[Marxism] Fwd: Special Page at Monthly Review (My reply to Heinrich) Part I

Shane Mage shmage at pipeline.com
Mon Dec 2 12:28:44 MST 2013

> This was written in May-June of this year, immediately after  
> Heinrich's article was published.  Because of the long, long delay  
> in his responding, MR felt unable to publish the critiques of his  
> article for six months.  Now that his "response" has been published-- 
> in my case not responding to any of the argument presented here and  
> merely demonstrating his ignorance of such elementary concepts as  
> the difference between a stock variable and a flow variable, while  
> repeating a nonsensical formula for the rate of profit that he in  
> his original article admitted was to be found nowhere in Marx but in  
> his reply to this critique he declares to be "Marx's formula")! I  
> will soon on these lists publish (undoubtedly at a tad greater  
> length than he merits) a brief examination of Heinrich's response to  
> my critique.  I leave Roberts, Cachedi. and Moseley to do their own  
> decisive answers--which they surely will--to Heinrich's response to  
> their critiques.
>  It was Marx's ultimate purpose, as stated in the preface to the  
> first edition of Das Kapital, "to lay bare the economic law of  
> motion of modern society." It is clear that Marx regarded as his  
> central achievement in this regard the "Law of the Falling Tendency  
> of the Rate of Profit."  In vol.3, (p.303) he declares that: "The  
> barrier of the capitalist mode of production becomes  apparent:
> 			 1. In the fact that the development of the productive power
> 			     of labor creates in the falling rate of profit a law, which
> 			     turns into an antagonism of this mode of production at a
> 			     certain point and requires, for its defeat, periodic crises.
> 			 2. In the fact that the expansion or contraction of production
> 			     is determined...by profit and by the proportion of this
> 			     profit to the employed capital--thus by a definite rate of
> 			     profit--rather than the relation of production to social
> 			     requirements, i.e., to the requirements of socially developed
> 			     human beings. It is for this reason that the capitalist mode  
> of
> 			     production meets with barriers at a certain expanded stage
> 			     of production which, from the human point of view, would
> 			     be utterly inadequate.  It comes to a standstill at a point
> 			     determined by the production and realization of profit, not
> 			     by the realization of human needs..."
> In the April 2013 issue of Monthly Review, Professor Michael  
> Heinrich--in an article entitled "Failure of the Falling Rate of  
> Profit Theory"--attacks Marx's Law not on empirical but on very  
> familiar [cf. Joan Robinson, Essay on Marxian Economics] theoretical  
> grounds.  Prof. Heinrich's rejection of the "Law of the Falling  
> Tendency of the Rate of Profit" enunciates two lines of criticism:   
> that the Law does not follow from the concepts and definitions of  
> the Marxian theoretical system; and that even if such a tendency  
> existed Marx would still be wrong to allege that it is important to  
> "crisis theory," ie., our understanding of the economic cycle.
>  Any "Crisis Theory" is an attempt to explain not only how but why  
> the capitalist mode of production, throughout its history, exhibits-- 
> alongside its tendency toward secular expansion of the means of  
> social production and of its output of  material goods and services  
> as commodities--recurrent interruptions of that process in which  
> substantial amounts of productive capacity (productive workers and  
> machines) find themselves, after a period in which they had been  
> fully employed, excluded from full participation in the process of  
> social production. Thus a "Crisis Theory" is a theory of the  
> cyclical movement of the capitalist economy.
> It is elementary (and Marx was first to point out) that the key  
> force in capitalist development is the accumulation of capital and  
> that the key variable in the capitalist economic cycle is the rate  
> of investment in the means and conditions of production.  It is  
> equally clear that the central purpose of investment for any  
> capitalist firm is the enhancement, or at least maintenance, of its  
> profitability. Thus far all economists, Marxian or not, should  
> agree.  Where Marxians and non-Marxians part company is the "Theory  
> of Value." For Marx, aggregate "profit" (comprising the categories  
> of profit-of-enterprise, interest, rent, and executive compensation)  
> consists of aggregate surplus value, the determinate (and, for each  
> "ideally average" [footnote one] capitalist firm, "aliquot") share  
> of the total number of hours of socially-necessary labor time  
> performed by the productively employed working class as alienated to  
> and appropriated by the capitalist class. Net capital investment  
> consists of the share of surplus value accumulated, rather than  
> consumed, by the capitalist class: and so capital, as the stock of  
> accumulated (capitalized) economic wealth of the capitalist class,  
> consists of all the surviving (ie., not used up in the course of  
> subsequent production) hours of surplus-labor time accumulated by  
> the capitalist class as property embodied in the means and  
> conditions of the productive system as a whole (including the  
> necessary but nonproductive objects required for sales,  
> administration, etc.).
> What then is required of an adequate "crisis theory?" In essence,  
> such a theory has to present a model of the cycle in which the  
> conditions promoting a rate and amount of investment sufficient to  
> assure expanding output, profits, and employment are transformed *by  
> that very process of capital accumulation* into conditions promoting  
> a generalized decline in output, profits, and employment (and,  
> subsequently, the resumption of expansion into a renewed cycle).   
> Every cycle is the concrete experience of a definite capitalist  
> economic system in the real historical context of capitalist  
> evolution on a world scale.  As Marx points out, the "the real  
> crisis can only be educed from the real movement of capitalist  
> production, competition, and credit--in so far as crisis arises out  
> of the special aspects of capital which are peculiar to it as  
> capital, and not merely comprised in its existence as commodity and  
> money." (Theories of Surplus Value, ch. 14)
> The dependence of capital investment on profitability, and the  
> effect of periodic shortfalls in the profitability of expanded  
> investment,  are certainly among the foremost aspects peculiar to  
> capital. But it is impossible to understand how Marx's "Law" would  
> work in determining capital's real cyclical movement if one cannot  
> properly formulate the "Law." Since Heinrich shows himself  
> completely unwilling (or unable?) to do that, we here have to start  
> by doing it for him.
> For Marx, the rate of profit tends to fall as an inevitable result  
> of the increasing "organic composition of capital."   Marx defines  
> Organic Composition as the ratio between "dead labor" and "living  
> labor.": "A definite number of laborers corresponds to a definite  
> quantity of means of production, [ie., the 'technical composition'  
> of capital] so that a definite quantity of living labor corresponds  
> to a definite quantity of labor already objectified in means of  
> production." (v.3, p.171)  This crucial category is thus defined as  
> the ratio between a stock and a flow, both denominated in hours of  
> socially necessary average labor time, over the natural accounting  
> period of one year. Accordingly, the "technical" and "organic"  
> compositions, alike, represent as opposite (physical vs. value)  
> sides the degree of development of productive forces accomplished,  
> in its characteristic forms, by the capitalist mode of production at  
> any given time.  "The progressively higher organic composition of  
> the social capital is, in another way, but an expression of the  
> progressive development of the social productive power of  
> labor)." (v.3, p. 248)   [footnote two]
> The (capital) stock is the total number of hours of socially  
> necessary labor time ("dead labor") accumulated over the past as  
> surplus-value, objectified (capitalized) in the material forms of  
> machines and structures ("fixed capital"), and inventories  
> ("circulating capital"). The ("living labor") flow is the total  
> number of hours of productive labor performed by the working class  
> over the year ("productive labor" for Marx is that commodity- 
> producing labor --whether the commodity is material in form or an  
> immaterial service consumed as a final product in the course of its  
> production--alienated to capital and thereby productive of the  
> surplus-value contained in the value represented by capital's net  
> output of goods and services).  This flow comprises two, and only  
> two, fundamental parts: the value received as aggregate income by  
> the class of productive workers; and that received as aggregate  
> income by the class of capitalist exploiters. The ratio "s/v"  
> between these two value-segments ("variable capital," represented by  
> the lower-case symbol v, and "surplus-value," represented by the  
> lower-case symbol s) of the social productive-labor year is the rate  
> of exploitation (rate of surplus value), represented by the symbol s'.
> How then is the Organic Composition (henceforward symbolized as Q)  
> to be represented? Its formula is C/(v+s) or its algebraic  
> equivalent, C/v(1+s'). The total capital stock which is to serve as  
> the denominator for the average rate of profit comprises not only  
> the amount of value invested in long- lived ("fixed") means and  
> conditions of production ("constant capital," represented by the  
> upper-case symbol "C") but also the value embodied in the stock of  
> circulating capital. One part of that stock consists of the  
> inventory of finished and unfinished commodities destined for  
> consumption by the class of productive laborers ("variable capital,"  
> represented by the upper-case symbol "V "). The remainder of the  
> inventory stock (intermediate products like unfinished goods or raw  
> materials, etc., short-lived tools, or consumer goods destined for  
> the consumption of unproductive workers and members of the ruling  
> class) counts as constant capital and so is a constituent part of  
> "C."  However "V," the stock of circulating capital represented by  
> the portion of consumer-goods inventories destined for productive  
> workers, constitutes historically  (because of both the increasing  
> fixed-capital/labor ratio and the increase in the ratio of  
> unproductive to productive laborers) a small and constantly  
> diminishing portion of the social capital stock. Accordingly it  
> distorts virtually nothing to simplify the definition of the overall  
> rate of profit by abstracting from "V." The rate of profit is thus  
> best represented as s'v/C  rather than as s'v/(C+V).
> By substitution,   [ Q=C/v(1+s'),  C=Qv(1+s'), and  p'=s'v/C. So  
> p'=s'/Q(1+s') ]   the rate of profit, s'v/C, to be symbolized as p',  
> can thus be represented algebraically as p'=s'/Q(1+s')...

> Shane Mage
> This cosmos did none of gods or men make, but it
> always was and is and shall be: an everlasting fire,
> kindling in measures and going out in measures.
> Herakleitos of Ephesos

More information about the Marxism mailing list