[Marxism] Marx and capitalism

Jurriaan Bendien andromeda246 at hetnet.nl
Tue Dec 14 18:50:16 MST 2004

Phil wrote:

The reason capitalists invest in labour-saving devices/new
technology/plant is because of competition with other capitalists.

Incidentally, this was also a central point in the controversy about the
Okishio theorem. Okishio argued essentially that capitalists would not
invest in new technology, unless it increased their profit rate. Hence any
hypothesis about a necessarily rising organic composition of capital
causing a falling rate of profit was false.

However, this conflates the mass and rate of profit, and ignores that
capitalists are compelled to invest in technological improvements to
increase productivity, if they don't want to lose business to others with
lower unit-costs and consequently more competitive prices. The only
alternative they have in the long run is to take over other competing
businesses, if they can. These days, of course, both occur at the same time.

Useful Marxian discussion of capitalist competition can be found in:

Shaikh, Anwar, 1978. "Political Economy and Capitalism: Notes on Dobb's
Theory of Crisis," Cambridge Journal of Economics, Oxford University Press,
vol. 2(2), pages 233-51, June.

Shaikh, Anwar, 1980. "Marxian Competition versus Perfect Competition:
Further Comments on the So-Called Choice of Technique," Cambridge Journal of
Economics, Oxford University Press, vol. 4(1), pages 75-83, March.

Useful books on the realities of competition are also Michael Porter's
"Competitive Advantage" and "Competitive Strategy". These are not Marxist
books but provide insight into the real world of capitalist competition.

In the Eastern bloc countries, there was almost no competitive market
pressure to invest in new technology. Hence Cliff postulated that
competition occurred through the arms race between the USA and
the USSR. He also argued that the USSR competed internationally,
but that is also doubtful because there was no large export-oriented
sector. In reality, the state authorities decided to
invest in new technology according to social or political priorities.
Whether enterprises made a profit might be totally irrelevant, because
what mattered was that a particular product was produced. The
only pressure that existed was political pressure to increase output, to
meet planning targets. But actually if you study the technological structure
of Soviet industry (the stratification of fixed equipment), you find that
very old technology and new technology operated side by side. Equipment that
would have been scrapped within ten years in a capitalist economy, was still
functioning twenty years later, and so on. In part, there was nothing wrong
with that, if the equipment functioned perfectly well, and it employed
people. But it became a huge problem when these economies were suddenly
opened to the world market, because costs and quality just were not
competitive in the world market. It is one of the factors which accounts for
high unemployment in East Germany, which had one of the most advanced
post-capitalist economies.

Recently the Financial Times carried an article about China, arguing that
China should "modernise" and develop its capital markets, enabling more
trade in futures, derivatives and other financial products. This, it is
argued, would create a better allocation of capital and higher profits, and,
"by raising productivity, they enable better wages for workers". (FT, 16
November 2004, p. 17). I don't really know how they figure that out, but
point is, that until the 1980s, there was no significant capital market in
China, banking-based or otherwise.

You could make a case for the idea that China has now made a transition to a
kind of state capitalism, insofar as capitalist markets now operate while
the state retains strong control over the economy. But if you argued that
China has been state capitalist since 1949, this is not really credible from
the point of view of economic history. After all, the capitalist class was
virtually wiped out, as were internal capital markets, and the markets that
existed were heavily regulated, preventing most accumulation of private
capital. Political state initiative was substituted for private initiative,
and industries were developed regardless of whether they were competitive in
the world market. That was the whole aim: if China had been integrated in
the world capitalist economy, then the bulk of industrial development would
never have happened there, apart from those few sectors compatible with the
interests of the advanced capitalist countries. That has been the fate of
many poorer countries: they suffered very uneven development, with a few
advanced sectors, and for the rest a poorly developed infrastructure.


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