Critique of Positivist Marxism and Economic Determinism

MP R A
Munich Personal RePEc Archive
Crisis and law of motion in economics: a critique of positivist Marxism

Alan Freeman
London Metropolitan University
2. June 2010
Online at http://mpra.ub.uni-muenchen.de/48619/ MPRA Paper No. 48619, posted 27. July 2013 04:57 UTC
Crisis and law of motion in economics a critique of positivist Marxism

AlanFreeman1 LondonMetropolitanUniversity afreeman@iwgvt.org
Abstract
ThisisaprepublicationversionofthepaperpublishedinReviewofPoliticalEconomyVolume26,2010 (http://www.emeraldinsight.com/books.htm?issn=01617230&volume=26).Itshouldbecitedas Freeman,A.(2010).Crisisandlawofmotionineconomics:acritiqueofpositivistMarxism,Reviewof PoliticalEconomyVolume26,2010,pp211250. Thispaperrestorestheconceptsoffreedom,consciousness,andchoicetoourunderstandingof economiclaws,sowemaydiscusshowtorespondtoeconomiccrisis.Theseareabsentfromorthodox economicswhichpresentsglobalisationorthemarketsastheoutcomeofunstoppableforcesoutside humancontrol. TheywereintegraltotheemancipatorypoliticaleconomyofKarlMarxbuthavebeenlosttoMarxism, whichappearsastheinspirationformechanical,fatalisticdeterminism.Thisconfusionarisesfrom Marxismsabsorptionoftheidea,originatinginFrenchpositivism,thatsociallawsareautomaticand inevitable. Thearticleconteststheorganizingprincipleofthisview:thateconomiclawsarepredictive,tellingus whatmusthappen.Marxslawsarerelational,notpredictive,layingbaretheconnectionbetweentwo apparentlydistinctformsofappearanceofthesamething,suchaslabourandprice.Suchlawsopenthe doortodemocracyandchoice,butdonotunambiguouslypredictthefuturebecausewhathappens dependsonouractions. Thecommodityformconcealstheselaws,disguisingthetruesocialandclassrelationsofsociety. Accumulation,however,underminesthecircumstancesthatpermitthecommoditytoplaythisrole.The resultiscrisis,definedinthispaperasthepointwhentheblindlawsofthecommodityformare suspendedandopenpoliticalforcescomeintoplay. Inpastcrises,capitalismhasrestoredtherateofprofitthroughsuchdestructiveinterventionsas imperialism,war,andfascism.Economiclaws,properlydefined,offersocietytherealchoiceof alternativeoutcomesfromcrisis. Keywords:Crisis,RateofProfit,TSSI,Marxism JELcodes:B1,B14,B3,B5 Critique of Positivist Marxism 1
Crisis and law of motion in economics a critique of positivist Marxism

1. Introduction
Thisarticleseekstorestorethenotionsoffreedom,consciousnessandchoicetoourunderstandingof economiclaws,placingdiscussionaboutresponsestoeconomiccrisisonarigorousfoundation.These conceptswereintegraltotheemancipatorypoliticaleconomyofKarlMarx.Theyhavebeenlost,Iwill argue,tomainstreampoliticaleconomyandalsotoMarxism,whichis,withgreatirony,castasthe originatoroftheopposednotionofmechanicalorfatalisticdetermination. ThisistheresultoftwosubstitutionsforMarxsownideas.AsTSSIscholars(Freeman2010,Kliman 2007)haveestablished,modernacademicMarxismhasreplacedMarxsvaluetheorywithare interpretationcastingitasvariantofgeneraleconomicequilibrium.Thismisuse,Isuggest,accompanies anevenbroadermisreadingofhisconceptofeconomiclaw,importedfromFrenchpositivism.Theidea atstakeisthatsocietyisgovernedbydeterministiclawsinwhichtheactionsofhumans,andaboveall thecollectivechoicesofsociety,donotfigure. Toclarifytheextentofthismisreading,Iwilldistinguisharelationallaw,forexamplethatthe magnitudeofvalueisequaltothetimeoflabour,orthatprofitisequaltosurplusvalue,froma predictivelaw,forexamplethatthecrisiswillendnextyear.ThelawmostwidelyassociatedwithMarx thetendencyoftherateofprofittofalliswidelyreadbyMarxistscholarsaspredictive.Iwillargue thatinsteaditexpressesarelationintime:therateofprofitwillfallforaslongascapitalism accumulatesvalue.Ityieldsnopredictionindependentofwhatclasses,statesandnationsdo.This explainswhyithasbeenreversedseveraltimes,andalsowhythehumancosthasbeensogreat;since accumulationisthemeansbywhichcapitalismexists,whenitissuspended,societycanonlybekeptin existencebysuppressionortransitiontosomethingelse.Ittookfascismandwartorecoverfrom1929; recoveryfromtheGreatDepressionof18731893andthecrashof1893wasachievedbyimperialism. Thislaw,hence,expressesarelationbetweenactionandoutcome.Itpermitsustoidentifyactionsthat canavoidthedestructivenessofthelasttwosolutions. Marxssignalachievementwastomaketransparentthecentralrelationallawsofoureconomysuchas thoserelatingpricetolabour,andincometopropertyallowingsocietytograspthelinkbetweenwhat itchoosestodo,andwhathappensasaresult.Thisisadeeplyemancipatoryproject:knowledge,for Marxalongwiththeenlightenmenttradition,isthemeanstofreedom.Capitalismhoweverconcealsthe truerelationbetweenouractionsandtheiroutcomeswithinthecommodityform.Thesystemic consequencesofindividualdecisionsthereforetaketheillusoryformofautomaticlawswhichMarx sought,inhisownwords,tolaybare. ThisendeavourstandsindiametricoppositiontotheWeltanschauungwhichdominatesmodern thoughtandparticularlyneoliberalandevenliberalthinkingwhichviewtheworkingsoftheeconomyas inevitableandoutsidehumancontrolparadoxicallyinviewoftheirnominalemphasisonfreedom,to whichweshallreturn.Thebestknownmodernexpressionofthisoutlookistheportrayalof
Critique of Positivist Marxism
globalizationasanunstoppableprocessdrivenbythegrowthoftrade,communicationandtravel.Its distinctivefeatureisinevitability.Itsapostlesdiscussonlywhetheritisgoodorbad;opponentsarecast notjustasmorallywrongbutillogical.Sinceitisgoingtohappeninanycase,itmakesnosenseto opposeit:itwouldbelikecallingfortherepealofthelawofgravity. Twooptionsareexcluded.Iwillshowtheyaretwosidesofthesamecoin.Thefirstisthepossibilityof endogenousselfcontradiction:thatglobalizationorcapitalism,orindeed,accumulationmay damagetheconditionsforitsownexistence,hencecontainingtheseedsofitsowndestruction.The secondispossibilitythathumanagencymayalteranythingsignificant.Thoughcommunication,trade andtravelareallpeculiarlyhumanandsocialbytheirverynature,theirhistoryispresentedasanalien, inhumanforce.Thesetwofailuresarecoupledintheanalysisorrather,lackofanalysisofcrisis, whichisthemomentatwhichselfcontradictioncreatesboththenecessityfor,andpossibilityof,a transitiontosomethingelse. Aboveallelse,thisideadominatesmodernthinkingabouttheeconomy.Withthecrisis,discussionon thejoysofglobalizationseamlesslygavewaytoamoralpanicaboutgovernmentspending.Country aftercountryfellvictimtoargimeofretrenchmentwhoseburdenfellonworkingandaboveallpoor people.2Atfirstsightthegroundsofthediscussionhadshifted.Followingglobalizationsunexpectedbut notunpredicted(Freeman2004)demise,governmentandevennationsreentered,stageright.Yeta shadowyfigurestalksthecorridorsofpower.True,itissaid,wemaybefoolishenoughtogivedestitute peopleaplacetolive,orletworkersretirewithfifteenentireyearsoflifeaheadofthembut,ifwedo, wewillbepunished.Bywhom?Themarkets.So,itappears,thereneverwasachoicethemarkets havealreadydecidedwhatmustbedone. Adeep,persistentintellectualflaw,perhapsthemostcharacteristicofthenewSpenglerianage, underliesunderbothdiscourses.We,thepeople,madetheinstitutionsthataresaidtoruleus.Theyare aproductofourconsciousness.Itisliterallyabsurdtoassertthatwecannotconsciouslyshapeor overridethem.Itviolatesrationaluseofthewordconscious.Yetsocietyhaslosttheintellectual capacitytothinkinanyotherway.EconomicnecessityislikeaconstructionofOrwellsMinistryof Truth,inwhoseinventedlanguageNewspeaktheverynotionofsocialchangecouldnotbestatedin words. Thiswasconcealed,butneverreallyovercome,bypositivismsAustriandescendantslikeHayek,who posedaschampionsoffreedombydefiningeconomicsasthescienceofindividualchoice.Itappears paradoxicalthattheyweresooftenfoundonthesideoftyrannicalpracticessuchasPinochet dictatorship.Butitisnoparadox;theirdeviceleavesnoplaceforcollectivefreedomtheactionof classes,states,nationalities,socialmovements,infactanyagencythroughwhichindividualfreedoms areactuallyrealized.Hayekarticulatestheideologicaloppositionofwealthownerstoallformsof collectivepowerotherthantheirown.Themarketistheirsandneithertherigidhierarchiesofthe corporation,northepoweroffinance,isseenasanintrusiononfreedom.Hostilityisreservedforthe state,thetradeunions,andallformsofclassorganisationexceptthosewhichupholdpropertyand order.Thelawswhichstilllieattheheartofthemythicalworldofneoliberaltheoryliveoutsidethe reachofcollectiveintervention,thatistosay,democracy.Itisanathemathatapeoplemaychooseto Critique of Positivist Marxism 3
implementuniversalsocialrights;themarketistheonlypermissibleexpressionofcollectivewill.Sothat aprivilegedhalfbillioncanaffordhealth,food,andsecurity,twelvetimestheirnumbergosick,hungry andfearful.This,ourworldcallsfreedom. Marxmaderigoroustheenlightenmentintuitionthatindividualfreedomrestsondemocracy,Marxism thenevolvedthedifferent,aliennotionthatfreedommeanssubmissiontolawsofhistory.Defending neithercollective,norindividualfreedom,noreventheirmutualdependence,ithaswrittenitselfinto historyasachampionofabstractnecessityagainstfreehumanaction.
2. Positivist Marxisms poisoned chalice

TheappearanceofdeterminisminMarxstheoryisreinforced,superficially,byhisownwritings.Isnot theverynotionofeconomiclawMarxsown?Didhenotwrite(1992:92)that
when a society has got upon the right track for the discovery of the natural laws of its movement and it is the ultimate aim of this work, to lay bare the economic law of motion of modern society it can neither clear by bold leaps, nor remove by legal enactments, the obstacles offered by the successive phases of its normal development. But it can shorten and lessen the birth-pangs.
Isnothisvaluetheoryallaboutthedeterminationofpricesandvalues?So,ishismessagenotthatwe mustrecognizetheforcesshapingourdestiny,embracethem,andobeythem?Isfreedomnot,as Engelsfamouslywrote,therecognitionofnecessity?Thisfatalisticreadingmakesnonsenseofhis passionateinvolvementintheFirstInternational,hiswritingsonpoliticsandhistoryandaboveallthe equallyfamousEleventhThesisonFeuerbach(1972):Philosophershavehithertoonlyinterpretedthe worldinvariousways.Thepointistochangeit.Consciousness,andhumanaction,areintegralto Marxsconceptofhistoricaldetermination,springingfromtheHegeliandiscourseonfreedomand necessitywhichwasthestartingandendpointofhisphilosophicaljourney. TheideaofironorinevitableeconomicandsociallawscameintoMarxismbyadifferentroute;via therationalisttraditionoftheFrenchrevolutionwhichtransmitteditselfintonationalworkers movementsthroughleaderslikeLassalle.Itthenevolvedintowhatisvariouslycalledtechnical determinismormechanicalmaterialism(Coletti1985,Labriola1970,Lukacs2000). ThisdoctrinewasarticulatedquitelateinthehistoryoftheenlightenmentbyAugusteComte(1798 1857),whonameditpositivism.Confusionsurroundsthiswordnowadays,whichiswhyIrefer specificallytoFrenchpositivism.Itisreducedtotheideaofusingnumbersormathematicsoreven beingexact.ItgetsconfusedwiththelogicalpositivismoftheViennaCircle(Stadler1998),towhich positiveeconomicscanbetraced.Itisneither.Reducedtoitsessentialsitisthenotionthathumanlife isgovernedbyexternallydefinedabstractlaw,asComte(1856)explainswithadmirableclarity:
Tounderstandthiseconomyaright,wemustrememberthatitembracesnotmerelytheinorganicworld, butalsothephenomenaofhumanlife,[which]thoughmoremodifiablethananyothers,areyetequally subjecttoinvariablelaws;lawswhichformtheprincipalobjectsofPositivespeculation.Nowthe benevolentaffections,whichthemselvesactinharmonywiththelawsofsocialdevelopmentinclineusto submittoallotherlaws,assoonastheintellecthasdiscoveredtheirexistence.Thepossibilityofmoral unitydepends,therefore,eveninthecaseoftheindividual,butstillmoreinthatofsociety,uponthe
necessityofrecognisingoursubjectiontoanexternalpower.Bythismeansourselfregardinginstinctsare renderedsusceptibleofdiscipline.Inthemselvestheyarestrongenoughtoneutraliseallsympathetic tendencies,wereitnotforthesupportthatthelatterfindinthisExternalOrder.Itsdiscoveryisduetothe intellect;whichisthusenlistedintheserviceoffeeling,withtheultimatepurposeofregulatingaction.
Sinceouractionsareallcompletelydetermined,allbadthingsthatoccurcanonlybetheresultofour ignoranceofthetruelawsofourdestiny.Therefore,ourtaskistodiscoverwhatthoselawsare,and obeythem.Thisisexplicit:Comte,above,statesthatthetaskistorecognis[e]oursubjectiontoan externalpower.Hewasequallyexplicitonthereligioussubtext,foundingareligionofhumanity (Comte185154).3 ThoughComtesdirectinfluencehasfadedsuchideasareamongthemostinfluentialofourage:How manyvictimshavebeenclaimedbythegodofprogressanditscousins,thecivilizingmissionof imperialism,thesuperiorityoftheWesternwayoflife,andourgeneralcontemptforanywhodonotfit modernitysarrogantselfimage?Development,givenbirthinthearchetypalvisionofWaltWhitman Rostows(1960)StagesofEconomicGrowthexactsanequallyhighprice,reducingtheeconomicchoices facingpoorcountriestoapreordainedcourseofhistoricaldevelopmentwhoseexemplarsarethevery countriesthatproduceandmaintaintheirmisery. Bourgeoisenthusiasmforsuchideasshouldcomeasnosurprise.Moresurprisingisthepositionof Marxism,whichappearsastheinspirationandoriginofwhatcanonlybedescribedasmorbidly technicistfantasies.Itsfatalismextends,inadifferentdirection,tomanyleftists,intheideathat capitalismhasnowayoutofcrisis.HoweveritsdominantexpressionisMarxismsmostcharacteristic positivistproduct:theacademiccurrentItermMarxismwithoutMarx(Freeman2010).Withinthe generalequilibriuminterpretationithasfoistedonMarx,itisimpossibletoformulatetheideathat capitalismgeneratescontradictionsfromwithinitself;thattherateofprofitmayfall,thatthemarket mayincreaseinequalitybetweennations,thatcapitalismmayfailtogeneratesufficientdemandtocall forththecontinuationofaccumulation(seeDesai2010inthisvolume),oreventhatcirculationmaybe interruptedbyhoardingmoney. Thisgivesrisetoafurtherparalysis.Unabletodiagnosehowcapitalismcangeneratecrisis,Marxist discussionisalmostdevoidofideasonwhattodoaboutit.Thereis,virtually,nosuchthingasaMarxist responsetothecrisis.Ihavesuggestedsuchresponseselsewhere(Freeman2009a)butitisnotthe purposeofthispapertorepeatthem.Here,IwishtoshowthatbyreclaimingMarxstheory,recognizing choicewithinitasanirreducibleelement,societymaychoosebetweenallpossibleresponses, identifyingthoseactionswhoseoutcomesaredemonstrablyconsonantwiththeirintentions.Iclaim,in short,thatMarx,properlyunderstood,offersaneconomicallyrationaltheoryofpoliticalaction.Thisis themostconsistentinterpretationofthefamousdictumthatopenedthissection.
3. The object of study: society in crisis

Idonotclaimthatthisprojectissimple.Thedifficultyliesinacontradictoryfactatthecentreofthe problemthat(presentday)Marxismfailstoaddress:capitalismsinnerlawsexpressthemselvesintwo apparentlydifferentwaysduringbooms,andduringcrisis. Critique of Positivist Marxism 5
Intherunuptoamajorcrisis,forperiodslastingyearsandsometimesdecades,thecontradictionsof capitalismexpressthemselvesasblindlawsofmotion,outwithhumancontrol.Theytaketheformof apparentlynaturallawsalong,slowdeclineintherateofprofit,theinexorableseparationofrichfrom poornations,andsoon.Butatthepointofcrisis,andafter,theseaccumulatedfailuresburstoutinto theopenandtheveryfailureofthemarketbringsexplicit,consciousclassactionintoplay,creatingthe conditionstoovercometheseaccumulatedcontradictions,whetherusingtheretrogrademeasuresof thecapitalists,orbyoptingforsuperiorwaystoorganizesociety.Classintereststhencomeoutintothe open.Savageattacksonworkingandpoorpeopleinausteritybudgetscontrastwithrefusalstoexact anypricefromthebankersandinvestorswhocausedcrisis.Classesandnationsaredrawnintoa maelstromofevermoreopenpoliticalconflictsasinGreece,forexampleinvolvingallthe institutionstheycreateorreston,betheystates,banks,corporations,armies,socialmovements,or indeed,riots.Capitalismslawstaketheformofabattleofclassforces.Themeaningoflawmutates intoitslegal,juridicalsenseoflawspassedbyagovernmentorimposedbyapeople.4 Ipreviously(Freeman2003)approachedthiswiththeideathatcrisisisendogenouscausedbyfactors internaltotheworkingsofcapitalismbutthatexitfromcrisisisexogenous,dependingonconscious action.Politicaleconomyitselfestablishesthisverydivisionincounterposingthepoliticaltothe economicsphereorindeedtocivilsociety. Shouldwethensupposethatcapitalismhastwosetsoflaws,theoneblindandeconomic,theother consciousandpolitical?Iwishtoargueforadialecticalapproach:foranAufhebung,asynthesis,oftwo ideasoflawwhoseopposition,fromahigherconceptualstandpoint,arisesfromtheonesided understandingtheyofferwhenisolatedfromeachother.Thisisnotoutoffancifulnotionsthatitsounds eruditeorlooksgoodinaseminar,butbecausetheobjectofstudyisthesame:namely,capitalist society;specifically,capitalistcrisis.Moreover,asthisobjectevolves,thetwoaspectsofeconomiclaw donotseparateoutneatlylikemagnetismandgravitysothateachcanbestudiedinisolation, governmentontheleftandmarketsontheright.Inacertainsense,thepositivisterrorconsistsinthe illusionthatthisseparationispossible.Itsillusorycharacteris,Ithink,akeypointinMarxsowncritical understanding:capitalismsnatureistoconcealitsownoperationfromitsagents.Theverynotionofan invisiblehandperfectlyexpressesthisidea.Letusinterrogateit,sinceitisthekeytothesynthesiswe require. MarxcharacterizescapitalismfromtheoutsetasEinungeheureWarensammlungamonstrous collectionofcommodities.Mandel(1974)specifiescapitalismasgeneralisedcommodityproductiona societywhichorganisesall,ornearlyall,socialrelationsthroughcommodities.Marxsanalysisof alienationandfetishisationfocusesonthefactthatinthecommodity,thetruenatureofsocialrelations isconcealed,orrather,appearsinanillusoryform.ItappearsthatIexchangeaneggforapieceof paper;actually,Iamtakingpartinanassociationoflabourandgratificationlinkingmetothefarmer, thedrivers,andtheretailers,everybitasmaterialaswhenmyfamilysentmetothebackyardtocollect thematerialproductofthehensdomesticlabour. Societyslawsofmotionbecomethelawsofmotionofthecommodityform.Butpreciselybecausethat formconcealstheselaws,theyappearasblindandexternal.Forthissamereason,itisincrisisthatthis Critique of Positivist Marxism 6
concealmentfallsaway,notonlyinperceptionbutalsoinpractice.Because,andtotheextentthat,the commodityfailstoorganisesociallife,overtclassagenciestakeitsplace. Thesearenottwodifferentlaws.Theobjectofstudysocietyisasingleentity,andcannotbesplit intotwoparts,oneconsciousofitselfandtheotherinaccessibletothatsameconsciousness.Aconcept ofthelawsofeconomicmovementhastosubsumeboththeblindworkingsofthecommodityform andtheexplicitactionofclass,nation,andstate.Iwillarguethatthisrenders,farmoreaccuratelythan anypositivistinterpretation,Marxsownideaoflaw. Crisisitselfisalsoanobjectofstudy.Itisaregularlyrecurringmomentofaccumulation.Itisnotan accident,adeviationorasurprise;itisconstitutiveofcapitalism.Iwillcriticizethepopularnotionthat crisisisabnormalorunrepresentativeofcapitalism.Afterfortyyearsofmoreorlesscontinualdecline, wehaveeveryrighttoconcludethatthereverseisthecase.Anintegratedconceptionofthelawof accumulationmustthereforeapplyattimesofcrisisaswellasboom.Crisisisaspecificphaseof accumulationwhenrelationsbetweenactionandoutcomebecometransparentandpoliticalaction becomesaprimarydeterminantofeconomicmovement.Thisis,infact,themostappropriateand rigorouswaytodefineacapitalistcrisis.Itisnotjustamonstrouscollectionofproblems;itisthatpoint whencapitalismsnormalmodeofexistenceasapurelyeconomicmeansofreproducingsocietygives risetointractablefailuresofgovernance. Thisisofcourseanoversimplification;capitalismcanbeunderstoodduringbooms,thoughlesspeople doso,andtheyhavelessinfluence.Duringcrisis,truthalwaysremainstosomedegreeconcealed. However,incrisis,classrelationsareclarified.Choiceisthenposedinthefollowingsense:itsoutcome dependsnotonlyonwhotakesthestreetswithgreatestdeterminationandforcebutonhowwellthe actorsformulate,andunderstand,thetruechoicesbeforethem.Incrisis,aboveall,consciousnessrises; thisisthesoilinwhichtheseedoffreedomcanbeplanted.Weseekaconceptoflawthatcanwater thatparchedflower.
4. Does capitalism have laws?

Doescapitalismhaveanylawsatall?Iwillbrieflysummarisetheempiricalevidencethatitexhibitsthe twomainfeaturesjustdescribedendogenous,concealed,butselfcontradictorydecline,alternating withexogenousandexplicitpoliticalreconstruction.Themostrecentlongboom,widelyrecognizedin theliterature,originatedwiththephenomenalresurgenceoftheUSeconomyduringandafterthewar, followingtheprolongeddepressionof19291941.Boththedepressionandtheboom,wereworldwide phenomena.
Chart 1: 10-year average real GDP growth of the world economy
6%
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0% 1960-1970 1965-1975 1970-1980 1975-1985 1980-1990 1985-1995 1990-2000 1995-2005
Source: IMF (World Economic Outlook); Groeningen RuG project, German national accounts, authors calculations Itismorecontroversial,althoughwidelyrecognized,thatthisboomendedaroundtheendofthe1960s withnocomparableresumptionofgrowth.Sincethen,theoverallmovementoftheworldeconomy, particularlytheUSeconomy,hasseenamoreorlessprotracteddeclinewithlowergrowthrates, increasinglyexplosivefinancialcrises,decreasingcapacityutilization,andrisingunemployment. Chart1illustratesthebasicpoint,showingthelongruntrendofgrowthinworldGDPsincethewar. Chart2presentsthesameindicatorfortheUSeconomy,forwhichlongerrunfiguresareavailable. Cyclicvariationscanobscuretheoveralldownwardtrend;however,twofactsmakeitreasonably difficulttoclaimitisabsent.First,eachsuccessivemajorpeakofthelongrunmovingaverageislower thanthelast.Second,averagegrowthoverthebusinesscycle,asdefinedbytheNationalBureaufor EconomicResearch(NBER),hasbeensystematicallylowersince1970.Itisjustpossibletointerpretthis, withDumnilandLvy(2004),asadoubleboomwithatroughin1974andanewpeakintheneoliberal years.Butthisstretchesthefabricofevidenceclosetotearingpoint:innocyclesince19611968has growthrisenabovetheaverageofthewholeofpreviousperiod;andgrowthbefore1968onlybriefly, between1953and1961,fellbelowthehighestpost1968point.
Chart 2: Growth rate of US real GDP
7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3%

1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Average Growth over cycle
Average over past 5 years
Source:USBureauofEconomicAffairsNIPAtable1.1.6USGDPinchained2005USD Thepatternofdeclinebecomesevenclearerwhenthepictureiscompletedwithfurtherevidence.Chart 3showsthelongtermdeclineinindustrialcapacityintheUSsinceatleast1973.Chart4illustratesthe relentlessgrowthinunemployment,mostcriticallylongtermunemploymentthebestindicatorofthe reservearmyoflabourwhichisnownearlytwicetherateofanyotherpostwaryearandsignificantly higherthanthe1974peak.
Chart 3: US manufacturing industrial capacity
90% 85% 80% 75% 70% 65% 60% 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Source:USBureauofEconomicAffairs,seriesCUPM,quarterly,seasonallyadjusted
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Chart 4: US long-term unemployment
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Source:USBureauofLabourStatistics,CPS(household)unemploymentmonthly,seasonallyadjusted Finallychart5fromKliman(2010a)showsthattheprofitrateoftheUSeconomy,eitherinvalueorprice terms,hastrendeddownwardssincethewar,atnopointreturningtoanythingremotelyresemblingits postwarpeak.
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Chart 5: US profit rate
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2007 2004 2001 1998 1995 1992 1989 1986 1983 1980 1977 1974 1971 1968 1965 1962 1959 1956 1953 1950 1947 1944 1941 1938 1935 1932 1929
Pricerateofprofit
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Source:Kliman(2010a) Isthisdeclineauniqueevent?Havesimilarthingshappenedbefore?Mostcertainly.Longdeclines followeveryexpansiveboomliketheBellepoqueof18931914(C.Freeman1995)andtheGoldenAge of19421968.Theyhavealawlikecharacter;theylastalongtimecoveringatleasttwoindustrialcycles, duringwhichtheyshownoserioussignofstableorpermanentreversal.Eachsuchcrisisexhibitsalong periodofdepressedgrowth,highunemploymentandfallingpricesaffectingthewholecapitalistworld. 18731893waswidelyreferredto(Krugman2010)asTheLongDepression. Theirendogenousnatureisalmostundeniable.Theveryfactthattheyhappenregularlyatleastfour timessincetheindustrialrevolutionsuggeststheysharesomecommonfeature.Thismakesithardto blamethecrisisonallegedlynewphenomenalikefinancialisationandexposesthedifficultyfacing Brenner(1998):havingruledoutMarxsMalthusianexplanation,hehastoresorttobehavioural explanations,forexamplesomespecialformofcompetitionafterthewar.Thismayormaynotexplain thepresentdecline.Doesitexplain1929?Or1873?SimilarproblemsbesetKrugmans(2010)diagnosis thatthisthirddepressionwillbeprimarilyafailureofpolicy.Whenahistoricaleventofthisscale repeatsitselfthreetimes,underentirelydifferentcircumstances,somethingbeyondpolicyisatwork. Itisalsohardtosustainthatthiscommonfeatureispoliticalorgovernmental,preciselybecauseofthe immensevarietyofpoliticalcircumstancesinvolved.Theverylongevityofthesedeclinesmeansthat suchexogenouscircumstanceschangerepeatedly.Andfinally,thedepthofthosemeasuresthatdo finallybringthemtoanend,suggeststhattheforcesproducingthemaredeeplyembeddedinthe natureofcapitalismthat,inMarxs(1991:350)words,capitalcomesupagainstabarriertothe Critique of Positivist Marxism 12
developmentoftheproductiveforceswhichhasnothingtotwowiththeproductionofwealthwhich comesintoaconflictatacertainstagewiththelattersfurtherdevelopment.
5. How do crises end?

Mustsuchdeclinesgoonforever?AsignificantleftMarxisttrendheldthisviewandstilldoes.The theoryofZusammenbruchorinevitablecollapse,associated(probablyunjustifiably;seeZarembka2003, Kuhn2007)withtheworkofLuxemburgandGrossman,wasendorsedbyasignificantsectionoftheleft Russianworkersmovement,andstronglyinfluencedCouncilCommunism.Thetendencytopredictcrisis asinevitableandunstoppablepersiststoday.Ithinkitishowevermistaken. Theresidualpositivistinfluenceitexpressesisneverthelessdecisivelydifferentfrombothneoliberal positivismandthatofMarxismWithoutMarx.Thelatterarecelebratoryandapologetic,ascribingto capitalismmiraculouspowersitdoesnothave.Leftpositivismoverstatescapitalismsdifficulties.The mainpoliticalriskisfatalismsincecapitalismisinsuchanawfulmess,theconclusioniseasilydrawn thatitwillcollapseofitsownandwecanbuildsocialismonitsbitterashes.Therehasneverbeenan unstoppablecrisis,andtherearenohistoricalorrationalgroundsforsupposingthatonewilloccurin thefuture.Theprofitratewasrestored,andtheGreatDepressiondidcometoanend.Giventhehavoc thisrestorationinflicted,theideathatoneshoulddonothingexceptprepareforsocialismcomes suspiciouslyclosetoconsenttoitsbarbarism. Howeverandthisisaverybighoweverrecoveryisnotautomatic.Evenacursorystudyshowsthat reversalsfrommajorcrisesareachievedbyconsciousand,indeed,brutalpoliticalintervention.The recoveryof1893wastheproductofimperialism.Itwouldhavebeeninconceivablewithoutit.The recoveryof1942wastheoutcomeoffascism,worldwar,andthetwin,butopposed,worldvictoriesof theUSandtheCommunistPowers.
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Chart 6: Unemployment, investment and government spending in the US economy 1929-2007
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Sources: US Bureau of Economic Analysis NIPA tables; VanGiezen, and Schwenk (2002)
ThepostwarboomwaslaunchedneitherbytheNewDealnortheGreatDepression,butbyWorldWar II.USunemploymentneverreallygotbelow15percentuntil1940afterwhichitsanktoalittleover onepercentandneverroseabovefivepercentuntilthe1970s.Outputgrowthroseby1942toanall timehighof18percent. Thebackgroundwasalevelofstateinvolvementintheeconomyneversinceseenreachingnearlyhalf ofGDPby1943.ThethreatofcommunismspurrednotonlyGermanandJapanesereconstructionbut theWelfareStateitself,whilewarcompletelyreorganisedthemapoftheworld,breakingthecolonial dominationoftheEuropeanpowersandopeningtheworldtoUSexports,whilsttoolingupUS productivity,reportedly,tothreetimesthatofBritain.Thepostwarboomwas,inshort,exogenous. Anyconceptionof'economic'lawaspurelymechanicalis,hence,notmerelytheoreticallymisguidedbut directlycontradictsthefacts.MainstreamtheoryandMarxismare,Ibelieve,lookingthroughthe telescopefromthewrongend.TheissueisneitherWillthecrisisgoonforever?(itwont)norWillit endonitsown?(itwont)butwhatwaysoutarethere,andwhatistheirprice?
6. Predictive and relational laws in economic theory

Toanswertothequestionsjustposed,wemustreturntotheory.Ibeginbydistinguishingbetween relationalandpredictivelaws.Thesecorrespondapproximatelytothetwomainheadingsunder whicheconomicsstudiesregularity,thoughIwillattemptmoreprecisionintheirdefinition. Critique of Positivist Marxism 14
1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
PrivateInvestment(rightscale)
Unemployment
Governmentspending,investmen:PercentofGDP
30%
60%
Unemploymentpercent
Relationallawsareusuallytermedidentities,ofwhichthemostfamousisthenationalaccounting identityY=C+G+I+(XM).Itisdrummedintoundergraduatemacrostudentsthatthisdoesnottellus whethersocietywillinvest,consume,import,orexport.Itsimplyassertsanarithmeticidentity:the valuecreatedeachyearisequaltothetotalusagesmadeofthatvalue.Relationallawsmaybefalse,for exampleSayslaw,usuallyformulatedassupplycreatesitsowndemand.Thisshowsarelationallawis notvoidofcontent,noreveninthestrictsenseatautology.Ifidentitiesweretautologicalbynature, therecouldbenosuchthingasafalseidentity. Predictivelawsaresometimesdiscussedasbehaviourallawsandsometimesaslawsofmotion.Ineither casetheyarecalledontocalculatethefuturestateoftheeconomy.Tomany,forecastingisthetrue arcanebusinessofeconomists,whosejobistotellushowmuchwealthandemploymenttheeconomy willcreate,justasaweathermanissupposedtotelluswhenitwillrain. TomostMarxists,Marxslawofmotionispredictive:ittellsuswhatwillhappennext.ThisiswhatI wishtochallenge.Togetattheproblem,Iwillinterrogatethenotionofautomaticrecovery,beginning fromthesurprisinglymodernsubjectofcycletheory.Thislittleknownbranchofmainstreamthinking, integraltothewayitneutralizedtheconceptofcrisis,hasoccasionedlittleMarxistcritique. Untilreallyquitelateinthenineteenthcentury,allinterruptionstoeconomicgrowthwereperceivedas acrisisanomalous,threateningandunexpected.Marx,inmovingfromGrundrissetoCapital,began speakingoftheindustrialcycle(Chapter15vol1p283)wherehehadpreviouslyspokenonlyof commercialcrisisormoneycrisis.Atthesametime,theFrenchEconomistClmentJuglar(1862, 1915,seealsoBesomi2005)wrotewhathassincebecome,moreorless,thedefinitiveaccountofwhat isnowcalledthebusinessortradecycle.ResearchculminatedintheworkofWesleyMitchell(1927), founderoftheNBER,andwasmarkedbyawideranginginterwardebateinvolvingHayek(1933), Keynes,andmanyRussianMarxists(Day1981)notablyMaksakowski(2004)whoseworkhasonly recentlybecomeknownintheWest. MarxandJuglarareoftencreditedwiththecontemporaneousdiscoveryofthebusinesscycle;yettheir conceptsofitdivergemarkedly.ForMarx,thecycle,thoughregular,neverthelessmanifestsitselfin crisis:
Thelifeofmodernindustrybecomesaseriesofperiodsofmoderateactivity,prosperity,overproduction, crisisandstagnation.Theuncertaintyandinstabilitytowhichmachinerysubjectstheemployment,and consequentlytheconditionsofexistence,oftheoperativesbecomenormal,owingtotheseperiodic changesoftheindustrialcycle.Exceptintheperiodsofprosperity,thereragesbetweenthecapitaliststhe mostfuriouscombatfortheshareofeachinthemarkets.Thisshareisdirectlyproportionaltothe cheapnessoftheproduct.Besidestherivalrythatthisstrugglebegetsintheapplicationofimproved machineryforreplacinglabourpower,andofnewmethodsofproduction,therealsocomesatimeinevery industrialcycle,whenaforciblereductionofwagesbeneaththevalueoflabourpower,isattemptedforthe purposeofcheapeningcommodities(Marxopcit)
Thiscyclicmovementisthereforeanexpressionofamoreintractableproblem:capitalismundermines theconditionsforitsownexistence.Theoverarching,primarycauseiscapitalismspersistenttendency, mostclearlymanifestedinthefallingprofitrate,toaccumulatewithoutreproducingthesocialand Critique of Positivist Marxism 15
economicconditionsrequiredforittofunctionascapital.Thisproducesaseriesofmoreorlessserious, andneverentirelypredictable,explosions.Duringthisprocess,theconditionsforsupersessionbyanew stateofsocietymatureandaccumulate,burstingouteventuallyinsocialandpoliticalconvulsionsfor whichtheworkingclassmustpreparebydevelopingorganisationscapableoftakingoversocietyand transformingit. FromJuglararatherdifferentideaemerged:thecyclewasanaturalandevendesirablefeatureof capitalism.Animportantadaptationoftheratherimplausiblelawsofevolutionarymotionsoughtby theclassicaleconomiststookplace.ClmentJuglarscontributiononperiodicalcrisesisoftencredited withhavingmarkedthedefinitetransitionfromthetheoriesofcrisestothetheoriesofbusinesscycles, writesBesomi(2010:1)Thechampionofthisviewis,asiswellknown,Schumpeter,whopropagatedit onseveraloccasions. Cycletheoriesbecameparticularlyattractive,aboveallintimesofeconomiccrisis,becausecrisisis empiricallydifficulttoreconcilewiththenotionofunilateralprogress.Evolutionarylawsbytheirnature encountercrisisasaninterruption.Theyassertacontinuedandunidirectionalmovement;forexample thelongruntrendofworldpopulationgrowth,orthatcapitalismindefinitelyraisesproductivity.Yetany allegedlyevolutionarylawmaybeinterrupted.TheBlackDeath,itisgenerallyaccepted,setback Europeanpopulationgrowthbyoveracentury.Inarecession,outputgrowthhalts.Hasthepotters handthenshaken? Economistsatleastarenotinthehabitofreportingthatanysuchlawisuntrue.Theytendtosayisthat ithasbeeninterrupted,asonewouldsayaboutgravity,whenafallingobjecthitstheground.What excitestheirinterestis,however,thereasonfortheinterruption.Ifoneispredisposed,nottosay funded,toreportthatthecapitalisteconomyisthehigheststateofnature,itisirksomewhenthe gloriousmarchofprogressgrindstoahalt.Economicthought,untilthelate1870s,tendedtoregardits periodiccrisesasserious,mysteriousandthreateningoccurrences,portentsofsignificantandunknown danger,muchasearlycivilisationsgreetedcometsandeclipses.Astheeconomicjournalistshave discovered(althoughtheacademiceconomistsarestillthinkingaboutit)largecrisesdonotsitverywell withfairytaletheoriesofmarketperfection. Twobasicexplanationscanbeoffered.Themostcommonisexogenousinterference:somethingwas donetotheeconomybadbanking,Napoleon,greedyworkers,communists,stateinterference,9/11 thelisthasnotstoppedgrowing.Buttherecessionsoftheindustrialcyclearerepeatedandsomewhat frequent,andhavegoneonthroughouthistory.Excusesbasedonexternalinterferencewearthin.Cycle theoryprovidesagetout,notdissimilartosomeChristianexplanationsofevil:imperfectionisthe meanstoperfection.Thecycleisanaturalmanifestationofcapitalismwhichcleansoutinefficiencies andrestoresbalance.Providedwedonotenquiretoodeeplyhowaperfectsystemproducedthese inefficienciesinthefirstplace,thenotionofnaturalordercanberestored.Schumpetercommends Marxfordiscoveringtheunderlyingcyclicalprocess:
He[Marx]aptlysaysthatthesuperficialityofPoliticalEconomyshowsitselfinthefactthatitlooksupon expansionandcontractionofcredit,whichisameresymptomoftheperiodicchangesoftheindustrial cycle,astheircause.Wefindpracticallyalltheelementsthateverenteredintoanyseriousanalysisof
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businesscycles,andonthewholeverylittleerror.Moreover,itmustnotbeforgottenthatthemere perceptionoftheexistenceofcyclicalmovementswasagreatachievementofthetime.Manyeconomists whowentbeforehimhadaninklingofit.Inthemain,however,theyfocussedtheirattentiononthe spectacularbreakdownsthatcametobereferredtoascrises.Andthesecrisestheyfailedtoseeintheir truelight,thatistoday,inthelightofthecyclicalprocessesofwhichtheyaremereincidents(Schumpeter 1965:41;emphasisadded).
Schumpetergraspedthatifcrisisisaphaseinaregularmovement,itcanberepackagedasareversal. Damagehasoccurred:hardshipanddiscontentensure.Societyasks'howcanthisdamagebeundone?' Cycletheoryallowstheeconomisttoclaimthat'natural'marketprocesseswillcorrectthecollateral damageinflictedbythesesamemarketprocesses.Thebestpolicyisthentodonothing,ormerely'work with'theforcesthatproducedthecrisisinthefirstplace.Suchideasliebehindthebankersconsensus thatinformedpoststimulusEuropeanresponsestothecrash.Yes,marketscausedtheproblem.Whatis theanswer?Moremarkets.Thearsonistshavetakenoverthefirestation. Economictheorythuscametoresembleamanwhojumpsoffacliffsupposinghecanflyand,onfinding thathecannot,concludesthatitdoesnotmatterbecausehewillbounce.Cycletheoryinthissense incarnatesaquietistexhaustionoftheprogressivepotentialofliberaltheory;itasksonlyhowsociety mayreturntowhereitwas,andceasestoconsidertheopportunityfor,oreventhenecessityof,doing anythingnew.Theinsatiablequestforsecurityextinguishesallcriticalcapacity. ThisculminatedinSchumpeterspopularizationofKondratieff'stheoriesof'LongWaves'.Hisaimwasto addressthebiggestproblemfacingsimpleJuglariantheoriesofthecycle:namelytheconvulsiveand protractedcrisesdescribedinthelastsection,whichcannotbeexplainedasashorttermperiodic bounce.Schumpeterwasoneofthefewmainstreamfigurestotakethisproblemseriously,whichis probablywhy,thoughfeweconomistsexplicitlyendorsehisideas,manyquietlydefertothem.He adaptedKondratieffsstatisticaldiscoverythatlongperiodsofrisingpricesalternatewithlongperiods offallingprices,constructingahighlyoriginalifultimatelyapologetictheory.Crisis,forSchumpeter, becomesanexpressionofregularity.Pasteconomists,hesaysabovefailedtosee[crises]intheirtrue light,thatistoday,inthelightofthecyclicalprocessesofwhichtheyaremerelyincidents.Crisisisback inPandora'sboxasa'natural'lawarepetitive,andaboveallautomaticprocess,requiringonlyalittle bitofcreativedestructionbeforenormalserviceisresumed. ThismanifestsitselfinthedisputedconceptofendogenousrecoveryofwhichSchumpeterstheoryof CreativeDestructionistheprogenitor.Themarketitselfestablishestheconditions,afteralongperiodof decline,foralongperiodofgrowthalongboom.Thus,Schumpeteracknowledges(withoutmuch analysis,itisoftensaid)endogenouscausesofdecline,suggestingthatcapitalismdoeshavesome seriousproblemsbutcountersbyassertingthatcapitalismitselfcansolvetheseproblems,iflefttoits owndevices,thatis,endogenously.
7. Determinism and endogenous recovery within the Marxist tradition

TowhatextentdoesMarxismdistinguishitselffromthisview?Notfarbelowthesurfacelurkstheidea ofnaturalrestoration.ItisalmostcommonplaceinMarxisttheorytoassertthattheroleofcrisisisthe
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restorationoftheprofitrate.Thenotionisasfollows:capitalstockrisesduringnormalaccumulation, andmustthenbereduced.Incrisis;thisisachievedbysimplynotproducing.Thecrisisthus automaticallyrestorestheprofitrate.Ihavetwoproblemswiththisidea.First,itisdeeplyfatalistic. Marxists,accordingtothisnotion,needdonothingexceptproselytizeandwait.Second,itisempirically untrue.Thegreatcrisesdidnotautomaticallyrestoretheprofitrate,evenwhenasinthecaseofthe NewDealtheywereaccompaniedbyconsiderablegovernmentintervention.Ittookmore. Adifferent,butclassical,MarxistapproachwasintroducedbyLeonTrotskyinthecourse(Day1981)of theseminalRussiancrisisdebatesoftheinterwaryears:

OnecanrejectinadvancetheattemptsbyProfessorKontradevtoassigntotheepochsthathecallslong cyclesthesamestrictrhythmthatisobservedinshortcycles.Thisattemptisaclearlymistaken generalisationbasedonaformalanalogy.Theperiodicityofshortcyclesisconditionedbytheinternal dynamicofcapitalistforces,whichmanifestsitselfwheneverandwhereverthereisamarket.Asforthese long(fiftyyear)intervalsthatProfessorKontradevhastilyproposesalsotocallcycles,theircharacterand durationisdeterminednotbytheinternalplayofcapitalistforces,butbytheexternalconditionsinwhich capitalistdevelopmentoccurs.Theabsorptionbycapitalismofnewcountriesandcontinents,thediscovery ofnewnaturalresources,and,inaddition,significantfactorsofasuperstructuralorder,suchaswarsand revolutions,determinethecharacterandalterationofexpansive,stagnating,ordecliningepochsin capitalistdevelopment.(Trotsky1923:9,citedinDay1981:8).
Trotskydoesnotdisputethatboomanddeclinesalternate.Heasksinwhatcircumstancesarethey reversed?Thedifferencebetweenthetwoconceptsisfurtherclarifiedifweinterrogatetheword recoveryitself.Thissuggeststhatboomisinsomesensethenaturalstateofcapitalism,whichit achieveswithlittleconsciouseffortbyjustbeingthecapitalistsystem,whereasthedeclinesarean unfortunateinterruption.ThisideaisprevalentamongMarxists,givingrisetoaphenomenonIterm CapitalWorshipabeliefinthealmostunlimitedpowerofcapitalistproductivitytoadvanceand improvewithoutimpediment.Inthismindset,boomsareachievedwithoutnospecialeffortorpolitical intervention.ThisviewwasmoststronglyassertedinBrennersfamous(1977)debatewiththe dependencyschool:

Totaketheviewthatdevelopmentandunderdevelopmentaredirectlydependentupon,causedby,one another,Wallersteinresortstothepositionthatbothdevelopmentinthecoreandunderdevelopmentin theperipheryareessentiallytheresultofaprocessoftransferofsurplusfromperipherytocore.Hemust thusendupbyessentiallyignoringanyinherenttendency ofcapitalismtodeveloptheproductiveforces throughtheaccumulationofcapital(Brenners1977:6061)
Capitalismsinherenttendenciestodevelopproductiveforceswereneverreallyindispute.However, whatsetsthemgoing?PersuasiveevidencefromBagchi(1982)andPatnaik(2006)showsthatthe extendedandcontinualapplicationofpoliticalforceaccompanied,andfacilitated,animmense mobilizationofsuperprofitsfromaroundtheworldonwhichatleasttheinitialaccumulationdepended. Marxstudiedthisparticularboomatsomelength,andhisopinioncontrastswithBrenners:

[The][c]olonialsystem,publicdebts,heavytaxes,protection,commercialwars,&c.,thesechildrenofthe truemanufacturingperiod,increasegiganticallyduringtheinfancyofModernIndustry.Whilstthecotton
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industryintroducedchildslaveryinEngland,itgaveintheUnitedStatesastimulustothetransformationof theearlier,moreorlesspatriarchalslavery,intoasystemofcommercialexploitation.Infact,theveiled slaveryofthewageworkersinEuropeneeded,foritspedestal,slaverypureandsimpleinthenewworld. (CapitalVol31:915emphasisadded)
Realboomsprolongedperiodsofexpansionaremoreoverquiterare,notatallanaturalstateof capitalistaffairs.Thepresentdecline,onBrenners(1998)ownrecenttestimony,hasbeenunderway foroverfortyyears,muchlongerthananyknownboom.Muchclosertorealitythanthetheoryoflong waveswouldbeatheoryoflongdeclines.Capitalisthistorymakesalotmoresense,ifwethinkof boomsaspoliticallylaunchedeventsthatpunctuateaninherentlyproblematicprocessofdevelopment, insteadofthenaturalformofitsexistence. Allmajorboomsfollowedaconcentrationofgreatamountsofvalueinoneortwogeographical locations,achievedbytheforcefulpoliticalmobilisationofresources,valueandhencelabour throughouttheworld.Thisisachievedinpartthroughthemarketitself,whichbothreproducesand extendsexistinginequalities(Freeman2009b)butdependscriticallyondirectpoliticalinterventionby thepowerswhichfunctionasgeographicalcentresofeachnewphaseofacceleratedgrowth.IftheUS economydoesnotneeditsarmedforces,whataretheytherefor?Whydidthepostwarboomstartin thewar?IftheindustrialrevolutionhadnoneedofBritainscolonialenterprises,whatweretheKings troopsandmerchantsdoingabroadandwhywasitsodifficulttodislodgethem?Iftheinherent tendenciesofGermanysindustrialistswassolelyresponsibleforitsspectacularrise,whatwasthe functionofPrussianJunkerdom,theNationalEconomy,thearmsrace,WorldWarIandfascism? IfTrotskyisright,periodicandoftenforcefulpoliticalactionisintegraltoaccumulation.Aconceptof economiclawwhichcomprehendsthisisabsentfromnearlyallmoderneconomicthinking.Almostthe onlyplacewefinditisinKeynesswritings,notuninterestinglybecauseofhisfocusonpolicy.Yetthe conceptiscompletelyexplicitin,andintegralto,Marx'sownthinking.
8. Was Marx a determinist?

MarxsmostfamousallegedlydeterministremarkappearsintheprefacetothefirstGermaneditionof Capital,wherehewrites
Intrinsically,itisnotaquestionofthehigherorlowerdegreeofdevelopmentofthesocialantagonismsthat resultfromthenaturallawsofcapitalistproduction.Itisaquestionoftheselawsthemselves,ofthese tendenciesworkingwithironnecessitytowardsinevitableresults.Thecountrythatismoredeveloped industriallyonlyshows,tothelessdeveloped,theimageofitsownfuture.
HoweverhisdiscussionswiththeRussianMarxistsexposedafarmorenuancedapproach,asevidenced byhiscorrespondencewithVeraZasulich(Shanin1984):
IndealingwiththegenesisofcapitalistproductionIstatedthatitisfoundedonthecompleteseparationof theproducerfromthemeansofproduction...Ithusexpresslylimitedthehistoricalinevitabilityofthis processtothecountriesofWesternEurope.Andwhy?BesokindastocompareChapterXXXII,whereit says:
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Theprocessofeliminationtransformingindividualisedandscatteredmeansofproductionintosocially concentratedmeansofproduction,ofthepigmypropertyofthemanyintothehugepropertyofthefew, thispainfulandfearfulexpropriationoftheworkingpeople,formstheorigin,thegenesisof capital...Privateproperty,basedonpersonallabour...willbesupplantedbycapitalistprivateproperty, basedontheexploitationofthelabourofothers,onwagelabour(p.341,columnII). Thus,inthefinalanalysis,itisaquestionofthetransformationofoneformofprivatepropertyintoanother formofprivateproperty.SincethelandinthehandsoftheRussianpeasantshasneverbeentheirprivate property,howcouldthisdevelopmentbeapplicable?
InadraftofthisletterhestatesthatifRussiacontinuesalongthecapitalistroaditwilllosethefinest chanceeverofferedbyhistorytoapeopleandundergoallthefatefulvicissitudesofthecapitalist regime.Losingachanceisalongwayfromafatalisticrecognitionofinevitablenecessity. Thisrestatementwasnotcasual.MarxsprolongedbattlewithLassalleoverthedirectionoftheGerman SocialDemocratscentredonthelattersironlawofwages:

Therestrictionoftheaveragewagetotheminimumthatapeoplecustomarilyrequires,toreproduceand ekeoutalivingis,Irepeat,theironandcruellawwhichgovernsthewagesunderpresentconditions. Thislawmaybedisputedbynoone....Thisironandcruellaw,gentlemen,youmustaboveallstampdeep, deepinyoursoulandallyourthinkingmuststartfromthispoint. InthesecircumstancesIcangiveyouandthewholeworkingclassaninfalliblemethod,whichwillfreeyou oftheillusionsanddeceptions.Toanyonewhospeakstoyouaboutimprovingtheconditionoftheworking class,youmustfirstandforemostsubmitthefollowingquestion:doeshe,ordoeshenot,recognisethis law.(Lassalle1863[mytranslationAF])
MarxremainedindignantlyopposedtoLassalleonthisprecisepointthroughouthislife,referringtohim amongsthiscircleastheironman.EngelswroteofthistoBebelthus(March1828,1875):
ourpeoplehaveallowedthemselvestobesaddledwiththeLassalleanironlawofwages...inCapital Marxhasamplydemonstratedthatthelawsgoverningwagesareverycomplex,that,accordingto circumstances,nowthislaw,nowthat,holdssway,thattheyarethereforebynomeansironbutare,onthe contrary,exceedinglyelastic,andthatthesubjectreallycannotbedismissedinafewwords,asLassalle imagined.
Marxsconceptionofsocialchangewasneverfatalisticnormechanical,beingposedintermsof complexities,indeterminacies,historicalbranchpointsandaboveallchoices,inwhichtheoutcomewas determinedbytheactionsoftheparticipants.Whatistheeconomicfoundationofthishistorical, politicalandethicalvision?WenotedinFreeman(2010)thatintheculturalturnasignificantsectionof MarxismWithoutMarx,ledbytheFrankfurtSchool,abandonedinterestinMarxseconomictheories. Retreatingintothecultural,socialandethicaldimensionsofhisanalysis,theylostsightofthefactthat incapitalistsociety,allsuchrelationsareorganisedbythecommoditythecellformoftheeconomy. ItmakesnonsenseofMarxsendeavourtodivorcethesetwoaspectsofhisanalysis.Italsomakesno sensetosupposethathegroundedanemancipatory,choicecentredtheoryofhistoryona deterministic,positivistanalysisoftheeconomy. Critique of Positivist Marxism 20
9. Positivism, rationalism and the origins of modern determinism

Wheredidwegettheideathateconomistsjobistopredict,tocalculatetheeconomysfutureposition likeanalienexternalobject,asastronomersforecasteclipses?Asindicated,theanswerliesintheearly historyofFrenchrationalism.Philosophystruggledtofreeitselffromthereligiousdogmaspermeating thecorrupt,intertwinedlayersofpettyaristocracyandvenalclergy,buttressedby,andmaintainingin power,thedecadentabsolutistmonarchywhichwastoprovoketheMotherofRevolutions1789.The emergingenlightenmentsoughtanalternativemoralitygroundedinthehumancondition.Catholicism, forwhichGalileosideasremainedasmuchananathemaasDarwinsweretobecomeforProtestantism, deducedthenecessity,dutiesandrightsofthesocialorder,truetoitsneoplatonicroots,fromthe perfectionoftheheavens,whilstthedoctrineofthedivinerightofkings,establishedbytheSunKing LouisXIV,excusedhimallrestraintsoflaw.InabsolutistFrance,revolutionaryphilosophyhadtoground itselfinphysics,inmechanics.Thesimplefactthatheavenlymovementswereordainedbynaturewasa mortaldangertothemonarchyspretensions.Ifreasonregulatedtheuniverse,shoulditnotgovern society? Themostcharacteristicformulationofthismathematicaldeterminismcomesfromthegreat mathematicianandastronomerPierreSimonLaplace(1951:4),arguablythetruefatherofmathematical positivism.Laplace,itshouldberecalled,whenaskedbyNapoleonwhatplaceGodoccupiedinhis system,famouslyrepliedIhadnoneedofthishypothesis.Heformulatedthebilliardballdeterminist principlethat,oncetheinitialpositionandmomentumofeveryparticleintheuniversewasgiven,allits subsequentmotionwascompletelydeterminedbytheirlawsofmotion.Sinceeveryparticleincludes theatomsthatmakeupourbodies,thisincludesourownactions:
Anintellectwhichatacertainmomentwouldknowallforcesthatsetnatureinmotion,andallpositionsof allitemsofwhichnatureiscomposed,ifthisintellectwerealsovastenoughtosubmitthesedatato analysis,itwouldembraceinasingleformulathemovementsofthegreatestbodiesoftheuniverseand thoseofthetiniestatom;forsuchanintellectnothingwouldbeuncertainandthefuturejustlikethepast wouldbepresentbeforeitseyes.
Laplacewasdeeplyinvolvedinsocialquestions,providingearlyinspirationtotheComtesgenerationof moralreformers.Thisparagraph,however,establishesthecriticalweaknessofhisargument.Whoisthis intellect?IsHethesameasComtesexternalpower?DoesHeholdcourtonsomedistantfrozen planet?DoesHereadhisemails?Hisreluctancetointerveneiscommendable,buthasHefully consideredtheadvantagesofendowingafewlargeprizes? TheexternalpowerdoesnotexistanymorethantheGodHestandsinfor.Thepositivistformulation erectsnaturallawintoagoverningprincipleoftherulingordereverybitastyrannicalastheold absolutistmonarchy,withthedisconcertingdifficultythat,owingtotherulingpowersunfortunate incorporeality,Hisheadcannotbecutoff.Theconstructionisalsointellectuallyholedbelowthe waterline,thoughthiswasnotreallyunderstooduntilquantumphysicsforcedthenaturalsciencesinto recognisethatanexperimentsobservercannotactuallystandoutsideit;thattherecanbenosuchthing asanexternalpowerinauniversethatbydefinitionincludeseverything.
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Laplacesallencompassingdeterminismcollapsesonceweask:whichintellect?Ifthisintellectwere humanorindeed,material,itmustitselfbesubjecttothelawsitissupposedmerelytodescribe.Butin thatcase,itcannotbeaconsciousintellectinanymeaningfulsense,sinceitwouldbedeprivedofany capacitytodecideonitsownactions.Butifitisnothumanor,inmoregeneralterms,ifitisnotpartof theuniverseofmateriallydeterminedconsciousnessitcannotexist.Itisasotherworldlyastheeternal good(Lovejoy1990)oftheNeoplatonists.Theentireprojectofconstructingatheoryoftheuniverse whichcontainsconsciousbeings,fromwhichconsciousactionisexcludedasacausalfactor,isself contradictory.Itisonthiscontradictionthatphysicswastoshipwreckearlyinthetwentiethcentury.It hastakenthenaturalsciencesacenturyandahalftoreformulatetheirownlawswiththeconscious observerinthescriptfromtheoutset.Byasupremeirony,Laplacianpositivismlivesononlyinthesocial sciencesandinfactalmostexclusivelyineconomics.Whythiswasthis? Itisnotdifficulttounderstandwhypositivismappealedtothepropertyowningclasses.Catholic supportforthelandowningclasseswasanirritanttotherisingrevolutionarybourgeoisieofthe eighteenthcentury,drivingittoseekmaterialisttheoriesofthecosmos.Withtheriseofmasslabour organisations,andtheonsetofapurelycapitalistcrises,furtherdangerssurfaced.Darwinismbegan pushingbacktheboundariesoffaithbeyondwhatwascomfortableevenforaresolutelynonconformist populace.Themostthoughtfulsectionoftheworkingclassmovementwasresolutelyatheistic,anti clericalismbecomingthehallmarkofitsrevolutionarywing.Evenmerelyprotestantlogic,inmillenarian forms,couldbeappropriatedbytheworkingclassaseasilyasbyanygodfearingprotestantindustrialist. Thenotionthatdivinejustice,administeredbyrevolutionarypropertylessclasses,impliedanendto propertyandtheinstallationofacollectivistorder,wastheinspirationfornumerousEuropeanrevolts datingbacktotheLevellers,theHussitesandindeed,themillenariantradition(Cohn1972)ingeneral.A latenineteenthcenturyriseinfundamentalistmovements,oftenamongtheverypoorestsectionsof society,placedfurtherstrainsontraditionalalliancesbetweenreligionandpower. Thecentreofgravityofcapitalistideologyshiftedontothenewterrainofnaturalorder.Social Darwinismthesurvivalofthefittestappliedtohumansocietygainedground.Evolutionfurnisheda usefulrationalizationofimperialismscivilisingmission,withprimitivepeoplespresentedascloserto apesthanhumans,justifyingallandeveryactofbarbarismagainstthem(Carpentier2001).Thenotion thatthecapitalisteconomyitselfwasacreationofnaturebecamemoreandmoreattractive,themore themarketextended,theglobefellunderitssway,andthemorestrikingintheWestits achievementsbecame.Positiveeconomicsconsummatedtheurgetofreethemarketfromthe perniciousinfluenceofethics,bypresentingitastheultimateinethics.Theoremsofoptimalitysuchas Paretos,andtheconvivialmarriageofmarginalismwithutilitarianism,providedanewanswertoall ethicalquestions:thereisnoneedtoaskwhetheragivenpolicyisbadorgoodbecausethemarketitself isgood;nothingbetterexists.Andwhydoesnothingelseexist?Becausenothingelseispossible.The market,inandofitself,requiresnofurtherjustification.Itisthenaturalorderofthings.
10.
Why did Marxism become positivist?
Positivismsattractiontothebourgeoisieisunderstandable.Butwhatwasitsappealtotheworking class?AsimplisticLaplaciandeterminismwasextremelyinfluentialwithintheMarxismofthelate Critique of Positivist Marxism 22
NineteenthandearlyTwentiethCentury.Moreworkisneededtounderstandhowthiscametobe,but ithadreasonablyclearmaterialroots.Forworkerslabouringundergreatprivation,oftensuffering heavylosses,itwasasourceofalmostreligioussolace,withacloseaffinitytoMillenarianism,tothink takepartinsomeinevitableworkingoutofhistory,humblingmightydespotsandraisingupthe downtrodden.Progress,theSecondInternational'sMarxismproclaimed,wasinevitable.Theworking classwastheinstrumentofitsdestiny. Lassallesironandcruellawoffersafurtherclue.AsMarxironicallynotesinhisCritiqueoftheGotha Programme,whatLassalleactuallydeducesfromthislawistheroleofthestate.Ifcapitalismcanonly drivedownwages,thestatemustacttokeepthemup.Inelucidatinghisownverydifferentconception ofthestate,MarxsourlynotesthatLassalleconvenientlyomitsthetradeunionsalongwithallvehicles ofworkingclassactionexcepttheGermanSocialDemocraticParty.BeneaththeSecondInternationals mechanicalmaterialismlurkedtheunderpinningsofclasscompromisesthatheraldeditssubsequent decline:theideaofapassiveandcompliantpeoplesurrenderingtonecessity,entrustingtheirfutureto apowerfulandwisestatemachine,5whereitsunrulyelementscouldbeexclusivelyrepresentedby sagaciousleaders.LassalleindeedenteredapactwithBismarck,supportingtheannexationof SchleswigHolsteininreturnforuniversalsuffrage(MarxtoKugelmanFebruary231865;seeRiazanov 1928).Thenotionofadifferenttypeofstatebasedonadifferenttypeofeconomy,theoutcomeofthe consciouschoicesofanactiveworkingclass,slippedaway. Thelanguageofinevitability,ofthenecessityofprogress,andcruciallyoftheexternalnatureofsocial laws,wastakenoveralmostunmodifiedintoSovietorthodoxy(Labica1984),notwithstandingits revolutionaryorigins.Theconceptionofastatesafeforcapitaltooktheformofapromisethatthe regimewouldnotpursuerevolutionaryambitiousbeyonditsfrontiers,becomingafixedfeatureof sovietpolicyafter1936.Thenotionofprogressbecameidentifiedwiththesovietstateitself,projected astheincarnationofthenextstageofhistoricalprogress.Thistookpowerfulholdonthemindsofa generationlockedinbattleagainstfascism.Thestruggleforprogresstookonaconcretenationalform, theManicheangodsofgoodandevilpersonifiedintheheadsofstateofthetwogreatestpowersinthe conflict. Itiseasytopassjudgement.Oneshouldnotforgetthatallthiswasverymuchthespiritoftheage,the Zeitgeistofallclasses.ItwastheLeitmotifof20thCenturyUScultureportrayingAmerica,justlikethe USSR,astheincarnationofhumandestiny,thepinnacleofprogresstowhichotherscouldbutdreamto aspire.IndeedthisideaisalltooevidentinmuchAmericanMarxism,whichinacceptingandeven promotingthemythoftheirowncountryasthe'highestform'ofsocialprogress,oftendoeslittlemore thanplaceaMarxistveneeroveritscivilizingmission. Whenwe,comfortablydistantfromevents,weighuptheintellectualdeficienciesofthisideaagainstthe sacrificesofagenerationtowhichweowefreedomfromfascism,weshouldrefrainfromfindingtoo muchfault.Itisanentirelydifferentmatterwhenthespiritualenergyofadeadgenerationis prostitutedtotheintellectualpretensionsofaliveone.Followingtheprolongeddefeatswhich culminatedinthecollapseoftheUSSRandthedisintegrationofthemassWesternandSoviet communistparties,thetheoreticalheritageofMarxismfellintothenearexclusivepossessionof Critique of Positivist Marxism 23
academia.Themantleofdeterministicpositivismsettledcomfortablyontheshouldersofasocialcaste freedofaccountabilityto,orresponsibilitiesfor,thegreatmassofthoseonwhosebehalftheyclaimed tospeak.Itputthem,effectively,inthepositionofapriesthoodofsecuringalivingasexpertsin,and interpretersof,theinevitablebutimpenetrablelawsoftheeconomy.Wenowturntothisideological evolutionanditsconsequences.
11.
General Equilibrium Marxism: a positivist substitution
Freeman(2010)andKliman(2010b)arguedthatMarxism,aswetodayfindit,nolongerbearsany seriousrelationtoMarxseconomictheory.MarxismWithoutMarxadoptedasubstitute,originatedby AustrianeconomistLadislawvonBortkiewicz(1902,1905),inwhichMarxstheoryofvalueispresented asavariantofgeneralequilibrium.Inowexplorethetighttheoreticalrelationbetweenthis interpretationandthepositivistnotionofeconomicsasprediction,beforeshowinghowatemporalist interpretationleadsinaverydifferentdirection.TheacademicpresentationofMarxasageneral equilibriumtheoristbeginswithSweezy(1970:53)whowrites,inaformulationvirtuallyunchallengedby Marxistssincethen,that

The law of value is essentially a theory of general equilibrium developed in the first instance with reference to simple commodity production
Morishima(1972:2)openlycelebratesMarxasafounderofequilibriumtheory,onhermeneutic groundsatwhichwecanonlymarvel:
Marx's theory of reproduction and Walrass theory of capital accumulation should be honoured together as the parents of the modern, dynamic theory of general equilibrium
ThisistheuniversallyadoptedassumptionofmodernMarxistacademiceconomicsandtheprincipal causeofMarxismspresentparalysis.Thisisclarifiedbythespecificroleofequilibriumwhichnow dominatesandovershadowsalmostthewholeofmainstreameconomicsandmanyofitsheterodoxies inthetheoryofcrisis,makingitparexcellencetheideologicalexpressionofcapitalismtriumphant. GeneralEquilibriumtheories,whethermarginalist,physicalistorevenISLMKeynesian,haveaproperty whichmakesthemextremelyattractivefromanapologeticpointifview:theylogicallyexclude endogenouscrisis.Breakdownarisingfromthemarketsinternallawsofmotioncannotbededuced fromanequilibriumtheory(Freeman1999).Thereasonisnotdifficulttounderstand.Thepremiseof equilibriumisthatthemarketwillreproduceitselfwithoutchange.Theequilibriumtheoristwritesdown anumberofsimultaneousequationsandsolvesthem,topredictpricesandquantitiesproducedand sold,givenonlysomeexternallygivenmagnitudesconsumerpreferencesinmarginalisteconomics, productionfunctionsinSraffa(1962),propensitytoconsumeandliquiditypreferenceinISLM Keynesianism Butbecausethetheoristassumesfromtheoutsetthatthemarketreproducesperfectly,nothingwithin thismarketcancauseanyofthesevariablestochangebetweenoneperiodandanother.Thereisno reasonforanypricetoriseorfall,orforanyonetoconsumeorproducemoreorless.Suchasystem mustcontinueinthesamestatewithoutchangeexceptandunlessanexternalchangedisturbsit.What happensafteradisturbance?Doesthisnotcontradicttheinitialassumption?Theequilibriumanswer, Critique of Positivist Marxism 24
termedcomparativestatics,istosupposethemarketmovesfromoneperfectstatetoanother.It adjustsfromtheequilibriumstateuniquelydeterminedbytheoldconditions,toanewstateuniquely determinedbythenewconditions.Thetheorydoesnotdenythatintheorytheeconomyis,foratime, inanimperfectstatecorrespondingtoneithersetofexternalconditions.Ithoweverholdsthatsuch disturbancesoradjustmentscanbediscounted.Theeconomycanbeanalysedasifitconsistedofa sequenceofperfectstates,noneofwhichdivergesfrommarketperfection.Anylawofmotionisthen entirelygovernedbyexogenousvariables.Innocasecananythingfromwithinthemarketitselfaffectits motion.Ifanyforcesdoarisefromitsprocessofadjustment,thetheorydiscountsthem.Indeedthisis whythevariablesconsideredbyanysuchtheoryarepartitionedintotwocategories,explicitlynamed endogenousandexogenous. GeneralEquilibriumishenceamathematicallypurepresentationofthepositivistviewofacapitalist economy,whosetrajectoryisgivenentirely,withnoadditionaldeterminations,bytheexogenous variables.Thepredictionsthatariseare100percentdeterminate.Theyeliminatenotjustcrisis,but humans.Walrasplayersaresoconstrainedthattheyhavenomeansofactuallyreachingthepriceshis systemdecreesforthem,leadinghimtoinvokethemysteriousauctioneerafigureremarkablysimilar toLaplacesexternalpowertogetthemthere.ThedeterminacyofGeneralEquilibriumisaprimal requirement,anditsabsenceintemporalinterpretationsofMarxengendersanearpathologicalfear. ThusMongiovi(2002:22)
TemporalSingleSystemmodelsavoidtheappearanceofinconsistencybyintroducingsomanydegreesof freedomthatMarxsinvariancepostulatescannotpossiblybeviolated:themodelsaresoopenendedthat theyexplainnothingatall.
ForMongiovi,asforlongruneconomictheoryonwhosebehalfhespeaks,theproblemistosecurea fullydeterminatepredictionoftherelationbetweenprices,profits,wagesandvalue.Actually,thisis impossible.Prices,profitsandwagesmustbeindeterminateinanyrealistictheorybecausethereal worldisitselfindeterminate.TheintrusivedegreesoffreedomofwhichMongiovicomplainsareknown aspeople.ItisonlybecausetemporalformulationsofMarxstheoryareopenendedthattheycan explainanythingotherthansomehypotheticalmathematicalworldmasqueradingasasociety. Thismakesthecopiousbodyofworkonastatisticallydeterminatecorrelationbetweenvaluesand prices(Ochoa1984,Shaikh1998,CockshottandCottrell1998and2005,TsoulfidisandManiakis2002), apartfromitsstatisticalflaws(Kliman2002,2005,Freeman1998)particularlymisconceived.Themost interestingthingsinacapitalisteconomyoccurnotwhenpricesareclosetovaluesbutwhentheyare distant.Thedrivingforceofproductivitychangeistheexcessprofitanewinventionyields,forthewhole periodinwhichitcoexistswitholdandlessproductivetechniques.Thedrivingforcesoffinancialization areprofitswithnoremainingconnectiontounderlyingvalues.ImperialismisdrivenbytheNorthsself reenforcingmonopolyofproductiveadvantage,bygerrymanderedcommerce,andbyplainrobbery,its mobilisationofresourcerentsshowingupinworldoilpricessurpassingvaluesbyfactorsapproaching 30.SuperprofitsaredescribedbyMarxinmanyplacesastheactualdriverofcapitalistmotion.Every divergencesofpricefromvalueexpressesasocialrelation,layingbarethesourceofthepoliticalpower ofthebanker,theoilmajorandtheimperialist.Thepurposeofaneconomiclawistoidentifyand Critique of Positivist Marxism 25
accountforthesesocialrelations,which,actually,runourworld.Anenterprisededicatedtoproving themstatisticallyinsignificantmeritsaspecialMarxistplaceinthecircleoutsidehellwhichDante reservedfortheFutile. AmorethoughtfulobservationcomesfromFoley(1997),whoobjectstothetemporalformulationof Marxstheoryasfollows:

Accountingidentitiescannotbythemselvesconstituteapredictiveorexplanatorytheory,sothat Freeman'sdiscussionisinevitablyonlythefirststeptowardthedevelopmentofthetypeoftheoryhecalls for.
Thestrikingpointofthiscriticismistheveryfactthatpredictionandexplanationappear,forFoley,to besynonyms.Hiscriticismwouldbelegitimate,ifthiswereso.Butforatemporalist,anexplanation meanssomethingthatlaysbaretherelations,concealedwithinthecommodityform,betweenreal, human,socialmagnitudessuchaslabour,culture,care,love,orspiritualbeing,andthealienated, fetishised,deadsymbolswecallmoneyontheother.Itisthustheveryoppositeofaprediction. WhatdidMarxthink?AgrowingbodyofTSSIresearch(FreemanandCarchedi1995,Kliman2007,Potts 2009)hasestablishedthathistheorywastemporalistorassometimesdesignated,successivist.The issueofdeterminismbeginsatthisprecisepoint.Withinasuccessivistderivation,valuesatanygiven timedependonvaluesatsomeprevioustime,andthelabourperformedsincethen.Pricesarenot determinedatall.Theysimplyexist:theyaredata.Thisiswhythetransformationproblemdoesnot reallyexist.ItarisesfromthepositivistnotionthatMarxsvaluetheorydeterminespricesand determinesvalues,inthesenseofpredictingwhattheymustbe.Thetemporalisttothecontraryseeks toestablishtheconcealedrelationbetweenvalues,givenbylabourtime,andprices,givenbythereal world,thusrevealingwhatthepricesactuallyconsistof. MostofthelawswefindinMarxsworkareclearlyrelational.Thelawofvalueitselfstatesthatthe amountofvalueproducedbyanycapitalandbysocietyasawholeisequaltothetimeoflabourit employs.Itthusrelatesthetwocentralcategoriesofpriceandlabour.Thesecondsuchlawconnects sourceofincometoproperty;workers,whosellonlytheirownlabour,receivewages;capitalists,who employthislabour,receivetherest.Thisexpressestwosocialrelationsconstitutiveofcapitalismboth value,andprofit,arecreatedby,andonlyby,thelabourofworkershiredbycapitaliststoproduce commoditiesforthosesamecapitaliststosell. Notethatrelationallawsareexact.Amodernconfusionidentifiespositivismwithexactness,andthe positivistsownidentificationofexactnesswithpredictionblindsthemtotheexactnessofrelational laws.Thisexactnessmusthold,becausesuchlawsexpressqualitativerelationsofidentity:forexample, thatpriceisaformofvalue.Thestatementonlylabourcancreatevaluecouldnotholdifanysuch relationwasinerrorbyeven0.0001percent.Therewouldthenbeasourceofvalueotherthanlabour. Thereinliestheimportanceofthetransformationofvaluesintoprices,whichisnotapredictionatall, furtherunderliningthefutilityofprovingitempirically.Moreover,itisfalseifitisnotexact,sothatit confirmsnothingtoshowitis97%true.Itdemonstratesthatthesocialandclassrelationsestablished
26
underthesimplifyingassumptionthatgoodssellattheirvalue,6arenotmodifiedwhenthis simplificationisrelaxed. Thenotionthatmereidentitiesaredevoidofcontentisseriouslymisinformed.Almostallphysicallaws arerelational.AssoonasastronomygotbeyondCopernicus,itcouldnolongersimplyforecastplanetary movementsbuthadtoaskedwhytheyhappened.Newtonslawsofmotionareallrelational.Thebest knownrelationallawinphysics,Einsteinsfamouse=mc2,gaveusnuclearweapons.Itwouldtakeabold economisttoclaimitaddednothingtoknowledge.Itisarelationbetweentwoformsofappearance matterandenergyofthesamething,showingthattwophenomenawhichappeardistinctareactually related.ThisoffersamorethansuperficialparalleltoMarxstheoryofvalue,whosepowerliesprecisely therelationsitestablishesbetweenquantitiesoflabourandmagnitudesofmoney. Thesemagnitudesbecomecrucialpreciselywhenweneedtoexercisecollectivechoice,changingthe socialrelationstheyexpress.Economistshavesofaronlypredictedthefutureinvariousways.Thepoint istomakeit.Becauseweliveinacommodityeconomy,thesemagnitudespresentthemselvesas purelyeconomic.Universalhealthrequireshospitals,doctors,drugs,nottomentionhealtheducation. Atfirstsightthisisamoneyquestionthecostofthesystem.But,actually,itisalabourquestion:the timespentbythebuilders,doctors,nurses,medicinemakers,educatorsandindeed,patients.Thesame resultcouldbeachievedbyfreeagreement,statedirection,orsomehithertounknownsystemof servitude.Whateversolutioniscontemplated,thechangesreallyrequiredwillremainmysteriousuntil moneyisunderstoodtobeasymbolicrepresentativeoflabour. Wegetaglimpseofthisunderlyingrealitywhenitisrevealed,forexample,that12percentofallUK pensionsarefinancedbytheoilrevenuesofonesinglecompany.WhydidwehavetowaituntiltheGulf ofMexicogotpoisonedtofindthatout?Aliberatorypoliticaleconomywouldmakeallsuchrelations transparentatalltimesandinallspheresofsociety.Societycanthenchoosewhetheritwishestotie thefutureofitselderlytothedestructionofthefloraandfaunaofalargepartoftheOcean,ortosome morehealthyandcommendableactivity.
12.
The rate of profit: a temporal relational law
Inthelightoftheabove,whatisthefunctionofthelawforwhichMarxisperhapsmostfamous,and whichisalmostuniversallyviewedwhethertoproclaimordismissitasapredictivelawofeconomic motionthelawofthetendentialfalloftheprofitrate?Inthisfinalsection,Iwillarguethatitshould beunderstoodasatemporalrelationallaw.Ithas,however,thepeculiarcharacteristicthatwhenthe commodityrelationisfunctioning,asduringbooms,itsformofappearanceisblind,automaticand therefore,haspredictivepower.Itsautomatismarisespreciselybecausethemeasuresrequiredto overcomeitareabnormaltocapitalism;itis,therefore,inaprofoundsense,alawofcapitalismit holdsswayaslongascapitalismfunctionsassuch. First,whatdoesMarxsownderivationestablish?Heoccasionallyemploystheemphaticlanguageof inevitability.However,hismanycarefulqualificationsmakeitclearthatsomethingquitedifferentis intended.Whatisrequiredinallsuchcasesistoexaminethelogicoftheargument,asexpressedbyits author.WhatdoesMarxsreasoningachieve,initsownterms?Itdemonstratesthattherateofprofit Critique of Positivist Marxism 27
willcontinuetofallforaslongasaccumulationcontinues.Againwemustnotethatthisdiffersfrom suchvaguenessesasitsometimesrisesandsometimesfalls.Itisanexactstatement;itsexactnessmay beappreciatedonlywhenitsqualitativenatureisgrasped.ThelawMarxsays,istheexpression, peculiartothecapitalistmodeofproduction,oftheprogressivedevelopmentoftheproductivityof labour.(Marx1991:319).Thatis,crisisistheresultofaccumulation. Wecanturnthisstatementaround.Therateofprofitwillberestoredif,andonlyif,accumulationgoes intoreverse.Statedthisway,itssuperioritybecomesclear.Fororthodoxy,crisisisovercomenaturally, aspartofthefunctioningofcapitalism.ForMarx,itisovercomeonlyifcapitalismceasestofunction naturally.Disaccumulationthedestructionofpreviouslyadvancedvalueisanenormouslydisruptive process.Itcanbeachieved,theoreticallyinoneoftwoways;ifalongdepressiondepriveslarge numbersofpeople(includingmanycapitalists)oftheirlivingorifthestate,whichproducesusevalue withoutproducingvalue,stepsinandreplacestheprivateinvestor,asinwarordevelopmentalstates. Thelawestablishestwopoliticalandsocialfacts.Accumulationunderminesthecircumstanceswhich enablepeopletotakepartinit;andtheconsequenceislargescalesocialandpoliticaldisruption.Itis,in short,anexplanationofcrisis.Inmyview,thisalsodemonstrateswhereMarxstandsinrelationtomany onesided,partialormonocausaltheoriesofcrisis.AnaccountbasedontheTRPFisnotcounterposedto anyparticularexplanationofcapitalistcrisis(underconsumption,overproduction,overaccumulation, socialstructuresofaccumulation,financialisation,etc).Eachisaparticularexpressionofthegeneral law,andoccurstosomedegreeineveryrealcrisis.Marx(1991:350)sawnocontradictioninthealmost casualassertionthatthefallpromotesoverproduction,speculationandcrises,andleadstothe existenceofexcesscapitalalongsideasurpluspopulationbringingtogethermostmonocausal explanationsinoneshortbracketedsubclauseasmereexpressionsofthegenerallaw. Therealissuesarisewhenoneaskswhatcanbedone.Liketheclownscar,nosolutiontocrisismaybe arrivedatbyaddressingonlyone,orafew,orevenallofthesetendencies.Tolaunchaboom,capitalism hastostopaccumulating,whichistosayinsomeverybasicsense,ithastostopbeingcapitalismaswe knowit.Needlesscomplexity,arisingfromthepeculiaritiesofatheoryMarxneverheld,haveobscured thesimplicityofMarxsreasoning.Inthealieninterpretationfoisteduponhim,valueisidentifiednot withlabourbutwithphysicalproducts.Capitalisseenasamassofobjects:machines,food,raw materials,andsoon.WhenMarxpresentshisownlawintermsofquantitiesoflabour,thelogicisclear:
itisaselfevidentnecessity,derivingfromthenatureofthecapitalistmodeofproduction,thatasit advancesthegeneralaveragerateofsurplusvaluemustbeexpressedinafallinggeneralrateofprofit. Sincethemassoflivinglabourappliedcontinuouslydeclinesinrelationtothemassofobjectifiedlabour thatitsetsinmotion,i.e.,theproductivelyconsumedmeansofproduction,thepartofthislivinglabour thatisunpaidandobjectifiedinsurplusvaluemustalsostandinaneverdecreasingratiotothevalueofby thetotalcapitalapplied.Butthisratiobetweenthemassofsurplusvaluetothevalueandthetotalcapital appliedinfactconstitutestherateofprofit,whichmustthereforesteadilyfall.(Marx1991:319,emphasis added)
Thisiseverybitasrelationalasthetransformationofvaluesintoprices;theonlydifferenceisthatthe relationsexistintime.Eachyear,acertainamountofvalueisproduced,equaltothetotalexpended Critique of Positivist Marxism 28
labourofthatyear.Eachyearacertainamountisconsumedbyworkers.Eachyear,acertainfurther amountisunproductivelyconsumed.Whatremainsisinvested.Timearisesbecausethevaluecannotbe investedbeforeitisproduced. Timethenentersinasecondway:thisinvestmentgrowsaslongas,eachyear,apartoftheproduced valueisaddedtotheadvancedcapitalofsociety.Literallyandalmostbydefinition,themassof advancedcapitalwillriseuntilandunlessthisstops. Theconfusionoftheequilibrium,physicalistpresentationsarisesbecausetheysupposethatthispast advancedvaluecanbewipedoutbytechnicalchange.Thisisnotso.Itoccurredinthepast,beforethe technicalchange,andcannotbewipedoffthebalancesheetsofthecapitalistswhospentthemoney. Norcanthisvaluebedestroyedinmerecirculation.Thisiswhythecrisisisprotracted.Theinitial, financialcrisissimplybringspricesintolinewithunderlyingvalues.Fictitiousassets,basedonthe capitalizationofincomestreams,falltowardstheunderlyingvalueoftheassetsinsomecases,zero. Thisisnotenough,whichiswhyfinancialisationisaninsufficientaccountoftheprocess.Evensucha dramaticadjustmentdoesnoteliminateunderlyingpastvalues.Thedestructionofvaluerequiresmuch more;itcallsforthetransferoftheaccumulatedvaluebackintosociety,bydisaccumulationinwhich capitalistsuseupwhattheyhavestockpiled,eitherbywastingitorbyconvertingitintonewproducts withoutreplacingit.Inshort,torestoretherateofprofit,netprivateinvestmentmustsinkbelowzero. Butcapitalismsraisondtreistoinvest.Thatshowitreproduces.Whenprivateinvestorleavesthe field,societycannolongerreproduce,rapidlydescendingintopoliticalcrisis. Sowhycannotthisbeovercometomorrow?Theobstaclesarenoteconomicbutpolitical.Theinvesting classmaywithdrawfromtheeconomynotfromsociety.Anymeasurestorelievethebillionsfalling underthehammerofthecrisis,orplacetheirdestiniesintheirownhands,attackswealthypeoplewho resist,butcannotrestore.Aneffectiveprogrammeislittlemorethanastatementofhowthisresistance maybeovercome. Inpureeconomicterms,remediesarenothardtofind.7TheThirdDepressionhasauniquefeature:with anaveragerealGDPof$6,000,equaltothatofaUScitizenofthe1950s,theworldcanforthefirsttime producesenoughforeveryone.Theonlylimitonusingitwiselyissocial.Anyreasonablyrichcountrycan secureadecentfutureandaprosperousandequalcitizenrybysuspendingalldividendpayments, compellingitsbankerstoceasedealinginspeculationandcommittoalongprogrammeofproductive investment,bywindingupalloverseasarmedactivities,andmakingarrangementsforlarge programmesofinvestmentineducation,information,culture,infrastructureandasustainablewayof life,allfinancedbylargetaxesreducingpersonalwealthtotheminimumrequiredforacomfortable lifestyleforimmediatefamily.TherapidgrowthofChinaandIndiashowsmoreoverthatcontagionfrom therichcountriesfailuretoundertakethesemeasurescanbecorralledandlimitedbyasufficiently energeticdevelopmentalstate. Thesecalculationsareanobrainer.Therealproblemisthepresentclassbalanceofmaterialinterests aboveallintherichcountries.Theproblemis,hence,toenablethosewhochoosesotodo,irreversibly toalterthisbalance:thatis,totranslatebetweenquantitiesofmoneyandclassesofpeoplethatreveals Critique of Positivist Marxism 29
thelikelypoliticalconsequencesofthemeasuresproposedbetheyuniversalrights,anassociative economytomorrow,orjustplainhighertaxesandmorespending.Butsuchlawsarenotthosethe positivisteconomicsisaccustomedto.Theywillnotsayhowlongthecrisiswilllastorhowdeepitwill go.Theywilltelluswhatwemustdo,inordertoshortenitandaboveall,exitfromitwithoutthesocial costsofthepreviousone.Thebottomlineisthis:socialjustice,organisedthrougheconomicdemocracy, istheonlylastingwayforhumanityfinallytofreeitselffromcriseswhich,forthefirsttimeinhistory, areentirelyofitsownmaking.This,thetrueroadtofreedom,iswhatMarx,Iamfullyconvinced,really intended.
13.
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Freeman, A. (2004). World Empire or a World of Empires? in Freeman, A. and B. Kagarlitsky (2004) (eds) The Politics of Empire: Globalisation in Crisis. Freeman, A. (2003). When things go wrong: the Political Economy of Market Breakdown in Westra; R and Alan Zuege (Eds) (2003) Value and the World Economy Today: Production; Finance and Globalization; pp91-118. London:MacMillan; Prepublication version on http://ideas.repec.org/p/pra/mprapa/5586.html Freeman, A. (2009a). Investing in Civilization in Guard, J. and W. Anthony (eds) (2009) Bailouts and Bankruptcies: Winnipeg: Fernwood Press Freeman, A. (2009b). The Poverty of Statistics, Third World Quarterly, Vol. 30, No.8, pp1427-1448 Freeman, A. (2010). Marxism Without Marx. Capital and Class Vol, 34, No.1. February 2010 Freeman, A. and G. Carchedi (1995). Marx and non-Equilibrium Economics. Edward Elgar. Freeman, C. (1995). The Third Kondratieff Wave: The Age of Steel, Electrification and Imperialism. Sussex: SPRU. Gunder Frank, A. (1978). Dependent Accumulation and Underdevelopment. New York: Monthly Review Press and London: Macmillan Press Hayek, F. (1933). Monetary Theory and the Trade Cycle. New York: Harcourt Brace Krugman, P. (2010) The Third Depression New York Times June 27, 2010 Juglar, C. (1862). Des Crises commerciales et leur retour periodique en France, en Angleterre, et aux Etats-Unis, Paris: Guillaumin. Juglar, C. (1915).A Brief History of Panics and their Periodical Occurrence in the United States. Downloadable from http://manybooks.net/titles/juglarcletext05panic10.html Kliman, A. (2002). The Law of Lalue and Laws of Statistics: Sectoral values and prices in the US economy, 197797, Cambridge Journal of Economics 26:3, 299311. Kliman, A. (2005). Reply to Cockshott and Cottrell, Cambridge Journal of Economics 29:2, 317323. Kliman, A. (2007). Reclaiming Marx's Capital: A refutation of the myth of inconsistency. Lanham, MD: Lexington Books. Kliman, A. (2010a). The Persistent Fall in Profitability Underlying the Current Crisis. New York: Marxist-Humanist Initiative Kliman, A. (2010b). The Disintegration of the Marxian School. Capital and Class Vol, 34, No.1. February 2010 Kuhn, R. (2007). Henryk Grossman and the Recovery of Marxism. University of Illinois Press. Labica, G.(1984). Der Marxismus-Leninismus: Elemente einer Kritik. Berlin: Argument Labriola (1970[1897]). La concepcion materialista de la historia La Habana. Laplace, P. S. (1951 [1820]). A Philosophical Essay on Probabilities, translated from the 6th French edition by Frederick Wilson Truscott and Frederick Lincoln Emory. New York: Dover Publications. French edition Laplace, P,S. (1820) Theorie analytique des probabilites. Volume VI of complete works, Paris:Gauthier-Villars. Laplace, P.S. (1836). Exposition de systeme du monde Paris: Bachelier. Lassalle, Ferdinand (1863). Offenes Antwortschreiben, http://www.marxists.org/deutsch/referenz/lassalle/1863/03/antwortschreiben.htm Lovejoy, A. O, (1990). The Great Chain of Being: A Study of the History of an Idea. Harvard University Press. Lukacs, G. (2000). Tailism and the dialectics, London: Verso. German original Lukacs, G (1996) Chvostisms tendus und Dialektik, Budapest, Aron Verlag. Maksakovsky, P. (2004). The Capitalist Cycle. Brill. Mandel (1974). Late Capitalism. London: Verso Marx, K. (1972). Feuerback. Opposition of the Materialist and Idealist Outlooks. Moscow: Progress Publishers Marx, K. (1991). Capital: Volume III. Penguin Classics. Marx, K. (1992). Capital: Volume 1. Penguin Classics. Meek, R. (1956). Studies in the Labour Theory of Value. London: Lawrence and Wishart. Mitchell, W.C. (1927). Business Cycles: the Problem and its Setting, New York: McGraw-Hill. Mongiovi, G. (2002). Vulgar Economy in Marxian Garb: A Critique of Temporal Single System Marxism RRPE (xxxx find details and check page reference)
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Morishima, M. (1973). Marxs Economics: a Dual Theory of Value and Growth. Cambridge: CUP. Ochoa, E. M. (1984). Labor-Values and Prices of Production: An interindustry study of the United States economy, 19471972. Ph.D. dissertation, Department of Economics, New School for Social Research, New York. Palloix,C. (1970). 'Ingalit des changes mondiaux ou ingalit du dveloppement des forces productives l'chelle mondiale'. La Pense, no. 150, mars-avril 1970 Patnaik, U. (2006). The Free Lunch: Transfers from Tropical Countries and Their Role in Capital Formation in Britain during the Industrial Revolution. Jomo, K. S. ed. Globalization Under Hegemony: The Changing World Economy. New Delhi: Oxford University Press. Plato, Timaeus (1965). Tr Desmond Lee. London: Penguin. Potts, N. (2009). Trying to Help Rescue Value for Everyone, Critique, Vol. 37., No. 2. Riazanov, D. (1928). Lassalle and Bismarck, Pravda 14 July 1928, translated in Labour Monthly, February and March 1929. http://www.marxists.org/archive/riazanov/1928/07/lassalle.htm Rostow, W.W. (1960). The Stages of Economic Growth: a Non-Communist Manifesto. Cambridge: CUP Schumpeter, J.A. (1965). Capitalism, Socialism and Democracy. London: Unwin. Shaikh, A.M.(1998). The Empirical Strength of the Labour Theory of Value. In Bellofiore, Riccardo (ed.), Marxian Economics. A reappraisal. Vol. 2: Essays on volume III of Capital: profit, prices and dynamics (London: Macmillan), 22551. Shanin, T. (1984). The Late Marx and the Russian Road. Monthly Review Press; First Edition edition (March 1, 1984) Sraffa, P. (1975). Production of Commodities by Means of Commodities. Cambridge University Press. Stadler, F. (1998). The Vienna Circle, in E. Craig (ed.) Routledge Encyclopedia of Philosophy Vol. 9, London: Routledge, pp. 606-616. Steedman, I. (1981). Marx After Sraffa (New Ed.). Verso Books. Sweezy, Paul M. (1968). Theory of Capitalist Development: Principles of Marxian Political Economy. Modern Reader Paperbacks. Trotsky (1923). O Krivoi Kapitalisticheskovo Razvitiya (The Curve of capitalist Development), Vestnik Sotsialisticheskoi Akademii, 4, April-July. Cited in Day, op cit. Tsoulfidis, L, and T. Maniatis (2002). Value, Prices of Production and Market Prices: Some more evidence from the Greek economy, Cambridge Journal of Economics 26:3, 35969. VanGiezen, R. And A. E. Schwenk (2002). Compensation from before World War I through the Great Depression. New York: BLS Wells, Julian (2009). PhD Thesis, Kingston University Zarembka, P. (2003), ;Lenin as Economist of Production: A Ricardian Step Backwards, Science & Society, Vol. 67, No. 3, Fall, pp. 276-302.
IamindebtedtoJulianWellswhodrewmyattentiontomanyoftheideasinthispaper,andtomyotherfellow TSSIscholars.Allmistakesareofcoursemyown. TheUKcoalitiongovernment,initsJune2010budget,wheeledoutthemagical80/20ruleaccordingtowhich 20percentofthedeficitwouldbemadegoodthroughtaxrisesand80percentthroughwelfarecuts. AsdidJohnStuartMill.ThepositivistreligionwasparticularlyinfluentialintheLatinAmericawherethereare positivisttemplestothisday.ThesloganOrdemeProgressoontheBrazilianflagisapositivistnostrum.

4 3 2
The depth and perhaps antiquity of this ambiguity is reflected inlanguage; law; can mean either naturallaw or lawofthelandinalargenumberoflanguages. Theverytermstatemachinegivesthegameaway.
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TheBortkiewizcSweezyMorishimainterpretationissouniversallytakenforgrantedthatMarxistsalmost everywhereassertthat,inVolumeIofCapital,goodsarepurchasedattheirvalue.Thisisnottrue.Marxs abstraction,showingsurplusvaluecannotarisefromcirculation,appliestothesalepriceattheendoftheperiod, notthepurchasepriceatthebeginning. TheCommunistManifestosonepageeconomicprogrammeoffersasurprisinglymodernsoundingpackageof measureswouldcertainlyovercometodayscrisis,ifimplemented.

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Critique of Positivist Marxism and Economic Determinism

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Crisis and law of motion in economics: a critique of positivist Marxism

Crisis and law of motion in economics a critique of positivist Marxism

Crisis and law of motion in economics a critique of positivist Marxism

Critique of Positivist Marxism

2. Positivist Marxisms poisoned chalice

Critique of Positivist Marxism

3. The object of study: society in crisis

4. Does capitalism have laws?

Critique of Positivist Marxism

Chart 1: 10-year average real GDP growth of the world economy

0% 1960-1970 1965-1975 1970-1980 1975-1985 1980-1990 1985-1995 1990-2000 1995-2005

Critique of Positivist Marxism

Chart 2: Growth rate of US real GDP

7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3%

Average Growth over cycle

Average over past 5 years

Critique of Positivist Marxism

Chart 3: US manufacturing industrial capacity

Critique of Positivist Marxism

Chart 4: US long-term unemployment

16% 14% 12%

Source:USBureauofLabourStatistics,CPS(household)unemploymentmonthly,seasonallyadjusted Finallychart5fromKliman(2010a)showsthattheprofitrateoftheUSeconomy,eitherinvalueorprice terms,hastrendeddownwardssincethewar,atnopointreturningtoanythingremotelyresemblingits postwarpeak.

Critique of Positivist Marxism

Chart 5: US profit rate

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

5. How do crises end?

Critique of Positivist Marxism

Chart 6: Unemployment, investment and government spending in the US economy 1929-2007

50% 40% 30% 20% 10% 0%

20% 15% 10% 5% 0%

6. Predictive and relational laws in economic theory

Critique of Positivist Marxism

7. Determinism and endogenous recovery within the Marxist tradition

Critique of Positivist Marxism

Critique of Positivist Marxism

8. Was Marx a determinist?

Critique of Positivist Marxism

9. Positivism, rationalism and the origins of modern determinism

Critique of Positivist Marxism

Why did Marxism become positivist?

Positivismsattractiontothebourgeoisieisunderstandable.Butwhatwasitsappealtotheworking class?AsimplisticLaplaciandeterminismwasextremelyinfluentialwithintheMarxismofthelate Critique of Positivist Marxism 22

General Equilibrium Marxism: a positivist substitution

Critique of Positivist Marxism

The rate of profit: a temporal relational law

Thisiseverybitasrelationalasthetransformationofvaluesintoprices;theonlydifferenceisthatthe relationsexistintime.Eachyear,acertainamountofvalueisproduced,equaltothetotalexpended Critique of Positivist Marxism 28

Critique of Positivist Marxism

Critique of Positivist Marxism

Critique of Positivist Marxism

Critique of Positivist Marxism

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