Michael Roberts
My foreword to Invisible Leviathan, by
Professor Murray Smith of Brock University, Ontario, Canada, published by Brill
in November 2018. Relevant, I think, to my recent
presentation on the contribution of Marx to economics made at the Rethinking
Economics conference at Greenwich University, London.
The message of Murray Smith’s
book is aptly portrayed by its title, Invisible Leviathan. The book sets
out to explain why Marx’s law of value lurks invisibly behind the movement of
markets in modern capitalism and yet ultimately explains the disruptive and
regular recurrence of crises in production and investment that so damage the
livelihoods (and lives) of the many globally.
This book is a profound
defence (both theoretically and empirically) of Marx’s law of value and its
corollary, Marx’s law of the tendency of the rate of profit to fall, against
the criticisms of bourgeois, ‘mainstream’ economics, the sophistry of ‘academic’
Marxists, and the epigones of the classical school of David Ricardo and Adam
Smith. As the author points out, even the great majority of ‘left’ commentators
concur that the causes of the ‘Great Recession’ of 2007–09 and the ensuing
global slump are not to be found in Marx’s theories, but rather in the
excessive greed of corporate and financial elites, in Keynes’s theory of
deficient effective demand, or in Minksy’s theory of financial fragility. When
acknowledged at all, Marx’s value theory and his law of profitability are
attacked, marginalised or dismissed as irrelevant.
None of this should be
surprising given the main political implication of Marx’s laws:
namely, that there can be no permanent policy solutions to economic crises that
involve preserving the capitalist mode of production. I am reminded of the
debate at the 2016 annual meeting of the American Economics Association between
some Marxists (including myself) and leading Keynesian Brad DeLong, who seemed
to characterise us as ‘waiting for Godot’ – that is to say, as passive
utopians, waiting for collapse and revolution – while he stood for ‘doing
something now’ about the deplorable state of capitalism. But as Smith explains
so well, it is the ‘practical’ Keynesians who are the real utopians in imagining
that actually existing, twenty-first-century capitalism – characterised by
crises, war and ‘the avarice and irresponsibility of the rich’ – can still
be given a more human and progressive face.
Against the many variants of
‘practical’ economics, Smith’s book sets out to:
[uphold Marx’s original
analysis of capitalism, not only as the most fruitfully scientific framework
for understanding contemporary economic problems and trends, but also as the
indispensable basis for sustaining a revolutionary socialist political project
in our time. It does so by examining the crisis-inducing dynamics and deepening
irrationality of the capitalist system through the lens of Marx’s ‘value
theory’ – which, despite the many unfounded claims of its detractors, has
never been effectively ‘refuted’ and which continues to generate insights into
the pathologies of capitalism unmatched by any other critical theory.]
Marxian value theory has been
subject to ridicule, distortion and incessant rebuttal ever since it was first
expounded by Marx 150 years ago. And the simple reason for this is that value
theory is necessarily at the core of any truly effective indictment
of capitalism – and essential to refuting its apologists. What truly
motivates the ‘Marx critique’ of the bourgeois mainstream is graphically
confirmed by the (in)famous argument of Paul Samuelson (the leading exponent of
the ‘neoclassical synthesis’ in mainstream economics after World War II)
according to which Marx’s value theory is ‘redundant’ as an explanation of the
movement of prices in markets. The market, you see, reveals prices, and that is
really all we need to know.
It is instructive to note
that, shortly after Samuelson’s 1971 broadside against Marx, the (recently
deceased) neoclassical economist William Baumol offered a trenchant response to
Samuelson’s ‘crude propaganda’. In a paper from 1974, Baumol pointed out quite
correctly that Samuelson had entirely misunderstood Marx’s purpose in his
discussion of the so-called transformation of values into prices. Marx did not
want to show that market prices were related directly to values measured in
labour time. Quite the contrary:
[The aim was to show that
capitalism was a mode of production for profit and profits came from the
exploitation of labour; but this fact was obscured by the market where things
seemed to be exchanged on the basis of an equality of supply and demand. Profit
first comes from the exploitation of labour and then is redistributed
(transformed) among the branches of capital through competition and the market
into prices of production.]
The whole process reveals the
‘Invisible Leviathan’ at work.
Unfortunately, it is not just
mainstream economics that has tried to rubbish Marx’s value theory.
‘Post-Keynesians’ like Joan Robinson and neo-Ricardian Marxists like Piero
Sraffa and Ian Steedman have also done so. Like Samuelson, they resort to the
argument that Marx’s value magnitude analysis is redundant, unnecessary and
above all fallacious. As an alternative, Sraffa claimed that prices in capitalist
markets can be derived directly from physical output.
Murray Smith demolishes these
critiques and revisions, standing firmly on what he calls a ‘fundamentalist’
position that involves a return to both aspects of Marx’s fundamental
theoretical programme: the analysis of the form and the magnitude of value, as
well as a concern with the relationship of each to the social substance of
value: abstract labour. I join him under this banner.
According to Smith:
[Marx’s theory of value yields
two postulates that are central to his critical analysis of capitalism: 1)
living labour is the sole source of all new value (including surplus-value),
and 2) value exists as a definite quantitative magnitude that establishes
parametric limits on prices, profits, wages and all other expressions of the
‘money-form’. From this flows Marx’s fundamental law of capitalist
accumulation: that the tendency of the social capital to increase its organic
composition (that is, to replace ‘living labour’ with the ‘dead labour’
embodied in an increasingly sophisticated productive apparatus) must exert a
downward pressure on the rate of profit, the decisive regulator of capitalist
accumulation.]
The book’s theory of
capitalist crises rests firmly on Marx’s law of profitability. But, as Smith insists,
[Marx’s law of value is merely
a ‘necessary presupposition’ of this law of profitability, not a sufficient one.
Yet, there is a sense in which the latter stands as a corollary to the former,
even if not a theoretically ineluctable one. For capitalism is a mode of
production in which the goal of ‘economic activity’ is only incidentally the
production of particular things to satisfy particular human needs or wants,
while its real, overriding goal is the reproduction of capitalist social
relations through the production of value, that ‘social substance’ which
is the flesh and blood of Adam Smith’s powerful yet also fallible ‘invisible
hand’ – of our ‘Invisible Leviathan’.]
And so:
[These laws provide a
compelling basis for the conclusion that capitalism is, at bottom, an
‘irrational’ and historically limited system, one that digs its own grave by
seeking to assert its ‘independence’ from living labour even while remaining
decisively dependent upon the exploitation of living wage-labour for the
production of its very life-blood: the surplus-value that is the social
substance of private profit.]
Smith is by no means content
with a purely theoretical defence of Marx’s analysis of capitalism’s Invisible
Leviathan; he moves on to empirical verification of the ‘economic law of
motion’ of capital as postulated by Marx. I share his view that this is
essential. The contrary opinion of certain Marxists is that it is simply
impossible to verify Marx’s laws, as the latter are about labour values and
official bourgeois data can only detect movements in prices, not values.
Moreover, according to this line of thought, statistical verification of Marx’s
value-theoretic hypotheses is unnecessary, as the regular recurrence of crises
under capitalism is a self-evident fact revealing its obsolescence.
But this is passing the buck.
Any authentically scientific socialism demands rigorous scientific analysis and
empirical evidence to verify or falsify its theoretical foundations; and Marx
himself was the first Marxist to look at data in an effort to confirm his
theories. In this connection, Smith writes:
[Marxist analysis of the
historical dynamics of the capitalist world economy ought not to dispense with
serious attempts to measure such fundamental Marxian (value-theoretic) ratios
as the average rate of profit, the rate of surplus-value, and the organic
composition of capital. To be sure, such attempts can never offer much more
than rough approximations. Even so, they are vitally important to charting and
comprehending essential trends in the [capitalist mode of
production] – trends that can usefully inform, if only in a very general
sense, the political-programmatic perspectives and tasks of Marxist socialists
in relation to the broader working-class movement.]
Murray Smith’s own empirical
analysis is original and somewhat controversial. He revives the approach of
Shane Mage, whose pioneering empirical work of 1963 on the rate of profit
treated the wages of ‘socially necessary unproductive labour’ (SNUL) as a
systemic ‘overhead’ cost that should not be regarded as a ‘non-profit’
component of (or absolute ‘deduction’ from) the surplus-value created by
productive labour, but rather as a special form of constant capital. In Smith’s
view,
[by
conceptualising SNUL as a necessary systemic overhead cost, the
constant-capital approach emphasises that capital’s room for manoeuvre with
respect to [persistent problems of valorisation and profitability] is quite
limited, giving Marx’s proposition that ‘the true barrier to capitalist
production is capital itself’ a somewhat new twist.]
And indeed, his analysis of
the US capitalist economy (from 1950 to 2013) does reveal a long-term
fall in the average rate of profit that is significantly correlated with a
secular rise in the organic composition of capital, entirely in accordance with
Marx’s view. This hugely important result has been replicated by many other
Marxist studies in the last 20 years, several of which appear alongside Smith’s
in The World in Crisis, a volume edited by Guglielmo Carchedi and myself.
Many are also referenced in my own recent book The Long Depression.1 (It is noteworthy
that Smith’s initial empirical study of Marx’s law of the tendency of the rate
of profit to fall, employing data on the postwar Canadian economy, was first
published in 1991, with an updated version appearing in 1996. The results of
those studies, along with some others, are also to be found in the present
volume.)
Theory and evidence should
lead to practice – which means not ‘waiting for Godot’. At the
end of the book, Smith refuses to evade the practical upshot of his
theoretical and empirical investigations:
[The essential programmatic
conclusion emerging from Marx’s analysis is that capitalism is constitutionally
incapable of a ‘progressive’, ‘crisis-free’ evolution that would render the
socialist project ‘unnecessary’, and furthermore, that a socialist transformation
cannot be brought about through a process of gradual, incremental reform.
Capitalism must be destroyed root and branch before there can be any hope of
social reconstruction on fundamentally different foundations – and such a
reconstruction is vitally necessary to ensuring further human progress.]
In this bicentennial year of
his birth, I can’t help thinking Marx would be pleased. The enemies of his
transformative, socialist vision will no doubt be disgruntled.
Michael Roberts
London
January 2018
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