected Marx’s method for the transformation of values into prices noticed (rightly) that the rate of profit in the accounting system established in prices of production necessarily differs from the rate of profit in the accounting system in values. They concluded from that observation that the detour deriving prices from values is deceiving, unnecessary. Equations expressing the general equilibrium can be formulated directly in prices, as Walras and Sraffa did. The authors have not answered to that major anti-Marx argument. I have done it, explaining that there is no mystery in the fact that the two rates differ, they must differ, precisely because the process of exploitation of labor is opacified by the commodity alienation specific to capitalism, while it is transparent in previous modes of production (Ref. The law of worldwide value, p. 31-32)
The developments of Marx on the banking system, credit and money as formulated in Capital (and other writings) are, in my opinion, far from offering a consistent Marxist theory of money. The core of that theory asserts that the demand for money generates its supply. The banking system offers credit in response to the demand, itself commanded by the path of accumulation. Hence the supply of money adjusts (or more precisely can be adjusted) to the need/demand of money. That Marxist theory of money has been developed after Marx (see in particular the decisive works of Henri Denis and Suzanne de Brunhoff). I have gone a step further and illustrated how the volume of demand of money needed, associated with the process of accumulation, can be calculated. The function of the banking system is precisely to regulate the supply of money in order that it can be neither smaller nor larger than needed. To that effect the banking system operates with a tool box which includes in particular the regulation of the rate of interest.
Beyond the day to day try and correct measures, an efficient monetary policy should facilitate the stability of the general level of prices (in spite of the welcome variations of the relative prices between different commodities, themselves commanded by the unequal progress of productivities from one industry to another) along with the increase of money wages.
But that management of money does not produces harmony, since it does not impact the central contradiction in capitalism, i.e. that real wages are not allowed to increase as they should in order to permit the smooth continuation of accumulation. Hence real crises through which that contradiction reveals itself are simultaneously crises in the management of the monetary system.
Two side observations :
One : Marx’s reflections on money took place in the time of the gold standard, which, by itself, produced a relative stability of the general level of prices. I related the long waves of rising and falling levels of prices not to the famous Kondratieff cycles but more directly to the brutal increase of productivity in the production of gold associated with the discoveries of new mines in America and South Africa.
Two : The theory of the active role of money in accumulation which I formulated does not deal with the possible inflation resulting from deficits of public accounts financed by lending of the Central Bank which, once the gold standard abandoned, became easy to implement.
The developments on the theory of the agricultural absolute rent offered in Capital constitute only half of the picture. Marx offers also a historical approach to the question and looks carefully into some different paths of the capitalist development in agriculture, in particular the French way, which came out of the popular/ peasant dimension of the French revolution, and, in contrast, the English way characterized by the evolution of the old aristocracy maintaining its positions as large modern/capitalist landowners. (Ref. Reading Capital, reading historical capitalism ; Monthly Review). Hence there is no theory of the agricultural absolute rent which could be formulated in universal terms. The different components of the ruling capitalist social bloc, specific to each of the different capitalist social formations, command the specific different patterns of the agricultural absolute rent.
I have therefore reservations with respect to the formulation by Marx relative to the organic composition of capital in agriculture, lower than it is in industry. This assertion was precisely Marx’s argument in favor of a general theory of absolute rent. Indeed landed property may have been an obstacle to early development of capitalism in agriculture. That is no more the case, and a full fledged capitalist agriculture exists now, albeit in different forms such as the modern capitalist family farming or the large agro business estates (Ref. Ending the Crisis of Capitalism or Ending Capitalism in Crisis, chap5). As a result of these developments the organic composition of capital in modern agriculture might be no lower on average then it is for manufacturing industries.
Marx had thrown full light on the central contradiction of capitalism : that one which Sweezy rightly described as « fatal » since it cannot find its solution within the very fundamental logics of the system. For that reason also I wrote that capitalism is a « bracket in history » : it has only created the conditions for it to be necessarily removed by communism, conceived as a higher stage of human civilization through a long socialist transition : (Ref. Ending the crisis of capitalism, or ending capitalism in crisis ; p. 1-3). Hence Marx remains relevant to-day and ever more than ever.
Therefore the question which calls for a response is : how is it that full fledged industrial capitalism expanded victoriously throughout the XIX th century, survived its first systemic crisis of senility during the XX th century, and faces apparently victoriously until this day its second long crisis of senility ?
The answer cannot be found in the abstract theory of capitalism, but on the ground of the concrete history of its deployment. These two sides of the analysis should not be confused and reduced to one.
After Marx himself (for his time) Rosa Luxemburg was the first Marxist thinker who made a serious attempt to answer the question. Recently Paul Zarembka has written two major papers published by Elsevier Sciences 2000 (Accumulation of capital, a century after Lenin and Luxemburg) and 2002 (Rosa Luxemburg’s Accumulation of capital, critics try to bury the message).
Paul Zarembka brings back to our attention the argument of Rosa, just as Joan Robinson had done it. He then looks carefully into the writings of almost all those who rejected Luxemburg’s thesis. No surprise, all the references are Russian and German Marxists of the XX th century : Lenin, Kautsky, Bukharin, Panekoek, Tugan Baranaowsky, Otto Bauer, Boudin, Dunayeskaia, Froelich, Grossman, Kowalik, Mattick. With the exception of Joan Robinson and the side interventions of Althusser and Sweezy, almost nobody in the west had shown any serious interest in Luxemburg on that issue. This recognition of outstanding writings of Russian and German Marxists is worth being noticed. In contrast the book of Fine and Saad- Filho refers almost exclusively to British and US academic Marxians (often additionally influenced by Trotsky’s fundamentalism). Marxian sounds to me as the name of an academic school of thought. Marxism is something more and else, uniting theory and revolutionary politics.
The arguments developed by the critics of Luxemburg are weak, to say the least. Lenin’s « Notes on Rosa Luxemburg » are far from revealing a correct reading of her arguments. And those of the others are repetitive and do not go beyond. My reading of those critics had lead me to conclude that their weakness – shared with Rosa herself as well as Joan Robinson – results from their confusing the abstract theory and the concrete history of capitalism. For that reason I have written a paper entitled “Reading capital, reading historical capitalisms” (Monthly Review, July-August 2016) insisting on the necessary distinction.
I refer here to the numerical example of expanded accumulation in « The Law of worldwide value » p. 21-22. I wrote : « There is no difficulty of absorption . For the absorption of consumer goods, the wages paid in each phase make it possible to purchase the entire output of department II in the same phase… From this general scheme of expanded reproduction I have thus deduced a first important conclusion, namely that the dynamic equilibrium requires the existence of a credit system that places at the capitalists’ disposal the income that they will realize during the next phase. This demonstration established the status of the Marxist theory of money and gives precise content to the Marxist (anti- quantity – theory) proposition that the supply of money adjusts itself to the demand for money (to social need), by linking this social need to the conditions of accumulation . Moreover this precise integration of credit into the theory of accumulation is the only answer to the market question raised by Luxemburg».
My example is exactly similar to those offered in Book 2 of Capital. They both assume that the basic condition which would permit a smooth accumulation is met. But neither Marx nor I said that this condition (i.e. the growth of real wages at a rate related to the growth of productivity) is, or even could materialize. On the opposite, and therefore the adjustment is relative and instable, reached through economic real and monetary crises.
Of course the scheme is simplified. The phases identified correspond to the average time life of equipment, say 10 years. The scheme assumes that the renewal occurs for all equipment at the same time while in fact it happens at different times for different industries. But this complication does not impact the reasoning.
Indeed the fundamental – fatal – contradiction of capitalism resulted into continuous over accumulation and therefore, faced a problem of outlet for capitalist production. On that ground Luxemburg is certainly right. How this contradiction has been overcome in history ? Here also Luxemburg is right : capitalism expanded by destroying pre capitalist modes of production both within the societies of the dominant centers and the dominated peripheries. Handicrafts are replaced by manufacturing industries, small shops by supermarkets etc. This process of accumulation by dispossession still goes on with the current privatization of former public services. Simultaneously these responses of capital to the problem of outlet constitute an efficient counterforce to falling rates of profits.
Rosa Luxemburg did not derive from her observation that socialist revolution is impossible (nor even desirable) as long as capitalism has not completed its conquest of the Planet and replaced in the peripheries all pre capitalist forms of life by full fledged modern capitalist forms of life similar to what they are in the advanced centers ? But both the Social democrats of the Second International and bourgeois liberals did derive it. Today liberals assert that capitalism is perhaps in crisis in the old western centers, but not globally, since it is moving ahead fast elsewhere. Accordingly, they see future capitalism no more centered on the west, but rather on new emerging regions of Asia and Latin America. I asserted that if that were possible, i.e. the peripheries catching up and becoming new centers within the bonds and by capitalist methods, “no force, no ideology, no cultural project, could be capable of seriously hindering its advances” (The Law of worldwide value, p. 120). But I added that this is precisely impossible, capitalism in the peripheries remaining subordinate in spite of its fast deployment. The social drama associated with that reality generate repeated anti-imperialist struggles, potentially anti capitalist.
Mature capitalism, facing its systemic crisis (of senility) has drastically changed, through the deployment of the two successive waves of development of monopolies (1890 – 1970; 1970 to this day). This change impacted fundamentally the process of accumulation and the formation of the price system.
I rejected Tugan Baranowsky roundabout scheme in response to the problems of outlet for capitalist production associating increasing productivities and stagnant wages (Ref. The Law of worldwide value, p. 25). And then asserted that it is Baran and Sweezy, introducing the new concept of surplus, who did identify the most important response of capital to the challenge.
The contemporary generalized monopoly capital (GMC), resulting from a qualitatively higher level of centralization of control of capital, has drastically modified the logics of accumulation and the price system associated to it (the generalized monopoly price system GMPS). The average rate of profit (rather low) has become meaningless : it is the average between high rates of profits for oligopolies and zero (if not even negative) rates of profit for all other productive activities, reduced to the status of subcontractors, the source of massive transfers of value to the benefit of oligopolies.
The very simple models that I constructed to that effect (Ref. « Three essays on Marx’s law of value, p. 67-76) illustrate numerically those changes. Moreover the models give a quantified picture of the monopoly/imperialist rent which corresponds exactly to the evolution that has indeed happened between year 1900 and year 2000.
A side observation : the prices in the GMPS have nothing to do with the so called real prices assigned to competition on the markets, in accordance with the liberal unreal discourse/ They constitute a system which simply reflects the capture of the economic and political power by the oligarchies who rule the major oligopolies.