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Frontiers of Political Economy: The Dialectics Of Value, Prices And Exploitation In The Contemporary World Economy
Transcending the arid formalism of present-day economic theory, Frontiers of Political Economy develops a new and accessible perspective on the world economy. Guglielmo Carchedi identifies and analyses three key features of modern the rapidly increasing share of human labour needed for the advancement of science and technology rather than for the production of goods; the global, rather than national, nature of production, distribution and consumption; and the dominance of the oligopolies.
This analysis enables Carchedi to explore new theoretical from an original theory of mental and material labour to an investigation of the conditions under which mental labour produces value; from an assessment of the class structure of modern capitalism to an appraisal of the social content of science and technology; from an alternative account of crises, inflation and stagflation to a study of their relation to the destruction of value and to arms production. He also cast fresh light on a number of basic contemporary issues—including the present financial and monetary crisis—and surveys the most important recent controversies in language accessible to non-specialists.
Rigorous and wide-ranging, but written with great lucidity, Frontiers of Political Economy is an essential book for both specialists and students in economics and politics.
This analysis enables Carchedi to explore new theoretical from an original theory of mental and material labour to an investigation of the conditions under which mental labour produces value; from an assessment of the class structure of modern capitalism to an appraisal of the social content of science and technology; from an alternative account of crises, inflation and stagflation to a study of their relation to the destruction of value and to arms production. He also cast fresh light on a number of basic contemporary issues—including the present financial and monetary crisis—and surveys the most important recent controversies in language accessible to non-specialists.
Rigorous and wide-ranging, but written with great lucidity, Frontiers of Political Economy is an essential book for both specialists and students in economics and politics.
- GenresNonfictionEconomics
336 pages, Paperback
First published January 1, 1991
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July 17, 2021
Masterpiece that forces you to think through categories to their ultimate implications instead of bracketing them and starting new ones. Resonates a lot with John Smith, Kees Van der pijl, Radhika Desai and the bits of Mandel I've read.
After Marx's Theory of Crisis, I thought I had a pretty good grasp of the different ways one could interpret Capital, Vol. 1: A Critical Analysis of Capitalist Production to think about crisis, but it remained on a strictly "marxological" plane -- the discussion concerned what Marx and Engels thought of crisis, not how it related to the real world economy necessarily [read my review here for a brief overview]. It did make the case, however, that crisis is a recurring phenomenon that cuts the circulation of capital back down to size, not a fatal bottomless pit that the capitalist system edges ever closer to. Radhika Desai underlined the importance of effective demand in crisis prevention and bundled Marx and Keynes together nicely, but based this on a reading of, yet again, Capital; the explanation why demand faltered was subtly sidestepped, since, if not, it would point towards a deeper tendency underlying crisis.
Guglielmo Carchedi (together with Michael Roberts and their intellectual forefather Henryk Grossman) focuses on the tendency of the rate of profit to fall. Marxology aside (Clarke and Desai both make a convincing point that to both Marx and the early marxists regarded the TRPF as a marginal phenomenon), Carchedi provides the first comprehensive theory of crisis I've hitherto read, able to account for the diverse expressions of crisis on the basis of the same underlying dynamics.
It goes as follows.
1) Capital reproduces itself in cycles, which could be represented as different grooves on a wheel. Value determines how wide each groove is. Constant capital simply passes on its value, but variable capital, through exploitation, causes new grooves to branch off. If a groove as wide as the one the capital started with loops all the way around the wheel, ie its value gets realized in the market in exchange for money, the same cycle can continue; if not, this specific production process must be whittled down or scrapped altogether.
2) Competition stimulates capitals to invest in constant capital, increasing productivity per unit of labour (ie, variable capital), decreasing the value (ie labour content) of each commodity and allowing this more-than-average productive capital to sell its commodities above their value. These surplus-profits are siphoned away from its less productive competitors within the same branch. In other words, capitals lagging behind in OCC (organic composition of capital, or ratio of constant capital to variable) will tendentially realise a lower value than they individually produced, while the superproductive capitals will tendentially realise a higher value than they individually produced.
3) Presume a group of 10 capitals each investing 90 in constant capital and 10 in variable, producing 10 surplus value for a total individual value of 1100. 2 of these capitals invest in more productive tech, increasing the rate to 2x 95 in C and decreasing V to 2x 5 (producing 2x 5 S). The total individual value of this branch of capitals has decreased to 1090, lowering the rate of profit for 8 capitals but increasing it for 2. The less-competitive capitals lose out revenue to the superproductive ones even if prices remain the same; however, tendentially they will decrease as costs of production decrease.
4) This results in a general crisis of profitability in value terms; that is, as the total value in a given sector diminishes and it is distributed ever more unequally between superproductive and old capitals, individual capitals will fail to sell their commodities at their individual values/prices as they're forced to conform to the new standard set by the superproductive capitals, and in total the entire sector will realize less of its value as old production processes are realized at the rates of the new. The grooves in the wheels tendentially grow narrower, even as individual superproductive capitals broaden theirs. Since value is not tangible, however, this crisis is expressed as one of realization: commodities sold at the newest standards cannot realize their full old cost of production.
5) This crisis of realization can express itself as a crisis of profitability in money terms; ie, capital cannot profitably invest itself without investing an extra part in higher-OCC production, which however will aggravate the crisis for all less-competitive capitals. Money gets bottled up rather than flow in grooves that ever more turn out to be cul-de-sacs.
6a) Governments can postpone this crisis by intervening with extra money: by increasing purchasing power, enough demand can be simulated to buy all commodities at their old values, ie fully realise the sum of the value cost of the individual production processes. [Incidentally, this sounds a lot like the "underconsumptionist" theories of crisis]. This way, all grooves can circle around and the same production process can resume.
7a) There remains the question of the extra money circulating. If this is invested productively and more workers employed, the initial problem (a fall in value produced, 1100->1090) is resolved. However, this cannot go on forever, due to the physical limit of labourers/labouring time, but even before these limits are reached, near-full employment will increase the bargaining power of labour, increasing wages and hence decreasing surplus value and the pool out of which profit is distributed. This can be combated (from capital point of view) by investing in... you guessed it, a higher OCC, reducing the value produced and generating crises of realization.
6b) There is, however, a second way around: inflation. By gradually raising the prices of commodities (and increasing the supply of money so as to be able to purchase them), the old capitals can realize their full individual values (even as superproductive capitals realize extra-super-profits). Additionally, higher prices mean lower real wages and hence a higher rate of exploitation -- inflation is a stealth wage reduction. The profitability crisis is postponed...
7b) ... but inflation is not to accelerate too much either. If it does, trust in the currency is undermined and the economy itself breaks down. By reducing the supply of money, inflation can be curbed, but this in turn resuscitates the crisis of realization, decreasing profitability and bankrupting old capitals (eventually decreasing the rate of profit of the superproductive ones).
In other words, whichever way you turn it, once full employment is reached, anti-crisis measures are limited to managing inflation and cutting wages or increasing the working day. I'll get some sleep now and maybe return to this later.
After Marx's Theory of Crisis, I thought I had a pretty good grasp of the different ways one could interpret Capital, Vol. 1: A Critical Analysis of Capitalist Production to think about crisis, but it remained on a strictly "marxological" plane -- the discussion concerned what Marx and Engels thought of crisis, not how it related to the real world economy necessarily [read my review here for a brief overview]. It did make the case, however, that crisis is a recurring phenomenon that cuts the circulation of capital back down to size, not a fatal bottomless pit that the capitalist system edges ever closer to. Radhika Desai underlined the importance of effective demand in crisis prevention and bundled Marx and Keynes together nicely, but based this on a reading of, yet again, Capital; the explanation why demand faltered was subtly sidestepped, since, if not, it would point towards a deeper tendency underlying crisis.
Guglielmo Carchedi (together with Michael Roberts and their intellectual forefather Henryk Grossman) focuses on the tendency of the rate of profit to fall. Marxology aside (Clarke and Desai both make a convincing point that to both Marx and the early marxists regarded the TRPF as a marginal phenomenon), Carchedi provides the first comprehensive theory of crisis I've hitherto read, able to account for the diverse expressions of crisis on the basis of the same underlying dynamics.
It goes as follows.
1) Capital reproduces itself in cycles, which could be represented as different grooves on a wheel. Value determines how wide each groove is. Constant capital simply passes on its value, but variable capital, through exploitation, causes new grooves to branch off. If a groove as wide as the one the capital started with loops all the way around the wheel, ie its value gets realized in the market in exchange for money, the same cycle can continue; if not, this specific production process must be whittled down or scrapped altogether.
2) Competition stimulates capitals to invest in constant capital, increasing productivity per unit of labour (ie, variable capital), decreasing the value (ie labour content) of each commodity and allowing this more-than-average productive capital to sell its commodities above their value. These surplus-profits are siphoned away from its less productive competitors within the same branch. In other words, capitals lagging behind in OCC (organic composition of capital, or ratio of constant capital to variable) will tendentially realise a lower value than they individually produced, while the superproductive capitals will tendentially realise a higher value than they individually produced.
3) Presume a group of 10 capitals each investing 90 in constant capital and 10 in variable, producing 10 surplus value for a total individual value of 1100. 2 of these capitals invest in more productive tech, increasing the rate to 2x 95 in C and decreasing V to 2x 5 (producing 2x 5 S). The total individual value of this branch of capitals has decreased to 1090, lowering the rate of profit for 8 capitals but increasing it for 2. The less-competitive capitals lose out revenue to the superproductive ones even if prices remain the same; however, tendentially they will decrease as costs of production decrease.
4) This results in a general crisis of profitability in value terms; that is, as the total value in a given sector diminishes and it is distributed ever more unequally between superproductive and old capitals, individual capitals will fail to sell their commodities at their individual values/prices as they're forced to conform to the new standard set by the superproductive capitals, and in total the entire sector will realize less of its value as old production processes are realized at the rates of the new. The grooves in the wheels tendentially grow narrower, even as individual superproductive capitals broaden theirs. Since value is not tangible, however, this crisis is expressed as one of realization: commodities sold at the newest standards cannot realize their full old cost of production.
5) This crisis of realization can express itself as a crisis of profitability in money terms; ie, capital cannot profitably invest itself without investing an extra part in higher-OCC production, which however will aggravate the crisis for all less-competitive capitals. Money gets bottled up rather than flow in grooves that ever more turn out to be cul-de-sacs.
6a) Governments can postpone this crisis by intervening with extra money: by increasing purchasing power, enough demand can be simulated to buy all commodities at their old values, ie fully realise the sum of the value cost of the individual production processes. [Incidentally, this sounds a lot like the "underconsumptionist" theories of crisis]. This way, all grooves can circle around and the same production process can resume.
7a) There remains the question of the extra money circulating. If this is invested productively and more workers employed, the initial problem (a fall in value produced, 1100->1090) is resolved. However, this cannot go on forever, due to the physical limit of labourers/labouring time, but even before these limits are reached, near-full employment will increase the bargaining power of labour, increasing wages and hence decreasing surplus value and the pool out of which profit is distributed. This can be combated (from capital point of view) by investing in... you guessed it, a higher OCC, reducing the value produced and generating crises of realization.
6b) There is, however, a second way around: inflation. By gradually raising the prices of commodities (and increasing the supply of money so as to be able to purchase them), the old capitals can realize their full individual values (even as superproductive capitals realize extra-super-profits). Additionally, higher prices mean lower real wages and hence a higher rate of exploitation -- inflation is a stealth wage reduction. The profitability crisis is postponed...
7b) ... but inflation is not to accelerate too much either. If it does, trust in the currency is undermined and the economy itself breaks down. By reducing the supply of money, inflation can be curbed, but this in turn resuscitates the crisis of realization, decreasing profitability and bankrupting old capitals (eventually decreasing the rate of profit of the superproductive ones).
In other words, whichever way you turn it, once full employment is reached, anti-crisis measures are limited to managing inflation and cutting wages or increasing the working day. I'll get some sleep now and maybe return to this later.
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