hayek (1)

jones-bhandari djones at uclink.berkeley.edu
Mon Oct 10 11:19:39 MDT 1994

If consumer needs are to be met, productivity continously revolutionized
and human freedom respected, we must recognize the necessity of prices,
markets and money.  So goes the Hayekian challenge which Chris has
eloquently defended.

If I understand the Marxist critiques of Alfred Sohn-Rethel and Henryk
Grossmann correctly, the market loses its regulative function under the
pressure of fixed capital, which of course plays the central role in Marx's
theory of accumulation and crisis. As Sohn-Rethel puts it: "If the prices
fall to a level below the cost of production, production can be curtailed
and thereby a corresponding part of the proportional costs can be saved. IF
howevever the essential part of the costs of production are fixed then the
costs will not be lessened by the curtailment of production.  And if in
this situation the prices fall there is no purpose in compensating this
fall by a curtailment of production.  It is cheaper to continue to produce
below the production costs. The enterprise will now function at a loss but
this loss will be smaller than it would be if production were curtailed
while the costs remain more or less undiminished."(my emphasis)

Under the pressure of fixed capital, firms cannot respond to market
signals. (Think of the D-RAM market in the 80's).  International cartel
agreements cannot be respected, as national antagonisms intensify over
dumping and throw-away sales (think of the attempts at voluntary
restrictions in the 80's, especially in the semiconductor industry); and
given the inadequacy of demand of a real kind, that is of reproductive
values, then an alternative demand, that of non-reproductive values, must
be created in the short term and that demand will then probably be made
effective for as long as possible by a state power which compels people to
pay for that production (e.g. militarism).

The price mechanism would then be the road to serfdom, nationalist
competition for world market supremacy and war.  Even if socialism were
sure to fail on epistemic grounds and to lead  to chaos and repression, it
does not follow that capitalism can prevent its own demise into barbarism.

As I am unable to develop the marxist argument as to why the supply and
demand mechanism loses its regulative function and what the political
consequences of that loss are, I include here works where the argument is

Henryk Grossmann, "Marx, Classical Political Economy and the Problem of
Dynamics", Capital and Class 3 (1977), p. 85-89

Alfred Sohn-Rethel, "The Dilemmas of Rationalization" in Economy and Class
Structure of German Fascism.

Chris is  to be thanked for his mention of Hilary Wainwright's response to
Hayek in her book Arguments for a New Left, which I have been checking out
on Chris' recommendation. Wainwright also mentions pieces by Robin
Blackburn and Andrew Gamble.  There is also a very provocative discussion
of Hayek in Frank Furedi's Mythical Past, Elusive Future.


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