Academic journal article Capital & Class

Marx and the Crisis

Academic journal article Capital & Class

Marx and the Crisis

Article excerpt

Introduction: Purely a financial problem?

Economics is an easy game to play if you do not want to look into things too deeply, and are happy to conform to what is expected of you. Economists as the mysterious high priests of capitalism are responsible for the 'word' rather than the 'flesh' (Potts, 2005). It does not matter that the economics profession failed to predict the crisis: their reconfirmation of the supremacy of the market has fitted politicians' and businesses' desire, since the end of the Golden Age in the early 1970s, to spread the market both within developed countries and to 'developing' countries. Now that crisis has 'unexpectedly' occurred, 'economics as usual' can take a short rest before resuming its historic mission of justifying the centrality of free markets to our well being. Keynesians can temporarily step in to make profound observations such as, if demand is falling we might try to boost it up again, and that speculation/deregulation of the financial system can apparently lead to disruptive financial bubbles. So let us support the economy and financial system in 'unconventional' ways and hope for recovery. 'Sensible' regulation of the financial system will then 'guarantee' a prosperous market-based future. Such superficial and aspirational economic analysis sadly reflects the political situation in developed countries, in which mainstream political parties from both left and right are equally committed to the market system. It is not in anyone's 'interest' to enquire further.

Perhaps surprisingly to those on the left who are not economists, radical critics of free-market economics have tended not to employ Marx's economics in their analysis, either before the current crisis or in order to explain the current crisis. In particular, Marx's theory of the determination of commodities' values by labour-time, which provides the basis for his prediction of a tendency for the rate of profit to fall in boom, has been rejected rather than embraced by most Marxist economists. This is because most Marxist economists have spent a hundred years believing that Marx's value theory is internally inconsistent (Kliman, 2007).

In 1906-7, Bortkiewicz (1952, 1984) first 'discovered' Marx's inconsistency, which Sweezy (1942) and Samuelson (1971) publicised, helping this 'fact' to become 'mainstream' Marxist economics--see, for example, Desai (1979). Bortkiewicz focused on Marx's (1981, Ch. 9) transformation of commodities' values into prices of production, so as to equalise profitability across sectors with differing ratios of constant capital (machines, raw materials etc.) to variable capital (wages). Marx had simply defined varying levels of total constant capital and variable capital inputs for five capitals/spheres of production, and assumed a 100 per cent rate of exploitation for each capital to determine the surplus-value each extracted, revealing the total value each capital produced. (1) If each capital simply realised/appropriated the value they produced, capitals with more variable capital compared to constant capital would enjoy higher profit rates than capitals with higher ratios of constant capital to variable capital, and this would make no sense. (2) Marx argued that movement of capital between spheres would tend to equalise profit rates between spheres, ensuring that the value capitals appropriated would tend to differ from the value they produce. Marx defined the set of prices that would equalise profitability as the prices of production. The determination of value by labour-time and surplus-value representing the ultimate source of profit are not violated since, although in each sphere appropriated value is likely to deviate from produced value, for the economy as a whole total appropriated value equals total produced value, and total profit equals total surplus-value. Problem solved.

For Bortkiewicz, Marx had under-defined the problem by ignoring the question of how the economy could reproduce itself. …

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