The following essay by Ernest Mandel was written for the collection Marx: the first one-hundred years published in 1983.i Edited by David McLellan, the volume intended to demonstrate that Marx’s work ‘one hundred years on’, remained ‘as capable as ever of generating fresh and relevant lines of inquiry’. The volume contained essays on culture, history, sociology, politics, philosophy and this contribution by Mandel on economics.ii Each essay ‘describes Marx’s own ideas on the subject, goes on to explore the ways in which these ideas have developed over the last hundred years, and finally discusses current preoccupations and debates’.
Economics
I. The key contributions
Marx’s economic theory starts from the historically limited and therefore relative character of economic phenomena and problems. It rejects out of hand the assumption of any eternal economic law and limits itself to the discovery of specific economic laws, applicable to specific social systems. Most of Marx’s analysis concerns the economic laws of the capitalist mode of production. But Marx views capitalism as generalized commodity production. Therefore, his research contains many elements for determining laws governing partial commodity production, i.e., pre-capitalist societies in which simple commodity production already has attained a certain maturity, and post-capitalist societies in which commodity production has not yet withered away.
Underlying Marxist economic theory is an anthropological paradigm: man is a social animal; the human species can only survive through social labour. In each specific society, there is a specific way of organizing social labour (specific relations of production) and a specific way of appropriating surplus labour (labour over and above that part of the available labour potential which is used to maintain (to reproduce) the labour potential of the producers and their instruments of labour).
All human societies have to balance output and needs (taking into account fluctuations of available stocks). The law of value is the objective mechanism through which in a market economy (under commodity production), socially recognized needs (i.e., those supported by available purchasing power) and socially necessary labour balance each other out, in spite of the fact that social labour is performed in the form of private labour, and that the private producer does not exactly know what precise needs (quantitatively and qualitatively) his output is supposed to satisfy.
The law of value governs the exchange of commodities. While commodities can only be sold at a price, i.e., against money, once commodity production is solidly established, the fluctuations of prices are governed in the last instance by fluctuations of the values of the commodities. For Marx, labour is not just a numéraire making different commodities commensurate with each other. It is value. The value of a commodity is determined by the fraction of the total available labour power in a given society, devoted to the production of that given commodity. The fluctuations of the values of commodities are governed by the fluctuations of productivity of labour in each sphere of production. But they are also linked to the fluctuations of aggregate social demands. If current output is larger than socially recognised needs, productive resources will be withdrawn from that sector of production. If current output is insufficient for satisfying demand for a given commodity, additional productive resources will be transferred to that sector.
The law of value thus governs not only the exchange of commodities but also the distribution of labour power and material resources between different sectors of economic activity, under conditions of commodity production and private ownership of the means of production. But private ownership, even when generalised, does not tend to reproduce itself indefinitely for all. Through a series of social and economic upheavals - the most important of which were the commercial revolution, the agrarian revolution and the industrial revolution - owners of means of production and people owning neither means of production nor means of livelihood (having no access to land where they could produce their own food) appear alongside each other. The second group (the proletariat, the working class) is forced to sell its labour power to the first group (the capitalist class, the bourgeoisie). This is the basic social relation of the capitalist mode of production.
Why is the capitalist class interested in buying labour power from the proletariat under conditions of ‘equal exchange’, i.e., at the real value of that labour power (without taking into consideration cheating, theft etc.)? Here appears Marx’s main economic discovery, his theory of surplus value. Under capitalism, the worker’s labour power has become a commodity. Like all commodities, this labour power is sold at a price - the worker’s wage - which is not arbitrary but is in the last analysis governed by its value. Now the value of that special commodity - labour power- is determined, like the value of all commodities, by the amount of labour socially necessary to produce it, i.e., by its reproduction costs at a given level of productivity of labour in the consumer-goods-producing branches.iii Like all commodities, labour power has at the same time value (exchange value) and use value, a given set of physical qualities which the buyers of that commodity want to enjoy. But the specific use value of the commodity labour power is precisely its capacity to produce new value. Living labour, working with raw materials and tools (machinery), incorporates into the value of these raw materials (and the fraction of the value of machinery which is maintained through current production) new value, additional value. If this ‘value added’ is just equal to the workers’ wages, there will be no surplus value, no profit for the capitalists. But if the ‘value added’ to the value of the material by the workers engaged in the process of production is larger than the workers’ wages, there appears additional value which the capitalist can appropriate simply through being owner of the finished products of the workers. This additional value is called surplus value by Marx. Its existence is the precondition for the capitalist hiring the worker. And its source is simply the difference between the total new value produced by the worker and the reproduction costs of his own labour power.
The precondition for the appearance of that difference is, obviously, a level of productivity of labour in the consumer-goods-producing sectors (in the first place agriculture) which enables the workers to produce the goods necessary for keeping them alive in only a fraction of the normal work-day. If they needed the whole work-day just to produce the goods without which they could not continue to work, no surplus value could appear.
Surplus value is appropriated by the capitalists. It is divided into two basically different categories. Part of it is unproductively consumed. This is used for the upkeep of the capitalist class and its hangers-on (including the upkeep of the bourgeois state). Another part is productively invested i.e., used to buy additional raw materials, additional machinery and additional labour force for expanding production. But under capitalism, production can only grow if capital expands. For under capitalism, additional raw material and machinery, and additional manpower take the form of additional capital (additional constant capital in the first place, additional variable capital in the second place). So capitalism lives under constant pressure of the law of capital accumulation. In order to survive, it must grow. Capital can only exist if more capital is being accumulated.
This is true above all because of competition. Capital appears in the form of many capitals in competition with each other, as it is based upon private property. Capitalist production is production for an anonymous market. To triumph in this competition, each capitalist, or more correctly, each capitalist firm, must reduce production costs. In order to reduce production costs, it is necessary to produce on a larger scale, to use more up-to-date machinery, to rationalise the labour and production process. All this demands more capital. Hence the constant drive to increase capital accumulation. And as surplus value is the only source of capital, the constant drive to increase capital accumulation implies a constant drive to increase the mass of surplus value.
Starting from all these premises, Marx discovered what he thought to be the basic economic contradiction of the system: the tendency of the rate of profit to decline. Profit originates from surplus value. Surplus value is produced by living labour, and by living labour only, i.e., by that part of capital which is used to buy labour power, and which Marx calls variable capital. But accumulation of capital, through technical progress, is not neutral with regard to the division of total capital between variable capital and constant capital. It tends to increase the latter more than the former (it tends towards the growth of the organic composition of capital, i.e., of the relation between constant and variable capital). Now as profit is only produced by variable capital, if variable capital becomes a smaller and smaller part of total capital, the relation between profit and total capital (which Marx calls the rate of profit) will tend to decline, all other things remaining equal.
Of course all other things do not normally remain equal; otherwise capitalism would have disappeared a long time ago together with the decline of profit. The same force - technical progress, increase in the productivity of labour - which leads to the increase in the organic composition of capital also leads to a constant cheapening of wage goods. This in turn makes it possible to produce the equivalent (counter-value) of these wage goods in a smaller and smaller fraction of the normal work-day. This means that the rate of surplus value (the ratio between that part of the work-day in which the worker produces surplus value, and that other part in which he reproduces the equivalent of his wage) tends to increase. The increase in the rate of surplus value can neutralise the effect of the increase in the organic composition of capital upon the rate of profit.
Nevertheless, Marx assumed that, in the long run, this compensation would not operate in a complete way. There are limits to the increase in the rate of surplus value, whereas the organic composition of capital can grow without limits. When living labour disappears under automation, the organic composition of capital becomes endless; but the rate of surplus value becomes zero, because only living labour produces surplus value. When over-accumulation (overheating) occurs, both the amount of capital accumulated and the relative scarcity of manpower leading towards an increase in real wages make the rate of profit decline. Under capitalism, a decline in the rate of profit induces a decline in productive investment, a decline in economic growth, an economic crisis, bankruptcies and massive unemployment. At the same time, through massive devalorization (destruction) of capital and wage cuts, the crisis creates conditions for relaunching the process of capital accumulation, once the rate of profit picks up again.
The tendency of the rate of profit to decline therefore does not operate in a linear way, but through successive phases of ups and downs, i.e., in a cyclical way. It governs the stages of the trade cycle (the business cycle) which is the specifically capitalist form of economic growth: a succession of stages of economic recovery, prosperity, boom, overheating, crashes, depressions, recovery etc. And from the specific way in which that tendency operates, both through the business cycle and in the long run, a whole series of laws of motion of the capitalist mode of production can be deduced and tested in the light of empirical evidence, i.e., in the light of the actual socio-economic history of the last two hundred years.iv
Marx’s contributions to economic analysis lie essentially in the field of the theory of value and of surplus value on the one hand, and in the discovery of these laws of motion on the other hand. But the controversies his ideas have caused centre much more around the laws of motion than around the basic theoretical stepping stones leading up to them. This is understandable, and was rather cruelly predicted by himself in his Preface to volume I of Capital:
In the domain of political economy, free scientific inquiry meets not merely the same enemies as in all other domains. The peculiar nature of the material it deals with, summons as foes into the field of battle the most violent, mean and malignant passions of the human breast, the Furies of private interest.v
It is true that the most serious opponents of Marx’s economic theories - like the most serious opponents of socialism - tried to show that what they called the ‘fallacies of Marx’s predictions’ had their roots in false basic analytical concepts or methods. They went on from a critique of the laws of motion of the capitalist mode of production to a critique of the labour theory of value and of the theory of surplus value, to a critique of the law of the tendency of the rate of profit to fall, and to a critique of historical materialism in general. Nevertheless, the critique concentrated on the laws of motion for a wider public. The basic theoretical assaults were more limited and often hermetic in their scope and contents.
This is even more true for the controversies which reigned in the Marxist camp itself, where these laws of motion came first under attack because of their obvious political implications, while the stepping stones which led to them were, for a long time, considered taboo and treated with filial awe.
So it seems appropriate to deal with the first hundred years of Marxist economic theory by treating the critique of the laws of motion of capitalism before dealing with the critique of Marx’s basic economic concepts -while logic would, of course, invite the reverse operation. This is not a sacrifice of the logical to the chronological sequence. It is a recognition of the fact that the formidable impact of Marx on contemporary history flows from the dynamics of class struggle and revolution,vi which are directly linked to the laws of motion of bourgeois society, and only indirectly, and in the last instance, flow from the most abstract of Marx’s analytical tools.
2. The laws of motion of the capitalist mode of production
I. Concentration and centralisation of capital
Does competition automatically lead to concentration and centralisation of capital? Does free enterprise breed monopoly? Does ‘free market capitalism’ produce monopoly capitalism? The question was answered positively by Marx, and taken up forcibly by Engels in his Anti-Dűhring and in his edition of volume 3 of Capital. This thesis hits right at the heart of the liberal-bourgeois credo, to wit that private property and the free market constantly extend the realm of human freedom. No, answer Marxists. Private property polarises society between haves and have-nots. It breeds progressive expropriation of small proprietors by big ones, of free entrepreneurs by gigantic economic trusts. It breeds concentration of economic power, hence corruption and oppression including in the political scene. It does so under the double pressure of technological progress - the constantly rising ‘costs of entry’ into large industry, banking, transportation, wholesale trade etc. - and of competition in which smaller and less efficient firms are eliminated (or absorbed) by larger and more efficient ones. And precisely because this law of concentration and centralization of capital hits at the heart of the bourgeois credo and the basic self-justification of bourgeois society, it was among the first to be violently challenged by critics.
These criticisms fall generally into three categories. The first one concentrates on empirical evidence which supposedly proves that there is no centralization of capital. The small industrial and banking firms are supposed to have a resilience which Marx strongly underestimated. The argument was taken up by the marginalist critics of Marx like Böhm-Bawerk, Pareto etc. It was relayed by the Russian ‘legal Marxists’ and their offspring Masaryk (the future President of the Czechoslovak republic), by some Catholic writers and especially by Bernstein and his supporters in the international social-democracy.vii But it never had much ground to stand on. In the best of cases, it was an unfounded extrapolation of temporary developments in new branches of industry or in periods of great prosperity, traditionally prone to the growth of new firms.
It is sufficient to recall the historical fact of the trust movement, the creation of large industrial and banking combines in the USA as early as the mid-1880s, its spread to Germany, France, Japan, Britain, Italy, the emergence in all imperialist countries of finance groups controlling a large part of big industry through holding companies, and the reduction of the number of market-dominating firms in key sectors of industry (coal, steel, oil, copper, aluminium, cars, electrical machine building, paper, aerospace construction, petrochemicals, computer building, nuclear equipment building etc.), to acknowledge that this law of motion of capitalism is a real one, confirmed by history.viii The emergence, especially after the Second World War, of the multinational corporation, is nothing but the verification of that same law now operating on an international scale: the international concentration and centralisation of capital.
It has been objected that the so-called Gini curve remained fairly stable during the last decades. Abstraction made of the fact that the evidence is by no means clear for the key industrial sectors enumerated above, this objection would only prove that concentration and centralisation of capital do not normally go beyond the point of a few firms dominating branches of production, i.e. that monopolistic competition prevents the concentration of capital advancing up to the domination of . branches of production by a single firm. But whether to call the result of the operation of that law of motion of capitalism ‘oligopoly’ or ‘monopoly’ is only a semantic problem. The substantial problem remains that ‘free competition’ as it operated in the first century after the industrial revolution gives place to market domination, with economic behaviour quite different from the first. And that was after all what Marx was really trying to prove: that as a result of competition, competition would decline, would turn into its opposite.
A second challenge concerned the so-called exceptional cases. It was argued successively that agriculture, the retail trade and the service industries were, for structural reasons, escaping the law of concentration and centralisation of capital. Marx himself pointed out the specific reasons which retarded a full-scale normal development of the capitalist mode of production in these sectors. But he also stressed that, in the long run, the laws of motion of the capitalist mode of production would impose themselves in these sectors too. The premature generalisations of the critics were slowly but surely bypassed by events. In the epoch of agro-business, of giant retail chains and of the growing mechanisation and semi-automation of one service branch after another, there is little doubt that he was right.
Finally a third objection notes that, while firms indeed grow gigantic, and the number of these market-dominating giants perforce declines as compared to the number of producing firms under ‘free market’ capitalism, this movement at the level of corporations is negated at the level of property of capital. Property becomes more and more diffused, especially after the emergence of joint stock corporations. Ownership and control get divorced from each other. It is not the concentration and centralisation of capital property, but the concentration of expertise in management, which is said to wield real (be it concentrated) power in the final stage of capitalism.ix
There is again a semantic confusion at the bottom of this objection. When Marx deals with centralisation of capital, what he is talking about is the centralisation of the decision-making power which capital property entails under the capitalist mode of production, not the centralisation of formal capital property. On the contrary, Marx himself understood that the joint stock corporation was but a new form of expropriation of real capital owners, by their transformation into purely formal capital owners.x The joint stock corporation enables the top layers of the capitalist class to control capital far in excess of their own formal ownership. But those who do control these huge assets, of which they only own a narrow fraction, are themselves private owners of capital, sometimes (in the case of so-called top managers) great masses of capital, most often huge masses of capital.xi No large corporation is controlled by people who do not own private wealth, who are not integrated into the rich sections of the capitalist class.
II. Social polarisation
The law of progressive concentration and centralisation of capital is so important in the Marxist analysis because it leads directly to a social and political conclusion. As the weight of small and medium-sized capitalists is progressively declining in bourgeois society, a declining fraction of the active population is composed of the ‘self-employed’, a growing fraction of that society is composed of people selling their labour power to the capitalists and their state. Hence the tendency towards growing polarisation between a declining number of buyers of labour power and a constantly growing number of sellers of labour power.xii
Empirical evidence fully bears out the correctness of that prediction of Marx. In the key industrialised capitalist countries, the fraction of the active population composed of sellers of labour power has jumped from less than 50 or around 50 per cent to around 75 per cent within one generation. In another generation, it has jumped to 85-90 per cent, topping 90 per cent already in the USA, Britain and Sweden. There is no indication that this trend is being reversed, although of course its speed is slowed down, once a certain threshold has been passed.
Therefore, the attempts to question this law of motion of bourgeois society, discovered by Marx, have always been rather perfunctory. It has been alleged that Marx underestimated the resilience of the petty bourgeoisie (independent peasants, artisans, tradespeople) or the substitution of ‘new’ middle classes to old ones. For Marx, however, the argument turned essentially around the problem of the economic obligation to sell one’s labour power. That a constantly rising part of the active population - never mind the rhythm at which this rise takes place - falls into that category can hardly be questioned on the basis of statistical evidence. And this law was derived by Marx from the very nature of value, surplus value, capital and capital accumulation, i.e., from the very structure of capitalism. It is because the capital needed to remain self-employed constantly increases in size, because even rising wages do not enable workers or salary-earners to accumulate capital, that only those who own more and more capital can continue to accumulate capital, i.e., remain capitalists.xiv All other economically active people progressively become part of the proletariat, i.e., have to sell their labour power.
Indeed, the main objection raised against that law of motion of bourgeois society is not that it is wrong, in and by itself, but that Marx read too much into it, i.e., made it the basis of sweeping political extrapolations. It is granted that the number of wage- and salary-earners grows more and more, critics state. But the more that mass grows, the more it becomes heterogeneous and unable of united organisation and action. State employees and private-sector workers, productive and unproductive workers, employed and unemployed ones, male and female wage-earners, young and adult ones (not to speak of wage-earners in imperialist countries and those in semi-colonial and dependent ones) have increasingly divergent and not convergent interests. Therefore, the law of concentration and centralisation of capital, and the law of increasing social polarisation, do not tell us anything about an increasing capacity of the proletariat, even when defined as the sum total of all those compelled to sell the commodity labour power, to overthrow capitalism and to realise a socialist revolution. And some of the critics will even add: on the contrary, the larger the part of the total active population composed of wage- and salary-earners, and the greater the heterogeneity of the proletariat, the greater its integration in bourgeois society, and the lower its revolutionary potential.xv
We believe the objection to be unfounded. The main trend, criss-crossed, of course, by several contradictory ones, is that of a growing homogeneity and not a growing heterogeneity of the proletariat as defined above. Today, the differences in income, in lifestyle and consumer habits, in social outlook and perspectives, between manual and intellectual workers, between unskilled workers and clerks or secretaries, between workers in the private sector and state employees, between male and female workers, are less and not greater than fifty or a hundred years ago. The clearest proof of that trend lies in the growth and growing homogeneity of union organisation. While trade unions, the elementary class organisations of the proletariat, were in the beginning essentially restricted to skilled male manual workers, they successively drew in women workers, unskilled labourers, state employees, white-collar workers, technicians.xvi In many capitalist countries, all these categories are today bound together in a single trade union federation. Indeed, in several we find representatives of white-collar unions, state employees or even technicians’ unions at the head of the most militant trade unions, if not at the head of the trade union federation itself.
And this is by no means a purely formal trend. When we speak of growing unionisation, we also speak of growing militancy and growing participation in strike action. The most sensational reversal of trends occurred among the technicians. They played a clear role as strike-breakers (the so-called Technische Nothilfe) in the German revolution and the Weimar Republic, as well as during the Spanish revolution of the 1930s and the French general strike of 1936. But they were largely integrated into the French general strike of May 1968 and the Italian, Spanish and British strike waves of the 1970s.xvii
The main problem, however, lies elsewhere. What Marx pointed out, when he linked the growing concentration and centralisation of capital with the increasing trend towards social polarisation, was another law of motion of the capitalist mode of production: the growing objective socialisation of labour its increasing conflict with private appropriation and the fact that all those involved in large-scale enterprise (whether in production, telecommunications, transportation, banking and finance, trade or state administration, including hospitals, schools and post offices) would be increasingly indifferent if not hostile towards private business, and increasingly subject to all those results of the socialisation of labour which are preconditions for socialism: understanding of the key importance of cooperation, solidarity and capacity for collective action and self-administration.
III. Pauperization
The increasing socialisation of labour, growing out of the increasingly decisive role of large-scale enterprise in all key sectors of economic activity, only creates the objective preconditions for the working class in the broadest sense of the word reshaping society according to its own needs and interests, i.e., for a replacement of capitalism by socialism. But a mediating link is obviously needed between this objective preparation of the working-class for self-management and socialism, as the result of its very role in the capitalist mode of production, and its actual capacity to overthrow capitalism. In this mediation, the shaping of working class consciousness in an anti-capitalist sense, through organisation, education and the experience of mass struggle, plays an essential role. And this evolution of working-class consciousness must in its turn be embedded on the rock of the proletarian condition, on the socio-economic conditions of life and labour of the working class. At this precise point of the analysis, a formidable controversy arose, which is still going on among commentators of Marx, supporters and critics alike. ls the growing misery of the working class a necessary precondition for shaping it into a revolutionary force? Can such an alleged growing misery by and large be reduced to a decline in wages, be it in value terms or even in terms of absolute standard of living?
The myth that Marx somehow defended an ‘iron law of wages’ theory - which in fact originated with Malthus and Ricardo, and was taken up in the socialist movement especially by Lassalle and consistently opposed by Marx - has been defended by many authors.xviii It has been refuted innumerable times.xix Marx’s theory of wages was an ‘accumulation of capital’ theory, in which the effects of lower and higher rhythms of accumulation both on the supply and the demand of the commodity labour power are taken into consideration, within the framework of the combined operation of all the other laws of motion of the capitalist mode of production. Furthermore, Marx explicitly stressed the partially autonomous nature of the fluctuations of wages, determined by the struggle (and the relations of forces) between Capital and Labour, as antagonistic fighting social classes, i.e., large groups of human beings.xx The result of the interaction of all these factors is by no means a historical trend towards lower and lower wages, neither in every country nor on a world scale.
But neither is there any trend of a gradual and constant rise of wages in function, e.g., of the increase of the average productivity of labour under capitalism. What emerges is a fluctuation of real wages determined both by the secular and the short-term trend of the reserve army of labour (unemployment), and by the relationship of forces between the classes.xxi Cyclical crises of overproduction tend to depress wages. In periods of long booms, wages tend to increase. In countries with long-term structural massive unemployment (Western Europe in the first half of the nineteenth century; Central and Southern Europe in the second half of the nineteenth and the beginning of the twentieth century; the so-called ‘Third World countries’ until this very day), wages tend to remain low. In countries with secular scarcity of manpower (the USA until the end of the nineteenth century), wages tend to be from the beginning much higher than in others.
For these reasons, massive international movements of labour migration play an important role in the Marxist theory of wages.
If, therefore, there is no such thing as a Marxist theory of ‘absolute impoverishment of the working class’, Marx certainly did deny that there would be, under capitalism, a linear improvement in the workers’ lot. His thesis of a cyclical fluctuation of workers’ wages, the strength of the labour movement and the welfare state notwithstanding,xxii has been impressively confirmed by the evolution of real wages since the second half of the 1970s, under the impact of the increase of massive structural unemployment in the imperialist countries during the ‘long depressive wave’ in the international capitalist economy, which set in in the late 1960s or the early 1970s.xxiii This has been true for many imperialist countries. It applies also to many semi-industrialised dependent countries, the most striking example being Brazil.xxiv
In what sense can one say that the workers’ lot becomes worse under capitalism, even if real wages do not decline generally, except in periods of long depression and in countries with massive structural unemployment? Marx did formulate a theory of relative impoverishment of the working class, given the capitalist mode of production. This theory has two sides to it.
In the first place, there is a definite trend under capitalism for the productive workers - the only ones who produce value - to receive a gradually declining share of the value they produce. In other terms, there is a definite trend under capitalism for an increase in the rate of surplus value (the ratio of surplus value and the value of the workers’ wages), brought about especially through steep increases in productivity of labour in the wage-goods-producing industries. Incidentally, it is this steep increase in productivity of labour which makes it possible for capitalism to achieve under certain conditions both a considerable increase in real wages (workers consumption) and in surplus value (capital accumulation). Increase in real wages is quite compatible with a decrease in the value of wages, if the rate of decline of the total value of wage goods is less than the rate of growth of productivity of labour in the consumer goods industries.
This thesis of the gradual increase in the rate of surplus value has been questioned by several critics who assert that there is, under capitalism, a definite trend towards constant shares of wages and RIP (rents, interests and profits) in the national income.xxv In order to oppose these so-called ‘constant shares’ to the law of a rising rate of surplus value, these critics are however forced to use aggregates which do not conform to Marx’s categories. Especially the category ‘aggregate wages’ is meaningless to indicate anything regarding the rate of surplus value. For Marx, variable capital only encompasses wages of productive workers, who are likewise the only ones who produce surplus value. Wages of non-productive state employees, or wage-earners employed in the commercial and financial sector, do not come out of variable capital. They have to be deducted from aggregate wages in order to calculate the rate of surplus value.xxvi
In the second place, even if real wages rise, they rise less quickly than do the needs which accumulation of capital - e.g., the development of new commodities by new branches of industry, and also the development of needs originated by transformation of the workers’ lives as a result of industrialisation, urbanisation, the decomposition of the nuclear family, the speed-up, the nerve-racking home-job-home transportation etc. - itself provokes among workers.xxvii There is therefore relative impoverishment of the workers in relation to their needs as consumers using up their labour power more intensively than before, not to speak about their needs as human beings who become conscious of the infinite possibilities of self-development.
IV. Crises of overproduction
If workers do not become constantly poorer and more miserable under capitalism, why should they question the survival of the system, even if their rate of exploitation goes up? One important link in the chain of Marx’s reasoning in that direction is the inevitability of crises of overproduction, which periodically hit the system, do lead to declines in the workers’ living and working conditions, and especially make it visible for an increasing number of wage- and salary-earners that the system is sick, cannot deliver the goods, should be replaced by a better one. For Marx, crises of overproduction were the memento mori of capitalism, again one of its fundamental laws of motion.
In spite of overwhelming historical evidence - twenty-one international crises of overproduction succeeding each other regularly since 155 years on the world market - this law of motion has been challenged at several levels. At the end of the nineteenth century (during the ‘long expansive wave’, 1893- 1913), Bernstein and his supporters argued that while there was a tendency towards overproduction under capitalism, capitalist organisation (monopolies, trusts etc.) would lead to a gradual decline of the gravity of these crises. In the light of the worst slump in capitalist history, that of 1929-32, this objection didn’t remain popular for a long period. But it was revived in the 1950s and the 1960s, during the ‘long expansive wave’ of 1948-68, by a whole series of economists, who thought that state intervention using Keynesian techniques had definitely licked the system’s propensity to produce periodic underemployment of men and machines. The present slump took care of answering that assertion better than any theoretician could have done.
On a more abstract general level, several theoreticians - above all the Russian ‘legal Marxist’ Tugan-Baranovsky, but also in a certain sense the Austro-Marxist Rudolf Hilferding and the Bolshevik N. Bukharin - argued that crises of overproduction did not grow out of the basic nature of the capitalist mode of production as generalised commodity production but only out of one of its specific features, to wit the tendency of competition to spur on disproportion between different branches of output, essentially between department I (producing producers’ goods) and department II (producing consumers’ goods). If and when capitalist organisation - what Hilferding called a ‘generalised cartel’ - could overcome this anarchy of production characteristic for capitalism as it had functioned up to now, crises of overproduction would no longer occur.
This line of reasoning conflicts with Marx’s view that crises of overproduction are being caused by all the basic aspects of capitalist mode of production taken together, and not only by anarchy of production (competition growing out of private property). The disproportion between consumption and production (the tendency of the development of productive capacity to grow without limit, as if the very nature of capitalist growth did not impose strict limits upon the growth of mass consumption as a result of the necessary rise in the rate of surplus value and the rate of accumulation, without which capitalist growth is impossible) is itself a basic aspect of sector disproportion under capitalism. But as long as that disproportion is not overcome by a ‘generalised cartel’ (and it cannot be overcome) crises of overproduction remain inevitable even under such a cartel. Indeed, Tugan-Baranovsky pushed his lack of understanding of this aspect of the problem to its ultimate and absurd consequence. He calmly envisaged a capitalist production with no consumption by final consumers whatsoever, i.e., with no living labour, not seeing that in such a situation there would also be no surplus-value production, no value production, no capital and no capitalism (not to say no human survivors).
Out of the scattered passages in Marx’s writings about the causes and explanations of capitalist crises of overproduction, two basically divergent schools emerged. The first one, in the footsteps of Tugan-Baranovsky and Hilferding, saw in the anarchy of production (dis-proportionality) the basic cause of capitalist crises. The second one, following Kautsky and Rosa Luxemburg, Nathalia Moszkowska and Paul M. Sweezy, situates the cause of the crisis in the lack of development of mass consumption proportionate to the development of society’s productive capacity (under-consumption). In the late 1920s, Henryk Grossmann developed his own analysis of capitalist crises, in which he tried to combine dis-proportionality and under-consumption as causes of crises around the central theme of over-accumulation (insufficient mass of surplus value, decline of the rate of profit) as the main cause of capitalist crises.xxviii
It is generally recognised that the Marxist theory of crises has had an important influence upon academic business cycle theories. These fall into categories similar to Marxist theories of crises: theories of crisis of profit and over-accumulation, as represented by authors like Schumpeter, the neo-classical Austrian school especially Ludwig von Mises and Gottfried Haberler, A.C. Pigou, the father of welfare economics etc., all of whom contend that crises arise because too little profit (savings) is available for investment; and theories of under-consumption, whose ancestors were Malthus, Sismonde de Sismondi and the Russian populists, and whose most famous modern representatives are of course Keynes and the neo-Keynesians. More sophisticated developments of business cycle theory originating from the Keynesian school, under the influence of macro-economics (econometry), e.g., the theory of the multiplier and the theory of the accelerator, were wholly or partially integrated with Marxist economic concepts by the Polish school of political economy, especially Michal Kalecki and Oscar Lange. It is striking to note that, contrary to the 1920s and the 1930s, the present ‘long depression’ has not given birth up till now to any significant new development of theoretical analysis, either in Marxist or in non-Marxist circles.xxix Whether this is because the theory of crisis (of business cycles) has already reached a high level of perfection, or whether it is due to an excessive preoccupation with immediate (and pragmatic) analysis, remains to be seen.
V. Monopoly capitalism, imperialism
While Marx and Engels clearly saw that competition would lead to monopoly, an additional phenomenon appeared before the end of the nineteenth century within the framework of the capitalist mode of production. Its modus operandi significantly changed under the impact of growing centralisation of capital. Price competition receded more and more into the background. Market control came more and more into the forefront. What is generally called among Marxists - but not only amongst them - the period of monopoly capitalism or of imperialism, was ushered in. The division of the world between metropolitan imperialist countries on the one hand, and colonies and semi-colonies (underdeveloped countries) on the other, became consolidated from that time on.Three broad explanations of these momentous changes have been offered among Marxist theoreticians, generally linked to similar explanations among academic economists and historians.
The first starts from decisive changes in the realm of production: the appearance of capitalist trusts and combines, and of finance capital, dominating national markets, dividing up among themselves international markets, and ultimately determining high levels of integration of concentrated economic and political power as well. The main representatives of this line of thought, among Marxists, are Rudolf Hilferding, V.I. Lenin and N. Bukharin.xxx International expansion and aggression, the subordination of foreign countries and whole continents, the drive to militarisation and war, are seen as the outcome of a new qualitatively higher level of centralisation of economic power inside the imperialist countries, as well as results of the specific needs arising out of the export of capital which becomes, more than the export of commodities (to which it remains however linked), the main driving force of capitalist expansion.
This close inter-linkage between monopolisation of production, capital export, foreign aggression and militarisation has been challenged above all by Schumpeter, who saw imperialist militarisation more as a result of the survival of semi-feudal elements in capitalism than as a product of capitalist development properly speaking.xxxi The emergence of American imperialism as the main imperialist country, in which no trace of ‘semi-feudal remnants in the sphere of the state’ can be discovered, has been history’s answer to Schumpeter’s objection.
The second explanation starts from what is assumed to be a peculiar exchange between capitalist and non-capitalist spheres in the world. It is best represented by Rosa Luxemburg, although she had many followers, the most important of whom was Fritz Sternberg.xxxii It alleges, in short, that ‘pure’ capitalism could not survive, that it will produce an unsaleable surplus of consumer goods, that capitalist expansion hinges upon the exchange of that surplus with non-capitalist revenues (revenues originating outside of the realm of the capitalist mode of production properly speaking). This comes down essentially to peasant revenues inside the capitalist countries, and the revenues of pre-capitalist classes of backward countries. Imperialism is therefore essentially a phenomenon in the field of circulation of commodities and capital a drive of capitalism to incorporate into its realm successive additional zones and layers of pre-capitalist classes.
The third explanation, of a more recent origin, sees the development of imperialism as determined by a specific relationship between the metropolitan centre and the underdeveloped periphery. This is essentially an exploiting relationship, through uneven exchange, a drain of resources from the periphery towards the centre, expressing itself above all in a ‘freezing’ of qualitatively different levels of wages in the centre and the periphery. The main representatives of this explanation of imperialism are André Gunder Frank, Samir Amin and Arghiri Emmanuel.xxxiii
All of these explanations of imperialism are not mutually exclusive. But some of them are. There is an obvious contradiction in the explanation of underdevelopment by low wages (the same way as its academic counterpart, the theory of the so-called vicious circle of poverty, is contradictory), especially if, as is the case with Emmanuel, this is combined with the (strictly unproven) assertion that productivity of labour is not lower in underdeveloped countries than in developed ones. If both these assertions are taken for granted, then one sees no reason why capital would not flow more and more to underdeveloped countries, where the rate of profit and the scale of exploitation would be substantially and permanently higher than in the metropolis, and why this flow would not end in situating most industries in the Third World. Instead of explaining underdevelopment, such a theory would explain it away, i.e., explain why it couldn’t exist for a long time.
VI. Capitalist collapse?
In the period leading up to the First World War, theories of crises and theories of imperialism were often linked together in the so-called ‘collapse’ controversy. This was graphically expressed by Kautsky in his formula of the ‘three Ks’ (Krise, Krieg, Katastrophe - crisis, war and catastrophe) which would lead to a collapse of the system. In Marx's own writings, no such precise amalgamation of ‘catastrophic’ predictions exists. And when he endeavours, as in the famous passage at the end of chapter 24 (section 7) of volume 1 of Capital to make general predictions, he always carefully introduces subjective factors (the subjective reaction of the workers towards the general trends of the system) as a necessary mediating link for the downfall of capitalism. In the Kautskian tradition, there was undoubtedly an excessive reliance upon pure economic determinism, the idea that certain objective laws would in and by themselves bring the system down and that all that socialists had to do was to organise the workers and educate them, waiting till the ‘objective development’ sounded the death-knell of the system (one must add, however, that Kautsky himself shied away from any automatic ‘collapse’ prediction).
This being said, the ‘collapse controversy’ was meaningful, and it retains its topical character more than ever in these days. Do the inner contradictions of capitalism tend to grow larger and larger, or do they tend to be progressively reduced? Does the system periodically lead to large-scale catastrophes, or do these become more and more unlikely? Can the system reproduce itself - adapt itself to new environments, overcome new contradictions - more or less ad infinitum or is there a definite historical end to capitalism as a socio-economic system? This question has, of course, to be separated from the quite different one, whether socialism is inevitable. Quite soon, in the framework of the collapse controversy, Rosa Luxemburg formulated the question in a more precise way: capitalism is certainly doomed to disappear; but whether it will lead to socialism or to a new barbarism remains to be seen. That will depend upon the outcome of the struggle between living social and political forces.
There is a certain historical rhythm - a ‘cyclical movement’ - of ‘optimists’ and ‘pessimists’ as to the historical perspectives of capitalism. This cycle is closely interconnected with the long waves of capitalist economic development themselves. During long waves of economic expansion (1893-1913, 1949-1969) ‘optimism’ prevails. Prophets of doom are ridiculed. Bernstein and Strachey-Crosland proclaim that crises and wars - not to speak of catastrophes and collapse - are more and more unlikely.xxxiv Kautsky, who, after opposing these ideas, started to embrace them himself after 1910, had the misfortune to see an article, in which he asserted that international cartels made wars unlikely if not impossible (the so-called theory of ultra-imperialism), appear after the actual outbreak of the First World War. Rudolf Hilferding, another opponent of Bernsteinian optimism in the early twentieth century, asserted during the brief ‘boom’ of 1923-9 that international indebtedness (capital flows) would make a new European war impossible.xxxv We know what happened afterwards.
During periods of long-term depression, on the contrary, the idea of unavoidable wars and catastrophic crises of capitalism prevails. The old Engels sketched some of these ideas under the influence of the long 1873-93 depression.xxxvi Under the impact of the First World War and the long depression of 1913-39, various Marxist economists like the Hungarian Eugen Varga, the German Fritz Sternberg and the Pole Henryk Grossmann rehabilitated the collapse hypothesis with a vengeance.xxxvii Grossmann even tried to give it a rigorous economic proof - ‘absolute’ lack of surplus value after a certain threshold of growth of the organic composition of capital, not only for assuring the accumulation of capital but even for feeding the bourgeois class and its hangers-on. This attempt was a failure. But after the deep crisis of 1929-32, the long depression of the 1970s and the 1980s reminds us of the growing difficulties of capitalism to reproduce expansion under ‘normal’ conditions. Cataclysms like runaway inflation, mass unemployment, wars, fascism and other forms of dictatorship occur with frightening regularity. They offer proof of the fact that the dilemma ‘socialism or barbarism’ has received quite some confirmation in actual history.
Among Marxist and non-Marxist participants in this controversy alike, the question has been posed whether, independently from its contents, ‘organisation’ of the economy was not the way out of the dilemma. The main theoretician who came back again and again to this question was the Austro-Marxist Rudolf Hilferding. In his magnum opus, Das Finanzkapital written before the First World War, he visualises ‘organised capitalism’ as capable of avoiding economic crises, but at the same time leading to social catastrophes. In the 1920s, he thought ‘organised capitalism’ as intrinsically leading to peace and prosperity, in the gradualist tradition of Bernstein. At the end of his life, under the impact of the traumatic shock of fascism, he thought ‘organised capitalism’ to be no more capitalism but a totalitarian society in which the law of value had ceased to reign.xxxviii Leon Trotsky, continuing the Bukharin-Lenin-Varga tradition of the 1914-20 period, visualised decadent capitalism as leading to war and fascism, but essentially remaining capitalism, the decline of capitalism covering a long historical period of revolutions and counter-revolution, but with increasingly sinister trends towards barbarism.xxxix
While writers like von Hayek saw even in democratic socialism and any form of reformist state-intervention a ‘road to serfdom’, thereby reversing Rosa Luxemburg’s dilemma (which, under their pen, became ‘capitalism or barbarism’), Schumpeter took a more subtle approach. The decline of capitalism seemed to him more or less unavoidable. But whether this would lead to a totalitarian society or to a combination of socialism and some forms of democracy remained an open question.xl
VII. Is a socialist economy possible? How will it be built?
As we have seen, the ‘collapse controversy’ more or less unavoidably leads to the question of whether socialism can succeed and (or) will succeed capitalism. This again leads to the question of what a socialist economy looks like. Even before the impact of the Russian revolution and of the Soviet experiment raised this question from the realm of theory to that of practice, and to judgements about the results of that practice, the more general question was posed: is a socialist economy in the strict Marxist sense of the concept possible?
The debate around this question was raised by opponents of Marx and of socialism more than by Marxists themselves, who shied away - as Marx did himself - from elaborating any form of blueprint of what a socialist economy would be like.xli So the debate was above all represented by the controversy between Pareto, Barone and the Vienna School, about the impossibility of economic calculation under socialism - in the absence of a market. The school which declared socialism impossible obviously exaggerated the actual function of the market in real economic life - even under capitalism. Barone’s answer was subtle, concentrating on the possibility for ‘planning authorities’ to simulate market mechanisms as the basis of economic calculation.xlii
Thirty years later, Lange and Taylor came back to the problem, expanding Barone's contribution.xliii Von Mises’ objection that you couldn’t solve millions of equations, which such a simulation would involve, has in the meantime been taken care of by the computer. But somehow, all participants in that debate seemed to miss Marx’s main point, to wit that resource distribution between different branches of output, and relations between resources and wants, need not be mediated through market mechanisms at all, neither ‘real’ nor ‘simulated’ ones. They can be decided by conscious preferences of consumers, which would give results quite different from choices determined by unevenly distributed purchasing power, publicity pressure, predetermined consumption patterns etc.
More important than the debate on the theoretical possibility of a socialist economy was the debate on the practical steps towards building such an economy, which came into its own only after the First World War, especially under the influence of the Russian and the German revolutions. Very rapidly, this debate fell into two parts: the debate in the capitalist countries on the main problems of the transition from capitalism to socialism: the debate inside the Soviet Union on the logic (the laws of motion) of building a socialist economy, once capitalist private property is by and large abolished.
The first debate centred around the specific problems of socialisation of the economy. If we make abstraction of many interesting but conjunctural debates, essentially determined by problems of political tactics in given national situations, the main controversies arose around the following problem: what was the key field of socialisation? The Austrian Karl Renner defended the view that it was easier to socialise the economy from the realm of circulation than from the realm of production as Marx and Marxists had traditionally argued. This idea had found many supporters among gradualists in the thirties and later on during the fifties and the sixties. What was the relative importance of property relations (nationalisation) and of production relations at factory level in the elimination of capitalism? The German left communist Karl Korsch appeared here as the forerunner of the Yugoslav school of self-managing socialism after 1950, while Gramsci’s contribution on the role of workers’ councils was very important. What was the importance of planning for overcoming capitalism? Here the contribution of the Belgian Hendrik De Man went in the direction of ‘organised capitalism’, with all the contradictions which we mentioned above.xliv
The debate in the Soviet Union, which was essentially centred around the laws of motion of a post-capitalist society in which commodity production has not completely disappeared - i.e., around the dialectics of plan and market - was conducted in a theoretically serious manner in two phases: in the 1920s and the 1960s, interrupted by the long night of Stalinism, during which no serious theoretical discussion of any kind was possible, the machine-gun being the key argument used against theoretical opponents by the faction in power. During the 1920s, the main participants in the debate were Eugene Preobrazhensky and Nikolai Bukharin. Not by accident, the main subject of the debate was primitive socialist accumulation i.e., the objective laws of building up large-scale socialised industry in an essentially peasant milieu, with or without transfer of value (of quantities of labour) from agriculture to industry, with or without gradual collectivisation of agriculture,with or without raising consumption for the mass of producers (workers, poor peasants, part of middle peasants).xlv During the 1960s, the controversy opposed essentially the Liberman faction of economists to the ‘dogmatists’ of the Strumilin school (one variant of which represented by the mathematician Nemchinov defending the ‘objective automatism’ of optimisations realised by mathematical methods, i.e., by generalised use of the computer).xlvi
This debate became more and more intertwined with debates on planning techniques in which the October revolution and the Gosplan had initiated a real breakthrough, with Wassily Leontief’s input-output tables and Grigory Feldman’s equilibrium-growth calculations.xlvii But this combination obscured to a large extent the fact that at the basis of different rhythms and forms of ‘socialist accumulation’ (i.e., of economic growth in a post-capitalist society) there lay political-social choices and not purely technical ones.xlviii
3. Debates about the basic theoretical concepts
1. Critiques of the labour theory of value
The appearance of Das Kapital coincided with a fundamental turn of academic political economy, away from the classics (Petty, Adam Smith, Ricardo) basing themselves on the labour theory of value to which Marx and Engels also adhered, although with substantial modifications, towards the so-called neo-classical, i.e., marginalist school. For a rather long period, this break of academic political economy with the labour theory of value had very little impact on the evolution of Marxist economic theory, except in the field of straightforward polemics.xlix It should be said also that the main marginalist theoreticians generally ignored Marx and Marxism.
The one exception was Eugen von Böhm-Bawerk, one of the founders of the neo-classical school, who, after the appearance of volume 3 of Das Kapital wrote a famous critique of the main concepts of Marxist economic theory, to which in turn Rudolf Hilferding wrote a no less famous reply. While this polemic hardly met an echo at the time of its appearance, it influenced the Cambridge school of neo-Keynesians, favourably disposed to Marxist politics and sociology but quite critical of Marxist economic theory, half a century later. In Joan Robinson’s Essay on Marxian Economics we find basically the same argument of Böhm-Bawerk’s, about the supposed contradiction, between volume 1 and volume 3 of Capital. In volume l, a commodity’s value is directly determined by labour inputs (quantities of socially necessary labour); in volume 3 it isn’t. In volume 1, stable (stagnant, low) real wages are posited; in volume 3, real wages are fluctuating cyclically. Etc. etc.l
As Roman Rosdolsky convincingly demonstrated, these criticisms of Marx’s economic theory are based on a misunderstanding about his method, which can be compared with that of the method of successive approaches, used in most sciences, natural and social ones alike.li In order to analyse a complex phenomenon, it is perfectly admissible first to assume that some constituent parts of that phenomenon are stable, in order to isolate a small number of variables which are essential for understanding the inner logic of the system (its structure). Once these have been discovered, it is possible to abandon progressively simplifying assumptions, to pass to a new level of abstraction lower than the previous one, to multiply the number of variables etc. This is what Marx has done in moving from volume 1 to volume 2 and 3 of Capital. And while volume 3 is less ‘abstract’ than volume l, nearer to the ‘appearances on the surface of economic life’, it by no means covers all of these. Other unwritten volumes of Capital dealing with competition, the world market and the state, would have completed the job, which remains unfinished.
Those inside the Marxist camp who challenged some of the basic laws of motion of capitalism laid bare by Marx slowly started to question the validity of Marx’s theory of value and of surplus value - or at the very least their relevance for ‘concrete’ economic analysis, not to say for the elaboration of socialist strategy and tactics. This was true, strangely enough, not only for the social-democrat Bernstein but also for the communist Graziadei.lii One has to admit that this debate has had little or no effect on the mainstream of Marxist economic thought.
There remains, however, one field of the theory of value properly speaking in which Marxists have been faced with a challenge to which they have offered very little response up to now. This is the so-called reduction problem. According to Marx’s theory of value, while all living labour engaged in production produces value, it is not completely homogeneous, i.e., one hour of labour is equivalent to another hour of labour only at the same level of simple skill. Higher skilled labour produces more value than unskilled labour. An hour of skilled labour can be reduced to a multiple of an hour of unskilled labour.
While the argument seems reasonable, the question arises: how can this multiple be measured in a precise way? By what concrete multiple do you reduce skilled labour to universal quantities of unskilled (or low-skilled) simple labour? The answers to that question have been complicated by the fact that several authors have gone into obvious circular reasoning, by deducing (in the Adam Smithian tradition) the higher quantities of simple labour produced by skilled labour from the higher wages paid to skilled labour (which include, over and above the normal reproduction costs of labour power, the production costs of the skill itself). This is, of course, impossible from a logical point of view and contrary to Marx’s analytical tradition.
The least one can say is that the answers to this problem remain by and large controversial, and that no solution has yet appeared which is generally accepted and integrated into the mainstream of Marxist theory.liii
II. The ‘transformation problem’
Much more important and much more ponderous than the debates about the labour theory of value properly speaking have been the controversies unleashed by a critique - among non-Marxists and Marxists alike - of the way in which Marx, in volume 3 of Capital ‘transformed’ values into prices of production. This ‘transformation problem’ is not a simple ‘technical’ aspect of Marx’s economic theory, i.e., it is not simply a question of using mathematics in a correct way. It is related to key aspects of the theory itself.
While under simple commodity production exchange is essentially an exchange of commodities, produced with stable production techniques, and therefore the socially necessary quantities of labour contained in each commodity are proportional to the actual labour time spent in their production, this is no longer the case under capitalism. In the capitalist mode of production, commodities are commodities produced by ‘many capitals’, in constant competition with each other and under conditions of constantly changing production techniques. Indeed, one could make a good case for the statement. that, under ‘pure capitalism’, it is not commodities which are circulating but segments of capital (commodity capital is but one of the many metamorphoses of capital as such).
But capitalist commodity production is production for profit. While each capital strives to receive the maximum amount of profit, the end-result of that strife is the tendency towards an equalisation of the rate of profit for all capitals. This equalisation in turn implies a redistribution of surplus value between different capitals (branches, firms), each of them not receiving the amount of surplus value produced by ‘their’ workers, but a part of total surplus value roughly proportional to that part of total capital which each of these capitals represents (this analysis does not of course take the problems of monopoly into consideration). Therefore, while total profit calculated in value termsliv is necessarily equal to total surplus value (no surplus value can be created outside of the realm of production), the profit accruing to each specific commodity-producing sector of production is not necessarily identical to the surplus value produced in that sector. Therefore, the ‘price of production’ (costs of production plus average profit calculated upon total capital spent) of the given commodity is not necessarily identical to its value.
Again, while the reasoning is convincing - it has, however, been questioned several times - the concrete calculations involved in the transformation of values into prices of production by Marx in volume 3 of Capital were quite rapidly challenged.lv The first main challenge - on which most of the subsequent ones are still based - came from the Prussian statistician von Bortkiewicz, who influenced Marxist authors such as Paul M. Sweezy. Especially since the 1940s, a large controversy has developed, in which many alternative solutions to the ‘transformation problem’, different from that of Marx, have been offered by authors such as Winternitz, Seton, Garignani etc. This controversy became increasingly interwoven with more substantial debates about the theory of value, initiated by Piero Sraffa’s critique of the neo-classical capital and value theory, but implying a return to a neo-Ricardian and not a Marxist labour theory of value. Disconnected from the theory of value, the theory of exploitation loses its firm foundations, although it must be admitted that some neo-Ricardians, as well as authors trying to establish some form of synthesis between neo-Ricardianism and Marxism, have tried to salvage that theory without using the concept of surplus value.lvi
Marxists were at first slow to answer the challenge, limiting themselves to making some obvious general theoretical points. In later years, this has progressively changed. Various Marxist authors have now come up not only with an intrinsic criticism of the von Bortkiewicz-Sraffa-Steedman solution of the transformation problem, but also with a more convincing analysis of the real economic problems lying behind that problem. The contribution to single out is that of Anwar Shaikh, who, by applying the iterative method, shows convincingly not only why prices of production have to deviate from values, but also that these deviations are themselves in the last analysis governed by the law of value.lvii By assuming from the outset a uniform rate of profit, the neo-Ricardians make the real difficulty which is to be solved disappear before even beginning the analysis. For on theoretical grounds as well as on the basis of empirical facts, the starting point for the real movement which has to be explained is that of uneven rates of profit between different branches of production, as well as a tendency towards overcoming that unevenness, through capital competition and capital mobility.
III. Is there a real tendency for the organic composition of capital to grow?
The basic economic contradiction of the capitalist mode of production is the tendency of the rate of profit to decline. As we have seen, this tendency is challenged above all on empirical grounds. But a deeper theoretical challenge has been raised, again, among Marxists as well as among non-Marxists. The declining rate of profit derives directly from the tendency of the organic composition of capital to increase. But is the assumption of such a tendency proven?
Those critics who deny the existence of that tendency argue above all that it confuses two different trends: the trend to more and more advanced (mechanised) techniques of production; and the trend to increasing value (or costs) of machinery and raw material as against wages. The first trend is an obvious feature of capitalist development. Each specific technique, as Marx pointed out when he analysed the concept of the organic composition of capital, implies a physical relation between a set of machines, a quantity of raw material and a number of workers. The efficient use of a Bessemer steel oven, or of an oxygen-fed LD oven, needs a certain amount of iron and a given number of workers. It also implies a given value of both constant and variable capital, inasmuch as for each given production cycle, or in each given year, the value of a steel oven, of x tons of iron, and of a given number of workers’ wages, can be considered data, and not a set of variables.
But from all this, the critics continue, it does not follow at all that technical progress, which implies an increasing number (or complexity) of machines, and an increasing amount of raw material fed to them, also automatically implies that the costs (the value) of these machines and raw materials will increase more quickly than the value of the labour power necessary to put them into motion. In other words: the tendency of the organic composition of capital to increase presupposes a labour-saving bias of technical progress in value terms and this supposedly is not proven. Indeed, some of the same critics argue, a capital-saving-biased technical progress is perfectly possible, and is indeed supposed to have occurred at several epochs in the twentieth century. A ‘neutral’ technical progress was another possibility. Closely related to such an assumption is the one of a slowly declining capital/output ratio, which would tend equally to disprove any tendency for the organic composition of capital to grow.
The empirical data are inconclusive, to say the least.lviii Among most of the participants in this debate, the use of macroeconomic aggregates like the ‘total wage bill’ obscures the distinction between productive and unproductive labour, as it does in the debate, referred to above, about the alleged ‘stable shares’ in the national income. It is easy to correct such mistaken impressions, by examining branches of production one by one, instead of operating with aggregates. One cannot find a single branch in which there is a secular tendency for wages to become an increasing part of total production costs. If this were not the case, how could one interpret the meaning of semi-automatisation, not to speak of full automatisation, which is, after all, the basic trend of contemporary production technique?
N. Okishio, a representative of the Japanese school of Marxism, has raised a logical objection to the tendency for the organic composition of capital to increase and the tendency of the rate of profit to decline.lix Every single capitalist only introduces new production techniques in order to cut production costs and increase profits. How could it happen that what is true for each individual capitalist would suddenly turn into its opposite for all capitalists taken together?
This objection implies a misunderstanding about the very nature of the average rate of profit. Under a generalised market economy, i.e., capitalist commodity production, the law of value imposes the value (price of production) of the commodities, after a certain time-lag, behind the backs of the ‘economic agents’, capitalists and workers alike, independently of their will. This time-lag is, roughly, that of the business cycle, i.e., between the moment when, in an investment wave (which covers the period of economic recovery and prosperity), new production techniques are introduced, and the moment of crash and depression, when under the pressure of over-accumulation, overproduction and capital devalorization, the value of the commodities is reduced to the level implied by these new production techniques. When the new technique is being introduced, it gives the innovators surplus profits (profits above average profit). This is of course why they introduce it; in this Okishio is right. But when, under the influence of over-accumulation, the value of the commodities is reduced, surplus profits disappear. Those who utilise the new production techniques only receive the average rate of profit, and, moreover, an average rate lower than in the beginning of the cycle. In not understanding that side of the process, Okishio does not see how an objective law (the law of value) imposes itself in spite of the intentions of individual capitalists.lx
IV. The source of monopoly profits
In the framework of capitalist industry, surplus profits are normally originated only as a result of temporary advantages enjoyed by innovating firms (superior techniques, more ‘rational’ organisation of labour etc.). As long as the weighted average of productivity of labour determining the value of the commodity in a given branch of production is not modified, those firms producing at a higher productivity of labour receive a surplus profit.lxi This is generally wiped out at the end of the business cycle, during the phase of crash and depression.
Can durable surplus profits arise under capitalism, not in spite but in function of the operation of the law of value? Marx answers ‘yes’ in volume 3 of Capital when he deals with ground rent. Structural, institutional obstacles to the mobility of capital - which is the objective force imposing the equalisation of the rates of profit between different branches - can lead to situations where branches of production with a lower organic composition of capital than the social average will enjoy a rate of profit higher than the average rate, i.e., will receive surplus profits during a long period (absolute ground rent). Likewise, conditions of structural, institutional scarcity, which cannot be simply overcome by the successive influx of capital into those sectors, will lead to situations where the productive unit operating with the lowest productivity of labour determines the value of the commodity, and receives the average rate of profit. Those units of production enjoying productivity of labour higher than the marginal one can also sell their products at the level of that price of production, thereby receiving a surplus profit over and above the average rate of profit (differential ground rent).
The question can now be posed: is this argument of volume 3 of Capital only applicable to agriculture and mining - it has today obvious applications in the fields of oil and gold production! - or could it be applied to industrial output also? Isn’t it merely a particular example of a more general case, that of monopolised branches of production? Cannot monopoly capitalism be defined as characterised by growing obstacles to the ‘perfect’ mobility of capital, arising out of capital concentration and centralisation (difficulties of entry resulting from size, patents etc.), capacity to limit competition and output (market control), growing unevenness of technology etc.? Wouldn’t in that case monopolistic rents, cartel rents, technological rents arise identical in origin and nature to the ground rent or mining rents analysed by Marx?
This line of reasoning implies that monopolistic surplus profits arise both from the redistribution of surplus value between monopolised and non-monopolised branches of production, and from situations in which the marginal and not the average firms determine the value (price of production) of a certain number of commodities (in which, therefore, the total amount of value and surplus value produced is higher than it would be under conditions of free competition). The tradition within Marxism which defends that point of view starts with Hilferding’s Finanzkapital which developed the concept of cartel rent and is represented among others by Varga, Sweezy and Mandel. It leads logically to the idea of two average rates of profits under monopoly capitalism, one in the non-monopolised and one in the monopolised sectors of the economy. These two rates would ‘equalise’ only during time-spans much longer than the normal business cycle, possibly during a ‘long wave’.
That line of reasoning has been challenged by other Marxists, especially the Soviet author Wygodsky, some of his East German colleagues, Elmar Altvater and partially Emmanuel. According to those authors, monopolistic surplus profits, inasmuch as they are real and not simply apparent, would be the result not of a redistribution of surplus value but of more surplus value produced within the monopolised sectors themselves. The function of monopolies would consist essentially in preventing these exceptional situations from becoming erased rapidly (e.g., institutional obstacles to a worldwide mobility of labour as compared to a much higher national mobility of capital). But the law of value would do away with any branch rate of profit over and above the average rate. In other words: surplus profits would appear more like advantages of firms within given branches of production, than advantages of monopolised branches as compared to non-monopolised ones.lxii
Needless to say, this debate, which parallels similar debates in academic circles, is only in its infancy, and has not reached the point where it can be said to have been solved in a satisfactory way for the bulk of those accepting the conceptual framework of Marxist economic theory.
V. Uneven exchange
Whether a Marxist accepts the idea of transfer of values between monopolised or non-monopolised sectors of the economy will greatly influence his view of what lies at the bottom of uneven (unequal) exchange on the world market. That such an uneven exchange has occurred, is occurring, and has greatly influenced the present polarisation of the international capitalist economy between ‘developed’ and ‘underdeveloped’ countries can hardly be denied. That the analysis of volume 3 of Capital does imply transfers of values between branches - the whole procedure followed by Marx in his calculation of the equalisation of the rate of profit is based upon such transfers - is equally obvious. Indeed, academic economics, following Marxist analysis, have gradually generalised the concept of ‘terms of trade’ (implying the notion of long periods of adverse evolution of these terms for certain participants in exchange) from a concept applicable only to relations between nations, to a concept applicable to inter-regional relations within a single country, to relations between agriculture and industry, or even to relations between skilled and unskilled labour.lxiii
Marx himself clearly stated that on the world market, labour from more advanced countries (i.e., countries with a higher level of productivity of labour) is valued as more intense, i.e., as producing more value than labour from underdeveloped countries. This means that on the world market, when two quantities of goods are exchanged (e.g., at one million dollars each), the one exported by the backward country can represent 30,000 hours of (less intensive) labour, while the other one only represents 20,000 hours of labour spent in the industrialised country.
Does this analysis imply that there is an actual ‘drain’ of value (of quantities of labour, and, in the long run, of economic resources, of ‘potential for economic growth’) from the underdeveloped to the developed country?lxiv At first sight, one could believe that this is simply a question of defining the sphere in which value-recognition occurs. If this sphere is the world market, then, it follows, that part of the less intensive labour spent in the underdeveloped countries has not been recognised as ‘socially necessary labour’ on the world market. If this sphere is the national market, however, it follows that all labour which is spent at the average productivity of a given country is value-producing (is socially necessary labour). In that case, through uneven international exchange, part of that value will not be realised within that country but to the advantage of the importers and (re-)users of commodities produced by that labour, i.e., will be transferred to the more advanced countries through uneven exchange.
From there on, one could construct a Marxist theory of foreign trade (which is still in its infancy), following Marx’s developments in volume 3 of Capital. Commodities would fall roughly into three categories. There would be those commodities essentially produced for ‘national’ markets, and which would therefore have different ‘national values’ (prices of production), inasmuch as the average productivity of labour and the average rate of profit is quite different in different countries. Only relatively small surpluses of these commodities would be exported. ‘World market prices’ of them would be different from ‘national prices’ and would be oscillating widely (e.g., the world market price of wheat as compared to the price of wheat in India on the one hand and in Canada on the other hand), determined by the least productive production unit which succeeds in having its labour recognised as socially necessary labour on the world market. Secondly, there would be those commodities essentially produced in a single country (or in a small number of countries). In that case, it would be the ‘national value’ (or the weighted ‘national values’) of that commodity which would simultaneously determine its national price and its world market price. And, finally, there would be those commodities produced by many countries, but essentially for the world market, for export. In that case, world market prices would be the determining factor for ‘internal market prices’, i.e., only those quantities of labour recognised on the world market as socially necessary would be value-producing.lxv
Further consideration will, however, lead to the conclusion that even if the hypothesis of different spheres of determination of the value (price of production) of commodities is abandoned, and with it the hypothesis of transfers of value, the question of the ‘drain’ through international trade, i.e., of the relative impoverishment of underdeveloped compared with developed countries as a result of ‘unequal exchange’, is by no means eliminated. One can give and should give great weight to given social structures (relations of production, class relations, property relations etc.) as relative motors or relative brakes upon the process of mobilisation of material and human resources for the purposes of economic growth (of increasing the average social productivity of labour). One can argue at length whether the survival of pre-capitalist and semi-capitalist social structures has been encouraged by imperialism, and to what extent this uneven and combined development has reduced actual modernisation and economic growth in so-called ‘Third World’ countries. One can even reduce the whole logic of that combined and uneven development to the pressure of the world market, i.e., the stranglehold of imperialism upon the Third World’ society and economy. But whatever be the main stress one puts on this or that ‘cause’ of underdevelopment, it remains true that, from a Marxist point of view, underdevelopment is in the last analysis underemployment, in a quantitative as well as in a qualitative sense. Underemployment in that broad meaning implies simultaneously lower wages (under the pressure of an immense surplus of labour) and lower prices of food and raw materials (although higher than could be obtained with more capital investment, all other things remaining equal). Whether the more industrialised capitalist countries’ ruling classes profit from these uneven levels of world prices and world wages indirectly (through favourable terms of trade) or indirectly (through easier access to these raw materials, and surplus profits resulting from capital investment in these countries) is not decisive. What is decisive is that part of the profits realised by the imperialist ruling class does originate in the Third World. And that is hard to deny.
VI. The nature of the post-capitalist economy
Marx and the Marxist tradition are unambiguous on the subject: socialism, as ‘the first phase of communism’, is characterised by the absence of commodity production. Nobody denies, on the other hand, that commodity production still exists in the Soviet Union and in all other countries calling themselves socialist. What conclusion should one draw from this apparent discrepancy between theory and reality? Was Marx’s theory wrong? Is the definition of these countries as ‘socialist countries’ wrong? What is the social nature of their economy?A debate amongst Marxists has been raging around that basic issue practically since the day of the October revolution of 1917.
We shall leave aside here the epistemological (philosophical) aspect of the debate, and concentrate on the issue of economic theory involved. For Marx and Marxists, there are only two basically different ways in which needs and resources can be balanced in any given society: either a priori in a conscious way (regardless of whether this is done democratically or despotically, based upon prejudice, magic rites, religion, habit, tradition, or based upon the application of science, whether it is ‘irrational’ or ‘rational’); or a posteriori through the operation of the law of value, i.e., objective laws operating behind the backs of the ‘economic agents’. Schematically, and in the last analysis, a priori adaptation of social resources to social needs implies social property of the means of production and labour which is directly recognised as social labour. A posteriori adaptation of social resources to social needs implies private property, implies labour which is spent in the form of private labour and which is not immediately and directly recognised as social labour. Only to the extent that the commodity it produces is sold at its value (under capitalism to the extent its owner receives, through its sale, the average rate of profit) is private labour recognised as social labour.
One can therefore only argue that commodity production still prevails under socialism if one argues that under socialism, there is still private labour. And this then immediately implies that planning, i.e., conscious a priori determination of social needs and husbanding of social resources to fulfil these needs, is impossible. For you can’t have commodity production without the rule of the law of value, and you can’t have the rule of the law of value with real planning.
Up to now the debate has been dominated by the tendency of most of its participants to approach the problem in a formal-mechanistic way of ‘either or’: either socialism or capitalism; either social property or private property; either social labour or private labour etc. This formalistic approach has obvious political, ideological and therefore social-interest functions, on which we do not need to dwell. We only want to stress the unsolvable theoretical contradictions to which it leads in the field of Marxist economic theory. For what we are dealing with is, obviously, a phenomenon of transition of a new form of society arising out of an old one, having not yet achieved its own intrinsic logic of development, but developing in constant struggle with an adverse environment. Capitalism, after all, still rules in the major part of the world.lxvi Any attempt to draw conclusions as to the nature of mature forms from immature, hybrid, transitional phenomena can only lead into a blind alley.
This was true for all those, starting with the Russian Mensheviks, who declared that, because socialism was impossible under the socio-economic and political conditions of backward Russia, capitalism and only capitalism could emerge from the October revolution.lxvii This was difficult to argue under the conditions of war communism, but with the emergence of the NEP and the restoration of commodity production, the Mensheviks thought they could triumph: capitalism had, after all, come back to Russia. Left-communist critics of the NEP (and later of Stalinism) adopted similar positions, the most consistent being Amadeo Bordiga. That Soviet society is some form of state-capitalism has been an opinion widely held ever since among many circles considering themselves Marxist (including the Chinese communists in the 1960s and 1970s).lxviii
On the other extreme of the spectrum, all those supporters or apologists for the existing regimes in the USSR, Eastern Europe and China have strenuously defended the idea that these are socialist countries, in spite of the survival of commodity production, money, different social classes and the state, if necessary by stating frankly that Marx and Engels were wrong on what socialism would be like, or could not predict it exactly. Their definition of socialism is reduced to a single argument: the prevalence of social property of the means of production. This reduction of socialism to a single aspect of social organisation has been repeatedly submitted to severe criticism which is by and large correct. We would add to that traditional criticism that the survival of commodity production implies many limitations to the nature of social (collective) property too, which makes it incongruent with the substance of social property characteristic for a socialist society.
The solution of the difficulty lies, in our opinion, in understanding the nature of the post-capitalist societies as societies in transition between capitalism and socialism, in which commodity production still survives but is no more generalised, in which the law of value still operates but no more rules, in which planning is already possible but perforce still imperfect. The emergence of a privileged bureaucracy which manages the state, the society and the economy of these countries has frozen their progress towards socialism and compounded the contradictions inherent in the transition period.
The repeated debates in the USSR on the nature of ‘socialist’ commodity production - the latest phase of which is the Kronrod controversy, in which the old Soviet economist actually argues that the law of value is not a capitalist survival or the product of a dual property system, state property and cooperative property in agriculture, but an organic product of socialism itselflxix - only testifies to the objective nature of the contradiction and the impossibility to ‘think it away’, whatever the political and material needs to try and do so.
These needs - i.e., the severe limitations on free critical scientific analysis and debate imposed by the rule of the bureaucracy - have until recently inhibited any creative development of Marxist thought inside the post-capitalist societies themselves. Since the late 1960s and the early 1970s this has changed, however, and in Yugoslavia, the GDR, the Czechoslovak Socialist Republic, Poland, Hungary and China, independent Marxist thinkers have appeared who try, with the tools of Marxist analysis, to understand the reality and the laws of motion of the economy of their own countries. The most impressive of them, up to now, has been Rudolf Bahro, although a special mention should also be made of the sociologists around the Yugoslav Praxis group, the Czech Petr Uhl, and several of the more radical socialist economists and sociologists emerging in and around Solidarnosc in Poland.lxx
It is fitting to conclude that, after one hundred years of development determined both by its own inner logic and by the impact of world history on it, Marxist economic analysis still basically evolves around key questions of human destiny. Is the subordination of humanity to severe and alienating ‘objective social laws’ the definite and unavoidable price it has to pay for its increasing emancipation from dependence upon blind natural forces? Can humanity become master of its own social fate, consciously determine its own future, mould its own nature? Can exploitation of man by man, oppressive class society, social inequality, social division of labour, the state, massive violence, wars, be overcome? Marx’s answer was: yes, through a regime of associated producers, on a high level of development of the productive forces, with the withering away of commodity production and money, i.e., through world socialism. Nothing in the historical evidence of the last hundred years disproves the scientifically realistic nature of that assumption. But final proof will only come from practical corroboration.
NOTES
i David McLellan, ed., Marx. The First Hundred Years (Oxford, 1983). Some of the literature references below have been updated to refer to English translations.
ii The other contributors are Raymond Williams (culture), Victor Kiernan (history), Tom Bottomore (sociology), David McLellan (politics) and Roy Edgley (philosophy).
iii Marx explicitly rejected the idea that these reproduction costs had only to cover physiological needs. They have to provide the workers with a set of consumer goods and services which have become historically incorporated into the socially recognised average wage. Marx called that part of wages its ‘moral-historical’ element.
iv In Late Capitalism (London, 1975), ch. 4, and in Long Waves of Capitalist Development (London, 1992) I have tried to prove that at least three times, around 1848, 1893 and 1948 (1940 in the USA), there has been a sudden and durable upward swing of the average rate of profit in the international capitalist economy.
v Marx, Capital (London, 1954), vol. I, p. 10.
vi ‘Poland is also challenging the idea that lies right down at the roots of Marxism: the idea of the irreversibility of history ... That could be the start of rescuing a large part of humanity from the cul-de-sac of history that Marx invented’ (the Economist’s editorial, 11 July 1981). Needless to say, Marx never believed in any ‘irreversibility’ of history, no more than he believed in any linear development of human societies. The concept which lies ‘at the roots’ of Marxism is the concept of social change, of the temporary nature of all social institutions, including private property and market economy, and of the dependence of human progress upon changes in social structure, in the last analysis changes in the relations of production, brought about by social struggles. Such a view of human history certainly encompasses the possibility of social regression, if ‘progressive’ social classes are crushed in a given context where no others can rapidly arise. Be this as may be, it is striking that the arch-bourgeois and leading anti-Marxist weekly in Britain attributes to Marx’s (presumably wrong) ideas the tremendous power of having led ‘a large part of humanity’ into a cul-de-sac. And when that same weekly acknowledges the possibility that the Polish revolution, clearly conducted and led by the working class, could reverse the course of history, it silently approves (should we add, tongue in cheek, ‘unconsciously’?) Marx’s vision about the key historical role of the industrial proletariat after the rise of modern industry.
vii See among others Eugen von Böhm-Bawerk, Karl Marx und der Ausgang seines Systems (1896; English edn, Karl Marx and the Close of his System (New York, 1949); Eduard Bernstein, Die Voraussetzungen des Sozialismus und die Aufgaben der Sozialdemokratie (1899; English edn, The Preconditions of Socialism (New York, 1993). Earlier English editions of this work are abridged; T.G. Masaryk, Die philosophischen und Soziologischen Grundlagen des Marxismus (Vienna, 1899); Michael Tugan-Baranovsky, Theoretische Grundlagen des Marxismus (Leipzig, 1905).
viii To give but one example: in the West German conservative business publication Wirtschaftswoche we read (issue of 7 August 1981); ‘Today, there is hardly any Japanese firm of importance which does not live under the protection of the six super-conglomerates and their ten satellites.’ The six super-conglomerates, heirs to the pre-war Zaibatsu are the finance groups Mitsubishi, Mitsui, Sumitomo, Fuyo, Sanwa, Dai-lchi Kangyo Bank. They control more than 600 big firms. Recently, the Mitsui group took Toyota, Toshiba and Oji-Paper under its umbrella as satellites.
ix The classical work making that assumption is A.A. Berle-Gardiner and C. Means, The Modern Corporation and Private Property (New York, 1933). See also James Burnham, The Managerial Revolution (New York, 1941), and J.K. Galbraith, The New Industrial State (Harmondsworth, 1968).
x See Capital, vol. 3, ch. 23, which actually uses the very words ‘the managing functions become more and more separated from the ownership of capital’ in the joint stock companies.
xi See, among different sources, Ferdinand Lundberg, The Rich and the Super-Rich (New York, 1968); S. William Dovehoff, Who Rules America (Englewood Cliffs, 1967); C. Wright Mills, The Power Elite (New York, 1957); Anthony Giddens, The Class Structure of the Advanced Societies (London, 1979); Jay Gould, The Technical Elite (New York, 1966), etc.
xii The definition of the proletariat as the sum total of those under economic compulsion to sell their labour power - given by Plekhanov and Lenin in the first programme of the Russian Social-Democratic Workers Party - situates outside the proletariat all those salary-earners (top managers, top functionaries of the bourgeois state, professional people like doctors and lawyers working under contract as hired labour etc.) whose income is high enough to enable savings, making possible accumulation of capital, and who actually own enough capital to live from the proceeds (interests, rents, dividends) thereof. If they sell their labour power, it is not because they don’t have other means of livelihood, but for other reasons, i.e., out of a ‘free choice’. This is precisely not the case for normal workers and employees, who have no choice in the matter.
xiii James F. Becker, Economie politique marxiste (Paris, 1980), English edn, Marxian Political Economy: an Outline (Cambridge, 1977), p. 287, gives this table with sources. We have some reservations on the way the category ‘managers and high functionaries’ has been calculated.
xiv Could the historical trend of centralisation of capital, which implies that more and more capital is necessary for going into business or staying in business as self-employed, be reversed by the micro-chips? This remains to be seen. But even if this were to occur, it would still be a marginal economic phenomenon. The advantages of large-scale production in a society based upon private ownership and competition would remain overwhelming in the large majority of branches of output.
xv See, among others. P. Baran and P. Sweezy, Monopoly Capital (New York, 1966), André Gorz, Farewell to the working class: an essay on post-industrial socialism (London, 1982), etc.
xvi The successful efforts in initial unionisation of unskilled women workers in England owe much to the role of Marx’s daughter Eleanor. See Yvonne Kapp, Eleanor Marx (New York, 1976), vol. 2. On progressive unionisation of the white-collar workers, see C. Wright Mills, White Collar (Oxford, 1951). State employees had to fight for a long period for the right to organise and to strike, and as the recent case of the air controllers’ strike in the USA shows, conquests in these fields are by no means irreversible.
xvii There was a correct premonition of this trend by Kautsky, The Class Struggle (Erfurt Program), (1892). See also Max Adler, Der Sozialismus und die lntellektuellen (Vienna, 1919).
xviii E.g. Fritz Sternberg. Der lmperialismus (Berlin, 1926); Jurgen Kuczynski, Die Theorie der Lage der Arbeiter (2nd edn, Berlin, 1952-after a ‘self-criticism’ imposed by the SED party leadership for incorrect formulations in the first edition!); Karl Popper, The Open Society and its Enemies (London, 1945). vol. 2; Akademie der Wissenschaften der UdSSR, Politische Oekonomie. Lehrbuch (Berlin, 1955); Wolf Wagner, Verelendungstheorie - die hilfslose Kapitalismuskritik (Frankfurt, 1976), etc.
xixThe best refutation is that by Roman Rosdolsky, The Making of Marx’s Capital (London, 1977).
xx I have tried to bring all these trends together towards sketching a Marxist theory of wages in my Late Capitalism, ch. 5.
xxi The first author to make a systematic study of this key-factor in the fluctuation of wages - including international migrations - was Fritz Sternberg, op. cit. A subtle analysis of the different components of the reserve army of labour is to be found in Rosa Luxemburg, Introduction to Political Economy, written in 1909 - 1910 in: The Complete Works of Rosa Luxemburg, Volume I: Economic Writings 1 (London, 2014). A similar study about the contemporary United States can be found in Michael Harrington, The Other America (New York, 1963).
xxii John Strachey, Contemporary Capitalism (London, 1956), and many other authors posited at the beginning of the long-term post-Second World War boom that rising real wages and social security allowances had become institutionally irreversible.
xxiii See Ernest Mandel, Late Capitalism, ch. 4, and Long Waves of Capitalist of Capitalist Development.
xxiv The 1980-1 recession hit Brazilian big industry in a strong way, starting with January 1981. The rate of unemployment among previously employed wage-earners, i.e., without taking into account the huge mass of marginalised permanent unemployed, rose up to 20 per cent. As there is no state compensation for unemployed, and as capitalist firms only pay small compensation to fired workers (on average, one month’s wage per year employed), a huge mass of persons appeared without any income whatsoever. Daily papers started to print advertisements of people willing to sell blood, kidneys and even one of their eyes as a means of getting money.
xxv See among others Joan Robinson, An Essay on Marxian Economics (London, 1966).
xxviThis is also what Joseph Gillman, The Law of the Falling Rate of Profit (London, 1957), fails to do.
xxvii Insistence on increasing needs arising out of the intensification of labour is characteristic of Jürgen Kuczynski., op. cit. Rosa Luxemburg had already gone in the same direction (Introduction to Political Economy).
xxviii M. Tugan-Baranovsky, Studien zur Geschichte und Theorie der Handelskrisen in England (Jena, 1901); Rudolf Hilferding, Finance Capital. A Study of the Latest Phase of Capitalist Development (London 1981 [1910]); Otto Bauer, ‘Marx’ Theorie der Wirtschaftskrisen’, Die Neue Zeit XXXIII, I; Otto Bauer, Zwischen zwei Weltkriegen? (Bratislava, 1936); N. Bukharin, Imperialism and the Accumulation of Capital (London, 1972 [1925]). This volume includes ‘The Accumulation of Capital - An Anti-Critique’, Luxemburg’s response to Bukharin’s critique of her The Accumulation of Capital (London, 1951). See also Natalie Moszkowska, Zur Kritik moderner Krisentheorien (Prague, 1935); Natalie Moszkowska, Zur Dynamik des Spätkapitalismus (Zürich, 1943); Fritz Sternberg, Der Imperialismus. op. cit.; Fritz Sternberg, Der Imperialismus und seine Kritiker (Berlin, 1929); Paul M. Sweezy, The Theory of Capitalist Development (New York, 1942); Henryk Grossmann, Das Akkumulations- und Zusammenbruchsgesetz des kapitalistischen Systems (Leipzig, 1929); abridged English translation: The Law of Accumulation and Breakdown of the Capitalist System (London, 1992), Karl Kautsky, ‘Krisentheorie’, Die Neue Zeit XX, 2; Michal Kalecki, Selected Essays on the Dynamics of the Capitalist Economy (New York, 1971).
xxix Nevertheless, interesting conjunctural and broader theoretical analysis are contained among else in Elmar Altvater, Jürgen Hoffmann, Willi Semmler, Von Wirtschaftswunder zur Wirtschaftskrise (Berlin, 1979); Ernest Mandel, The Second Slump (London, 1979); André Gunder Frank, Reflections on the World Economic Crisis (London, 1980); Michel Aglietta, A Theory of Capitalist Regulation: The US Experience (London, 1979).
xxx Rudolf Hilferding, Finance Capital, op. cit.; N. Bukharin, Imperialism And World Economy (London, 2003 [1914]); here cited according to the German edition, Vienna, 1929); V.I. Lenin, Imperialism, the Last Stage of Capitalism (1917). These works were influenced by the book of Hobson, Imperialism (London, 1902).
xxxi Joseph A. Schumpeter, Zur Soziologie der Imperialismen (Tübingen, 1919; English edn, Imperialism and Social Classes, New York, 1951).
xxxii Rosa Luxemburg, The Accumulation of Capital, op. cit.; Fritz Sternberg, Der Imperialismus, op. cit.; Paul M. Sweezy, The Theory of Capitalist Development, op. cit.
xxxiii André Gunder Frank, Capitalism and Underdevelopment in Latin America (New York, 1967); Samir Amin, Accumulation on a World Scale: A Critique of the Theory of Underdevelopment (Paris, 1974); André Gunder Frank, Dependent Accumulation and Underdevelopment (New York, 1979); Arghiri Emmanuel, Unequal Exchange (New York, 1972).
xxxiv Bernstein, The Preconditions of Socialism, op.cit.; John Strachey, Contemporay Capitalism, op.cit.; Anthony Crosland, The Future of Socialism (New York, 1963).
xxxv Karl Kautsky, ‘Der Imperialismus’, in Die Neue Zeit, 11 September 1914; Rudolf Hilferding, ‘Realistischer Optimismus’ in Die Gesellschaft, November 1924.
xxxvi The first article actually using the formula ‘collapse theory’ is by Heinrich Cunow, ‘Die Zusammenbruchstheorie’, in Die Neue Zeit XVI (1898), 2.
xxxvii Eugen Varga, Die Niedergangsperiode des Kapitalismus (Hamburg, 1922); Henryk Grossmann, Das Akkumulations- und Zusammenbruchsgesetz des Kapitalistischen Systems, op. cit.; Sternberg’s answer to Grossmann was published under the title Eine Umwälzung der Wisschenschaft? (Berlin, 1930).
xxxviii Hilferding had had an early intuition about the dialectical relationship between the growth of capitalist ‘organization’, organized capitalism and strong state power in ‘Organisationsmacht und Staatsgewalt’, Die Neue Zeit, XXXII, 2. He reversed that position in the 1920s, then came back to it in the 1930s.
xxxix Leon Trotsky, In Defence of Marxism (New York, 1942), Manifesto of the Emergency Conference of the Fourth International (New York, 1940).
xl von Hayek, The Road to Serfdom (London, 1944); Joseph Schumpeter, Capitalism, Socialism and Democracy (New York, 1942).
xli The main classical Marxist comments on socialist society are contained in Marx’s ‘Critique of the Gotha Programme’ and Engels’ Anti-Dühring. See also Karl Kautsky, The Social Revolution and On the Day after the Social Revolution (1903).
xlii E. Barone, The Ministry of Production in the Collectivist State (1908), and L. von Mises, Economic Calculations in the Socialist Commonwealth (1920), both reprinted in F.A. von Hayek, ed., Collectivist Economic Planning (London, 1935).
xliii Lange and F. Taylor, On the Economic Theory of Socialism (Minnesota, 1938).
xliv Karl Renner, Die Wirtschaft als Gesamtprozess und die Sozialisierung (Berlin, 1924); Karl Korsch, Schriften Zur Sozialisierung (originally published between 1919 and 1937; Frankfurt, 1969); Antonio Gramsci, Philosophie der Praxis (1919--21; Frankfurt, 1967); Edvard Kardelj, Les contradictions de la propriété sociale dans le système socialiste (Paris, 1976). See also Branko Horvat, An Essay on Yugoslav Society (New York, 1969); Hendrik De Man, Au-delà du marxisme (Paris, 1929), Réflexions sur l'économie dirigée (Paris, 1932), L’Idée Socialiste followed by Le Plan du Travail(Paris, 1935).
xlv E. Preobrazhensky, The New Economics (1926; Oxford, 1965); N. Bukharin, Le Socialisme dans un seul pays (Paris, 1974).
xlvi E.G. Liberman, ‘The Plan, Profits and Bonuses’, in Pravda 9 September 1962; Oscar Lange, Problems of Political Economy of Socialism (New Delhi, 1962); Ota Sik, Planning and the Market under Socialism (New York, 1967); Wlodomierz Bruz, Problèmes généraux du fonctionnement de l'économie socialiste (Paris, 1968). The opposite thesis was defended by Strumilin, Kronrod, Gatovsky and others. Among the main contributors to the problems of mathematical calculations (including the use of computers), planning and market, see: V.V. Novoshilov, The Problems of Planned Pricing and the Reform of Industrial Management (Moscow, 1966); V. Nemchinov, ‘Basic Elements of a Model of Planned Price Formation’, in Voprossi Ekonomiki 1963, no. 12; L. Kantorovitch, Mathematical Methods for Organising and Planning Industry (Leningrad, 1939); L. Kantorovitch, The Best Use of Economic Resources (London, 1955)
xlvii See G.A. Feldman, Zur Wachstumstheorie des Nationaleinkommens (originally published in 1928; published in German, Berlin, 1969).
xlviii A good example is the Stalinist so-called ‘law of the priority development of heavy industry’. I have refuted that in Marxist Economic Theory, ch. 16. For a different position see Maurice Dobb, On Economic Theory and Socialism (London, 1955).
xlix E.g., Bukharin’s polemics with marginalism, Economic Theory of the Leisure Class (New York, 1972 [1914]).
l Eugen von Böhm-Bawerk, Karl Marx and the Close of his System, op. cit. answered by Rudolf Hilferding, Böhm-Bawerk’s Criticism of Marx (1920); Tugan-Baranovsky, Theoretische Grundlagen des Marxismus (Leipzig, 1905); Joan Robinson, An Essay on Marxian Economics, op. cit.; Paul Samuelson, Marxian Economics as Economics (New York, 1967); Michio Morishima, Marx’s Economics (Cambridge, 1973); Leszek Kolakowski, Main Currents of Marxism (Oxford, 1978), vol. I.
li Rosdolsky, The Making of Marx’s Capital, op. cit. The publication of Marx’s Grundrisse in 1939 passed nearly unobserved, because only few copies reached the public outside of the USSR. The second edition in 1953 also got slow comments, but these received momentum in the 1960s and 1970s, especially after the appearance of Rosdolsky's book and the translation of the Grundrisse into French, Italian and English.
lii Tugan-Baranovsky, Theoretische Grundlagen des Marxismus, op. cit.; Bernstein, op. cit.; Graziadei, Prezzo e Sovraprezzo nella Economia Capitalistica (Torino, 1924).
liii See I.I. Rubin, Essays on Marx’s Theory of Value. Conceived as a Variorum Edition (2025 [1923]); the contributions of Böhm-Bawerk, Hilferding and Bob Rowthom in Nutzinger and Wolfstetter, eds., Die Marx’sche Theorie und ihre Kritik (Frankfurt, 1974), vol II, part 5 (‘Das Reduktionsproblem’).
liv The problem of values calculated in value terms being equal or unequal to prices of production calculated in money terms is a false one, as it implies comparing incommensurable quantities. In order to give meaning to that problem, the fluctuations of the value of gold, i.e., of the marginal productivity of labour in the gold-mining industry, have to be introduced into the calculation.
lv The bibliography of all the contributors to that debate is too long to quote. Here are those which I consider the most important: L. von Bortkiewicz, ‘Zur Berichtigung der grundlegenden theoretischen Konstruktion von Marx im Dritten Band des Kapital’, in Jahrbücher für Nationalokonomie und Statistik (July 1907); J. Winternitz, ‘Values and Prices: a Solution of the So-called ‘Transformation Problem’’, in Economic Journal (June 1948); F. Seton, ‘The Transformation Problem’, in Review of Economic Studies (1957), vol. 24; C. Garignani, On the Theory of Distribution and Value in Marx and the Classical Economists (1977); C.C. von Weiszacker, ‘Notizen zur Marx’schen Wertlehre’, in Nutzinger and Wolfstetter, eds., Die Marx’sche Theorie und ihre Kritik (Frankfurt, 1974); Gilles Dostaler, Valeur et Prix. Histoire d’un debar (Paris, 1978); G. Abraham-Frois and E. Berrebi, Theorie de la valeur, des prix et de l’accumulation (Paris, 1976); Ian Steedman, Marx after Sraffa (London, 1977); Pierre Salama, Sur la Valeur (Paris, 1975). Piero Sraffa’s basic work is Production of Commodities by Means of Commodities (Cambridge, 1960).
lvi See Willi Semmler, Zur Theorie der Reproduktion und Akkumulation (Berlin, 1977); James F. Becker, Marxian Political Economy, op. cit., and others.
lvii Anwar Shaikh’s contribution in a forthcoming book, The Transformation Problem: Essays in the Memory of Robert Langston: ‘The Transformation from Marx to Sraffa’.
lviii Roy Harrod (Economic Essays [London, 1953]) seems to be the main author to have substantiated the idea of a ‘neutral’ technical progress. For empirical evidence in the opposite sense see R.J. Gordon, A Rare Event in Survey of Current Business (July 1971) and the same author’s articles in Review of Economics and Statistics (November 1968) and in American Economic Review (June 1969); see also Anne P. Carter, Structural Change in the American Economy (Harvard University Press, 1970). For another confirmation see A.E. Ott, ‘Technischer Fortschritt’, in Handworterbuch der Sozialwissenschaften (Göttingen, 1959), vol. 10: ‘If one finally asks, which of the seven cases of technical progress occurs most often in real life, it is evident that labour-saving technical progress with additional expenditure of capital ... represents that form of technical progress typical for the development of capitalism.’
lix N. Okishio, ‘Technical Changes and the Rate of Profit’, in Kobe University Economic Review (1961), vol. 7; N. Okishio, ‘A Mathematical Note on Marxian Theorems’, in Weltwirtschaftliches Archiv (1963), vol. 91; Makatoh ltoh, ‘Marxian Crises Theories’, in Bulletin of the Conference of Socialist Economists (February 1975), vol. IV, no I. Older representatives of the Japanese Marxist school include Shigeto Tsuru and Kozo Uno. A more recent one is Shinzaburo Koshimura.
lx For sophisticated mathematical inquiries into the interrelationship between the evolution of the organic composition of capital, the evolution of the rate of surplus value, the evolution of productivity of labour in both departments etc., see G. Stamatis, Die spezifisch kapitalistischen Produktionsmethoden und der tendenzielle Fall der allgemeinen Profitrate bei Karl Marx (Berlin, 1977), and Willi Semmler, Zur Theorie der Reproduktion und Akkumulation (Berlin, 1977).
lxi Marx, Capital vol. 3, ch. 10.
lxii Rudolf Hilferding, Finance Capital, op. cit.; E. Varga and L. Mendelson, eds., New Data for Lenin’s Imperialism (New York, 1940); Mandel, Late Capitalism, op. cit.; Wilhelm Brenner, Zur politischen Oekonomie des Monopols 1972); (Koln, 1975); S.L. W e godsky, Capitalisme Der gegenwartige Monopoliste d'Etat Kapitalismus (Koln, Paul Boccara, ed., r (Paris, 1971) etc.
lxiii James F. Becker, Marxian Political Economy, op. cit.
lxiv See especially Paul A. Baran, The Political Economy of Growth (New York, 1957). But there is an ample literature on the subject.
lxv I developed this in Late Capitalism, ch. 11. For alternative interpretations see Christian Palloix, L’economie mondiale capitaliste (Paris, 1971), 2 vols.; Heinz-Dieter Meier, Der Konkurrenzkampf auf dem Weltmarkt (Frankfurt, 1977).
lxvi This is the historical background against which the socialism-in-one-country' controversy of the 1920s in the Soviet Union has to be seen. Those who contend that commodity production (and the state) in the Soviet Union cannot disappear as long as imperialism survives thereby admit that what they call ‘socialism’ is not the society described by Marx and Engels, in which there was no commodity production, no state and no classes. They thereby implicitly admit that socialism, as described by Marx and Engels, is impossible in one country.
lxvii Throughout the 1920s and 1930s, there was an interesting debate in the Second International between Otto Bauer and Karl Kautsky on that subject, a debate in which Bauer ended up by considering the Soviet economy socialist or semi-socialist.
lxviii The list of contributions to that subject is too long to be quoted in full. Let me limit myself to four authors: Amadeo Bordiga, Structure Economique et Sociale de la Russie d’aujourd’hui (Paris, 1975); Tony Cliff, Russia, a Marxist Analysis (London, 1962); Charles Bettelheim, On the Transition co Socialism (New York, 1971), and Class Struggles in the USSR (New York, 1976, 1978), 2 vols. The official Chinese position: How the Soviet Revisionists Carry Our AlI-round Restoration of Capitalism in the USSR (Peking, 1968).
lxix See Marie Lavigne, ‘La société socialiste avanceé’, in Marie Lavigne, ed., Economie politique de la planification en système socialiste (Paris, 1978).
lxx Rudolf Bahro, Die Alternative (Berlin, 1978); Petr Uhl, Le Socialisme emprisonné (Paris, 1980).