Data Matters & Chatters

 “Capitalism in the 21^st Century – Through the Prism of Value,” by Guglielmo Carchedi and Michael Roberts, 2023 (Part 1)

This is similar to the title of Thomas Piketty’s 2014 book on wealth disparities and the similarity might be intentional.  The authors seek to look at modern capital, not wealth, through the eyes of Marx’s theory of value - so I see it as a poke at Piketty for ignoring actual capital.  This is a data-driven book, it’s not merely ‘theory;’ just as Piketty’s book dealt with data on European taxes, wealth and inheritance in his look at inequality.

The authors first deal with nature as a source of value, along with labor.  This was also Marx’s position.  How to evaluate nature’s economic value is the problem.  They contend that nature in all its forms cannot be ‘priced’ or turned into a commodity, as neo-classical capitalist economists contend, due to its many-sided involvement in economic life.  Plans like carbon credits and carbon taxes, carbon capture and offsets have all failed, and can only do so in the future. The capitalist method presupposes that the cheaper or ‘freer’ nature and raw materials are in ground rent, the higher the profit margin.  They especially take aim at neo-classical Integrated Assessment Models (IAM) as deeply complacent.  The real solution is a planned economy, where production is not broadly ‘degrowth’ but done for world-wide human needs, eliminating or reducing useless, bourgeois and toxic commodities instead.

The authors next deal with money, explaining Marx’s conception of money versus those of Modern Monetary Theory (MMT).  According to Marx, money’s value is based on abstract labor, and includes surplus value as a result. It is part of the labor theory of value.  MTT contends that the state creates money, not labor power operating under capitalist production.  This theory – first proposed long ago by Proudhon and the Chartalists, then echoed by Keynes and Graeber – is ahistorical, as it contends the state created money to pay taxes with the rise of the first state.  Yet under capital, taxes come after production, not before, and profits precede government-issued money.  MMT in effect ignores capitalism, and believes unemployment can be solved by the government printing more money – providing jobs at minimum wage so as not to compete with regular businesses.  It is a deeply reformist and deceptive theory, propping up capital and its government.

Regarding crypto it is essentially a speculative instrument.  It cannot become a stable form of payment for at least 4 reasons.  One is that crypto currencies like Bitcoin© use immense amounts of electricity to ‘mine’ blockchain ledgers, so they actually have costs, which in some countries are quite large. China actually banned cryptocurrency mining in 2021.  Two is that it has limits on size. Versions of digital coins like Libra by Facebook© would privatize money and put control of currency in the hands of massive corporations.  Digital currencies issued by national central banks could compete with their own non-digital versions, weakening their value.  The authors reject these technologies at this point.  They will certainly not usher in ‘anarchism’ or 'anarcho-capitalism' via digital cash either.

Inflation

The authors have developed a Marxist theory of inflation that combats both monetarist and Keynesian perspectives.  It is based on their analysis of the period between 1960 and 2019, 59 years.  Monetarists in the Federal Reserve and other central banks think that lowering the money supply by raising interest rates will stop inflation.  Facts have shown that this is not true, as this method will actually cause a recession or slump.  Nor do they blame price rises on wage rises – as do Keynesians and some Democrats.  Wage demands actually follow price rises, as Marx pointed out years ago and as every worker knows. There is even one pop theory that says 'inflation expectations' create inflation, which if you think about it for a second, is pure psychological idealism. They also deal with several other theories put forward by other Marxists. 

The authors think that inflation is mostly based on increasing or decreasing combined purchasing power (CPP) of both capital and labor. It secondarily relies on the input of money by the state, which they combine as the ‘value rate of inflation’ (VRI). A reduction in profits involves a lowering of the CPP.  If it falls, inflation generally increases. To them profits, surplus value and labor play the key roles in inflation.  Since 1979 labor’s share of the VRI has been decreasing.  Inflation rose until 1979, then fell until 2019 and rose again in 2022.  This should reflect a current profit-squeeze, and according to Roberts' figures on his blog, it is heading in that direction.  They point out that the government’s CPI is lower than the VRI, hiding part of inflation.

Oddly, Roberts seems to be on both sides of the current ‘price gouging’ issue - showing how oligarchic business sectors extract higher prices and profits; and denying that price gouging plays a major role over time.  He says statistics do not show that these kind of ‘monopolies’ and oligopolies have done this over many years, which after 1979 saw price deflation or stagnation.  International competition also exists to put a crimp on price gouging. The oligopolies obviously pick their moment!  And perhaps, due to the failure of regulation and their market power, they have built-in and on-going price gouging. 

CRISES

Marx never had a full-fledged theory of crises under capital, but the authors claim you can put one together using his writings in Capital and Theories of Surplus Value.  Most prominent is the tendency of the rate of profit to fall, which underlies periodic slumps, busts, recessions, depressions and the like.  It is built into capital’s unstable functioning, based on the differing amounts of variable labor and constant technology involved in production – i.e. the ‘organic composition of capital.’  An increase in technology cuts into profits after a while, as labor is the only source of surplus value. There are countervailing forces like increasing labor exploitation and productivity, imperial looting and wage cuts, so the ‘tendency’ is not automatic. 

The authors disagree with Rosa Luxembourg’s take on Marx’s analysis of this tendency.  She said that imperialist exploitation would permanently delay its effect.  Through their data-driven look at the economy since 1945 they see profit's statistical role in every recession and every rebound - and even prior to that.  They also see over the whole period, through ups and downs, that the rate has fallen over time.  This is one of the motivations for capitals’ heavy move into speculation in financial markets… a derivative effect of the productive economy.  It is also one of the causes of mergers and takeovers of smaller and weaker capitalist entities by larger ones.  Liberals, Keynesians, anarchists, conservatives and even some Marxists ignore the central role profit has in a profit system.  That is odd. It is part of how labor exploitation is hidden in order to mystify bourgeois economics. 

Another source of capitalist business cycles / crises is the depreciation of fixed capital - equipment, buildings, tools, vehicles, software, etc. – estimated by Marx at the time at about 13 years. The authors challenge other Left theories of crisis based on 1) financial anarchy; 2) under-consumption and 3) overproduction of capital goods as opposed to consumer ones. On the first they counter that Marx in Capital, Vol. III carefully delineated between productive capital and fictitious, unproductive capital, with the latter based on the former.  The ‘financial anarchy’ financialization theory of people like Jack Rasmus or Michael Hudson confuses and then reverses the two, substituting debt for value. Interest on debts is not productive, it is a rentier device; as is the ownership of stocks, bonds, derivatives, crypto-currencies, etc. It represents stagnation in the productive economy.

Clearly due to the overconsumption of coffee

UNDERCONSUMPTION?

Monthly Review is the former home of the ‘underconsumption’ theory, though they’ve been pretty quiet about it lately. The authors confront the theory via Bertell Ollman by pointing out that both Marx and Engels empirically rejected it in Capital, Vol II, as low wages leading to ‘under-consumption’ of commodities was not the cause of crises.  Underconsumption by workers is continuous; crises are periodic; they do not match.  The authors’ charts show that most consumption in the U.S. is in fact not from workers or the public but from business investment.  Nor do consumption falls predate recessions – in fact rising wages predate recessions 11-1 since WWII in the U.S. 

Underconsumptionists argue that the 2008 financial crisis was caused by inequality; yet statistics by many sources over many years show that rising inequality does not cause credit booms and subsequent busts.  Inequality is a consequence of increased exploitation over a falling rate of profit – unemployment, low wages, foreclosures, union-busting, privatization, deregulation, reducing corporate taxes are all part of the neo-liberal attack to prop up that rate.  Those pre-2008 toxic ARM mortgages were a speculative Wall Street and banking scheme to increase profits.  Almost nobody could have paid the interest when the rates exploded.  

Underconsumptionism is a deeply reformist theory that claims raising wages will prevent capitalist crises.  It is not based on the labor theory of value; in fact it ignores profit and capital accumulation as the main motivators for capital.  Higher wages mean lower profits –a situation inimical to any businessman and the reason this issue is one of class struggle, not capitalist crisis resolution.  The theory is Keynesianism dressed up in radical clothes and actually undermines the fight for socialism.   

(End of Part 1 review.)   

Prior blog reviews on this subject, use blog search box, upper left, to investigate our 16 year archive, using these terms: “The Long Depression” (Roberts); “The Deficit Myth” (Kelton); Capital in the 21^st Century” (Piketty); “Debt” (Graeber); “Zombie Capitalism” (Harman); “The Anti-Capitalist Chronicles” (Harvey); “The Revolutionary Ideas of Karl Marx” (Callinicos); “In Letters of Fire and Blood” (Caffentzis): “Monopoly Capital” (Baran & Sweezy); “Marx and the Earth” (Foster/Burkett); “Ecological Revolution”(Foster); The Robbery of Nature” (Foster/Clark); “Dead Epidemiologists” (Wallace).

And I bought it at May Day Books!

Red Frog

May 18, 2023