Brexit and Empire

I should say at the start that the title of this post is a little misleading. I’m currently reading the influential book “Empire” by Michael Hardt and Antonio Negri which theorises a shift from a 20th century ‘modern’ world built on sovereign nations to a ‘postmodern’ world of a transnational global order, which they refer to as Empire.

Hardt and Negri describe the prior regime of ‘modern’ capitalism as structured around physical industry as the dominant form of production. It therefore has a close relation to geographic location, with production based on factories and a physical relationship between raw material, production, circulation and consumption. This physical nature of production means that capitalism throughout the 19th and most of the 20th century was best served by nation states with clear boundaries.

In a similar argument to that put forward by Benedict Anderson in Imagined Communities, Hardt and Negri see the modern nation state as a constructed entity, influenced by this geographic nature of industrial capital. Capitalism during this period is best served by a nations with physical boundaries within which capital accumulation can take, and outside which is a space for new markets and expansion. The creation of these nations leads to the idea of a ‘people’ on which that nation is founded, and idea that is created, not an inherent part of nature. The people does not exist first and build a nation around itself. Rather the nation defines its people, and creates a founding myth to go with it.

This geographical structure of ‘modern’ capital leads then to late 19th and 20th century imperialism, where sovereign nations compete for control of those parts of the globe ‘outside’ developed capitalism both grab control of raw materials for production and to support expansion through new markets. In many ways this is building on Rosa Luxemburg’s thesis in “The Accumulation of Capital” where she develops the idea that capitalism needs a space ‘outside’ itself to expand into to remain stable (or even viable over the long term).

The concepts of nation and people are therefore inherently exclusionary requiring an ‘other’ to define themselves against. In a world dominated by developed western European states where the rest of the world is colonised and exploited this division is inherently built on a concept of race. As Hardt and Negri say “the concepts of nation, people, and race are never very far apart” (Hardt and Negri 2001 p. 103). Further:

“despite the persistent nostalgia of some, European societies and peoples were never really pure and uniform. The identity of the people was constructed on an imaginary plane that hid and/or eliminated differences, and this corresponded on the practical plane to racial subordination and social purification.”

(Hardt and Negri 2001 p.103)

In other words, the nation state is a creation of industrial capitalism, not an eternal part of nature, and was built on racism from the very start. I’ll come back to the idea of nostalgia for this world in a moment.

“An originary notion of the people poses an identity that homogenizes and purifies the image of the population while blocking the constructive interactions of differences within the multitude.”

(Hardt and Negri 2001 p.113)

‘Post-modern’ capitalism though is different. Information and the shared exchange of data has become the defining nature of production in the postmodern world. This informational nature of commodity production (either through highly developed and technology driven physical production, or through the production of immaterial commodities) depends less on fixed geography of places and more on communication. Capitalism no longer needs fixed borders, instead it needs to remove barriers to people interacting with each other, because it is this interaction that drives the new production forward.

Hardt and Negri are hugely optimistic about what this means for the future. In an echo of Marx’s view that the development of capitalism would lead naturally towards socialism, they see postmodern production driven by collective information sharing as presaging the end of the need for private property. The controlling power of capital becomes an unnecessary fetter on the free sharing of information which is the key feature of the postmodern world – and this opens the possibility of a future without capital in control. What they sketch out seems like a utopia of people sharing information, facilitating production with the need for an owner of the information to mediate between them.

But in truth it’s not that simple. Capital cannot simply wipe away the structures (or perhaps that should be ‘superstructures’) that it has created. There remain people and companies whose livelihoods depend on the old ‘modern’ economy creating a tension between the interests of the old and the new.

What’s more the link between the economy and the rest of society is not (and never was) the sort of structure-superstructure fantasy imagined by some twentieth century marxists. What Brexit demonstrated is that the construction of the identity of the nation through some imagined uniformity imposed on heterogeneous reality has seeped deeply into the culture. For some the new postmodern world has created a strong sense of nostalgia for that lost uniformity, driving the desire to reassert ‘our’ culture through exclusion. This is why the vote for Brexit seems so both so reactionary, and a basically racist endeavour. These are the people who don’t feel part of the new postmodern world. Egged on by those parts of capital with a vested interest in fostering the tension between old and new, either as a means of making short term profit (for example hedge funds betting on the fluctuations created in the stock market) or as a means of preventing the sort of utopian future without capital sketched out by Hardt and Negri, enough momentum was created to get the Brexit referendum passed – and subsequently to maintain a core level of support for the Conservative party who have sought electoral advantage from this sentiment.

Hardt and Negri’s analysis therefore helps us make sense of the trends that led up to the Leave vote in the Brexit referendum, but also exposes their overly optimistic approach to that analysis. To understand how things seem likely to play out we need to keep in view the sources of tension and conflict too.

Hardt, Michael and Negri, Antonio Empire (Harvard University Press, Cambridge, 2001)

Luxemburg, Rosa The Complete Works of Rosa Luxemburg Volume 2: Economic Writings 2 (Verso, London, 2016)

Anderson, Benedict Imagined Communities (Verso, London, 2016)

Some Brief Thoughts on Representation in UK Politics

I don’t often write about contemporary politics here, but after posting some brief thoughts on BlueSky (yes I’m on BlueSky now) about George Galloway’s victory in the Rochdale by-election I wanted to capture them here and perhaps add a little. Apparently we should all be very worried about Galloway’s victory. In an impromptu speech from Downing Street Rishi Sunak characterised it as part of a wider assault by unspecified extremists, claiming that “our democracy itself is a target”. As was pointed out on BlueSky, if someone you don’t agree with winning an election is an attack on democracy then it’s difficult to know what democracy actually means anymore.

But I think there’s more to it that that. In his book on China’s Twentieth Century, Wang Hui suggests that in the early 21st century both the western liberal democracies and modern Communist China are suffering from a crisis of representation. The parties that control the levers of the state no longer represent people’s views. This may feel self evident for China, but is equally true of modern UK politics. Our response to the Israeli assault on Gaza is a case in point, made much of by Galloway in his pitch to the electorate in Rochdale. There is a broad consensus between both Conservatives and Labour to avoid condemning Israeli or directly calling for the Israeli government to halt it’s attack. And yet this is out of step with the British public. Polling suggests that only 13% of British people think that Israel should continue military action in Gaza, with large majorities thinking Israel should stop fighting and enter peace negotiations with Hamas. A smaller majority (45%-24%) think that Israel’s attack on Gaza is unjustified.

While the public attitude to Israel and Gaza is the most obvious current example of the two main parties being out of step with the public, it is not the only one. To pick one more example, recent polling suggests that a large majority of British people support re-nationalisation of Britain’s railways (66% either strongly supporting or tending to support, with only 11% opposed).

If you’re one of the large majority of people who think that Israel should curb it’s assault on Gaza, or support re-nationalisation of the rail network, who do you vote for in Britain right now? Neither main party seemingly sees their role as being to represent opinion and seek to govern on the basis of broad popular support. In fact, the leadership of both Conservatives and Labour seem desperate to avoid the emergence of actual people into into their closed game of politics, aided and abetted by the Westminster media obsessed with the gossip of the village, who’s up and who’s down.

So what happens when formal politics no longer represents people? What is democracy even for if it isn’t about allowing people to influence the actions of the state through their representatives? When there are voters who have no outlet, when no one in the mainstream of politics is interested in representing them, they are likely to fly off in unexpected directions creating an opening for opportunists like Galloway (or for that matter Trump) who are prepared to say whatever it takes.

And why the comparison with China? It’s no accident that both the western liberal democracies and Communist China have pursued neoliberal economic policies over the last few decades, one of the key characteristics of which is a sharp separation between the political and the economic. “The economy” is cut loose from political influence, intentionally preventing the mass of people from intervening in the accumulation of capital. Despite their visibly different political systems, they suffer from the same symptom. The long term outcome of keeping people out of decision making is that they lose faith in that system and start to look for alternatives. And that’s something we should all worry about. What happens when the voters want radical change but no one in politics is prepared to offer it to them? As Walter Benjamin said “behind every fascism there is a failed revolution”.

Financialisation and Modern Capitalism

“Financialisation” is an insightful concept when thinking about the modern economy, and how it has changed over the course of the last fifty years. It is something discussed in particular in Greta Krippner’s book “Capitalizing on Crisis” (Krippner 2011).

According to Krippner “financialisation” is associated with a post-industrial economy, and means:

“a broad based transformation in which financial activities… have become increasingly dominant… over the last several decades.”

(Krippner 2011, p.2)

Krippner outlines an example of this process in practice analysing changes in the US economy from the 1960s to the 2000s. Successive policy changes in response to developments in the real economy led to the highly developed financial economy of the 2000s.

In practice this means the corporations come to rely on increasingly on the income from financial investments for their profits, and less on the return on investment in productive industry. Krippner quotes a 2006 study of the Ford Motor Company generating profit primarily by selling loans to purchase cars rather than from the sales of the cars themselves (Krippner 2011, p.3).

This is a fundamental change in how the economy functions, reducing investment in production as companies instead chase profitable financial investments. The system becomes increasingly disconnected from the ‘real’ economy and prone to oscillation and crisis. It’s a process that Marx touches on in Volume 3 of Capital when he describes ‘fictitious capital’, speculation, and the credit system. As more money is invested, the banks use it to create more ‘fictitious’ capital to create more investments and so as the system begins to spiral out of control. It was a process like this which drove asset prices for ‘subprime’ US real estate to unsustainable levels leading to the global financial crisis of 2007-9.

Michael Roberts takes up a similar theme in his analysis of the economy since 2007. His focus is on how companies need to search for different sources of profit as they try to survive a declining rate of profit overall, something which is a standard part of Marx’s analysis of a capitalist economy.

“After 2000, the rate of profit based on net worth remained under the rate against tangible assets for the first time on record, suggesting that the “financial” part of the assets of the capitalist sector became a significant obstacle to the recovery in capital accumulation.”

(Roberts 2016, p.122)

“Profit margins for the large companies are near all-time highs and cash reserves have accumulated, but there is little corresponding investment in the real economy; instead, it is in dividends, stock buybacks, and speculation in financial assets—and, of course, a revival of the property markets.”

(Roberts 2016, p.144)

There is little doubt that weak productive investment is driving poor ‘real world’ economic performance. Analysis by the UCL Institute for Innovation and Public Purposes suggests that “at the root of the UK’s weak economic performance is a low rate of investment“.

“The UK banking sector has largely retreated from funding productive activity in the real economy, and is instead focused on financing and trading existing assets.”

(MacFarlane 2018)

Krippner’s view that individual policy decisions designed to tackle an isolated problem have resulted in long term and fundamental changes to the functioning of the economy  also complements David Harvey’s view on how capitalism handles crises.  For Harvey, building on Marx, capitalism is an inherently unstable system with a number of points where crises can form for different underlying reasons. When a crisis occurs, the response tends to address the immediate short term problem by moving the point of tension elsewhere in the system to re-emerge later.

This is exactly the process that Krippner describes in the US. Policy responses developed in reaction to a present crisis put the economy on the path to the next pinch point and the next crisis, each widening and deepening the influence of finance on the economy as a whole.

“Financialisation” then is a concept that helps the analysis of the modern debt-laden economy both as a response to the tendency of the rate of profit to fall (Roberts) and as a means to avoid an incipient crisis while unintentionally preparing the ground for the next (Harvey).

 

Krippner, Greta Capitalizing on Crisis (Harvard University Press, Cambridge Massachusetts, 2011)

Roberts, Michael The Long Depression (Haymarket Books, Chicago, 2016)

Harvey, David Marx, Capital and the Madness of Economic Reason (Profile Books, London, 2017)

Macfarlane, L State investment banks as a source of patient strategic finance in the UK (online) (UCL Institute for Innovation and Public Purpose, https://www.ucl.ac.uk/bartlett/public-purpose/state-investment-banks-source-patient-strategic-finance-uk, accessed 19 January 2018)

Marx, Karl Capital Volume 3 (Penguin, London, 1981)

Review: Capitalizing on Crisis

This is a technically complex work of sociology unpicking and analysing trends in US society, economy, and politics over the course of forty years from the 1960s to the 2000s.

Krippner’s basic thesis is that successive policy decisions over the course of this period, each in response to immediate challenges, have ‘financialised’ the US economy. In other words, have shifted the focus of profit making from investment in productive activity to the ownership and exchange of financial instruments. Even major industrial companies come to make significant portions of their profit from activity in the financial market. This shift has significant implications for how the economy is managed, and the location of future crises.

Krippner demonstrates this through a detailed analysis of economic data and a systematic review of policy shifts during this period. Although this is somewhat dry in places the case is convincing. She defines three separate phases. First the deregulation of the domestic financial market as an attempt to get to grips with the social crisis of the 1960s and 1970s, offering policymakers a ‘reprieve from difficult political choices’. Second the response to the fiscal crisis of the late 1970s and 1980s with growing government deficits which altered the relationship between the domestic and global markets driving a ‘dramatic expansion of credit in the US economy’. Finally on the realisation relying on market mechanisms offered in fact very little restraint on consumers, corporations, or governments how approaches to monetary policy developed incrementally in the period up to 2001 to control the demand for credit through interest rates (as opposed to regulation of the supply).

Although the book was first published in 2011, Krippner stops short of the 2007-9 financial crisis, indicating in the introduction that she considers this to represent a separate stage of development that requires a separated analysis. That said it is clear that the ‘depoliticisation’ of economic decision making that Krippner outlines is a significant factor underpinning the later crisis. As Krippner explains, in making this change the expectation had been that the market would impose a discipline on economic behaviour that political actors were unwilling to do. In fact this has turned out not to be the case at all. The market has promoted and validated a lack of restraint particularly in relation to credit which has left us more exposed than ever to the risk of financial crisis.

Although this is not Krippner’s intention, her analysis is a neat fit for the Marxist view of the long term tendency of the rate of profit to decline (see writers such as Robert Brenner and Michael Roberts). The declining profit possible in productive industry leads to speculation in what Marx called ‘fictitious capital’. This growing financialisation becoming increasing unstable and leading inexorably to crisis. The picture here is one that provides a deep-seated explanation for the financial crisis of 2007-9.

So this is a fascinating book with many implications for further analysis. If a touch dry in places, it is detailed, well researched, and a thought provoking discussion of what underpins the modern economy.

Krippner, Greta Capitalizing on Crisis (Harvard University Press, Cambridge Massachusetts, 2012)

Review: How Will Capitalism End?

Wolfgang Streeck may not in fact answer the question that he poses in the title of this book, but it is still a superb read.

“How Will Capitalism End” consists of a set of essays and speeches from the German sociologist published previously in New Left Review (and elsewhere) and organised around the theme of the challenges to capitalism. Each is a thoughtful and valuable contribution to the analysis of modern capitalist, it’s impact on society, politics, and environment, and what our options for the future might be.

The opening essay sets the tone. It poses the suggestion that capitalism has so successfully eliminated all opposition to it’s conquest of politics and society that it’s destructive nature now has free rein without constraint from organised labour or political control. The end result will be the long slow death of capitalism’s ability to deliver for the majority of its inhabitants, without the prospect of its replacement by a different system which can pick up the baton as Marx originally envisaged.

The remaining essays work around similar themes. The emphasis is on the impact of the neoliberal project to disconnect the management of the economy from political and social control. This can be seen in Streeck’s characterisation of the changing nature of the state leading towards the current “consolidation” state where having passed successively through private debt then public debt stages now exists to ensure that we reliably meet our obligations to asset holders.

Another theme of Streeck is the divide between social rights and free markets. Where the democratic state prioritises providing public services for its citizens identified through elections. By contrast the “consolidation” state prioritises the contractual claims of creditors and the servicing of debt. The tension between these two has been a major driver for social and political change since the second world war.

This is a thought provoking and very readable set of essays which should be of interest to anyone who doesn’t accept the orthodox economist world view.

Streeck, Wolfgang How Will Capitalism End? (Verso, London, 2016)

Rosa Luxemburg and the Communist Manifesto

After reading Rosa Luxemburg’s “The Accumulation of Capital”, included in Verso’s second volume of her complete works I wrote a post covering her analysis that accumulation could only proceed on the basis of there being sufficient space outside the global capitalist system for it to expand into.

I recently re-read Marx’s and Engels’ Communist Manifesto (thanks to my wife, who gave me the best possible Christmas present for a radical). This was written in 1848, that is before Marx began his economic work. It is interesting therefore that Marx and Engels also point out in the Manifesto the importance of the non-capitalist economies to the growth of capitalism itself.

For example this comment on the importance of the discovery of America on the initially explosive growth of capitalism:

“Modern industry has established the world market, for which the discovery of America paved the way. This market has given an immense development to commerce… This development has, in its turn, reacted back on the extension of industry.”

(Marx and Engels 2010, p. 22)

Marx and Engels seem to have a similar mindset to Luxemburg in her analysis that capitalism needs to grow into the space outside itself in order to expand.

“The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe.”

(Marx and Engels 2010, p. 25)

Along with the points Luxemburg makes about capitalism drawing even those parts of the globe that are not part of the capitalist world into its orbit.

“The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country.”

(Marx and Engels 2010, p. 25)

“The bourgeoisie… draws all, even the most barbarian, nations into civilisation… It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst… it creates a world after its own image.”

(Marx and Engels 2010, p. 26)

As I wrote in my earlier post I don’t think that this is the end of the story, that their are other important factors both supporting and driving the expansion of capital. But it is interesting to see support for Luxemburg’s analysis in this earlier work of Marx and Engels.

Luxemburg, Rosa The Complete Works of Rosa Luxemburg Volume II (Verso, London, 2016)

Marx, Karl and Engels, Friedrich The Communist Manifesto (Vintage, London, 2010)

Beauty and the Beast

Over Christmas this year I watched the Disney live action version of “Beauty and the Beast” with my family. I was fascinated by two specific parts of the film which are revealing about US politics and Disney’s place as a prop for the status quo. It’s easy to believe that Disney promotes a reactionary view of society through its depiction of women, gender, and the family. In Beauty and the Beast we are presented with a right wing view of political economy as well.

At the beginning of the film we are presented with an aristocrat whose lifestyle brings down on him the curse of the Enchantress which turns him into the beast. His most important crime is given as impoverishing the villagers by imposing too much tax.

This is the world view of Trump and his tax cutting bill. The prince stands in place of the state and the film gives us the morality of the Tea Party, where the state is considered too intrusive and all tax is bad. Nothing else is said about where the prince’s wealth might have come from or how it will be sustained once it is no longer derived from ‘taxes’.

At the end of the film the prince is released from the curse. His position in society, and therefore presumably also his ability to extract surplus value from the villagers is reinstated. The film ends with a party where the villagers celebrate the return of the prince and his engagement to Belle. Having realised the folly of his earlier life, the prince is now keen to include the villagers. In their turn they no longer present themselves a supplicants or workers but as well dressed and middle class, they fit seamlessly into the etiquette of the castle in both dress and behaviour.

In other words it is not the prince that has changed, but the villagers who no longer seek to challenge the prince’s behaviour but rather accept it and seek to fit in. This is a standard charge by the status quo against those who seek progressive change, the attempt to change the prince was simple the “politics of envy“. The villagers ought to accept that the prince’s lifestyle is one they should aspire to achieve themselves (presumably in competition with each other).

This film then brings a very specific world view to its depiction of the life of the prince and the village. In some ways this is similar to Downton Abbey in its embodiment of conservative values.

I didn’t watch the film closely, but these two fragments stood out to me. Perhaps it is not surprising that a major film studio should reflect the current status quo, and Disney is well known for conservative “family values”. But I must confess that I was surprised to see the political economy of the neoliberal right as well.

Rosa Luxemburg and Marx’s Reproduction Schema

One of Rosa Luxemburg‘s most important works is The Accumulation of Capital, written in 1913 and included in translation in the second volume of her complete works published by Verso.

Here Luxemburg unpicks in detail the reproduction schemas described by Marx in Volume 2 of Capital. Marx defines two different basic formulae. Under simple reproduction, the economy remains the same size from year to year, with just sufficient productive activity taking place to replace what is consumed. Of course this exists only in theory. Capitalism is driven by the need to continuously expand, so simple reproduction serves only to demonstrate the basic approach to the problem.

This method abstracts the economy into two basic sections. One part which produces just means of production, commodities supporting the production process. A second part which produces means of consumption, commodities which will be consumed by society. The two sections clearly need to work in close lock step. Sufficient means of production must be created to support continuing production. Sufficient means of consumption must be produced to support the population. Marx goes into mathematical detail (which I won’t duplicate here) to demonstrate how this interaction must work for the economy to function.

In reality though, capitalism is driven by expanded reproduction, or ‘accumulation’. Here a portion of surplus value is used to increase the output of the economy year on year. Marx again shows how this might work mathematically, but somehow it is never quite convincing.

This brings us to the key criticism made by Luxemburg. For the economy to expand in this way then there must be demand for the increased output of both means of production and consumption goods. Marx’s expanded reproduction schema shows production increasing. But where does the increased demand come from? An economy operating at a particular capacity simply ought not to generate the demand (backed by the ability to pay) over and above that needed for simple reproduction. Marx demonstrates mathematically how the growth of an economy should progress, but not the process by which this expansion can actually happen.

What is more the expanded reproduction schema ignores the tension between the drive to produce more and more surplus value (and therefore commodities to be consumed for their value to be realised by the individual capitalist) and capitalism’s need to curtail the capacity for consumption of the majority of the population. The schema as described by Marx implies that accumulation can continue smoothly and indefinitely in mathematical progression. This does not match the lived experience of capitalism with it’s booms and busts. The absence of a smooth growth trajectory is a fundamental part of the system. In other words there must be a flaw in Marx’s analysis.

Marx assumes throughout that the economy in question is a fully self contained capitalist one with only two classes – capitalists and workers – and this is where Luxemburg identifies the critical point. Capital has since the beginning existed in a world which includes significant elements operating in non-capitalist ways, whether it is left over peasants and handicraft workers in the same country or colonies and developing countries overseas. Throughout it’s history capitalism has not been the closed system that Marx assumes in the reproduction schema.

Luxemburg gives two reasons why this is important. First the existence of a market outside capitalism itself creates the safety valve that is missing in the schema. This is where the demand comes from that allows the system to move beyond simple reproduction, allowing surplus value to be turned into capital and reinvested in expanding production.

“the surplus value that is to be capitalized and the corresponding part of the capitalist mass of products cannot possibly be realized within the capitalist sphere, and must therefore at all costs find purchasers outside this sphere, in social strata and formations not engaged in capitalist production.”

(Luxemburg 2016 p. 259)

The progressive growth in production also implies a growth in the workforce and allowing the world outside capitalism to be included in the theory makes clear where these additional workers come from – that is the ranks of peasants and others who are progressively brought into the world of waged work.

“It must be able to draw on other social reservoirs of labor-power not previously under the command of capital, which are added to the wage proletariat as required.”

(Luxemburg 2016 p. 260)

This is an aggressive and destructive process. Marx discusses “primitive accumulation” as something that kick starts the beginning of capitalism. Luxemburg asserts that in fact this continues all around us. In her time it was the growth of colonies and imperialism. In ours we might see it in the extension of commodity exchange to areas of life not previously touched by capitalism such as childcare.

“the accumulation of capital as a historical process, in all its relations, is contingent upon noncapitalist social strata and forms.”

(Luxemburg 2016 p. 263)

Luxemburg explicitly states then that when capital is no longer able to expand outwards into the non-capitalist world, when the whole globe is fully incorporated into capitalism, that the system will no longer be tenable and must collapse.

“Yet the more violently, forcefully, and thoroughly imperialism brings about the decline of noncapitalist civilisations, the more rapidly in removes the very basis for hte accumulation of capital. As much as imperialism is a historical method to prolong the existence of capital, objectively it is at the same time the surest way to bring this existence to the swiftest conclusion.”

(Luxemburg 2016, p.325)

Although there is much that is valuable in Luxemburg’s thinking, I think there are two basic problems.

First that the century of capitalism since Luxemburg wrote this has shown it’s ability to find new spaces for exploitation. To the extent that her analysis is correct, it does not imply the approach of the ultimate crisis of capitalism that she is seeking to demonstrate. It simply confirms the system’s dynamic nature, its ability to find new outlets and opportunities for primitive accumulation. Nothing from the last hundred years suggests there is any inherent limit to this.

Second and more significantly I think that Luxemburg misses Marx’s point. David Harvey points out that the expanded reproduction schema is constructed in such precise terms that it is hard to believe that Marx is not trying to point out that securing such a smooth path to accumulation is highly unlikely. Marx’s schema demonstrates the expanded reproduction is mathematically possible. But think about all the different processes that have to align in order for this to work: wages we must be suppressed to maintain profits, but sufficient to support realisation; the relation between producing means of production and means of consumption which must be just right to avoid overproduction as a result of disproportionality.

Obviously the schemas are totally unrealistic, and Marx has cooked the figures to fit his case. But are the schemas so unrealistic as to reveal nothing about the nature of the stresses, strains and contradictions, as well as the dynamic capacities, of a capitalist mode of production? If not, what are the schemas intended for?

(Harvey 2013, p. 368)

In other words the schema is an analytical tool rather than a statement of categorical truth. Something which allows us to examine what mechanisms the system must possess for it to function, how they must mesh together, and more importantly where they might jar and clash. Luxemburg is therefore undoubtedly right to point out how difficult it is for expanding capital to realise itself in the market, and no doubt aggressively exploiting the remaining non-capitalist segments is part of how capitalism solves this. But so is debt, speculation, and the loss of value or destruction of individual capitals which guessed the market wrong. The system is fundamentally not stable. Marx’s toolbox can help us to understand where and how that instability appears and its impact.

Luxemburg, Rosa The Complete Works of Rosa Luxemburg Volume II: Economic Writings 2 (Verso, London, 2016)

Marx, Karl Capital A Critique of Political Economy Volume 2 (Penguin, London, 1992)

Harvey, David A Companion to Marx’s Capital Volume 2 (Verso, London, 2013)

Notes from Michael Heinrich on Capital

Michael Heinrich’s “Introduction to the Three Volumes of Karl Marx’s Capital” is a fascinating short introduction to Marx’s ‘critique’. There are a number of key insights which I want to capture here.

Chapter three goes into detail on the nature of value. Heinrich draws a distinction between what he calls a traditional Marxist ‘substantialist’ view and value as developed as a social relation through the act of exchange. In the ‘substantialist’ view value is understood as a property of each individual commodity, created during production. In Heinrich’s view this is not what Marx is getting at. Instead value is determined by “socially necessary” labour time, and what is socially necessary can only be determined in exchange where the individual labour of producers is compared to the total labour of society.

“abstract labour is a relation of social validation existing only in exchange… value is not at all a property that an individual thing possesses in and of itself.”

“The substance of value… is something only obtained by things when they are set into relation with one another in exchange.”

(Heinrich 2012, p.53)

“this social relationship between people appears as a relationship between things: it is no longer people who stand in a specific relationship with one another, but commodities.”

(Heinrich 2012, p.73)

This emphasis on value as a social relation and not an eternal property of individual commodities chimes well with Marx’s statement that under capitalism, commodities represent:

“the definite social relation between men themselves which assumes here, for them, the fantastic form of a relation between things.”

(Marx 1990, p.165)

Heinrich defines the substantialist view as a ‘pre-monetary’ theory of value, one which sees value as part of the commodity and money as a passive practical way to simplify the process of exchange. Marx’s theory is rather a ‘monetary’ one. Commodities cannot be related to each other without the value form that is money.

In chapter 7 Heinrich touches on the equalisation of the rate of profit, something which I felt I didn’t really understand on a first reading of Marx, defining the link between the amount of surplus value generated and the actual profit received by an individual capitalist. If commodities actually exchange at or near their true value then different rates of surplus value must mean that capitalists in different branches of production receive differing rates of profit.

As explained by Heinrich rates of profit are equalised in process similar to “supply and demand”. Assuming that capital is able to move between different branches of production, then individual capitalists will gravitate away from areas with lower rates of profit and towards those with higher rates. As supply increases in the areas with higher profit rates, prices will fall and vice versa. The result establishes an average or general rate of profit. To the individual capitalist this process disguises surplus value as the actual source of profit, making it appear that profit is a premium added to the cost of producing it.

“The actual profit of an individual capital… thus seems on the one hand to depend upon objective conditions (market prices) and on the other hand on the subjective skill of the capitalist in producing at a low cost of production. The fact that profit rests on the appropriation of surplus value is not apparent.”

(Heinrich 2012, p.147)

Most importantly of all, this transition from value to price is a transition from one level of description to another. To see the dialectic whole from a different angle. Value mediates the relationship of individual labour to the labour of the whole of society. Price and profit mediate the relationship of individual capital to the total social capital. They are different poles of the same social relationship.

Heinrich argues that Marx has not proven that the rate of profit is bound to fall over the long term (Heinrich 2012, p.151) on the basis that while it is likely that the organic composition of capital is increase, Marx assumes that the rate of surplus value will remain at least stable thereby leading to a falling rate of profit. In fact it is possible that the rate of surplus value may increase, or at least fall more slowly than the organic composition of capital rises either one of which will mean that the rate of profit does not fall.

On crises Heinrich outlines an “underconsumptionist” view. The unrestricted nature of production struggles to realise value in a world where the income of most people is constrained.

“The tendency for an unlimited extension of production confronts an ability to consume in society that is limited in a variety of ways.”

(Heinrich 2012, p.172)

“a potentially unlimited reproduction confronts a limited consumption… The consequence is a tendency towards the overproduction of commodities… and the over-accumulation of capital.”

(Heinrich 2012, p.173)

This leads to crisis as value cannot be realised in the market, leading to the destruction of social wealth but also conversely an increase in the rate of profit for the remaining capitals and a eventually a renewed upturn often driven by technological changes which improved profitability.

In the final chapter, Heinrich offers some thoughts on how Marx envisaged a communist society working. This is of interest as a rule Marx did not write much about what would come after capitalism. For Heinrich there are two key differences. First that society is no longer based on exchange. Capital, commodities, and money no longer exist. Second humanity is emancipated from a social structure that develops a life of it’s own and impose itself upon each individual. The social relations which generate fetishism must disappear with society organised as an “association of free men”.

Heinrich contrasts this with traditional Marxism-Leninism based on changing distribution patterns which remains dependent on a central authority, with the people becoming a passive object of the party’s policies.

Finally Marx:

“emphasises the massive development of productivity on the basis of science and technology, as well as the comprehensive development of the abilities of the workers as essential preconditions for the transition to a communist society.”

(Heinrich 2012, p.223)

Heinrich, Michael An Introduction to the Three Volumes of Karl Marx’s Capital (Monthly Review Press, New York, 2012).

Marx, Karl Capital, A Critique of Political Economy (Penguin, London, 1990)

Review: An Introduction to the Three Volumes of Karl Marx’s Capital

This is a superb summary of the key points made by Marx across the three volumes of Capital. Heinrich is clear from the start that he seeks to avoid the simplifications of the one-time ‘orthodox’ Marxism-Leninism of the defunct Soviet Union. The analysis is sharp, succinct, and up to date.

This is not a companion to the book itself, in the way that David Harvey’s two volume “Companion” is. What Harvey provides is a walkthrough, a genuine companion on the road as you work through each chapter. His goal is to encourage you to read Marx as a work of literature and on his own terms.

By contrast Heinrich takes you away from the book itself to summarise and draw out the principle conclusions. He looks beyond the debates of the past within organised communism to assess Marx’s analysis from a modern dispassionate perspective. His section on the development of value within capitalism as a social relation I found especially insightful. Heinrich also does an excellent job of drawing together the three volumes to explain what Marx is attempting in each, while showing how they join to create a overarching analysis.

The focus throughout is on the categories and structures of Marx’s economics rather than his philosophical approach. Heinrich specifically attacks the use of the word ‘dialectics’ in simple Marxism-Leninism as a way of saying ‘this is complex’. Bertell Ollman’s “Dance of the Dialectic” would make a useful companion work, covering as it does Marx’s method rather than the specifics of his economic analysis.

In brief, a superb short outline of Marx’s economic analysis as laid out in the three volumes of Capital.

Heinrich, Michael An Introduction to the Three Volumes of Karl Marx’s Capital (Monthly Review Press, New York, 2012).