12
Apr

A Critique of Heinrich in MR on Technology, Value and Crisis

By Keith Joseph

The Kasama Project

Monthly Review published an essay by Michael Heinrich critiquing Marx’s work on the falling rate of profit called:Crisis Theory and the Falling Rate of Profit.  I haven’t seen any response yet.  Here’s mine.

Heirnrich puts forth three basic theses: 1. Marx, at the end of the day, does not present a coherent and final crisis theory.  2. Marx had two more or less distinct economic projects.  The first begins with the Grundrisse (although this text appears to the public last) and includes the three volumes of Das Kapital and the Theories of Surplus Value. This was the project as Marx originally conceived it and announced it in the Preface to A Contribution to the Critique of Political Economy (the six book plan). The second, lesser known, project begins after 1865 and see Marx re-working his earlier formulations in light of new evidence and even scaling down his ambitions.  He now believes he will only be able to complete part of his work and others will have to finish it.  3. The math on the falling rate of profit doesn’t add up.

The essay is very interesting and I am certainly eager to investigate Marx’s “second” project more thoroughly.  Heinrich does a fine job of explaining how Marx conceived the critique of political economy  at various moments and his emphasis on Marx’s willingness to continually question and re-think his findings is important and worthy of emulation.

I found Heinrich’s refutation of the falling rate of profit’s math unconvincing because it is not clear that Heinrich understands the falling rate of profit at the conceptual level.  Setting the rate of profit and the rate of surplus value into mathematical formula  is an important step in the proof of the theory and the formalization of theory can bring clarity but the way that Heinrich proceeds obfuscates more than it reveals.  

Simply put, rising productivity of labor manifests itself in a falling profitability of capital.  It is not clear in Heinrich’s critique that he understands this basic point at the conceptual level.

Rising labor productivity means less labor embedded per unit of output so the commodity bears increasingly less value. Additionally, rising labor productivity destroys existing values since value is determined by socially necessary labor times and rising labor productivity shortens socially necessary labor times. So, existing values must compete in the market with values created under the new conditions of production.  Any labor time above the new socially necessary standard is disappeared in the market as a result of competition.  A falling rate of profit can co-exist, for a time, with a rising mass of profit if the capital relation is reaching new places and markets are expanding.  Heinrich ignores all this.  Now he does mention the importance of the credit system (which is the most developed form of money under capitalism) and its importance to understanding modern crisis.  The credit system is no doubt crucial.

Heinrich’s error, I think, is revealed in the following. Heinrich quotes a famous passage from the Grundrisse and then he argues that it is mistaken. 

“In the so-called “Fragment on Machines,” one finds an outline of a theory of capitalist collapse. With the increasing application of science and technology in the capitalist production process, “the immediate labour performed by man himself” is no longer important, but rather “the appropriation of his own general productive power,” which leads Marx to a sweeping conclusion: “As soon as labour in its immediate form has ceased to be the great source of wealth, labour time ceases and must cease to be its measure, and therefore exchange value [must cease to be the measure] of use value. The surplus labour of the masses has ceased to be the condition for the development of general wealth, just as the non-labour of the few has ceased to be the condition for the development of the general powers of the human head. As a result, production based upon exchange value collapses.”

Heinrich’s then says:

These lines have often been quoted, but without regard for how insufficiently secure the categorical foundations of the Grundrisse are. The distinction between concrete and abstract labor, which Marx refers to in Capital as “crucial to an understanding of political economy,” is not at all present in the Grundrisse.6 And in Capital, “labor in the immediate form” is also not the source of wealth. The sources of material wealth are concrete, useful labor and nature. The social substance of wealth or value in capitalism is abstract labor, whereby it does not matter whether this abstract labor can be traced back to labor-power expended in the process of production, or to the transfer of value of used means of production. If abstract labor remains the substance of value, then it is not clear why labor time can no longer be its intrinsic measure, and it’s not clear why “production based on exchange value” should necessarily collapse. When, for example, Hardt and Negri argue that labor is no longer the measure of value, they do not really refer to the value theory of Capital but to the unclear statements of the Grundrisse.7

Hardt and Negri’s arguments, regardless of what they may assert, are not consistent with the Grundrisse and that they appeal to the authority of the Grundrisse is not a mark against that text.  But that is a minor point.  Heinrich points out that value embedded in a machine (that is the labor time embedded in the machine) is transferred from the machine to the product.  This is correct. 

But when Heinrich says:

“If abstract labor remains the substance of value, then it is not clear why labor time can no longer be its intrinsic measure, and it’s not clear why “production based on exchange value” should necessarily collapse.”

Production based on exchange-value would collapse at this point because no new value production is possible.  Yes the products of human labor would exist, including means of production but there would be no source for surplus value, the capital relation is a process and the process would end without labor to exploit.  Heinrich’s comment above reveals that he doesn’t really understand the point of the falling rate of profit.  Profit is the form that capital accumulation must take under capitalist social relations.  Capital accumulation is the form that the development of the productive powers of human labor must take at a certain level of development.  Once the productive powers of human labor are developed to the point that human labor is no longer necessary the profit form is no longer necessary but more importantly the value form is no longer necessary.  Value is “abstract socially necessary labor time.” If socially necessary labor time is zero exchange value is no longer an adequate form, capitalism is over.

The crisis of 2008 is best understood in this light.  Moore’s Law, for example, the idea that digital technology develops in an exponential progression, is an expression of stunning rate of technological change that has taken place over the last 30 years.  Rapid (and in some instances exponential) technological change and rising labor productivity are the central feature of the current economic crisis.

This crisis is rooted in the neoliberal solution to the stagflation crisis of the 1970′s.  Neoliberalism in practice crushed the labor unions, deregulated the economy, dumped the gold standard and moved to floating exchange rates, and globalized the production process thereby unleashing the merciless whip of competition radically spurring the pursuit of relative surplus value and resulting in mind boggling technological change. Rapid technological change and rising labor productivity puts downward pressure on the rate of profit and that is the essence of the problem for the system. 

Rising labor productivity, pursued relentlessly by capital seeking advantage over the competition, gives temporary advantage to the innovating capital but, paradoxically, undermines the overall rate of surplus value production putting downward pressure on the rate of profit.

Rising labor productivity means less labor embedded per unit of output so the commodity bears increasingly less value. Additionally, rising labor productivity destroys existing values since value is determined by socially necessary labor times and rising labor productivity shortens socially necessary labor times. So, existing values must compete in the market with values created under the new conditions of production.  Any labor time above the new socially necessary standard is disappeared in the market as a result of competition.  A falling rate of profit can co-exist, for a time, with a rising mass of profit if the capital relation is reaching new places and markets are expanding. 

Debt financing, another way to offset a falling rate of profit, allows the realization of existing values before they are destroyed by the fall in socially necessary labor times.  The financial crisis ensued when expanding markets and debt financing could no longer keep pace with rising productivity/falling rate of profit.  Although it is expressed as a financial crisis its origin is in the production process. 

Marx explained, famously, in the Preface to A Contribution to the Critique of Political Economy, that a mode of production is overthrown when the forces of production can no longer develop within the matrix of existing social relationships. 

The "productive forces" is another way of thinking about technology. Technology increases the productive power of human labor. The productive forces are then people and their technology/tools.

Under capitalism, the productive power of human labor takes the alienated form of capital and appears, to labor, as an alien power outside itself when capital is in fact the mystified form of labor’s power.  Disturbances in the development of human productive power appear as crisis of capital accumulation.

In the current crisis the further accumulation of alienated human power (capital) is fettered by the debt relation.  The debt relation started as a spur to further development allowing consumption to outstrip revenue. Debt and credit sped the turnover of capital making further accumulation possible.  But as interest rates rose debtors became unable to continue borrowing and repaying. The crisis ensued and the debt relation became a fetter on further accumulation – the movement of a social relation from spur to fetter is a familiar pattern explained in Marx’s Preface to A Contribution to the Critique of Political Economy.

The tendency towards a falling rate of profit is an expression of the contradiction between the continued development of the productive forces and the social relationships in which those forces have hitherto developed (the contradiction is also detailed in the Preface).

At this time debt is the specific social relation fettering continued economic development. Transforming the debt relation will solve this crisis.  There isn’t any other solution. If the hegemony of financial capital continues we will remain in recession tittering on depression for at least a decade while the impossible task of attempting to pay back debt is undertaken. The debt relation is enforced by the hegemony of financial capital.  This is why financial capital is our main enemy right now, and it is also why we should be able to rally the whole of society (all other social classes) against this “one percent.”  As an aside, “financial capital’s” hegemony is not some unanticipated outcome due to a new stage of “monopoly capitalism.”  The hegemony of financial capital is rooted in the separation of ownership and production which is what the stock market is all about.  This is a part of the expected maturation of capital.

Historical Materialism demonstrates that increasing labor productivity drives historical change. Rapid technological development is the historical mission of capitalism. Marx showed us that capitalism’s social relationships began as a spur to rapid technological development but they would eventually become brakes on further development and at that point there would be social and economic crisis and a transformation of our economic relationships would become necessary if catastrophe is to be averted.

Heinrich’s work shows that there is still much theoretical work to do, the role of the credit system and its relation to the falling rate of profit is still a critical area of further research and the current crisis is an perfect example of this relationship.

Tags: crisis of 2008, crisis theory, falling rate of profit, Marxism, value theory

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Category : Capitalism / Marxism / Technology

3 Responses to “Questioning the Falling Rate of Profit:”


Keith April 13, 2013

I appreciate your comments and the reading suggestions, negative potential.

Perhaps, I wasn’t clear in my initial comments.

Heinrich’s understanding of the falling rate of profit is mistaken. That is clear when he writes:

“If abstract labor remains the substance of value, then it is not clear why labor time can no longer be its intrinsic measure, and it’s not clear why “production based on exchange value” should necessarily collapse.”

When socially necessary labor time is zero or close to it then value (abstract socially necessary labor time) ceases to be the form that wealth must take. If socially necessary labor time is reduced to zero or close to it as is “implied in the fragment on machines” the law of value is overcome. There is no substance of value at this point there are only use values.

Heinrich seems to miss the point that reductions in socially necessary labor time act back retroactively on previously produced values. If socially necessary labor time is zero then the value form is abolished. The existing machines are simply use values.

negative potential April 12, 2013

P.S. Also, not to be rude, but did you actually read the piece? Because you actually get completely wrong the works and manuscripts Heinrich counts as being part of Marx’s first project, and the ones that are part of the second project. And honestly, that’s pretty remarkable, considering he actually creates a table indicating which manuscripts are part of which project.

negative potential April 12, 2013

Anybody who talks about the labour “embedded” in a commodity is a Ricardian who has not understood the first thing about Marx’s theory of value, and what distinguishes him from classical political economy (I’m not saying that to be a dick, but rather to point out that any further discussion is pointless if your conception of “value” is that of a Ricardian physiological substance).

I would suggest to go back and read chapter one of Vol. I of Capital very, very closely to understand the distinction Marx makes between concrete labour and abstract labour, how the latter is not a physiological substance, but rather a social abstraction consummated in societies of generalized commodity exchange. It goes without saying that Heinrich’s book is very helpful in this regard if you need supplementary literature (it has the advantage of also providing quotes from Marx’s revision manuscripts that are otherwise not yet available in English).

Also, the argument underlying the machine fragment of the Grundrisse was explicitly rejected by Marx in Vol. I of Capital when he introduces the concept of relative surplus-value, noting that Quesnay used to torment the classical political economists for the apparent contradiction that labour is the substance of wealth, yet capitalists strive to reduce the socially necessary labour involved in the production of a commodity. The category of relative surplus-value resolves this apparent “contradiction”: what interests the capitalist is not the socially necessary labor time required for the production of a commodity, but rather the surplus *beyond* that level of social necessity.