James Heartfield Responds

Jul 1st, 2015 | By | Category: Articles

This essay is in response to James Heartfield and Me (debating Marx on Facebook). A response to this response entitled James Heartfield’s Arguments (Nonsequiturs and Borrowed Kettles) was published on July 3rd.
Douglas Lain
Publisher Zero Books

James-Heartfield-chairing-third-sessionDouglas Lain takes issue with some of the things I have said about capitalism today, Marx’s theory of it, and Andrew Kliman’s re-telling of Marx’s theory (which, I understand Douglas broadly agrees with).

Douglas gets bogged down in some detail about Marx’s theory, mostly, I am afraid, because he does not understand it that well, as I hope I will be able to explain later.

But first, I want to explain that, like Andrew Kliman, Douglas does not understand Marx’s method very well.

Marx’s theory of capital is a theory of capital accumulation. In it the dynamic and the restricted sides of capitalism are grasped at the same time. Marx explains this in the ‘Rough Draft’ (Grundrisse) by looking at two economists of his day, David Ricardo and Sismondi. Ricardo emphasised unrestricted growth; Sismondi absolute limits. Marx said that they were both wrong:

Those economists who, like Ricardo …having in view only the development of the forces of production and the growth of the industrial population … have therefore grasped the positive essence of capital more correctly and more deeply than those, who, like Sisimondi, emphasized the barriers of consumption … although the latter has better grasped the limited nature of production based on capital, its negative one sidedness. The former more its universal tendency, the latter its particular restrictedness. (Marx, Grundrisse, Harmondsworth, Penguin, 1973, p 410)

Andrew Kliman in his work The Failure of Capitalist Production: The underlying causes of the Great Recession (2012) one-sidedly emphasises the limits to capitalist production, apparently unaware that without growth capitalism would never confront its limits.

Here we are concerned first of all with the theory, but one has to note that by the time that Kliman’s book was published the world was already out of recession, and posting positive growth of around 4 per cent. More problematically, Kliman fails to understand that between 1989 and 2008 the world experienced a broad expansion of the wage-labour/capital relationship. Between 1996 and 2006, the world labour force grew by 421 million jobs, from just under 3.6 billion to just over 4 billion (Key Indicators of the Labour Movement, International Labour Organization). Between 1983 and 2007, which is that the absolute number of US workers increased from 99 million to 145 million, much more than the growth in the natural population. Europe saw similar growth. The foundation of this growth was the defeat of the labour movement and of radical nationalist and Stalinist regimes, allowing a broad extension of the market. But to Kliman these were only ‘artificial’ booms due to market manipulation (Failure…, p 73).

Characteristic of Kliman’s one-sided understanding of capitalism, he isolates the movements in the rate of profit, which he says is declining (and here we have to note that since his book was published US corporate profits have risen from 1,200 billion at the end of 2009 to 1,890 billion in 2015). What Kliman fails to understand is that in Marx’s theory a decline in the rate of profit is evidence of an expansion of capital – the two being intimately related in Marx’s theory.

In particular, Marx argues, the fall in the rate of profit comes about because of the growth in that part of capital investment dedicated to new technology, relative to capital laid out in wages. In Marx’s day there was a marked trend for greater investment in machinery, plant and raw materials, than in labour. He called this trend the growth in the ‘organic composition’ of capital, that is a movement in the ratio of investment in capital goods (what he called ‘constant capital’) and in labour (‘variable capital’) in favour of the former.

Marx’s point was that because labour is the true source of value, more investment in more machinery could create no new value, only extend it over more goods. That meant that investment in new machinery would only mean that less of the capitalists’ investment was actually productive of new value.

However, capitalists did invest in new machinery – so what was their motive? Marx explains that greater labour productivity does have a special advantage for the capitalist, and that is that it increases the rate of exploitation, the ratio between the share of output that falls to the capitalist, and that which falls to the worker.

Marx says that capitalist accumulation rests on the creation of surplus value, that value that is created over and above the value which is equivalent to the workers’ own means of consumption. He says further that by increasing the productivity of labour more goods are produced in less time, meaning that they are cheaper. That applies to the goods that go to make up the wage basket. Because the wage goods are cheaper, the cost of reproducing the worker’s means of subsistence is cheaper. Which means that he can be paid less, increasing surplus value.

The motive for a new investment in labour saving technologies, then, is to increase the rate of exploitation by diminishing the value of labour power.

But in Kliman’s peculiar reading of the statistics there was no rise in the exploitation of the working class. Here most economists disagree, pointing to a secular rise in inequality since the 1970s. But more problematic for Kliman’s reading of Marx, without a growth in the rate of exploitation there would be no fall in the rate of profit in Marx’s theory.

Marx says the tendency of the rate of profit to fall arises out of the ‘continual relative decrease of the variable capital vis-à-vis the constant and consequently the capital’, which is, ‘identical with the rising organic composition of capital’. What is more ‘it is likewise just another expression for the progressive development of the social productivity of labor’. ‘The progressive tendency of the general rate of profit to fall is, therefore, just an expression, peculiar to the capitalist mode of production of the progressive development of social labor,’ says Marx. (Karl Marx, Capital, Volume III, Part 3, Chapter 13, see https://www.marxists.org/archive/marx/works/1894-c3/ch13.htm).
Capitalists, of course, do not increase productivity to lighten the load of workers, but to exploit them further. The only reason capitalists have to increase the organic composition of capital is to increase the rate of exploitation.

Faced with this point, Douglas Lain argues that there is another reason that capitalists increase labour productivity, and that is because of competition. This sounds plausible, but it just mixes up different levels of analysis in the theory of capital. As Marx explains:

Competition executes the inner laws of capital; makes them into compulsory laws towards the individual capital, but it does not invent them. It realizes them. To try to explain them simply as results of competition therefore means to concede that one does not understand them. (Grundrisse, https://www.marxists.org/archive/marx/works/1857/grundrisse/ch15.htm)

As Marx explains in Capital ‘whenever an individual capitalist cheapens shirts, for instance, by increasing the increasing the productiveness of labour, he by no means necessarily aims at reducing the value of labour-power and shortening, pro tanto, the necessary labour time’. But ‘the general and necessary tendencies of capital must be distinguished from their forms of manifestation’. (Capital I, p 301-2).

It is a problem that the people like Douglas Lain and Andrew Kliman who aim to defend Marx’s analysis misunderstand Marx’s analysis. It is a problem because it exhausts energy in pointless exegesis of Marx’s theory. That is a shame because it gets in the way of trying to understand what is happening in the economy today, which is by no means a simple repeat of the trends that Marx isolated when he wrote about capitalism in the late nineteenth century.

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