Reply to MCL of ‘Controverses’


The Crisis of Production and the Crisis of the Market Have the Same Cause: The Value Form



I apologize for having assumed that the text presented by ‘Controverses’ at public meetings jointly organized with IP to which I addressed some critical comments , expressed the opinion of ‘Controverses’. In his reply to these comments, the author of the text stressed that ‘Controverses’ is not ‘a group’ but ‘a project’, in which the collaborators, such as him, talk in their own name. So what follows is not a reply to Controverses but to its collaborator C. Mcl.

Mcl insists on the need for a sane polemic and on this we wholeheartedly agree. Indeed, a theoretical discussion on the origins of the crisis can easily degenerate in some kind of children’s game, “I’m more Marxist than you,” in which quotations of Marx replace the snowballs. Such a game does not interest us. Nor are we are interested in waging a polemic just to prove that we’re right. If we think it’s important to answer Mcl, it is because theoretical errors can lead to political choices that might be regrettable.

The essence of the debate is Mcl’s disagreement with the analysis of IP according to which the main contradictions which condemn capitalism to ever deeper crises, that is, the insufficiency of its market and the tendency of its profit-rate to fall, are intrinsically linked and have their common origin in the very foundation of capitalism: the value form. Against this view, Mcl affirms that these two contradictions are independent factors which are ‘not theoretically linked’ (and therefore neither practically linked, one has to assume) and have no common origin. And he lines up quotations to prove that Marx thought so too.

Thus Mcl claims that the current crisis is not caused by the tendency of capital to become less profitable, since, according to his figures, the rate of profit has increased in recent years, but by an independent manifestation of the other contradiction, the insufficiency of its market, and more specifically by the lack of demand of the working class, caused by the relative decline of wages. This problem, he states, cannot be resolved by an increase of consumption by other components of the market, because the different components of the market are not ‘communicating vessels’: instead of investing or consuming more, the capitalist class prefers to ‘park’ its profits in financial capital.

If this indeed were an independent problem, not linked to the problem of the production of value, then its cause as well as its solution (or the reason for the lack of any solution) would not be linked to the contradictions in production either. If the insufficiency of the market is an independent problem, its solution, if there is any, is obvious: To expand the market. To raise wages in order to stimulate the consumption of workers. To have the state intervene in the economy in order to accomplish M-C, the transformation of money into commodities which private capital is refusing to do. If one accepts that the insufficiency of the market is an independent factor, unlinked to what goes on in the sphere of production, it’s hard to see what one could oppose to this vision, which is the one of the left wing of capital.

Still, Mcl insists that he’s not an underconsumptionist. His argument seems to be that he’s not one because Marx wasn’t one and he agrees with Marx. Indeed, as Mcl admits, Marx sharply criticized the idea that “the working class receives too small a part of its own product and this could be redressed by giving it a larger part of that product, and thus higher wages.” Mcl agrees: “to increase wages would not resolve anything because they were restricted precisely in order to redress the rate of profit since 1982” So, after insisting so much that these problems are independent, unlinked, he winds up saying that one cannot be solved because of the other. Some independence!

Mcl admits that “In general, these two contradictions manifest themselves together and reinforce each other,” but he insists on the fact that there are also moments in which one is more dominant than the other. That is true, but it hardly shows that they are independent factors. Indeed Mcl himself shows how one is held back at the expense of worsening the other, how the rate of profit in the past years was propped up by reducing wage-costs and thus demand, and how, in the 1970’s, demand was propped up by state policies which weighed heavily on the rate of profit. So he himself demonstrates that the idea, according to which these contradictions are independent factors, is untenable. We should therefore try to understand instead how they are linked. Since he denies that they’re linked, Mcl cannot do that. The quotes from Marx which he so carefully gathered are not a substitute for an analysis.

But let’s look at these quotes a little closer, since they could give the impression that Marx’s view was as contradictory as Mcl’s. That is not the case. According to Mcl, the analysis of IP goes against that of Marx because:

It is true that Marx shows that the conditions of the production of value and of its realization “are not identical”, but that is precisely a position which IP has affirmed in all its theoretical texts on the capitalist crisis. In contrast to most other groups and publications in the pro-revolutionary milieu, including the one of which Mcl was a member, IP was almost the only one (Communisme Ou Civilisation was another exception) to insist that these conditions are not identical so that the crisis in the phase of the realization of value cannot be explained as a mere consequence of the crisis in the phase of production, nor the other way around.(1) If Mcl would follow his own advice, “first to get to know seriously the respective arguments”, he would know this and avoid a false debate.

Unfortunately, the two camps in this debate were not able to push their understanding much further than it was already before Marx, when Ricardo assumed that the realization of capital is completed in the phase of production and Sismondi saw the insufficiency of the market as a source of crisis without understanding how it was linked to the contradictions within the phase of production. Marx learned something from both but he also criticized both for not understanding the unity between the two phases of the reproduction process, the common source of the obstacles that appear in them, which is capital itself, value. The solution to this false debate is not to deny the link between them but to understand this link more profoundly, instead of seeing the obstacles in one as mere consequences of the obstacles in the other.

Of course these obstacles are linked, theoretically as well as practically. Marx knew very well that “production determines the market, as well as the market determines production”. One presupposes the other. Without their unity, the process of reproduction would be impossible. His entire analysis of the reproduction of capital is based on the understanding of the phase of production of value and the phase of its circulation as a whole, but also on the understanding that the very evolution of capitalism generates a contradiction between them. This contradiction results from the value form, from the double nature of the commodity as exchange-value and use-value. If use-value and exchange-value were the same thing, or even if they weren’t but would develop harmoniously, production would equal consumption and there would be no crisis resulting from the contradiction between them. But the value form forces capital to measure wealth with socially necessary labor-time, while at the same time it compels it to reduce socially necessary labor-time as much as possible. It therefore imposes a different course on the production of use-values, which tends to grow at an exponential rate, and on the production of exchange-value, which tends to shrink relatively. This manifests itself in the phase of production in a lack of profit and in the phase of circulation in a lack of demand, but the source is the same. As Marx wrote, the limit is “not inherent to production generally, but to production founded on capital.” (2) In the same way, he saw no limit to consumption in general, but to consumption based on capital. This limit is the same, seen from different angles. In the phase of production, the limit is the declining course of exchange-value. In the phase of circulation, the limit is the exponential growth of use-values, relative to their exchange-value. The realization of exchange-value is the goal but it’s also the use-value as such, which determines demand. The commodity as use-value is in contradiction with itself as exchange-value. It is the need for it as a use-value (by those who possess exchange-value) which conditions its realization as exchange-value.

And this need does not automatically adjust itself to the tendency of capital to produce ever more use-values with ever less exchange-value (All this is examined in more detail in the section entitled “How the contradiction affects the realization of value” in “Crisis of Value” in IP 51/52, which Mcl seems not to have read).

While “this unity of production and realization, not immediately but as a process” (Grundrisse p.407) must be understood, it must be also understood that this unity is not achieved automatically. In the sphere of production, capital seeks only surplus value and therefore tendentially pushes production beyond the limits of expansion of its market. In the sphere of circulation, capital acts as if circulation were itself a source of value, as if it would be under no obligation to return to production to valorize. It’s in this sense that Marx saw these different phases of a single whole manifest an independence from each other. But this independence itself signals the development of the contradiction between them, which shatters their necessary unity and provokes the crisis.

“The contradiction between production and realization – of which capital, by its concept, is the unity -- has to be grasped more intrinsically than merely as the indifferent, seemingly reciprocally independent appearance of the individual moments of the process.” (Grundrisse, p.415.)

Their unity is capital: the reproduction of society as value. It is the contradiction within the value form that breaks this unity. The limit which exchange-value imposes on the production of use-values as well as the limit use-value imposes on the realization of exchange-value, as Marx explains further on.

So, far from him to consider those two phases, and the obstacles that appear in them, as being “not linked theoretically.” And yet that’s what he wrote, according to Mcl. This surprised me, even more so since I remembered the passage well, having quoted it myself in a text (see IP 30-31). Mcl quotes him as writing: “Les conditions de l’exploitation immédiate et celles de sa réalisation ne sont pas identiques. Elles ne diffèrent pas seulement par le temps et le lieu, théoriquement non plus elles ne sont pas liées” (In English: “The conditions of the immediate exploitation and those of its realization are not identical. They differ, not only in time and space, but theoretically, they are not linked either.”) But in my edition of Capital, Vol. 3, (International Publishers), the same passage ends: “they differ, not only in time and space, but also logically.” So I looked up the original, German text: “Sie fallen nicht nur nach Zeit und Ort, sondern auch begrifflich auseinander.” Which is pretty close to the English translation, though the closest translation would be: “They differ not only in time and space, but also conceptually.” So it seems that the translator of Capital for “Les Editions Sociales”, the version to which Mcl refers, has deformed Marx’s thinking considerably, thereby sowing confusion in Mcl’s head. Indeed, to differ conceptually is quite another thing from not being linked theoretically. The difference between the conditions of production and realization do not make the link between them disappear. It is precisely in this link that the value form, under the pressure of the inherent evolution of capitalism, becomes an untenable contradiction. Because we disagree with his opinion that the relative decline of the demand of the working class is an independent cause of the crisis, Mcl claims that we reject Marx’s view that “the ultimate reason of all real crises is always the poverty and restricted consumption of the masses.” Not so. In defense of his theory that the current crisis is caused by the relative decline of wages, Mcl writes: “what IP forgets is that for Marx the restriction of the market results not only from the mechanism of the decline of the rate of profit” [note in passing that this formulation implicitly recognizes that both are linked, contrary to Mcl’s claim] (…) but also from an increase of the rate of surplus-value (…) resulting from the decline of the part of wages in the total social product.” Like Marx, we think that the demand of the exploited class is inadequate by definition (Grundrisse, p. 420). The capitalist system is based on this. For the total capital, this demand represents necessarily more cost than profit. It pays for it. Its size is linked, in an inverse relation, with the rate of profit. From this, it does not follow that the relative restriction of the demand of the exploited class does not create any problems for capital, but that the appearance of crisis in the realization of value is intrinsically linked to the conditions of its production.

The causes of the relative decline of wages are to be found in the sphere of production. In this regard it does not matter whether it results from a rise of the organic composition of capital (the ratio C/V, constant to variable capital, technology to living labor) or from a rise of the rate of surplus value (the ratio S/V, surplus value to wages). Besides, the two – the process of production which becomes more and more based on past labor to which ever less living labor is added, and the process of production in which the reproduction of the working class becomes ever cheaper for capital-- go hand in hand. The sense of the quotation from Marx, in its context, is that the capitalist market can never be more than the use-values needed for the reproduction of capital (in an enlarged form, imposed by competition and its tendency to devalorize), and the use-values needed to satisfy the unproductive wants of those with money. It is not the latter market that poses a problem. It can always grow. If not because of a growing demand of private capitalists and their hangers-on, the state can stimulate a rise of unproductive demand. In this regard, it’s not important who consumes. If wages are doubled tomorrow (fat chance!), this would shift a part of the unproductive consumption from the capitalist class to the working class, but it would in no way resolve the real problem of the market for capital. Because this problem is in the first market, the one that is limited by the quantity of use-values necessary for the enlarged reproduction of capital.

It’s there where the contradiction between use-value and exchange-value becomes insurmountable (see “Crisis of Value,” op. cit) It’s this market which counts because it’s only by passing through it that value continues its cycle and can produce new value. The other market, the one of commodities that are unproductively consumed, is but a dead-end for capital: a necessary dead-end, but still a dead-end.

There are other questions raised in Mcl’s text (such as the redistribution of surplus value in the circulation process, the metabolism between the developed capitals and the rest of the world and its historical evolution, whose importance he seems to under-estimate) that we can address later on. My main goal is to show that the cause of the crisis of capital, in production as well as circulation, is capital itself, its value form whose internal contradiction becomes untenable following internal changes in the mode of production. From this flows the need to situate the manifestations of crisis in an historical framework, to see the changes that the mode of production has undergone, to link them to the progress of the real domination of capital and what has been called the decadence of capitalism. If I criticized the lack of historical approach in Mcl, it was not to score a point but because an historical contextualization is essential to understand the stakes today. To see the phenomena of crisis in production and on the market as separated, independent and unlinked theoretically, is dangerous because not seeing their link means not seeing that the essential problem is capital; that its foundation, the value form, must be destroyed. This opens the door to the defense of a lesser goal. Such a defense could become a safe-conduit for counter-revolution; it’s therefore important not to continue down that road.

Sander


Notes

1. See for instance, “ The roots of the capitalist crisis”, part 2 (IP 30-31): “Insofar as there is real debate on crisis theory amongst revolutionary Marxists (alas, very little, despite the fact that it is the linchpin of their message) each side tends to see only one contradiction and ignore the other, while both confusing the frameworks of individual capitals and capital as a whole, with inevitably disastrous results for their overall understanding of the unfolding of capitalism's historic crisis. When Marx states "production determines the market, as well as the market determines production", each camp in this debate hears only half of what he's saying. One side, the Luxemburgists and others focusing exclusively on realization-problems, can't accept the first half: that production determines the market and that, therefore, an expansion of the scale of production also brings about an expansion of the market. Contrary to what they think the immanent barrier to market expansion is not static and can't be understood without grasping the dynamics of the production process. The other side, of which Paul Mattick has been the best known theoretician, believes that the fall of the profit-rate is the only barrier to capital accumulation, and can't therefore accept the implications of the second half of Marx’s statement, that the market determines production, and that therefore the narrow basis on which this market rests, can become an insurmountable obstacle for the accumulation of capital, which is forced by the tendential fall of the profit-rate to expand continuously.

2. Marx, Grundrisse, Penguin ed, p.415

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