I am in the process of reading a book with a very long title, Black hole: how an idea abandoned by Newtonians, hated by Einstein, and gambled on by Hawking became loved by Marcia Bartusiak.
According to Bartusiak, few scientists believed Einstein’s theory had any practical use before mid-century. Einstein’s theory wasn’t even taught in most universities and Newton’s theory was thought to be adequate:
“After the flurry of excitement in 1919, when a famous solar eclipse measurement triumphantly provided the proof for Einstein’s general theory of relativity, the noted physicist’s new outlook on gravity came to be largely ignored. Isaac Newton’s take on gravity worked just fine in our everyday world of low velocities and normal stars, so why be concerned with the minuscule adjustments that general relativity offered? What was its use? “Einstein’s predictions refer to such minute departures from the Newtonian theory,” noted one critic, “that I do not see what all the fuss is about.” After a while, Einstein’s revised vision of gravity appeared to have no particular relevance at all. By the time that Einstein died, in 1955, general relativity was in the doldrums.”
As I read Bartusiak’s book it occurred to me that much the same is true of Marx’s theory. Marx’s labor theory of value, although a giant step beyond the classical theorists of his time, and despite initially producing a huge wave of revolutionary fervor, has mostly been ignored at least since the 1930s.
The depression that never ended
In his own book, Austerity, the history of a dangerous idea, Mark Blyth argues that Marxists in Germany in the 1930s assumed the Great Depression be like any previous crisis– it would devalue excess capital and establish a basis for a new expansion. Although Blyth is only speaking of the SPD he may have a point. Every previous crisis had unfolded that way. Why would the Great Depression be different? No one at the time knew things had changed forever, nor how they had changed forever. Most of all no one seems to have realized that only with the Great Depression did Marx’s theory really become relevant to policy.
Most economists, even Marxist economists, are not accustomed to thinking about labor theory as a policy framework. Even for self-identified Marxists like SYRIZA in Greece or the SWP in Britain Keynes not Marx provides the policy framework. This leads to the sort of theoretical contradictions highlighted by SYRIZA MP and Marxist economist Costas Lapavitsas that the Keynesian policies he advocates are designed to save capital not kill it:
“Keynes is not Marx, and Keynesianism is not Marxism. Of course there’s a gulf between them, and it’s pretty much as you have said. Marxism is about overturning capitalism and heading towards socialism. It has always been about that, and it will remain about that. Keynesianism is not about that. It’s about improving capitalism and even rescuing it from itself. That’s exactly right.”
Hence in an ironic turn of a phrase usually applied by Stalinists to Trotskyists, Marxists appear to oppose capitalism everywhere but where it exists. If you ask Marxists what they would actually do once elected they could hardly give you anything more Marxist than SYRIZA’S Thessaloniki programme. The program that Marxists run on in elections is not their complete program, of course, and they will emphasize this, but it is their ‘immediate’ program to ‘address the crisis’; while their full program is overthrow of capitalism.
I would argue this sort of division between immediate and full program is what became obsolete in the 1930s.
The breakdown of marginalist school theory
How does this relate to Bartsiak’s insightful observation about Einstein’s theory? When scientists began to test the limits of Newton’s theory its limitations became apparent and Einstein’s theory became necessary. Bartusiak observed that Newton’s theory was good enough to get us to the moon and back, but broke down after that. In a similar sense, marginalist theory worked up until the Great Depression, but proved incapable of addressing the sort of mass unemployment that erupted in the 1930s.
Marx’s theory certainly predicted the emergence of mass unemployment, but this prediction, although interesting, was irrelevant until capitalism reached a certain point in its development. Up until that point, economists could ignore the contradiction between production on the basis of exchange value and production for profit. Which is to say, they could ignore the contradiction between values of commodities and their capitalistic prices of production. Even if this contradiction existed, as a practical matter the mode of production was motivated by profit, not by exchange value. As a practical matter, if you want to transform values into prices, said Paul A. Samuelson:
“It’s easy, you erase [Marx’s labor] values and replace them with prices of production”.
This is how things stood until the Great Depression, when, as former Federal Reserve Chairman Ben Bernanke put it, the gold standard mysteriously “malfunctioned”; transmitting the shock of absolute overaccumulation throughout the entire world market. Capitalism, in short, had gone to the moon and back, but it was now on the frontier of an economy where marginalism was inadequate.
Why would Marx’s theory be particularly relevant beginning with the Great Depression? First, because in Marx’s theory capitalism constantly reduces the socially necessary labor time required for production of commodities. The reduction of the socially necessary labor time required for production of commodities is the reduction of the values of commodities. Second, and simultaneously, capitalism constantly extends the labor time of the social producers so as to maximize its profits. With the values of individual commodities declining, and the total labor time of society increasing, the mass of commodities produced during the labor day grows phenomenally.
It is true that new consumer needs are created by, and new export markets open up to, this massive torrent of commodities, but eventually, as Keynes observed, the growing productive capacity of social labor outstrips any and all new uses for labor. Commodities can no longer be sold at their prices of production, because the average rate of profit has fallen to zero. The capitalist mode of production has reached the limits of the expansion of capital, of production of surplus value, production for profit.
In Marx’s labor theory, the capitalist price of a commodity is some duration of living labor, divided into necessary and surplus labor time. This gives us the mathematical expression, v+s. This is opposed to the simple labor value of a commodity, whose price is mathematically expressed as v. The capitalist commodity production price is maintained by extending the labor of the worker beyond the point necessary given the technological development of the productive forces. This extension is mathematically expressed as s — i.e., surplus value or surplus labor time. So long as the labor time of the social producers can be extended beyond what is necessary for their material need, surplus value is created.
Thus, at the point where capitalistically produced commodities can no longer be sold at their prices of production, the labor time of the social producers can no longer be extended beyond that duration necessary to satisfy their material needs. The surplus labor time of the social producers, no matter how great or materially necessary, produces no new value. Since capitalist production is the production of surplus value, it halts, and must of necessity halt, at the point where labor no longer produces value.
Animal spirits versus labor time
This cessation of production is not a subjective phenomenon; the result of animal spirits, or inadequate demand; nor is it the result of malinvestment, overproduction of commodities or too little money or some other nonsense. The source of the collapse of capitalist production is too much capital, i.e., the production of surplus value, production for profit. Capital suffocates on its own capacity for self-expansion. So soon as capital has successfully reconstructed society in its image, the means by which it overturns the old society — by extending the labor time of the producers and increasing the productivity of labor — becomes a weapon turned against itself.
Like Einstein’s theory in the natural sciences, Marx’s theory only proved significant when society had actually crossed the threshold of absolute overaccumulation. Until that time, capitalist production went through crises, but these crises were simply momentary forcible adjustments that paved the way for new capitalist expansions. When the Great Depression hit, everyone thought it would end up the same way — a short-term forcible readjustment of capitalist production. In fact, the depression never ended; it just went on and on without any let up. As in the case of Greece today, no one realized something had changed permanently with the way capitalism worked.
When it comes to policy, Marx’s argument is not well understood even by Marxist economists and certainly not by anyone else. To understand why this is true, doesn’t take much analysis. We can all agree that Marx essentially called for the abolition of wage labor. This call by Marx is typically cast in a political context: The working class must seize political power and employ its position as the new ruling class to work out its emancipation. There is, in fact, nothing about this political interpretation of Marx’s theory that is wrong or even misunderstood, per se.
However, what most people overlook is that Marx did not make this argument out of the blue, i.e., he was not describing his peculiar blueprint for society, nor a vision of the future that could be imposed by political measures. For Marx, capitalism was already in the process of abolishing labor by developing the productive forces of society. The proletariat could not abolish labor unless, simply because it wanted to end wage slavery, any more than slaves could abolish slavery simply because they wanted to be free.
What the proletariat had that slaves did not is that the capitalist mode of production itself was already headed toward abolition of wage slavery — something that was never true of slavery. The proletariat could accelerate the process already under way in the capitalist mode of production, because the way capital accomplished the abolition of labor periodically created obstacles to that historical result. Properly armed with theory, the working class could remove those obstacles and emancipate itself. Simply removing the obstacles to the development of social labor was sufficient to accelerating the process.
Every crisis is a crisis of overwork
The biggest obstacle to development of the productive forces was the tendency toward overaccumulation of capital. But the overaccumulation of capital resulted solely from the extension of hours of labor of the social producers beyond that duration socially necessary for production of commodities. Marx’s theory states that the solution to any crisis of capitalism is simply to reduce hours of labor.
Perhaps, he got this wrong; perhaps he dropped a stitch somewhere. In that case, those who accuse Marx of getting it wrong have to explain why every crisis is accompanied by a general social demand for Keynesian stimulus to achieve full employment. If hours of labor are not the problem, why does the fascist state have to create jobs to maintain full employment? Why does every crisis generate political calls for job creation or a subsistence stipend for those without jobs? Why do even the opponents of the working class drape their proposals in the flag of job creation?
If Marx’s theory is correct, the only policy any Marxist needs to advocate “to address the crisis” is a reduction of hours of labor. But the reduction of hours of labor is itself only the progressive abolition of wage slavery itself. Thus, the immediate program of Marxists to “address the crisis” is EXACTLY the same as their full program; there is no longer the contradiction of an immediate program to address a capitalist crisis that saves capitalism rather than killing it.
Perhaps some might think I am being unfair in castigating Arthur for his historical ignorance when it comes to his discussion of money.
