The Tendency of the Mass of Crisis Theory to Rise

This is my first draft of my paper for “The Economic Crisis and the Left Response” which is taking place in New York this coming weekend (11-6-10). “First draft?” you ask, “Isn’t that happening in just 4 days?” Yes, I am really behind… which is why this is a pretty sloppy draft. Any comments are welcome.

How easy our task would be if we had merely to identify the historical origin of this crisis: A little old lady in Cleveland defaults on her mortgage setting off a chain reaction, Alan Greenspan sneezes, stock traders at Lehman Bro’s make some bad decisions. But such thinking, which merely develops a chain of causes and effects, leading to a great web of interchanges that is a crisis, doesn’t get us any closer to understanding this crisis. Surely the names and places in the story can change yet the story remains. Clearly the crisis was inevitable. It is up to historians to tell us why it happened on a Tuesday not a Monday, why it started in one place first and how it spread. But it is the task of Marxists to tell us why it was inevitable.

But was it inevitable? Amongst the different theories of crisis circulating about the Marxian milieu there are diverse answers to this question. For the theorist of the uncoupled economy this crisis is not an inevitable crisis of capitalism, but an inevitable crisis of finance, inevitable given a specific set of financial institutions that evolved over the past 30 years. In the underconsumptionist thesis, this crisis is the inevitable result of capitalists winning the class war, of the depression of workers wages. But had the class war gone differently we can only assume, given this underconsumption argument, that we would not be in a crisis right now. For the falling rate of profit theorists this crisis is an inevitable expression of the basic contradictions of capitalism, contradictions which have always plagued capital and will always plague it regardless of the evolution of the credit system, the state of class struggle, the political realities of the time, etc. (Or at least that is what they argue.) And finally there are the eclectic theorists of multiple causes (David Harvey, Erik Olin Wright) who argue that, given the plurality of obstacles to accumulation, eventually one will cause a crisis.

A huge part of such a debate is a meticulous battle over the interpretation of empirical data. For many of us, such number-crunching is beyond our capabilities, and this makes it hard to form opinions as to the strength of these competing theories. But there is also a theoretical side to these debates and this is both more accessible and just as important. After all, even if we establish the truth of an statistic/piece of data we are still left with the question of how to make sense of it, how to fit it into some model. What allows Marx to make such powerful observations about the antagonisms of capitalism is the fact that he doesn’t just see all of these different relations, different categories, all colliding randomly with equal weight and mass like billiard balls. Classes, commodities, money, means of production, all these categories all fit into a tight structure of relations, a structure which determines the motions and possibilities of the whole and the particular. If we are to understand all of these different takes on the crisis it is imperative that we understand how they relate to this overall structure of capital. For instance, we must understand what a theory of the uncoupled economy implies about the relation of money to capitalist production and what this implies about the Marxist project.

re. the structure of capital

The structure of capitalism is a logical structure and not an historical one. This doesn’t mean that history is unimportant or that agents can’t exercise agency. But it means that historical events are expressions of deeply antagonistic social relations. In the Greek riots of this past summer, for instance, we can read the unfolding of the antagonism between value and devaluation that comes to the fore in a crisis, of the need of the capitalist state to devalue labor power in order to assure the continued accumulation of capital. Because historical events have no choice but to express the antagonistic social relations of which they are made up it can become easy for those of us caught up in these historical events to read the equation backwards: to assume that it is the particular historical moment that is defining the social relations of the time. For Naomi Klein and the Kleinistas, neoliberalism defines a new phases of capitalist social relations. They call for a new phase of Keynesianism to set us on a different era of capitalism. But perhaps it isn’t Kenyes or Hayek that is defining the social relations of the time but the social relations that are defining Keynes and Hayek. (Or, how important was Keynes to Keynesianism? Hayek to Neoliberalism?)

The ordering of these categories within the structure of capital follows a few basic rules. The movement from one category to the next always asks the question of what presupposes what. For instance, a credit system presupposes money, commodity exchange, and capitalist production. These categories are more fundamental because they are logically prior to credit. The credit system is merely an elaboration upon the basic contradictions of money which themselves are not merely properties of money in isolation, but money in a definite social role in a system of commodity exchange. So if we are developing a critique of the financial crisis we must realize that it will inevitably lead us to ask more fundamental questions about the contradictions of capitalist commodity production.

The movement between categories always follows from the abstract to the concrete. This is because capitalism itself is a process of abstraction. This process of value creation, of profit maximization, that drives capital is a process which abstracts away from all particular labor processes, all particular commodities, and which pursues the production of value in the abstract. As we move from the fundamental category of value and abstract labor to the successively unfolding series of categories we fill in our picture of capital with increasing concreteness, like a painter who begins with the broadest of brushstrokes and finishes with the most minute rendering.

[maybe just start with this and skip the prior two paragraphs]
In terms of crisis theory we start with the most abstract possibility for crisis, filling in the picture with more and more levels of concreteness. The possibility for crisis exists because the purchase and sale of commodities are separated as two different logical moments in commodity exchange. They are separated by money. We can exchange our commodities for money, the abstract measure of value, but that doesn’t mean that we have to then go buy something else with this money. This means that there is always a possibility that the social product may not all be bought back. But this is only a possibility. At this point there is no necessity of crisis.

The abstractness of money takes on more concrete forms as the analysis proceeds. It becomes credit money, a credit system with all sorts of insane credit instruments for measuring and circulating value. We see how credit is bound up in coordinating all sorts of temporal flows of value through space and time. Yet still crisis remains only an abstract possibility, never a necessity. We can never establish the necessity of crisis from within an analysis of the credit system or money because in the end money is only a means of measuring and moving value. Value must still be produced. A credit bubble is never too big on its own terms. It’s only too big in relation to how much real value it is supposed to lay claim to. If there is a credit bubble the questions are always “Why wasn’t there enough money in the economy to pay back that credit?” and “Why did so much investment end up in speculation instead of in the creation of real value?” Neither one of these questions can be answered from within the analysis of credit. They point us outside of credit into the realm of production. Yet for those theorists who continue to insist that this is a crisis of finance and not capital the analysis remains in the world of credit. Their theory is uncoupled from the traditional domination of money by capital. Money, they claim, has escaped from the domination of capital to exercise its own autonomy. And this is the result of a historically new period of capitalism brought about through the evolution of specific financial policies.  (rephrase all this).

Money existed long before capitalism. But once capitalism becomes ascendant money is subordinated to capital. It becomes not just the means of circulating commodities but measure of value, the essence of capitalist production. And so the logic of capital dominates the logic of money. Money must serve the self-expansion of value that is capitalism. If something goes wrong with money we must ask what went wrong with capitalism.

It is understandable that we would want to suspect money or credit for being at fault for the crisis. Since the most abstract level of crisis theory is the separation of purchase and sale, since a crisis always manifests itself in the forcible separation of purchase and sale, money is always on the scene of the crime whenever crisis breaks out. Money exists at this intersection of the world of production and the world of exchange, two worlds separated in a capitalist society. Just because surplus value has been created in production doesn’t mean it will be realized in the market. There is always the possibility that surplus value won’t be realized and that this will cause an interruption in the circuit of capital. Now our abstract possibility of crisis has become more concrete: the separation of purchase and sale has become the separation of different moments in the circulation of capital, from the purchase and sale of labor power, to the purchase and sale of commodities to workers, to the purchase and sale of means of production to capitalists.

The theory of underconsumption sees a conflict between capital’s drive to produce surplus value and the condition for its realization. There are different versions of the underconsumptionist argument. The most absolutist is the notion that capitalism is incapable of buying back all of the products it creates because workers produce more value than they are paid for. This of course neglects the role of productive consumption, the role capital itself plays in creating demand, demand for productive inputs. In volume 2 Marx shows us that it is entirely possible for capital to provide enough demand to absorb the surplus value that so upsets the underconsumptionist. All that is required is the proper balancing of proportions between the production of means of production and means of consumption. (Capitalist demand for means of production can adequately compensate for any shortfall of demand from workers. This just requires the proper balance between production of means of production and means of consumption.) This gives the abstract possibility of crisis a further level of concreteness. We are dealing not just with separation of purchase and sale, not just with different moments in the circuit of capital, but also the balancing of the production of specific use-values with the differing effective demand from the capitalist and working class.

As capital evolves the demand for productive consumption grows relative to the demand for consumer goods. A great deal of production is not intended for human consumption at all. It is purely production for the sake of production, accumulation for the sake of accumulation. The surplus labor of the worker goes not just towards the enrichment of the capitalist class but also toward the creation of the machines that are her instruments of domination, which stand over and dominate her work. As the production of means of production for their own sake becomes an increasing clear that the stability of the system does not hinge upon the consumptive power of the worker. This point, however, is not accepted by all. In fact, the last refuge of this absolutist-underconsumptionist argument is to assert that all production, ultimately, is production for human consumption. But there is no way of proving such an assertion, especially as it seems to conflict with the basic fact that so much capitalist production is production of productive inputs for companies that also make productive inputs.

This leads to a softer version of the underconsumptionist thesis: that though such proportions are possible there is no reason to expect capitalism to arrive at them, that the anarchy of the market drives capitalism toward disproportion. It is asked how capitalist could ever arrive at such a balance. They argue that the drive to create surplus value overruns any possibility of achieving some sort of equilibrium. This begs the question of what mechanisms might move us toward or away from the right proportions for the realization of surplus value.

As the discussion of crisis takes on more concrete forms it becomes increasingly clear that the notion of equilibrium and disequilibrium has become central to the discussion. Surely the potential for disequilibrium is present, and surely the successively concrete picture we get, with different turnover times, fixed capital, different departments, credit, interest, etc, is a picture of an increasingly more complex set of interlocking relations. The stakes are high. For some, the increasing complexity of it all is enough to assure us that crisis is bound to happen. (David Harvey says as much in Limits to Capital.) Yet despite this complexity we still can’t confuse possibility for necessity. We need a theory of what moves a capitalist society towards and away from equilibrium.

Marx’s theory of crisis is such a theory. We have to understand that it comes out of a critique of two opposing strands of thought. On one hand it is a critique of the bourgeoise theories of equilibrium which claimed that the market could always even out small disproportionalities. On the other hand it is a critique of a diversity of crisis theories of overproduction, underconsumption and the like that were popular in various quarters. (definitely going out on a limb there. malthus… engels?….) To both of these sides Marx points out that the same force that moves capitalism towards equilibrium is the force that moves it toward disequilibrium. This force is the drive for surplus-value, or, in the world of appearances, profit.
The point is that the same force(s) that cause disproportion also eliminate these disproportions (or at least keep them from destabilizing the system). This doesn’t mean that an economy is ever in equilibrium, or that it even gravitates around equilibrium. Instead it means that constant disequilibrium and change are part of the system, but that this isn’t the same as a crisis. In the hunt for surplus value, or-in the world of appearances-profit, capital constantly evolves the forces of production, raising the productivity of labor, and increases the amount of surplus value capitalists capture in competition. But this is also a process of overproduction and devaluation. As productivity rises and more commodities enter the market at lower prices, rival firms find their stock of commodities devalued. But rather than trigger a crisis, this process of devaluation solves the problem. It is the process by which these rival firms are disciplined to the social average, and by which capital is reallocated in search of the most profitable use. Here we have an even more concrete picture of the possibility for crisis: that constant revolutions in productivity in the search for profit cause disproportionalities while devaluation and falling profit triggers a reallocation of capital that reacts against this disproportion. Whether we are moving towards or away from this fictional equilibrium state the same force is guiding us: the hunt for profit. (still this isn’t dispro between workers and capitalists or between departments….. flesh this out.) This means that while we still haven’t the necessity of crisis, we have established that, far from equilibrium, we are dealing with a system of constant change, overproduction, devaluation, and POTENTIAL instability. Through it all, the pursuit of profit is the guiding force.

In the end, this discussion of realization can only flesh out all of the things that could go wrong, all of the ways this abstract possibility for crisis might manifest itself. But we can’t move to a discussion of the necessity of crisis until we move out of this realm of realization and look at the mechanism of the profit rate itself. Sure, in the hunt for profit capital can always move away from unprofitable industries (say consumer goods) and into more profitable ones (producer goods), but only if there are more profitable fields to invest in. The theory of the falling rate of profit says that these disproportionalities and problems of realization occur because this basic regulating mechanism, the drive for profit, for the self-expansion of value, has gone wrong. The general rate of profit is falling and so capital can’t find places to invest. It must invest in speculation, in debt-fueled consumption, etc.

Two-theories, Two perspectives, Two solutions

The camera pans away from the question of realization toward the question of the conflict between living and dead labor. Whereas the underconsumption question posits the problem as a conflict between capitalist and worker that comes to light in the realm of exchange, the falling rate of profit question posits posits the problem of the relation between the worker and her own alienated labor in the realm of production. They are two different angles. I hope that, thus far, I have shown that that questions of realization of SV in the market can only present the possibility of crisis, and that we must look to the profit rate and the production to establish necessity. But there are other important distinctions that come up at this point, distinctions that bring out important differences in perspective in the relation of these two theories to the structure of capital.

Perhaps these differences are best brought to light if we look at the sort of solutions that might be suggested by each theory. If the underconsumption problem is a problem between capitalist and worker that manifests itself in the market place then we can imagine that a world of higher wages might solve this problem. Or, if we take a more radical perspective, that the elimination of the capitalist class, and the organization of production through worker-owned cooperatives that trade in the market, would eliminate crisis. Here there would be no class of owners exploiting workers, wages could rise, and thus no realization problem.

But for the theorists of the TRPF this will not to at all. This is because what appears on the surface as an antagonism between two classes is more deeply an antagonism between people and their own alienated labor, their past labor that appears as capital, a force dominating their work and driving their society into crisis, inequality and chaos. A society of worker-cooperatives would not do anything to liberate humanity from the domination of dead labor in the form of capital. Instead we would find ourselves still producing a surplus for its own sake, still dominated by machines, markets and the law of value, and still subject to a falling rate of profit.

It seems the two theories stress different definitions of what the social relation of capital consists of: a social relation between two classes, or a social relation between workers and their own alienated labor.


In his critique of Marx’s notion of the falling rate of profit Paul Sweezy finds Marx at fault for not properly justifying the priority of the tendency of the rate of profit to fall against its counter tendencies. He agrees that the drive to develop the forces of production does result in a technical composition of capital. But he says that since the counter-tendencies of a rising rate of exploitation and falling prices of constant capital are both generated from this same force, the development of the forces of production, that there is no reason to privilege the tendency over the counter-tendency. Instead he recommends jettisoning the whole language of tendency-countertendency and just talking about the aggregate change in the profit rate in a purely contingent manner.

In developing his own underconsumptionist crisis theory Sweezy uses the notion of tendency and counter-tendency in a way which he finds more suitable. There is a tendency toward underconsumption in a modern capitalist society which creates a capital surplus-absorption problem. There are also counter-tendencies that absorb some of this surplus: state spending, population growth, unproductive consumption, the opening up of new markets, etc. But these counter-tendencies are external to the tendency. They are not generated by it. And in the end they are not strong enough to avert the long-run problem of underconsumption. Thus, rather than the cyclical theory given by the TRPF, we get a theory of long-run stagnation.

Sweezy’s critique of the TRPF takes the language of “Marx forgot” or “Marx should have seen” or “Marx’s mistake” that is often used when discussing this notion of tendency. I think he makes a big mistake here. The whole point of a tendency is that it is generated by the same forces that make for a counter-tendency. And because of this inner relation of a tendency with its own limits, with its own opposite, we get three possible types of motion. (from Carchedi)

1. The tendency dominates and the counter-tendencies are fluctuations around a tendential point. ie the wages
2. The Counter-tendency dominates, the tendency causing aborted and incomplete motions toward a tendential point that is never reached. ie the average rate of profit…
3. Cyclical movement where either the tendency or counter-tendencies are dominant given the point in the cycle.

The TRPF is of the latter, cyclical type. At the rise of a boom constant capital is cheap and the rate of surplus value high. Over time the successive development of the means of production can only squeeze so much more surplus from workers. Every time you double the productivity of a worker you get half as much more SV from them, yet they require twice as much constant capital. And as the mass of surplus value grows relative to the amount of workers in the economy the only place for it to go is into constant capital. It doesn’t matter if the constant capital is getting cheaper. The mass of profit is always getting bigger and more and more of it is going into constant capital.

Superficial concluding comments:

These two very different notions of tendency make for very different pictures of crisis. For the underconsumption position the lack of an inner-relation of a tendency with its own counter-tendency leads to one of two possibilities. For Sweezy it means long-run stagnation. For others it means that underconsumption is essentially not a question of inevitable economic laws but of contingent political events, the defeat of workers power by the capitalist class. For the TRPF the picture is of an inevitable crisis, one that occurs in cycles of boom and bust.

It is with the TRPF that, I think, we can fully put into use all of our observations made during our analysis of the the possibility for crisis. As the rate of profit falls, it becomes harder and harder to find profitable investments. Disproportionality between departments breaks out. The credit system is used to boost up consumption and profits. This creates further disproportions that far out-run the ability of the economy to actually balance production and consumption. The crisis is increasingly postponed through the use of credit. Since, as we saw, money/credit is the point at which production and exchange meet, the point at which the social product is realized, and the purpose of capitalist production, it becomes the thing upon which all aspects of the crisis seem to revolve. And so people look to blame credit, or realization for the problems we are facing. And since devaluation is always the mechanism by which disproportions are “corrected”, it is the prospect of massive devaluation that we now face: devaluation of labor power, writing down of assets, closing of companies, and brutal austerity measures.

Bibliography in no particular order and not fleshed out
Marx, Kapital 1-3
Marx, Grundrisse
Sweezy, Paul Theory of Capitalist Development
Carchedi, Guglielmo- Frontiers of Political Economy
Carchedi, Guglielmo- Return from the Grave
Kliman, Andrew- Persistent Fall in Profitability Underlying the Current Crisis
Kliman-Husson debates:
Husson- The Debate on the Rate of Profit
Kliman- Masters of Words
Chris Harman- Not All Marxism is Dogmatism
Kliman – all that other stuff on crisis theory
Freeman- everything he’s written on crisis theory.
Simon Clarke- Marx’s theory of Crisis
Kuruma Lexikon
Lebowitz, Michael- Following Marx
Olin Wright, Erik- Class, Crisis and the State
Arthur, Chris: The New Dialectic and Marx’s Capital
Bertell Olman, Tony Smith: Dialectics for the New Century
Dunayevskaya, Raya- Marxism and Freedom
7 MArxists on the crisis, interviews with Lapavistas, Husson, Moseley, Panitch, etc. on Workers Liberty
Shaihk, Anwar- An Introduction to the History of Crisis Theory
Paul Mattick’s review of David Harvey’s Limits to Capital
Harvey, David- Limits to Capital
Harvey- Brief History of Neoliberalism
Harvey- The new imperialism
Harvey- Conditions of Postmodernity
Howard and King- A History of Marxist Economics, volume 1
Cambell, Martha, ed: The Culmination of Capital- Essays on Volume Three of Marx’s Capital
Sekine, Thomas- The Dialectic of Capital: An Unoist Interpetation


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1 Response to The Tendency of the Mass of Crisis Theory to Rise

  1. Alexander says:

    So your thesis is that the TRPF is still the most logical model. Perhaps you could work more with the other two tendency-oriented theories, and explain why TRPF is still dominant. But I could be missing the point all together, your audience with their experience will surely be more receptive to your meaning than I am.

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