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Historical Materialism #177
Invisible Leviathan: Marx's Law of Value in the Twilight of Capitalism
In Invisible Leviathan, Murray E.G. Smith refutes the main criticisms of Marx's theory of labour value and argues that human civilization is imperilled by the capitalist imperative to measure wealth in terms of 'abstract social labour' and money profit.
396 pages, ebook
Published November 8, 2018
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January 31, 2020
This book is a theoretical and empirical defense of Marx’s law of value. It shows how the law of value, like an “invisible leviathan”, operates behind the scenes of the capitalist economy governing the magnitude and rate of surplus-value production and capital accumulation.
There are two components of this law which Smith considers fundamental and defends throughout:
1) that living labor is the source of all new value and that value is a definite quantitative magnitude that sets parametric constraints on prices, profits, wages, and all other expressions of the money form
2) that there is a secular tendency for the rate of profit to fall due to an increasing organic composition of capital
This is an incredible book overall I'd recommend to anyone looking for a “fundamentalist” approach to Marxist theory. To note one highlight in particular: this book contains the best non-technical overview of the Transformation Problem I've ever come across. Here are the chapter summaries for a better picture…
In Ch. 1, Smith sets the groundwork for his approach and defense of Marxist value theory
starting with concept of the "twilight of capitalism" which involves 3 crises: of valorization, international relations, and ecological catastrophe. The "crisis inducing dynamics" of capitalism are rooted in 4 contradictory fundamental principles of social organization:
1) formal equality between actors and products
2) exploitative relation between owners and workers
3) competitive relation between market participants
4) cooperative relation between producers in a sophisticated social division of labor
He then defines the Invisible Leviathan and its central law: the capitalist law of value which compels humanity to use "value" (Abstract Socially Necessary Labor Time) as the sole yardstick for measuring wealth. The theoretical implications of the four-fold inherent antagonisms outlined above and which express the law of value necessarily tend toward a lowering of the rate of profit as labor productivity increases
Ch 2 "offers a philosophical and historical framework for conceptualizing the historically specific--and limited--contributions of value relations to human progress"
Starting with the theoretical framework based on 3 principles of Marx’s materialist theory of history:
1) monistic view of reality as ontologically unified with matter as its substance. "New materialism" of Marx adds human practices as important component of this material reality
2) historical subject is the real living individual practically engaging with natural, social, and intellectual problems using natural, social, and intellectual means
3) humans seek material security in the face of hostile natural and social forces and this drives rational technical development of labor productivity which gives history meaning. In summary, human history has a pattern to the extent that it is guided by a human propensity toward technical-scientific rationality.
This is followed by a very interesting discussion on the relation between productive and cognitive capacities. Smith argues rational cognition is not a transhistorical category. While Kant saw the categories of reason as inherent features of human intellect, and while Hegel recognized them as a historical development, Smith argues for a materialist account of this historical development of human "problem solving capacities". In this he builds off Engels and, later, Söhn-Rethel's insights connecting the philosophical innovations of the Greeks with their adoption if exchange relations. Essentially, the emergence of a real abstraction (the value-abstraction) made possible those conceptual abstractions associated with rational philosophy.
Ch. 3 explores the general history and ideological component of value theories running from classical political economy to Marxism to marginalism. The main takeaway being that the turn from political economy to economics today was motivated by a shift in analytical agenda. From describing the social foundations of value in order to illuminate the laws regulating the wealth of nations (Smith) or the distribution of national income between classes (Ricardo) or of accumulation and motion in the capitalist mode of production (Marx) to a theory of relative price formation. The rejection of the Labor Theory of Value stems from its inapplicability to the new theoretical objectives which themselves are rooted in the personal and class interests of the leading figures in economic academia. Thus the LTV is treated as "wrong" or "useless" in large part because it is not limited by the horizon of bourgeois class interests.
Ch 4 take a deeper dive into the specifically Marxist treatment of value as a social substance standing behind price, a mere phenomenal appearance of an underlying content (human abstract labor time). He touches on conceptual points of Marx's dialectical method with respect to form vs content, universal vs particular, and the equalitarian/exploitative/competitive dimensions of capitalist social relations of production.
Smith gives the most general outline of the Law of Value by reference to its fundamental postulates:
-living labour is sole source of new value
-value has a quantitative magnitude
-this magnitude is a "parametric determinant" of economic phenomena under capitalism
He continues on with the other conceptual categories of Marx's analysis in "Capital": labor-power, the capital circuit, profit, rate of profit, rate of surplus-value, composition of capital, production prices, etc. The chapter ends with an overview of two early debates between Marxists and neoclassical or neoricardian critiques. The first was Bohm-Bawerk's attack on Marx's value theory which Smith refutes convincingly; the second is the "first phase" of the transformation controversy in which Bortkiewicz (and later Sweezy) argue Marx's method for transforming labor values into production prices is inconsistent with Vol II's model of simple reproduction. Basically, they are irreconcilable if Marx's aggregate equalities are to hold in a context of equalized profit rates between sectors of varying capital intensities.
Ch 5 Takes the reader through the next phase of value theoretic debates in the mid 20th century between neo-Ricardians and Marxists. He divides both camps into two subgroups. Among neoricardians there is a clique sympathetic to Marxism in its attempts to explain the distribution of the surplus in a manner that acknowledging class antagonisms (eg Dobb and Meeks). There is also a group hostile to Marxism and sought its replacement with a new approach entirely (eg. Steedman and Hodgson). The Marxists likewise can be grouped into a neo-orthodoxy school, so-called because while it reaffirms the qualitative dimension of the form of value and is therefore orthodox, it eschews the quantitative dimension of his analysis and is to that extent revisionist. Then there are the fundamentalists, like Smith, who find the right balance by grounding the quantitative implications of the theory of value in the qualitative aspect of the value-form.
Smith doesn't say much about the neo-Ricardians sympathetic to Marx and instead moves directly on to Steedman's critique of Marx's value framework as essentially redundant and irrelevant since surface level economic phenomena such as price and profit rates can be fully explained in terms of the physical components of commodity production.
The first response to Steedman and his ilk's attack is that of the "neo-orthodoxists". Theorists like Gerstein, Himmelweit, and Mohun who lean too much on the value-form so as to avoid confrontation with the quantitiative arguments of the neo-Ricardians and neo-classicalists.
Smith then turns to the defense of Marx against Steedman et al's critique given by Anwar Shaikh whom Smith considers an early fundamentalist. Ultimately, by accounting for value transfers between the circuit of capital and the circuit of capitalist revenue and by applying an "iterative solution" to the transformation of values to prices (inspired by Morishima's work), Shaikh shows that labor and its money-form expressions can diverge even in the aggregate "without violating the law of conservation of value through exchange". He thus preserves Marx's key insight that price-forms are conditioned by the structure of production despite displacements between the former and the latter. "It is the structure of value categories (the pattern of organic composition, and the proportion of surplus-value that is converted into revenue) that provides the limits to this displacement effect."
Smith finally brings the debate to the present and gives an overview of contemporary value-form theorists, on the one hand, and fundamentalists like Andrew Kliman, Guglielmo Carchedi, Alan Freeman, and to some extent Fred Mosely. The main idea of this school, at least in the case of the first three, is a Temporal Single Systems interpretation of value theory which succesfully addresses the transformation problem by adopting an inter-temporal framework where values and prices constitute a single monetary system as opposed to a dual system approach of static inter-departmental equilibrium.
Ch 6
Now assesses the value controversy in light of Marx's overall system of thought. Smith breaks this task down to three distinct levels for evaluating the labor theory of value:
1) philosophical-methodological
2) substantive-theoretical
3) political-programmatic
To make his evaluation in terms of (1) above, Smith must explain Marx's philosophy of science as a dialectical (against formal logic), holistic (against reductionist), and materialist (against idealist) project that locates contradiction and abstraction in "the real". This method firstly involves moving from "abstract abstractions" to "concrete abstractions" in the process of conceptually distinguishing ever more complex determinations of objects. Secondly, it requires an appreciation for the "logic of essence" in which what makes something what it is must necessarily appear (takes on a form) other than itself.
Moving on to (2) above--the theoretical implications--Smith demonstrates how Marx's "dialectical-monism" (his appreciation for dichotomies and contradictions but simultaneous recognition of a materialist holism) avoids the dualistic pitfalls of the physicalist and subjectivist value theories which give undue primacy to nature or to the ideal respectively.
Finally, he addresses the third level or the "political-programmatic" level. Basically, fundamentalist Marxism recognizes that the need to fully abolish capitalism follows logically from the law of value and its consequent tendency for the rate of profit to fall. This is counterposed to the left neo-Ricardians who rarely rise above "bourgeois reformism" in their attempt to provide essentially micro foundations for Keynesian or post-Keynseian macroeconomic theories. And, finally, it is also counterposed to the Stalinist model of bureaucratic central planning which was not able to fully transcend the law of value.
Ch. 7 turns to the question of capitalist crisis. Smith begins by placing the question in the context of Marx's overall project in Capital of (1) tracing out the dynamic of accumulation in its technical development of the forces of production by encouraging increased productivity through labor-saving investments and (2) revealing how this process of productive development involves a contradiction that undermines its own appropriative imperative.
Smith defends the TRPF against Sweezy and Robinson's criticism that an increasing rate of surplus-value can act as a counter-tendency alongside a rising OCC and therefore it is indeterminate whether the rate of profit should fall. Smith responds that so long as we express the rate of profit as a ratio of surplus to the total capital stock (s/c as opposed to s/(c+v)), and also the OCC as a ratio of dead to living labor ((c/s+v) as opposed to c/v), then the indeterminacy is overcome. Smith gives a good argument for why we should redefine the OCC in this way but not, I think, for the rate of profit.
Smith then summarizes the "broad contours" of three additional arguments against the TRPF: neutral technological progress, rising TCC-stable OCC, and "choice of techniques" arguments. He finishes the chapter defending the TRPF's primacy in creating crises of valorisation against, what he views as secondary, crises of realisation promoted by "underconsumptionist" schools of Marxist thought.
Ch 8 is a value-theoretic defense of the Marxian distinction between productive and unproductive labor. What sets Smith's approach apart is that while conventionally the wage bill of unproductive workers is treated as a non-profit component of surplus value, Smith considers it part of the overhead cost of the capitalist system reflected in the constant capital portion of the products value.
Ch 9 covers the uneven character of capitalist development on a world scale. Most of the chapter is devoted to countering Arghiri Emmanuel's theory of unequal exchange as the primary mechanism of value-transfers from poor to rich countries.
Ch 10 is the empirical component of Smith's book in which he surveys a range of studies by fellow Marxist economists evaluating the Theory of the Rate of Profit to Fall and presents his own findings on the long run trends of the main Marxian ratios like the rate of profit, rate of surplus value, and the organic composition of capital in the US over the past 70 years. There is a long discussion of the proper measurement of Marx's value categories--how to delineate unproductive vs productive labor, do you price the capital stock at historic or current replacement costs, what components of national income do you include in the measure of surplus value vs variable capital, how to account for any distortions caused by fictitious capital, etc.
Ultimately Smith concludes the rate of profit has exhibited a secular tendency to fall due to a rising organic composition of capital and rising share of the wage bill earned by the non-productive sector. There were periods where counterdencies raised the rate of profit but these were anomalous and reflect the expansion of fictitious capital, setting the stage for the 2008 financial crisis and subsequent global slump.
Ch. 11 seeks to explore the practical implications of Marx's value theory with an eye to "delineating a programmatic orientation for the workers' movement to end capital" and to the issue of "socialist construction". It is primarily a defense of Trotsky's "transitional program" which asserts radical demands challenging the logic of the law of value and anticipates an eventual workers' government.
There are two components of this law which Smith considers fundamental and defends throughout:
1) that living labor is the source of all new value and that value is a definite quantitative magnitude that sets parametric constraints on prices, profits, wages, and all other expressions of the money form
2) that there is a secular tendency for the rate of profit to fall due to an increasing organic composition of capital
This is an incredible book overall I'd recommend to anyone looking for a “fundamentalist” approach to Marxist theory. To note one highlight in particular: this book contains the best non-technical overview of the Transformation Problem I've ever come across. Here are the chapter summaries for a better picture…
In Ch. 1, Smith sets the groundwork for his approach and defense of Marxist value theory
starting with concept of the "twilight of capitalism" which involves 3 crises: of valorization, international relations, and ecological catastrophe. The "crisis inducing dynamics" of capitalism are rooted in 4 contradictory fundamental principles of social organization:
1) formal equality between actors and products
2) exploitative relation between owners and workers
3) competitive relation between market participants
4) cooperative relation between producers in a sophisticated social division of labor
He then defines the Invisible Leviathan and its central law: the capitalist law of value which compels humanity to use "value" (Abstract Socially Necessary Labor Time) as the sole yardstick for measuring wealth. The theoretical implications of the four-fold inherent antagonisms outlined above and which express the law of value necessarily tend toward a lowering of the rate of profit as labor productivity increases
Ch 2 "offers a philosophical and historical framework for conceptualizing the historically specific--and limited--contributions of value relations to human progress"
Starting with the theoretical framework based on 3 principles of Marx’s materialist theory of history:
1) monistic view of reality as ontologically unified with matter as its substance. "New materialism" of Marx adds human practices as important component of this material reality
2) historical subject is the real living individual practically engaging with natural, social, and intellectual problems using natural, social, and intellectual means
3) humans seek material security in the face of hostile natural and social forces and this drives rational technical development of labor productivity which gives history meaning. In summary, human history has a pattern to the extent that it is guided by a human propensity toward technical-scientific rationality.
This is followed by a very interesting discussion on the relation between productive and cognitive capacities. Smith argues rational cognition is not a transhistorical category. While Kant saw the categories of reason as inherent features of human intellect, and while Hegel recognized them as a historical development, Smith argues for a materialist account of this historical development of human "problem solving capacities". In this he builds off Engels and, later, Söhn-Rethel's insights connecting the philosophical innovations of the Greeks with their adoption if exchange relations. Essentially, the emergence of a real abstraction (the value-abstraction) made possible those conceptual abstractions associated with rational philosophy.
Ch. 3 explores the general history and ideological component of value theories running from classical political economy to Marxism to marginalism. The main takeaway being that the turn from political economy to economics today was motivated by a shift in analytical agenda. From describing the social foundations of value in order to illuminate the laws regulating the wealth of nations (Smith) or the distribution of national income between classes (Ricardo) or of accumulation and motion in the capitalist mode of production (Marx) to a theory of relative price formation. The rejection of the Labor Theory of Value stems from its inapplicability to the new theoretical objectives which themselves are rooted in the personal and class interests of the leading figures in economic academia. Thus the LTV is treated as "wrong" or "useless" in large part because it is not limited by the horizon of bourgeois class interests.
Ch 4 take a deeper dive into the specifically Marxist treatment of value as a social substance standing behind price, a mere phenomenal appearance of an underlying content (human abstract labor time). He touches on conceptual points of Marx's dialectical method with respect to form vs content, universal vs particular, and the equalitarian/exploitative/competitive dimensions of capitalist social relations of production.
Smith gives the most general outline of the Law of Value by reference to its fundamental postulates:
-living labour is sole source of new value
-value has a quantitative magnitude
-this magnitude is a "parametric determinant" of economic phenomena under capitalism
He continues on with the other conceptual categories of Marx's analysis in "Capital": labor-power, the capital circuit, profit, rate of profit, rate of surplus-value, composition of capital, production prices, etc. The chapter ends with an overview of two early debates between Marxists and neoclassical or neoricardian critiques. The first was Bohm-Bawerk's attack on Marx's value theory which Smith refutes convincingly; the second is the "first phase" of the transformation controversy in which Bortkiewicz (and later Sweezy) argue Marx's method for transforming labor values into production prices is inconsistent with Vol II's model of simple reproduction. Basically, they are irreconcilable if Marx's aggregate equalities are to hold in a context of equalized profit rates between sectors of varying capital intensities.
Ch 5 Takes the reader through the next phase of value theoretic debates in the mid 20th century between neo-Ricardians and Marxists. He divides both camps into two subgroups. Among neoricardians there is a clique sympathetic to Marxism in its attempts to explain the distribution of the surplus in a manner that acknowledging class antagonisms (eg Dobb and Meeks). There is also a group hostile to Marxism and sought its replacement with a new approach entirely (eg. Steedman and Hodgson). The Marxists likewise can be grouped into a neo-orthodoxy school, so-called because while it reaffirms the qualitative dimension of the form of value and is therefore orthodox, it eschews the quantitative dimension of his analysis and is to that extent revisionist. Then there are the fundamentalists, like Smith, who find the right balance by grounding the quantitative implications of the theory of value in the qualitative aspect of the value-form.
Smith doesn't say much about the neo-Ricardians sympathetic to Marx and instead moves directly on to Steedman's critique of Marx's value framework as essentially redundant and irrelevant since surface level economic phenomena such as price and profit rates can be fully explained in terms of the physical components of commodity production.
The first response to Steedman and his ilk's attack is that of the "neo-orthodoxists". Theorists like Gerstein, Himmelweit, and Mohun who lean too much on the value-form so as to avoid confrontation with the quantitiative arguments of the neo-Ricardians and neo-classicalists.
Smith then turns to the defense of Marx against Steedman et al's critique given by Anwar Shaikh whom Smith considers an early fundamentalist. Ultimately, by accounting for value transfers between the circuit of capital and the circuit of capitalist revenue and by applying an "iterative solution" to the transformation of values to prices (inspired by Morishima's work), Shaikh shows that labor and its money-form expressions can diverge even in the aggregate "without violating the law of conservation of value through exchange". He thus preserves Marx's key insight that price-forms are conditioned by the structure of production despite displacements between the former and the latter. "It is the structure of value categories (the pattern of organic composition, and the proportion of surplus-value that is converted into revenue) that provides the limits to this displacement effect."
Smith finally brings the debate to the present and gives an overview of contemporary value-form theorists, on the one hand, and fundamentalists like Andrew Kliman, Guglielmo Carchedi, Alan Freeman, and to some extent Fred Mosely. The main idea of this school, at least in the case of the first three, is a Temporal Single Systems interpretation of value theory which succesfully addresses the transformation problem by adopting an inter-temporal framework where values and prices constitute a single monetary system as opposed to a dual system approach of static inter-departmental equilibrium.
Ch 6
Now assesses the value controversy in light of Marx's overall system of thought. Smith breaks this task down to three distinct levels for evaluating the labor theory of value:
1) philosophical-methodological
2) substantive-theoretical
3) political-programmatic
To make his evaluation in terms of (1) above, Smith must explain Marx's philosophy of science as a dialectical (against formal logic), holistic (against reductionist), and materialist (against idealist) project that locates contradiction and abstraction in "the real". This method firstly involves moving from "abstract abstractions" to "concrete abstractions" in the process of conceptually distinguishing ever more complex determinations of objects. Secondly, it requires an appreciation for the "logic of essence" in which what makes something what it is must necessarily appear (takes on a form) other than itself.
Moving on to (2) above--the theoretical implications--Smith demonstrates how Marx's "dialectical-monism" (his appreciation for dichotomies and contradictions but simultaneous recognition of a materialist holism) avoids the dualistic pitfalls of the physicalist and subjectivist value theories which give undue primacy to nature or to the ideal respectively.
Finally, he addresses the third level or the "political-programmatic" level. Basically, fundamentalist Marxism recognizes that the need to fully abolish capitalism follows logically from the law of value and its consequent tendency for the rate of profit to fall. This is counterposed to the left neo-Ricardians who rarely rise above "bourgeois reformism" in their attempt to provide essentially micro foundations for Keynesian or post-Keynseian macroeconomic theories. And, finally, it is also counterposed to the Stalinist model of bureaucratic central planning which was not able to fully transcend the law of value.
Ch. 7 turns to the question of capitalist crisis. Smith begins by placing the question in the context of Marx's overall project in Capital of (1) tracing out the dynamic of accumulation in its technical development of the forces of production by encouraging increased productivity through labor-saving investments and (2) revealing how this process of productive development involves a contradiction that undermines its own appropriative imperative.
Smith defends the TRPF against Sweezy and Robinson's criticism that an increasing rate of surplus-value can act as a counter-tendency alongside a rising OCC and therefore it is indeterminate whether the rate of profit should fall. Smith responds that so long as we express the rate of profit as a ratio of surplus to the total capital stock (s/c as opposed to s/(c+v)), and also the OCC as a ratio of dead to living labor ((c/s+v) as opposed to c/v), then the indeterminacy is overcome. Smith gives a good argument for why we should redefine the OCC in this way but not, I think, for the rate of profit.
Smith then summarizes the "broad contours" of three additional arguments against the TRPF: neutral technological progress, rising TCC-stable OCC, and "choice of techniques" arguments. He finishes the chapter defending the TRPF's primacy in creating crises of valorisation against, what he views as secondary, crises of realisation promoted by "underconsumptionist" schools of Marxist thought.
Ch 8 is a value-theoretic defense of the Marxian distinction between productive and unproductive labor. What sets Smith's approach apart is that while conventionally the wage bill of unproductive workers is treated as a non-profit component of surplus value, Smith considers it part of the overhead cost of the capitalist system reflected in the constant capital portion of the products value.
Ch 9 covers the uneven character of capitalist development on a world scale. Most of the chapter is devoted to countering Arghiri Emmanuel's theory of unequal exchange as the primary mechanism of value-transfers from poor to rich countries.
Ch 10 is the empirical component of Smith's book in which he surveys a range of studies by fellow Marxist economists evaluating the Theory of the Rate of Profit to Fall and presents his own findings on the long run trends of the main Marxian ratios like the rate of profit, rate of surplus value, and the organic composition of capital in the US over the past 70 years. There is a long discussion of the proper measurement of Marx's value categories--how to delineate unproductive vs productive labor, do you price the capital stock at historic or current replacement costs, what components of national income do you include in the measure of surplus value vs variable capital, how to account for any distortions caused by fictitious capital, etc.
Ultimately Smith concludes the rate of profit has exhibited a secular tendency to fall due to a rising organic composition of capital and rising share of the wage bill earned by the non-productive sector. There were periods where counterdencies raised the rate of profit but these were anomalous and reflect the expansion of fictitious capital, setting the stage for the 2008 financial crisis and subsequent global slump.
Ch. 11 seeks to explore the practical implications of Marx's value theory with an eye to "delineating a programmatic orientation for the workers' movement to end capital" and to the issue of "socialist construction". It is primarily a defense of Trotsky's "transitional program" which asserts radical demands challenging the logic of the law of value and anticipates an eventual workers' government.
November 28, 2019
Fantastic! Smith actually gives a detailed and concise account of the differences between Marx and David Harvey’s interpretation of Marx.
Displaying 1 - 2 of 2 reviews