Reply to Jurriaan and Julio

Mark Jones markjones011 at
Fri Dec 13 16:12:11 MST 2002

Both Julio and Jurriaan share a productivist, ricardian-sraffian reading of
Marx which is highly contentious, not to say tendentious. For both of them
(as for Tony Cliff, as has just been argued) words and even theories seem to
mean whatever they want them to mean. But this is the politics of Lewis
Carroll's Red Queen not of red Marxism. I'm not going to spend time on
Julio's productivism, which is so wildly wrong a reading Marx that it stands
the old man on his head. You simply cannot assert things like:

>>But, the main argument of Marx against capitalism is that, as human
productive forces expand under capitalism, this social order becomes
intolerably inefficient -- wasteful of productive force, wasteful of social
labor, wasteful of human life.  The argument of communism is both that
humans can do MUCH better at managing their productive force and that the
very development of productivity induced under capitalism ENABLES them to do
so.  Without THIS argument, communism has NO material case.  If capitalism
is so efficient managing human productive powers, then why would intelligent
human beings want to overthrow it?  Mark's argument leads to abandoning the
main argument against capitalism.<< (Julio on "Mark & David's Debate",

as Julio does unless you stop reading Marx, as Julio seems to have done,
with the German Ideology, and ignore most of what comes before and
everything which comes after (as Marx said, 'we abandoned German Ideology to
the gnawing criticism of the mice'. He and Engels left it unpublished
precisely because the mechanistic materialism the work espouses leads
directly into the trap of productivism; the whole weight of the Grundrisse,
written shortly afterwards, is bearing down on the errors of German
Ideology, and the whole burden of the Grundrisse--not written for
publication, obviously-- was to clarify in his own mind Marx's final and
devastating critique of the productivist errors of German Ideology.).

Julio continues by attempting to assimilate Marxian value theory and Marx's
equilibrium theory to neoclassical theories based on concepts of utility and
by positing the historical (actually, the transhistorical) universalising of
the theory that the marginal return on capital always and everywhere a
priori decides any rational allocation of labour-time. The notion that
Marxian value theory is a subset or historical deviation from neoclassical
theory starting with Jevons is not exactly new. The oldest criticism of Marx
staring with people like Boehm-Bawerk began by suggesting that qua economist
Marx was simply a 'minor post-Ricardian' and that the 'labour theory of
value' was fundamentally flawed because it could not account for the
transformation of values into prices. Marx is alleged to have assumed what
he set out to prove, and his 'reproduction schemes' are allegedly closed and
metaphysical, is mathematics wonky and in any case serving only didactic
purposes because in fact his theory is not scientific at all and not subject
to any kind of empirical verification. According to this critique of
Marxism, the source of value is utility and the value (=price) of a good is
determined by the market according the level of demand for the good (not
according to what in this view is Marx's 'abstract, unprovable and
tendentious' assertion that prices are determined by values and values are
embodied socially-necessary abstract labour-time). This idea that
value=price and is determined by subjective demand expressed in the market
place, is the basis of the whole rigmarole of neoclasscial apologetics. The
neoclassicals per contra think that the concept of 'socially-necessary
abstract labour-time' is itself just a logical rigmarole unsusceptible to
empirical proof and therefore not scientific. Their key argument is that
Marx does not succeed in demonstrating in empirical form (capable of
real-world verification) the transformation of values into prices, although
Marx ab initio is forced to acknowledge that there IS such a transformation
process, because it is absolutely clear that values and relative prices do
diverge in reality. This is also a central point made by Jurriaan.

Whether or not Marx solved the famous Transformation Problem (I think he
did), it seems clear that neoclassical marginal utility is based of nothing
more than a psychological fetishism--the notion that all that determines the
value of any commodity is its utility in the mind of the beholder/purchaser.
Neoclassical theory itself does not deny that this psychologism is the nub
of its apologetic theorising, nor can it because it is simple self-evident.
Julio's notion is false, that:

>> A basic rule is that returns
are maximized when wealth is allocated in such a way that the marginal
return on each particular endeavor is equalized.

This is a universal principle of rational resource allocation, not limited
to market economies.  It follows directly from the law of economy of time.
<< (Julio, ibid)

He, like Jurriaan and a host of other would-be benefactors of poor old
struggling Marxism, wants to 'amend' Marxism, to 'correct' Marxism, but in
fact is negating it altogether! The historical trajectory of political
economy, starting with the 'classical political economy' Locke, Hulme, Adam
Smith, Ricardo (in fact, starting with Aristotle) is to move from a simple
labour theory of value (values are determined by embodied labour-times) to
Marx, who destructively criticised and in fact, completely liquidated the
classical labour theory of value, and in the process revealed the transitory
nature of capitalism and the falseness of its claim to be 'eternal' and
'natural'. From Marx onwards, political economy bifurcated. In the
revolutionary tradition of Marxism and of Leninism, the labour theory of
value was transformed into Marxian value theory, a devastating tool of
historical and social analysis and of revolutionary theory placed by the
Founders into the hands of the revolutionary proletariat. In the hands of
bourgeois apologists, however, starting with Jevons, classical political
economy sank into the mire of obtuse and shallow theorising known as
marginal utility theory. Unable to acknowledge that the workers had anything
to do with adding value to what they produced by their labour (an absurd
denial of the plain truth), the neoclassicals argued that value was, as
mentioned, a purely psychological artefact. What the 'modernisers of
Marxism', of which Jurriaan and Julio are only the latest and hardly the
most imaginative variants, have done is--eliminate Marxism entirely! They
simply dump Marxian value theory and try to reconcile the labour theory of
value of the classicals (primarily David Ricardo) with the neoclassical
utility theory originated by Jevons and Marshall, thus excising Karl Marx
entirely from the history of economic theory. The great modern originator of
this 'theory' is Piero Sraffa. It is his ideas (production of commodities by
means of commodities) which Julio and Jurriaan cheerfully and uncritically
buy wholesale. Sraffa found many opportunistic followers among academic
self-styled Marxist professors. However, no-one is going to die at the
barricades for the weird notion that commodities are actually produced
by--other commodities. People are workers, not commodities. But this is not
the reason why the theory sucks. It sucks because it is unable to deal with
the very Transformation Problem with which it begins its critique of Marx's
alleged errors.

The 'basic rule' which Julio invokes, that "returns are maximized when
wealth is allocated in such a way that the marginal return on each
particular endeavor is equalized.
This is a universal principle of rational resource allocation, not limited
to market economies.  It follows directly from the law of economy of time."

cannot in fact apply to any kind of economy except that of capitalism. Only
modern industrial capitalism, by creating a generalised labour market,
creates a true 'economy of time'. That is the specific difference between
capitalism and all precedent modes of production: and it is so because of
the existence of wage labour as the dominant form of labour. In fact the
'basic rule' which Julio invoke is just a shallow and useless derivative of
the idea, fundamental to all macroeconomics, that in modern industrial
societies capital must be rationally allocated between different branches of
industry which by their nature have different capital compositions and
different inherent rates of return. Since industrial production did not
exist prior to modern capitalism, the need to allocate social capital
intersectorally obviously did not exist either. The question is, just how is
capital allocated between different sectors, bearing in mind that they have
different inherent profit-rates resulting from different value-compositions?
The answer can hardly lie in the absurd notion that "returns are maximized
when wealth is allocated in such a way that the marginal return on each
particular endeavor is equalized." That merely begs the whole question,
namely of the *mechanism* which allows the profit-rate to e equalised
between different sectors. Wishing doesn't make it so.

The first person to attempt an answer to this question was the same person
who in fact was the creator of macroeconomics as a discipline and the first
person ever to attempt to model theoretically the intersectoral structure of
a modern industrial economy, allowing for the rational allocation of capital
and proving how the profit rate is equalised. That person was not Ricardo
nor Jevons, but Karl Marx. It was Marx who first showed how equilibrium is
possible in a capitalist economy with different sectoral profit rates. It
was he who created the first dynamic equilibrium models. The sad fact is
that he entire history of bourgeois macroeconomics and capital production
theory, from Joan Robinson on the left to Kenneth Arrow or Samuelson on the
right, with many a Nobel winner in between, has entirely failed to solve or
even address the problem of the equalisation of the profit-rate. Marx
succeeded only because he succeeded first in solving the Transformation
Problem. In the process of showing how values are transformed into relative
prices, he also showed how a general profit rate comes into existence and
how equilibrium is asserted.

The fact that neoclassical theory has been revitalised (as Julio says) by
Kenneth Arrow, Ronald Coase, and by the judicious application of public
choice theory etc, doesn't change the fundamental objections of Marxism to
neoclassical apologetics, which were first voiced by Engels, then by Lenin,
Luxemburg, Bernstein, Henryk Grossman, Trotsky, Bukharin and indeed by every
major Marxist thinker who dealt with the subject. It is absolutely useless
and pointless to try and resurrect the neoclassical vampire here, it has
been staked out at a crossroads, buried in garlic and had a stake thru its
heart long long ago.

Jurriaan Bendien  wrote:
> All that Marx really says in the passage you quote is that in order for
> money, assets or commodities to be accumulated (used for value accretion,
> i.e. used as capital), definite social relations are necessary, encoded or
> reflected in specific private property relations, ideological forms,
> institutional arrangements etc. I don't deny that at all, of course. And
> further, that capital becomes an alien social power, that people
> effectively
> become the slaves of capital accumulation, whatever they may
> think. I don't
> deny that either.
> But when Marx later says capital "is not a thing, but a social relation" I
> think it would be better to say it is a specific thing within, or
> by virtue
> of, a social relation.

This statement, which is of a piece with the whole run of Jurrian's
thinking, is another example of either standing Marx and Marxism on its
head, or it is meaningless. Capital, according to Marxism] is not a thing
but a reified social relationship. Its reified forms include money-capital
and the whole physical apparatus of markets, banks, means of exchange etc.
But capital is not a thing, specific or otherwise.

In Jurriaan's earlier posts answering James he similarly conflates values
with prices. It is a clever argument, but false. It is an argument about
socialism as 'the allocation of resources', in which the choice is between
the market and some kind of political process. Jurriaan either comes down
for the market, or ends up avoiding the issue altogether, I'm not sure
which, because he is completely unclear himself.

In Jurrian's answer to James Daly dates Thu 12-Dec-02 20:12, he mentions
among other writers, Makoto Itoh and Diane Elson. Elson, at least in her
earliest work, certainly took the same view as me, namely that capital is
not a thing or entity of any kind, it is essentially a relation. Makoto Itoh
has done very important work on the Transformation Problem. In particular,
he addressed the ways in which values become relative prices. A crucial step
which he identifies is the formation of prices of production. In
pre-capitalist societies where large scale industry and large industrial
proletariats do not exist, the formation of prices of production is not an
issue. It only becomes an issue when large-scale industry produces a social
division of labour in which many different branches of production with
different capital intensities and productivity levels, compete for scarce
capital. Somehow a general social profit rate must emerge even though the
rate of exploitation in difference branches of industry which have very
different value compositions means that surplus value extracted greatly
varies. For capital to be allocated smoothly between the different branches,
process of production must be formed such that the profit rate is equalised
among the various branches. This crucial step, the basis of capitalist
reproduction, is also the key to understanding the so-called
transformation-probem, i.e., the problem of the transformation of values
into prices. This step Jurriaan  elides completely however, by using the
sraffian formulation that in capitalism, 'production of commodities by means
of commodities' occurs and is the process of value creation and realisation.
This, of course was not Marx's view. It is a Ricardian theory and a
regression from Marx's own achievement.

There is no concept in the work of David Ricardo of the formation of prices
of production as the crucial step in the transformation of values into
relative prices, and no concept at all of a functioning capitalist economy
divided into many industrial branches.  Makoto Itoh among others
conclusively demonstrated the train of Marx's thought, which attacks the
problem of price-formation from both directions, i.e. from the direction of
value-production (which occurs within the labour process) and from the
direction of price-formation (which occurs within markets). Many people have
continued to misunderstand what Itoh was on about and have assimilated to
some brand of market socialism or sraffianism. But this was not Itoh's
intent at all.

Markets may continue to play a transitional role under socialism, and I
agree completely with Jurriaan about the fact that there is no such thing as
'pure markets', they do not exist and never have. They are always subject to
the action of the state and other things. But the transitional role markets
will play can only be in regulating production while markets themselves are
discarded, beginning first of all with capital markets and with price
formation at the level of prices of production. Socialism is not, in fact,
about discovering a 'better form of resource allocation' than either markets
or politicised bureaucracies are capable of, it is about *liquidating the
conception of resources*. The notion that the natural world is an
externality consisting of exploitable 'resources' is only the historical
legacy of commodity production, not the future of human society. Arguably,
the invention of double-entry bookkeeping, which was essential to the
emergence of capitalism, was also the harbinger of its downfall because it
posits the duality of resource/destruction, which always sums to zero. The
only true indestructible product of the capitalist epoch is knowledge, and
that is not a commodity even though it is constantly under threat of
commoditisation. Knowledge is not a commodity under capitalism because
tendentially knowledge can only be either a monopoly or universal. If
knowledge is kept as a monopoly the effect is to disrupt capitalist
competition and then to destroy equilibrium. But if a knowledge is sold as a
commodity it almost immediately loses its value, becomes universally
available, and serves to increase general productivity and cheapen
production. Keeping monopoly control of knowledge in the form of patent
rights, intellectual knowledge rights etc, is a form of rent-seeking
behaviour appropriate to highly decadent and parasitic social formations
like US and European capitalism is now. It is a primary cause of global
deflation and the highly destabilising inequality of wealth and income
between the West and the South (where most of the workers and most of
production now is).

The knowledge which socialism inherits will by definition have no economic
value; it will be universally freely available, and the production of new
knowledge therefore cannot also be the production of new value. This will be
because science and technology as social processes will not be (cannot any
longer be) entropic processes which consume unsustainable amounts of energy,
raw material inputs and human labour and which create a duality of complex,
privileged, urbanised networks surrounded by devastated entropic wastelands.
Under capitalism, economic equilibrium is achieved by the commensuration of
embodied socially-necessary abstract labour-times by means of the sale of
commodities and realisation of values on the market. Equilibrium under
capitalism requires the realisation of profits (the result of surplus-value
extracted from labour-power), otherwise the system goes into crisis. But
equilibrium therefore entails the endless growth output (for if output
remained constant then the expanded reproduction of capital would become
impossible and a part of the newly created value, i.e. the surplus-value,
i.e. profits, would not be realised). Hence equilibrium also requires the
endless growth of final demand, i.e. of the human population, otherwise
surplus value embodied in extra production cannot be realised on the market.
Marx asserted this by saying that the General Law of Population was the most
important law in capitalism.

Capitalism is afflicted by a Grow-or-Die syndrome. It cannot be
environmentally sustainable even in the case that continuous improvements in
technology make production ever more efficient and less wasteful (this is he
so-called Jevons Paradox, according to which capitalist economies will
always continue to consume more energy in absolute terms, no matter how much
more energy-efficient technology makes production). There is no escape for
capitalism from the Thermodynamic Trap. This alone is sufficient proof  that
capitalism is a transient social order and mode of production and that
capitalism will therefore be superseded by something else.

Socialism per contra, entails the commensuration not of values but of the
metabolic process of society and nature. Technological advance must result
in the absolute as well as relative decrease of entropy. In other words,
socialism entails the abolition of 'sink and faucet' models of social
reproduction and the embrace of genuine sustainability.

As Julio says:

>>Externalities are costs imposed on or benefits received by an individual
producer or consumer due to what other individuals do and for which no
market payment or charge takes place.  But Marx's thesis is that the
development of human productive force leads towards more externalities --
more interdependence than markets can handle adequately.  This is what
Marx's called the increasing "socialization of production" under

Capitalism cannot exist without growth in material consumption. Capitalist
apologetics equate the increase of civilisation with the growth of material
consumption, but this is false. In fact, civilisation means more free time,
above all. Capitalist growth has not resulted in more free time. Billions of
under and unemployed persons have no free time because they are forced to
scavenge for the bare necessities. Meanwhile in the metropoles the working
days appears to be lengthening. There is no growth in civilisation anywhere.

Socialism means growth of civilisation without growth of material
consumption. Sustainability means the installation of an Ecological
Imperative at the heart of human culture. This Ecological Imperative must
have the force of a taboo of such elemental significance as the creation of
earlier taboos were at the very dawn of human civilisation-- such as the
taboo prohibiting the taking of human life, or the taboo against incest. It
must have the same fundamental, unquestioned character. No social order can
be based upon cannibalism, incest, or generalised murder. In future, no
social order will be thinkable which breaches the Ecological Imperative.
This taboo will be a taboo against impoverishing evolution. We do not have
the right to diminish diversity. We do not have the right to kill off any
species. We do not have the right to kill off parts of the ecological fabric
of the planetary biosphere.

Socialism means locating the human species and human civilisation as a
subset of the ecosphere. It means dissolving the Society-Nature distinction
which has characterised thought at since classical antiquity. Socialism is
therefore a fundamental alteration in the constitution of human thought as
well as of human society.

Mark Jones

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