(This post is part of an ongoing project: a close reading of volume 3 of Kapital, one post per chapter. I hope that others who are tackling this book for the first time might find my summaries and thoughts useful. I also hope that others might leave their own thoughts, criticisms, help, etc. here so that this blog might become a good resource for those brave souls who take on Vol. 3.)
Before launching into a summary of Marx’s text I’d like to briefly list some of the things I am specifically looking for in his explanation of the Falling Rate of Profit (FRP).
There is so much debate between Marxists over how to properly understand capitalist crisis. Some claim that Marx does not give us a completed theory of crisis at all and that our job is to fill in the gaps. Others claim that Marx provides the essential structure of the argument, a structure which only requires some fleshing out. Then there are those that think Marx’s argument is flawed and requires replacing. This latter group contains those who believe they can construct a theory of crisis still within the framework of Marx’s logic and those who have turned to other theoretical frameworks.
Depending on where you fall within this debate you will describe and classify the varying theories differently. For a Falling Rate of Profit theorist (or “Tendency of the Rate of Profit to Fall”, as many will urgently remind you) any appeal to underconsumption lies outside of the Marx’s framework. Some classify underconsumption as a branch of disproportionality theories. Some classify the FRP as a branch of profit-squeeze theory. Others see profit-squeeze as a separate theory relating to wages. David Harvey tries to paint a more general theory of crisis by using the term “overaccumulation”. But some associate this term with underconsumption! What a confusing mess. But isn’t this the way any debate goes? One side will classify the other differently then they would classify themselves.
So when reading through part 3 one of my goals is to try to make sense of Marx’s own argument as best as can be done. We know that there are many different types of economic relations that make up a capitalist society. The relations between producers in the market form the basic value relation. The relations of production form the wage-capital relation. The relations between different parts of the capitalist class form the money-capital relation and the landlord relation. Then there’s the state…. With the exception of the state all of these relations are expressed through the primary relation of value. Money capitalists buy and sell money. Capitalists buy wage labor and raw materials and sell commodities. Workers sell their labor power and buy commodities. This means that problems that arise in a specific relation may find their expression not in that relation itself but in the market place. A capitalist may find that she is unable to realize a profit from selling her commodities in the market. Where does this problem come from? We can’t tell just by looking at the market. We must look to the sphere of value production.
The current crisis expressed itself at first in the housing market and then in the credit markets in general. But credit expansion is only a problem if not enough value can be created to pay back credit. This takes us back to the labor-capital relation. In all these examples we see that the expression of the crisis is not the same as the cause of the crisis. The market is the mechanism by which the law of value asserts itself on producers. All relations find their expression there. This creates confusion. We see crisis breaking out in the credit market and so we think that is where the crisis came from. But this was only a distant expression of the crisis. Credit bubbles happen because capital can’t find profitable investments in the creation of real value and thus sends capital flowing into fictitious investments which create artificially high, but risky, orgies of high-stakes gambling. There are some modern Marxists who identify this current crisis as a crisis of the credit system. But for the most part we cannot take this seriously as a real Marxist analysis of crisis. Marx will treat money-capital in later parts of this book and so I will be interested to see how his analysis of money-capital helps explain the way crisis manifests itself, the form of appearance it takes, through money and credit.
Obviously underconsumptionist theory sees underconsumption as being expressed through the market. But the tendency of the falling rate of profit (FRP) also must be expressed through the market. Capitalist don’t just look down at their assembly line and realize their new batch of commodities don’t contain enough value relative to expenses to make a profit. They encounter this inability to make a reasonable profit in the market. The subjective experience, the mode of appearance, of the FRP and underconsumption seem quite similar. I am curious as to how Marx presents this world of appearance in relation to the inner dynamics of capitalist accumulation. I want to know how specific he is about the relation between the production and circulation of value.
In addition to wondering about the theoretical relation of these different manifestations of crisis I am also reading for critiques and defenses of Marx’s argument that I have read about elsewhere. Marx’s explanation of the FRP relies on his claim that the organic composition of capital rises faster than the amount of new surplus value created. Critiques therefore aim at either the rising organic composition or the rate of surplus value. One often reads that Marx’s claim of a rising organic composition (the ratio of dead to living labor) is cast in ambiguous terms. Is he referring to a rise in the physical quantities of constant capital (machines, factories, raw materials, etc.) or to their values? We know that the rising productivity of labor is constantly causing the values of these commodities to fall. It is argued that just because their physical presence in the workplace increases this doesn’t mean that the value of constant capital is rising.
I am curious to see just how ambiguous Marx’s presentation is. The two responses to this criticism that immediately come to mind involve the rising mass of surplus value and depreciation. M-C-M1 means that at the end of each production period there is more profit and that this increased mass of profit must be converted into larger investments. There are a finite amount of laborers in the world. Eventually this mass of profit must incorporate larger proportions of non-people, of products of past labor. I am curious to what extent Marx makes this or similar arguments.
Depreciation occurs when a firm has spent huge amounts of money on long-term investments in fixed capital like a railroad or a factory. The cost of these investments will be realized over a long period of time. Yet the constantly rising level of productivity (which is always cheapening these means of production) allows newcomers in the market to buy this same fixed capital more cheaply and produce at a lower cost, selling at lower prices. This devalues the older fixed capital, forcing older firms to take a loss. So if critics of the FRP claim that rising productivity cheapens constant capital enough to offset the FRP they ignore the real, observable ways in which this cheapening causes devaluation which does cause profit to fall. Nowadays many defenders of the FRP point to Detroit as a classical example of this phenomenon: Large scale investments in fixed capital forced Ford and GM into long-term productive strategies that couldn’t compete with Japanese and German firms that came online later with newer, cheaper fixed capital investments. The TSSI guys (Temporal Single System Interpretation) have a word for those who ignore depreciation. They call them “physicalists”, which is a word the reserve for anyone who confuses physical quantities with a fixed sum of value. They say that to think the cheaper price of fixed capital to Nissan somehow lowers the initial expenditures of Ford on fixed capital is to believe in some theory of time travel. I am curious to see how Marx treats depreciation and whether he makes any specific statements about the temporal treatment of depreciation.
The other criticism/debate over the FRP centers around “Okishio’s Theorum”. I’m actually less interested in reading this chapter for this issue as I think that the TSSI has significantly disproved the validity of Okishio’s critique. The issue is also pretty technical so I would like to hold off on diving into it right now. Perhaps it can be a topic of a future post.