Why do crises happen; why are we stagnating?

Two good posts from Sam Williams.

In the first he compares and contrasts three theories of crisis (within Marxism).

1. The underconsumption/Monthly Review school of thought
2. The tendency of the rate of profit to fall (FRP for short)
3. The generalised overproduction of commodities relative to the market.

Williams identifies David Harvey and Michael Heinrich as belonging to the first school, Michael Roberts and Andrew Kliman as proponents of the second, while he himself adheres to the third school of thought.

Sam reminds us of Marx's (Capital, Volume 2) analysis of the discrete steps in capitalist reproduction. Crises can occur at any point in the process and the schools of thought differ as to which dysfunction is most critical. Here's a flavour of his piece:

"Crises can occur at any point in the process of expanded reproduction.

To further clarify this point, let’s examine the basic formula for capitalist production

M—C…P…C’—M’.

Reproduction consists of a series of these cycles. In the case of expanded capitalist reproduction—and capitalist reproduction can only exist in in the long run as expanded reproduction—the numbers represented by the algebraic quantities M, C, P, C’, and M’ get bigger with each successive production cycle. A crisis in the process of capitalist expanded reproduction can occur at any place in this formula, from M on the extreme left to M’ on the extreme right.

Let’s start on the extreme left. If there is not enough M available, the circuit does not even get off the ground. Historically, it was no accident that the “rosy dawn” of capitalist development, as Marx ironically called it in the chapter on the primitive accumulation of capital in Volume I of “Capital,” began with the search for gold and silver in the Americas.

The conquistadors found gold aplenty in Peru. While to the natives of Peru gold had a largely artistic use value, to the conquistadors it was money. This money material in the form of gold and silver stolen from or extracted with the labor of the enslaved natives toiling in the mines of the Americas in no small measure formed the initial M that launched the process of capitalist expanded reproduction in the first place.

Assuming enough money is available, we next come to C. The industrial capitalists must find commodities on the market to carry out the production of commodities containing surplus value. These include the elements of fixed capital—buildings and machines. In addition, the industrial capitalists must find sources for motive power, lighting in factories, and so on. These are called auxiliary materials. And they must find raw materials. If they cannot find the appropriate commodities in the necessary quantities, or adequate substitutes, capitalist (re)production will suffer a crisis.

Most importantly, the capitalists must find the commodity labor power in the form of “free wage labor,” which alone actually produces surplus value. If they cannot, capitalist expanded reproduction will suffer a crisis caused by the absolute overproduction of capital. In its earliest days, this was perhaps the biggest problem for capitalism.

All the gold and silver of the Americas would not in and of itself have made capitalism possible if the problem of finding an adequate supply of wage labor had not been solved. It was also necessary to separate the producers from their means of production. Only in this way would the producers be forced to offer their labor power to the capitalists on the market in exchange for wages.

This task was solved—not without the massive intervention of state violence and coercion. The FRP school of crisis theory believes that cyclical crises that mark the history of capitalism since 1825 occur at this point, the point where the capitalists convert or attempt to convert money into variable capital. I disagree.

We then come to P, the production of commodities that contain surplus value. It is at P that C is transformed into C’. The constant part of C transfers its value to C. The variable portion of C—labor power—replaces its own value. Most importantly, the labor power in addition to replacing its own value produces an additional value, the surplus value. C’ differs from C in two ways. One is that C’ has a different use value than C. Two, C’ has a value quantitatively larger than C. The difference, C’ minus C, is the surplus value.

Crises can and sometimes do occur at this point in the process of capitalist reproduction. For example, if there is a workers’ strike, reproduction breaks down at this point because the striking workers withdraw their labor and no surplus value is produced as long as the strike continues.

In the case of agriculture, unfavorable growing conditions or diseases might cause P to fail. Workers perform unpaid labor but the use value of C’ fails to emerge because mother nature doesn’t cooperate. For example, as sometimes happens in my native New York State, a late spring frost destroys the flowers in an apple orchard owned by a capitalist farmer. Since no apples appear on the trees, the physical use value of C’ is not produced. P has failed. And when we have no use value, we have no value.

Assuming, however, all goes well for them—and we can see this is not guaranteed—the industrial capitalists will possess C’, commodities that contain surplus value. But unless they happen to produce the commodity that serves as money material, they are not yet home free. A dangerous step lies ahead. They must find buyers with the ability to pay for the commodities that contain surplus value.

Let’s assume they do find buyers. They now posses M’, or a sum of money greater than amount of money they started with. They are now in a position to carry out another cycle of production M—C…P…C’—M’ on a yet larger scale. Expanded capitalist reproduction proceeds. But if they fail, expanded reproduction is halted at this last and most dangerous point in the cycle of capitalist expanded reproduction.

Experience had already shown by the time of Marx and Engels that it is at this last point where capitalist expanded reproduction is most vulnerable to a general breakdown or crisis. It is important not to confuse this type of crisis with other types of crisis that can and inevitably do occur at other points in capitalist expanded reproduction—and indeed in any system of economic reproduction—with this particular type of crisis unique to highly developed capitalism. This is an error that I believe the FRP theory of crisis falls into."

Incidentally, I'm not as worried as some people about the existence of crises; it's akin to exploratory behaviour under uncertainty. Something similar would be a feature of any future mode of production although one would hope with diminishing amplitude.

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In the second post he talks about why it's so hard to recover from crisis. A critical distinction is the overproduction of commodities (the ones piled high in warehouses) vs. the overproduction of manufacturing equipment (fixed capital). The latter linger on in zombie fashion for many months, if not years, leading to spare capacity and acting as a drag on new growth. Here's an excerpt:

"Fixed capital can be very difficult to transform quickly into money capital in a crisis. Commodity capital [e.g. finished goods waiting to be sold] can often be quickly transformed into money capital by selling it below the price of production or even at a loss if capitalists due to a crisis have to quickly raise cash in order to pay off pressing debts. In this case, our capitalists may lose a portion of the value of their capital but not all of it. The capitalists can often survive as capitalists—though not always—and go back to the accumulation of capital once the crisis has passed.

However, it is far more difficult to sell factory buildings, machinery and so on used to produce commodity capital, let alone sell it quickly under crisis conditions. Though fixed capital can be transferred from the ownership of one capitalist to another, it is not really designed to be “sold” but rather used up over a series of turnover cycles. One of the great perils confronting any industrial business is finding itself with a lot of fixed capital but very little money capital when a crisis hits. In this situation, the owner(s) of industrial capital can very easily lose all their capital, because though they have a great deal of capital, they do not have capital in the form demanded by their creditors—money.

Overproduction of fixed capital

When commodity capital is overproduced, this by definition means that the fixed capital used to produce those commodities was also overproduced. Every generalized crisis of overproduction therefore involves the overproduction—or over-accumulation—of fixed capital. The overproduction of commodity capital can be overcome fairly quickly by reducing or halting production of that particular type of commodity or by selling it at a loss. It is much harder—and takes far longer, often many years—to overcome the overproduction of fixed capital. During this period, little new additional fixed capital will be produced. This is shown by the stages of the industrial cycle.

The history of industrial cycles has shown that the crisis proper rarely lasts more than a year and half. Even the super-crisis of 1929-1933 lasted less than four years in the United States and about three years in most of the other capitalist countries. The end of the crisis phase of the industrial cycle, when industrial production reaches its lowest point and begins to rise once again, corresponds to the overcoming of the overproduction of commodity capital.

However, the period of stagnation or slow growth lasts for several years beyond the actual crisis and sometimes considerably longer. The stagnation or semi-stagnation phase of the cycle corresponds to the period between the overcoming of the overproduction of commodity capital that occurred during the preceding boom and the overcoming of the overproduction of fixed capital that accompanied the boom, or sometimes several preceding booms.

While the crisis proper is marked by “excess inventories” piling up unsold in warehouses, the period of post-crisis stagnation is marked by a high level of excess capacity, with large quantities of factories and machines—fixed capital—lying idle, not able to function as capital.

Only gradually is this excess capacity overcome. (3) It is overcome by being gradually reactivated as demand for commodities rises once again in the wake of the crisis, on one hand, and by being physically destroyed, [in value terms, which could mean made obsolete or disposed of] on the other. Only when excess capacity has fallen to a certain point can a new investment boom occur. As long as excess capacity remains high—the preceding overproduction of fixed capital has not been overcome—no fall in the rate of long-term interest rates can trigger a new investment boom. This is the phase of the industrial cycle that Keynesian economists call a liquidity trap. Such a liquidity trap represents the period between the overcoming of the preceding overproduction of commodity capital and the far longer process of overcoming the overproduction of fixed capital."

Worth reading both posts to get a feel for the dynamics of our age.

Readings relating to total automation under capitalism

From the film, "Elysium"

Introduction

Suppose progress in AI and robotics manages to eliminate all human jobs: no more human workers. Would capitalism collapse or just sail serenely on, making the elite ever richer while the masses of the dispossessed watch in apathetic horror from outside the gated communities (Elysium)?

The usual Marxist account is that total automation is incompatible with capitalism, yet the standard response is curiously unconvincing. Marxists say that all automation systems are constant capital, and constant capital eponymously can't create new value. Only variable capital, living human labour, can do that. And it's from variable capital that surplus value - profits - are derived.

No workers, no profits.

This argument uses the abstract model of capitalist production developed in Volume 1 of Capital. But it leaves many things obscure.

• What is the special status of human labour, was Marx a vitalist?
• As automation increased, what actually would we see in the economy?
• If total automation brings about some other mode of production, how did we  switch?

Let's see if we can clarify any of this.

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1. Why can't robots produce surplus value?

The question was asked particularly clearly in this Reddit post.

"I've often read that Marx firmly asserted that a machine cannot create surplus value. However, since technological capabilities have changed quite a bit since Marx's day, today I decided to do some research into modern interpretations of this theory.

"I couldn't find a good answer as to why a robot can't produce surplus value (sure, it's constant capital, but that doesn't really explain it), but I did find mention that neither slaves or animals (which are both living) can produce surplus value, which indicates that there is something very particular about the type of work done by machines, not the inanimate-ness of the machines themselves, that prohibits them from creating surplus value.

"This leads to a few questions:

• Why can't robots, slaves, and animals produce surplus value?
• Does the possibility of robots manufacturing other robots affect this?
• What about human-like robots created in the future?

"How can a society be both slave-based and capitalist (like the old American South)?

"Thanks!"

And here is the favoured answer - somewhat accurate but ultimately confused and unconvincing.

"Slaves are like tools since they are owned. If they exist alongside capitalism, they, like all other tools, pass their value on to the commodity but do not create new value. This does not mean that slaves are not exploited and don't produce a surplus for their masters. They do, but this surplus does not take the form of surplus value. In this case all the master's profit is surplus value transferred from free laborers. ...

"Surplus-value production requires a certain social organization. The question then is: What social organization differentiates the slave from the wage-laborer such that one doesn't produce surplus value but the other does?

"The answer is a social organization of generalized commodity production requiring an extensive division of labor. This social organization requires what Marx calls the laborer's "freedom in the double sense":

as a free man he can dispose of his labour-power as his own commodity, and that on the other hand he has no other commodity for sale, is short of everything necessary for the realisation of his labour-power.

"So, the slave/animal/robot must be given bourgeois rights; it must no longer be possible to buy and sell them, they must be considered equal as commodity owners and sellers. The slave/animal/robot must also be driven off the land and deprived of any means of production. This forces them to sell their labor-power to survive.

"If the animal/robot had the mental and physical capacity to function this way under these conditions, they would be surplus value producers."

Marx was not a vitalist, the term 'living labour' is an economic category (a producer of new value, an entity which brings labour-power to market as a commodity), not a term of biology.

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2. Forms of Production

The first step to understanding why the Marxist account is, nevertheless, correct is to carefully distinguish different ways stuff can get produced in a complex economy with a division of labour, requiring trading and exchange. It will become clear that the two critical ideas are the distinction between use-value and exchange-value, and the subtleties of the labour theory of value.

We start by describing three forms of economic organisation: pre-capitalist, capitalist and post-capitalist. Only the second creates surplus value, value appropriated by an economic actor other than the producer.

2a. Simple Commodity Production

Wikipedia has a good account of this pervasive economic mode:

"Simple commodity production (also known as "petty commodity production"; the German original phrase is einfache Warenproduktion) is a term coined by Frederick Engels to describe productive activities under the conditions of what Marx had called the "simple exchange" of commodities, where independent producers trade their own products. The use of the word "simple" does not refer to the nature of the producers or of their production, but to the relatively simple and straightforward exchange processes involved. ...

"Simple exchange of commodities is as old as the history of trade, insofar as it has progressed beyond barter, and occurred for thousands of years before most production became organised in the capitalist way. It begins when producers in a simple division of labour (e.g. farmers and artisans) trade surpluses to their own requirements, with the aim of obtaining other products with an equal value, for their own use. Through the experience of trade, regular exchange values become established for products, which reflect an economy of labour-time. ...

"Simple commodity production is compatible with many different relations of production, ranging from self-employment where the producer owns his means of production, and family labour, to forms of slavery, peonage, indentured labour, and serfdom. The simple commodity producer could aim just to trade his products for others with an equivalent value, or he could aim to realise a profit.

"That is to say, simple commodity production is not specific to any particular mode of production, and might be found in many different modes of production, with various degrees of sophistication. It does not necessarily imply that all inputs or outputs of productive activity are commodities traded in markets. Thus, for example, simple commodity producers could produce some products for their own use on their own land, while trading another part of their products. They might buy or trade some tools and equipment, but also make some themselves. ...

"In Marxian political economy, simple commodity production also refers to a hypothetical economy used to interpret some of Karl Marx's insights about the economic laws governing the development of commodity trade: it refers to a market economy in which all producers own the resources (including the ability to work) that they use in production. No-one is a proletarian, selling his or her labor power to another. Instead, each is self-employed.

"In this imaginary model, there is a direct correspondence between prices and the values of commodities. The model is imaginary, because no such society has ever existed in history; simple commodity production has always combined with some other modes of production, and as soon as a market economy reaches any size, it begins to utilise wage labor in production, and falls under the sway of the laws of capital accumulation."

The take-home point is that in simple commodity production the proprietor is neither a wage labourer nor a capitalist.

Amazon link

In general proprietors trade commodities at their value and do not produce surplus value, as Duncan Foley explains (Understanding Capital, p. 31):

"Consider a system of commodity production in which independent producers buy inputs to production, add their own labor to commodities, and sell the commodities for prices that in the aggregate reflect the labor time expended in the value added to the commodities. We could represent the movement of money and commodities in such a system by the diagram:

C-M-C'

where the producer starts with the commodities he has produced (C) and sells them for money (M) as a way of buying another bundle of commodities (C') that better suit his needs. The commodities purchased (C') have the same value as the commodities sold (C). The motive behind this transformation is not any change in the value owned by the producer but the qualitative change in the use-values he consumes.

When we think of the commodity circulation in this way, we realize that the process comes to an end after one round of exchange. Once the producer has exchanged the commodities he initially owns for the bundle he chooses, there is no reason for any further exchange to take place. If the economic process is to continue, the reason for its continuation must be sought outside the process itself, for example, in the external assumption that the next day the producer will once again find himself with commodities C that are not the ones he wants to consume and will be forced to exchange again.

Furthermore, there could be no social surplus value in this system. An individual trader might cleverly manage to buy some commodities below their real values and sell them at or above their real values and in this way appropriate a surplus value through unequal exchange. But whatever these agents gain in surplus value, some other agents must lose, because of the conservation of value in exchange.

Producers add value to commodities by expending labor on them, but in general they receive in exchange no more than the equivalent of this labor time. Thus there appears to be no way to explain the pervasive appropriation of surplus value as the basis of economic life within this conception.

Notice also that the only conception of accumulation of value in such a system is for an agent to realize more value by selling commodities than he spends in buying them over a period. The difference must take the form of an accumulation of money by the agent. But this accumulated value is simply withdrawn from commodity circulation through the agent's abstinence from consumption.

When the agent finally spends the hoard he has accumulated, he simply returns the money value to circulation and withdraws commodities from circulation of the same value (assuming that the value of money has not changed in the  meantime). There is in this conception no systematic process of accumulation."

2b. Capitalism

Capitalism is a weird mode of production, its strangeness hidden by its historical and geographical ubiquity, as Michael Heinrich explains in his “An Introduction to the Three Volumes of Karl Marx’s Capital” (p. 17):

Amazon link

"In precapitalist societies, the exploitation of the dominated class served primarily the consumption of the ruling class: its members led a luxurious life, used appropriated wealth for their own edification or for that of the public (theater performances in ancient Greece, games in ancient Rome) or to wage war.

Production directly served the fulfillment of wants: the fulfillment of the (forcibly) restricted needs of the dominated class and the extensive luxury and war needs of the ruling class. Only in exceptional cases was the wealth expropriated by the ruling class used to enlarge the basis of exploitation, such as when consumption was set aside to purchase more slaves, to produce a greater amount of wealth.

But under capitalist relations, production for the sake of increasing the capacity to produce is typically the case. The gains of a capitalist enterprise do not serve in the first instance to make a comfortable life for the capitalist possible, but are rather invested anew, in order to generate more gains in the future. Not the satisfaction of wants, but the valorization of capital is the immediate goal of production; the fulfillment of wants and therefore a comfortable life for the capitalist is merely a by product of this process, but not its goal. If the gains are large enough, then a small portion is sufficient to finance the luxurious existence of the capitalist, and the greater portion can be used for the accumulation (enlargement) of capital.

The fact that earnings do not primarily serve the consumption of the capitalist, but rather the continuous valorization of capital, that is, the restless movement of more-and-more accumulation, might sound absurd.

But the issue at hand is not an individual act of insanity. Individual capitalists are forced into this movement of restless profiteering (constant accumulation, expansion of production, the introduction of new technology, etc.) by competition with other capitalists: if accumulation is not carried on, if the apparatus of production is not constantly modernized, then one’s own enterprise is faced with the threat of being steamrolled by competitors who produce more cheaply or who manufacture better products.

A capitalist who attempts to withdraw from this process of constant accumulation and innovation is threatened with bankruptcy. He is therefore forced to participate, whether or not he wants to."

2c. Bureaucratic Socialism

Sam Williams describes the following scenario:

"A single corporation emerges that controls all of production. Let’s call our imaginary corporation the Universal Company Inc.  Its stock is traded on Wall Street and other global stock exchanges. Indeed, it is the only stock traded on the world’s stock exchanges, because it is the only corporation. It is the only business in the world.

Every factory, mill, mine, farm is controlled by Universal’s board of directors. Managers and technical personnel hired by its board of directors determine exactly what kind of goods are produced and the proportions in which each type of good is produced. Under the rule of Universal Company Inc., all workers are employees of the company since there are simply no other corporations to work for. Under the rule of Universal, what is the highest authority that the individual workers face? Why it’s the board of directors of Universal, which is elected by the stockholders of Universal on the principle of one share one vote.

But do the products of the labor of the workers of Universal take the form of commodities? The answer is no. Why not? Remember, Marx defined commodity production as a situation where the producers work for their own private accounts. Producers of commodities exchange the products of their labor and face no higher authority than the mutual pressure they exert on one another. Or what comes to exactly the same thing, the highest authority the producers face is competition among themselves. But this is not the case with the workers of Universal.

Instead of being indirectly social, the labor of the workers of Universal is directly social, as would also be the case under the rule of the associated producers. The board of directors and its subordinate employees such as managers, computer experts, foremen and so on see to it that the workers produce the right products in the right proportions. Since there is no commodity production, there is also no money, since money is simply a form of the commodity. And for the same reason, there is no capital, since capital consists of commodities and money. Where there is no commodities and money, there is no capital. And where there is no capital, there is no accumulation of capital.

The board of directors of the Universal Company Inc. might choose to continue expanded reproduction, but if it does, it will be accumulating use values not capital.

Since I am assuming a class of stockholders, the workers of Universal are indeed exploited. They are forced—just like is the case at the present day—to work some of the time for the boss—the stockholders of Universal—and some of the time for themselves. This allows the stockholders of Universal to live without working.

But the surplus product produced by the surplus, or unpaid, labor of the workers cannot take the form of surplus value, because there is no commodity production and labor does not take the form of value. And where there is no value, there can be no surplus value. And where there is no surplus value, there is no commodity production and no money. The surplus labor of the workers cannot take the form of profit—surplus value realized in the form of money. And where there is no surplus value and no capital, there is no capitalist mode of production.

While some might want to call our imaginary system of exploitation run by the Universal Company “state capitalism” in order to underline its exploitative nature as opposed to the system of cooperative production carried out by the associated producers, they would be forgetting that there have been other systems of exploitation in the history of human production over the last ten thousand years besides capitalism. But our imaginary system would not be a form of capitalism whatever else it might be, because it would lack the essential characteristics that separate capitalist production from other forms of exploitation.

For example, there would be no crises of the general overproduction of commodities, if only because there is no commodity production. In principle, our imaginary system might experience a generalized overproduction of use values, but that is something very different than the crises we experience under capitalism, which combine a generalized overproduction of commodities with a generalized underproduction of use values."

What Sam Williams describes here is an economic description of the "Communist States" emerging from the Russian Revolution and its WW2 aftermath. If you replace bureaucratic domination by workers control, you have a Trotskyist model for the aftermath of a socialist revolution: democratic socialism as the precursor (as the productive forces are developed) of communism. I have critiqued that model elsewhere.

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3. Discussion

To read further on why total automation is incompatible with capitalism, please continue to:

"They dismiss the last workers from their fully automated factories".

A Marxist Economist in Academia

Sam Williams writes about Anwar Shaikh.

Amazon link

"Shaikh has lived and worked in an era dominated by the reaction—the back side so to speak—of the Great Russian Revolution, whose one-hundredth anniversary we celebrate this year (2017). In the United States, where Shaikh works and lives, there has been no socialist organization that was either capable or willing to support the great work that Shaikh has performed. This stands in contrast to the eras of the Second and Third Internationals. As a result, Shaikh has had to earn his living as a professor of economics at the New School. And the New School should be complemented for allowing a man of Shaikh’s stature to perform his work.

This has enabled Shaikh to earn a living and live in relatively comfortable material conditions—at least compared to that of Marx. And he has been free from the kinds of political pressures that existed in the Second and Third Internationals. But the price he has paid for this is that he is subjected to the pressure of “official” economics. Under the “publish or perish” pressure that dominates the academy, he has to show that he is a “real economist”—unlike the writers who produce articles on basic Marxist economics that occasionally appear in the small newspapers published by the small U.S. socialist organizations.

As a result, “Capitalism” is written in such a way that few political activists—even those who specialize in economics—will be able to understand. Instead, “Capitalism” is directed at Shaikh’s fellow economists, who won’t be able to understand it either—though for quite different reasons.

It is also reflected by Shaikh’s definition of “the classical school” of economics, in which he includes Marx, the neo-Ricardians, and his own work. This differs radically from the definition of classical economics as defined by Marx.

In contrast to Shaikh, Marx saw classical economics as something already in the past in his own day as a result of the growing intensity of the class struggle. In contrast to Shaikh, he also put himself outside of all political economy, seeing it as a “bourgeois science” that he was critiquing as an outsider serving the working class.

Modern universities, though they support “free thought” up to a point, cannot but help but be organs in the final analysis of the capitalist ruling class. As such, they are the chief sponsors of “official economics,” which has done and continues to do great harm to the working class and other exploited people. In recent decades, unlike in the past, university economics departments have been willing to hire a few Marxists, but they not surprisingly show a strong preference to those Marxists who concentrate on criticizing aspects of Marx’s work—especially those who have the effect of stripping away all its revolutionary implications.

Neo-Ricardian-inspired critiques of the law of labor value that invalidate Marx’s theory of surplus value, and criticisms of the falling tendency of the rate of profit, which imply that capitalism can last forever, are much appreciated. This is all the more true since the great majority of bourgeois economists are trained only in neo-classical marginalism and are therefore so profoundly ignorant of Marx’s work that they are incapable of criticizing it. Therefore, an economist or two who are familiar enough with Marx’s work that they can critique its most revolutionary conclusions are considered in many university departments a valuable addition to a department otherwise consisting entirely of marginalists—most of whom are allied with the right wing of bourgeois politics.

Almost all professional economists, whether of the right or left, “know” that gold plays no important role in the modern monetary system, though strangely enough operators in the financial markets who are obsessed with every movement of the dollar price of gold have failed to get the message. And the economists also “know”—especially “progressive economists” but not only them—that getting rid of the role gold formerly played in the national and international monetary systems is key to the capitalist state’s alleged “successes” in avoiding “depressions,” which are now defined only as downturns on the scale of the 1930s or greater. Indeed, any attempt to return to a gold standard under current circumstances would have appalling consequences.

While upholding some version of the labor theory of value can be barely tolerated in university economics departments, it generally can’t be Marx’s version but some “MELT” [monetary expression of labor time] or MELT-like version of labor value. The revelation of all the contradictions of accepting Marx’s full theory of value is simply too revolutionary.

Shaikh’s work is all the more remarkable considering the political environment in which he has been obliged to work. However, it cannot in its current form be accepted as a finished product. It is more like a semi-finished product that is almost there but needs a little more work—the most important of which was fortunately done more than a century before the time of Shaikh by Marx himself. Once Shaikh’s MELT-like theory of value is replaced by Marx’s full theory of value, Shaikh’s work will come fully into its own. Correcting and completing Shaikh’s work will be a key task for Marxist economists in the coming years, whose primary job is to wage the now rapidly intensifying class struggle in the field of ideas."

Sam Williams has written an enormously erudite ten part critique of Shaikh's book, starting here. Look to the bottom of his sidebar to find the links to the next nine parts. It's essentially a pamphlet, or a small book.

Anwar Shaikh's video lectures are here.

Steve Keen and Anwar Shaikh

In the 1970s the International Marxist Group (IMG) was known as the most intellectual of the far-left organisations. Theory was taken seriously but as a member in my early twenties I never learned much economics - I was not the only one. An abiding memory was of a conference where a senior comrade gave a speech on economic perspectives: a colleague whispered to me that all he had done was take an editorial from The Economist that week and dress it up in Marxist language - I was appalled.

Amazon link

I'm in two minds about Steve Keen's book. I understand that it's dumbed down, written for students contemplating entering university-level economics. The book describes the vast arc of economics history stretching from the classical era of Adam Smith, David Ricardo and Karl Marx (who arguably terminated that tradition by making it politically explosive) through to the rise of the neoclassical tradition, Keynesianism and the confusion we are in today (Sam Williams' analysis is shorter and more definitive).

On the downside, in areas I know something about (quantum mechanics, special relativity) Keen's writing is confused although blusteringly self-confident. Throughout the book he has eschewed equations and diagrams, which is insane - he is reduced to conveying exactly the same concepts in prose which completely obscures his narrative. I was concentrating closely and his verbal arguments elide important steps and don't really hang together.

So I'm thinking Keen is interesting but intellectually underpowered, the kind of tourist guide who you sense isn't really authoritative.

The guy I'm really meant to read, apparently, is Anwar Shaikh.

Amazon link

Sam Williams writes:

"Shaikh’s book is by a modern university-educated economist written for other modern university-educated economists. Economics blogger Michael Roberts in his review says Shaikh’s “Capitalism” is more difficult than Marx’s “Capital.” I agree with Roberts on this point, and I think it is important to examine why this is so.

One reason is that Shaikh’s book demands a thoroughgoing knowledge of Marx’s work, including all three volumes of “Capital.” But it also requires a thoroughgoing knowledge of modern orthodox bourgeois economics—neoclassical marginalism. While parts of the book use Marxist language, the bulk of it is written in both the language of English and mathematics in a way that will be familiar only to those well grounded in orthodox bourgeois economics.

Shaikh provides some “translation” between the terminology employed by Marx and that used by modern economists, but it is hardly sufficient. In addition, where in the many places Shaikh uses the jargon of neo-classcal marginalism in place of basic Marxist concepts, it renders his language imprecise. Marx’s terminology was designed to describe in precise terms his analysis of capitalism. The terminology of neo-classical marginalism was developed for quite different purposes, to say the least, though it’s always possible to see what Shaikh is getting at provided the reader is sufficiently fluent in both “languages.”

Shaikh does provide a useful appendix listing the meaning of symbols he uses in his mathematical equations. The list is a long one.

Marxist political activists, even if they are highly educated Marxists but lack knowledge in today’s bourgeois economic orthodoxy, will have trouble understanding the book. But professional economists thoroughly grounded in modern bourgeois economics will be if anything in even greater trouble. The reason is that trained as they are in present-day bourgeois economics, they will also have a great deal of difficultly with the book unless they also have a thorough grounding in Marx. Though they will feel “more at home” with much of the terminology than will Marxist political activists, the Marxist foundations of the book will escape them.

The professional economists who will have the least difficulty with “Capitalism” are those familiar with the work of the Italian-British economist Piero Sraffa. For those somewhat familiar with Shaikh’s work, this will be no surprise. Much of Shaikh’s work has revolved around the “transformation problem”—the problem of transforming Marx’s values—or direct prices—into prices of production.

Shaikh has spent a considerable part of his career in refuting the suggestion by various critics of Marx that Sraffa’s work has both refuted Marx’s theory of value and surplus value and rendered it unnecessary. Essentially, these critics—also mostly university-educated economists—hold that the capitalist economy can best be described in terms of prices of production. According to them, analyzing capitalism in terms of “value” merely gets in the way.

But even professional economists familiar with Sraffa, unless well grounded in Marx, will not find “Capitalism” an easy read. I would most certainly not recommend Shaikh’s “Capitalism” as an introduction to modern Marxist economic thought.

None of this detracts from the importance of this work, however. Shaikh is undoubtedly one of the most important economic thinkers of our time. What it does mean is that it may take many years—or decades—for the arguments in this book to be assimilated into the understanding of the workers’ movement. I hope to contribute to this process in this extended review and critique."

So this is exciting and daunting! Although Michael Roberts in his review strikes a cautionary note.

Amazon link

Here is my go-forward plan (I have almost completed Capital Vol 1).

1. Read Capital Vols 2 and 3 and Theories of Surplus Value (Vol 4)
2. Read David Harvey's "Limits to Capital"
3. Engage with Shaikh's book (or watch the video lectures).

I would like to complete this plan within my lifetime.