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An Introduction to Marxist Economic Theory

1973Ernest Mandel

4.1/5

Ernest Mandel puts a finer point on many of the concepts Marx introduces in Capital, Volume One. He teases out the ramifications for a mid-20th century world of the Marxian theory of the declining rate of profit, collaboration of the state with capitalist industry (neo-capitalism), the role of the state in crises of over-production, and economic colonialism. Mandel’s account of Marx is astute and elegant; his grasp of Marx was apparent. However, I propose that Mandel is a little too uncritical of Marx on certain important topics, including the question of whether there is really a tendency to a declining rate of profit and the question of the usefulness of Marx’s model of the “crisis of overproduction.”Here and there in An Introduction to Marxist Economic Theory, Mandel leaves the reader clues as to the historical-political position from which he writes. Early in the book, Mandel asserts that “every step forward in the history of civilization has been brought about by an increase in the productivity of labor…as long as a given group of men barely produced enough to keep itself alive, as long as there was no surplus over and above this necessary product, it was impossible for a division of labor to take place and for artisans, artists or scholars to make their appearance” (7). This view roughly indicates Mandel’s place in the broad and varied history of critics of capitalism: unlike Derrick Jensen and other radically anti-capitalist environmentalists who endorse a return to subsistence living, Mandel adopts Marx’s conviction that capitalism creates the necessary preconditions for communism, that it provides organizational strategies essential to the production of sufficient surplus-value for the advancement of societies. Before I write anything else, I want to pause and note that Mandel seems to equivocate on the definition of surplus-value in the early chapters of his book. According to Mandel, exchange-value and surplus-value are not intrinsically detrimental, but that the methods according to which they are distributed dictate their effects on people. He writes that “as long as there was no surplus over and above this necessary product, it was impossible for a division of labor to take place…” (7). I am confused on this point, because I thought that surplus-value would disappear if the working-class were to be compensated equally for the value that its labor added to the commodities in question. I am pretty sure that this is simply a misunderstanding on my part, but if anyone can describe what a situation in which workers were remunerated fairly (perhaps equally) for their labor and still generated surplus value would look like, I would appreciate it. Mandel offers a very handy tool for visualizing Marx’s labor theory of value in his “proof by reduction to the absurd.” Imagine, he writes, a world in which every possible kind of “living human labor” has become mechanized and/or automated. Mandel asks, “Can there be a society where nobody has an income but commodities continue to have a value and to be sold?” (28). I thought this exercise was helpful insofar as it stripped away peripheral details to reveal that at the heart of profit-making there is human labor. Now I want to address the question of the tendency to the declining rate of profit under capitalism. There seem to be a few glaring lacunae in Mandel’s explanation of Marx’s theory, but Mandel nonetheless forges ahead with his own argument. Marx came up with the expression (S/C+V) to express the rate of profit under capitalism, where S stands for surplus-value, C for constant capital, and V for variable capital. Mandel runs with Marx’s expression for the organic composition of capital (C/V) and with Marx’s conviction that savvy capitalists are always tempted to purchase technologically-advanced constant capital to reduce the socially-necessary labor-time of production and reduce variable capital expenses. He notes that an increasing organic composition of capital would produce a declining rate of profit, because the denominator in the expression S/C+V would grow, while S, presumably, would not change. Mandel writes that capitalists can maintain the former, higher rate of profit by increasing the rate of exploitation, which is expressed by S/V. I wonder, though, what the incentive for increasing the organic composition would be if it did not yield increased surplus-value? If S were to grow simply due to an increase in the organic composition (which I assume is the point of increasing the organic composition), there would be no need to increase the rate of exploitation. Mandel notes that in reality there are limitations to the apparent solution of increasing the rate of exploitation. There is no upward limit to the expense of constant capital (new technologies), but there is a limit to the amount of surplus-labor that a human worker can produce in one day. Capitalists rely on the exploitation of human labor – the idea that the worker replaces the cost of his labor and gives the excess surplus-labor and surplus-product to the capitalist. Without some positive value for variable capital, there would be no value for S – no surplus value at all. I wonder if this is a plausible situation. One of the biggest challenges I faced as I read first Marx and then Mandel was trying to conceptualize scenarios like the one I have just described, for example, one in which a capitalist had no variable capital expenses, only constant capital expenses. In that case, Marx’s expression for the capitalist rate of profit and for the organic composition of capital would be useless. How would this sort of business coexist with businesses that still employed human workers? Would there be any explanatory framework, like the one that Marx hashes out in Capital, to reveal the terms on which these different kinds of business carry out transactions? If the scenario described above is plausible – indeed, if it is already a reality – what insight can Marx offer?The second and last issue that I want to touch on is Mandel’s brilliant explication of neo-capitalism, and the gradual merging of monopoly capital’s interests with the state’s. One persistent question I have, thinking back to my reading of Capital and then Mandel’s book, is how the initial bond or alignment between the state and the capitalist class occurred. I can see the (civic and economic) reasons for the state intervening in the economy in the case of economic crises, but how did this relationship begin, and what conditions preserve it?It is worth giving a quick overview of at least one way in which the state and the capitalist class collaborate. Mandel gives a lot of attention to the crisis of over-production, which he holds up as the classic crisis of capitalism. I think that his explication of the state’s role in crises of over-production does provide some keys to understanding the American government’s response to the 2008 financial crisis, and it is actually exactly at this point that my questions begin. I will present those at the end of this essay. States have an interest in softening the blows of cyclical crises of overproduction because these crises spread like wildfire and can result in sudden mass unemployment and therefore the disintegration of social order. It seems reasonable to imagine that elected politicians consider their both their future careers in politics and the welfare of the countries they have decided to lead when responding to crises. Mandel describes how these crises proliferate: one consumer-goods industry produces too many of a particular commodity; worse than breaking even, these firms lose money and have to lay off workers. The unemployed workers obviously now lack the income to spend on goods they used to buy. Now, industries producing those goods find themselves producing too much, and in turn must lay off workers. The firms that supply the consumer-goods firms with their heavy machinery also suffer because demand has decreased and now they are producing too much, as well. State-funded entitlement programs like unemployment insurance, food stamps, universal health coverage, and others protect workers from the uncertainties they face as workers, alienated from the means of production. Mandel calls these entitlements “deferred wages” because they fall neatly into the category of the necessary means of subsistence, which capitalists are obligated to pay employees in order to profit. Paradoxically, entitlements also protect the capitalist classes from the uncertainties associated with the continual upgrading of constant capital. Upgrades in constant capital free capitalist firms from their variable capital costs, but can also depress demand for their products; so it is critical that even while they are unemployed, workers can afford to spend on consumer goods and preserve the status quo. Given this arrangement, it makes perfect sense that the federal government decided to bail out Wall Street in 2008: not to bail the financial sector out would have disastrous ripple effects for the rest of the country (even with the bailout, millions of working and middle-class Americans have suffered). But my question is, how can we recognize in the housing and financial crisis – the catchwords of which were collateralized debt obligations, subprime mortgages, and lax regulation – the “classic” capitalist crisis of overproduction?
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