Marx’s Critique of Political Economy Deepankar Basu
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he global economic crisis triggered by the United States financial crisis of 2007 has revived political movements critical of aspects of the capitalist system like income and wealth inequality, unjust burdens of housing and student debt, racial oppression and discrimination of immigrants, unequal trade and investment treaties, and policies of economic austerity. Parallel to the revival of such political movements has been a growing interest—among activists, scholars and the general public—in currents of critical social and political thought that can make sense of such issues and offer alternatives to the unjust and exploitative capitalist–imperialist system. In this context the publication of an English translation of Michael Heinrich’s An Introduction to the Three Volumes of Karl Marx’s Capital—the original book by Heinrich is written in German and has been translated into English by Alexander Locascio—in 2012 by the Monthly Review Press becomes an important event. There are at least two reasons for that. First, Marxism, and in particular the work of Marx, offers the most systematic understanding and critique of capitalism. It can potentially provide an overarching framework for understanding, and linking, the various issue-based movements that have emerged in the wake of the global financial and economic crisis. A thorough and lucid introduction to Marx’s work on political economy can be a valuable resource for political activists in the current conjuncture. Second, Heinrich is a significant scholar of Marx’s work and Marxism. He teaches economics in Berlin, writes (mostly) in German, is the managing editor of PROKLA: Zeitschrift für kritische Sozialwissenschaft (journal for critical social sciences), and his interventions have been extremely influential in debates on Marxism in Germany. The translation of his work will Economic & Political Weekly
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review ARTICLE An Introduction to the Three Volumes of Karl Marx’s Capital by Michael Heinrich (translated by Alexander Locascio), New Delhi: Aakar Books for South Asia, 2013; pp 240, Rs 295, paperback.
be of great interest all over the Englishspeaking world. To those who follow debates in Marxism, Heinrich’s name will undoubtedly ring a bell. His 2013 Monthly Review article, “Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s” (translated from the German by Alexander Locascio), had attracted lot of attention and generated interesting debates among Marxists in the English language press. Introducing the 2013 article, the editors of the Monthly Review recommended Heinrich’s work for “exemplary clarity,” a characterisation with which I wholly concur. In addition to depth and clarity, what I find most noteworthy about the book under review is that it offers a systematic introduction to all the three volumes of Capital. Many commentary pieces—both articles and books—on Marx’s critique of political economy refer to Volume I. References to Volumes II and III are, if at all, unsystematic and fragmentary. As a result, they offer only an incomplete picture of Marx’s work. By engaging with all the three volumes of Capital in a systematic manner, Heinrich presents a comprehensive account of Marx’s work on political economy. The organisation of the 12 chapters of the book follows, in the main, the logic of the three volumes of Capital. Flanked by two introductory and two concluding chapters, the main content of the book, dealing with the three volumes of Capital, is presented in Chapters 3 to 10; Chapters 3–5, Chapter 6, and Chapters 7–10 discuss Volume I, II, and III, respectively. vol l no 39
The first two chapters are introductory in the sense that they set the scene, clear the ground and locate the book within the larger Marxist corpus. By way of conclusion, Chapters 11 and 12 offer comments on theories of the state, and socialism and communism, respectively. ‘New Reading’ of Marx Marx’s critique of political economy is primarily concerned about the economic structures of capitalism. So Heinrich begins by clarifying our understanding of capitalism, which shares features with, but is also unlike pre-capitalist societies. It is like pre-capitalist societies in that it is also a class society and rests on class domination and exploitation. But, it is different from pre-capitalist societies— and this is key—because the “form” of class domination and exploitation is different. Focusing on forms of exploitation allows us to identify two defining features of capitalism that mark it off from all precapitalist societies: (a) unlike pre-capitalist societies, exploitation in capitalism does not rest on a relationship of personal domination and dependency; and (b) unlike pre-capitalist societies, the aim of production in capitalism is the valorisation of capital, and not the increase of consumption of the ruling class. Heinrich offers a provisional definition of capital right away: capital is a sum of value whose goal is to be valorised, that is, to generate a surplus and increment itself quantitatively. History offers three forms of capital: interestbearing capital, which generates the surplus as interest; merchant capital, which generates the surplus as the difference between a high-selling and low purchase price; and finally, industrial capital, which takes control of the process of production to generate a surplus. The key to understanding class exploitation in capitalism will be to understand the operation of industrial capital, and 25
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for that Marx will develop his theory of value. Before we turn to that, it will be useful to highlight two important issues from Chapters 1 and 2. The first issue concerns the location of Heinrich’s work within a tradition that has come to be identified with a “new reading” of Marx. In his attempt to counter the growing but problematic influence of Herr Eugen Dühring in the late 19th century German social democratic circles, Engels initiated a tradition that Heinrich calls “world view Marxism.” This was continued in the work of Karl Kautsky, and later incorporated within the framework of Marxism–Leninism. This world view Marxism consisted of a mishmash of schematic conceptions: “a crudely knitted materialism, a bourgeois belief in progress, and a few strongly simplified elements of Hegelian philosophy and modular pieces of Marxian terminology combined into simple formulas and explanations of the world” (p 24). Two important characteristics of world view Marxism were crude economism (the reduction of ideology and politics to a direct and conscious transmission of economic interests), and a
strong historical determinism (the end of capitalism and the triumph of proletarian revolution as inevitable). Heinrich’s work is located within an alternative tradition that developed from a “Marxist” critique of world view Marxism. Based on the work of scholar– activists like Karl Korsch, Georg Lukacs, Antonio Gramsci, and members of the Frankfurt School, this stream was retrospectively aggregated under the label “Western Marxism.” While the foci of early work in this tradition were philosophy and history, the worldwide mass movements of the 1960s and 1970s generated a wide-ranging interest in Marx’s political economy. Building on Louis Althusser and Etienne Balibar’s rereading of Capital, Roman Rosdolsky’s brilliant commentary on the Grundrisse, and the work of (West) German scholars HansGeorg Backhaus and Helmut Reichelt, this strand developed a “new reading” of Marx’s critique of political economy. The second issue I wish to highlight by way of introduction relates to the uniqueness of this new reading of Marx’s political economy. Probably the best way to understand this is to contrast “Marxist
political economy,” a component of traditional/world view Marxism, with “Marx’s critique of political economy,” an important part of the “new reading” of Marx. How are the two different? Within world view Marxism, Marx had taken over key categories, if not the whole, of the labour theory of value from classical political economists like Adam Smith and David Ricardo, and added to that an explanation of exploitation and the crisis-prone nature of capitalism. Thus, according to this view, “there are no fundamental categorical differences between Marxist political economy and classical political economy, only differences concerning the conclusions of both theories” (p 33). According to the “new reading of Marx” that Heinrich subscribes to, this is a faulty understanding of what Marx was attempting to do in Capital. This is highlighted by the subtitle of the book: “A Critique of Political Economy.” Marx was not trying to provide an alternative political economy, but wanted to “criticize the categorical presuppositions” of political economy. This is the key difference and can be emphasised by noting
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that Marx was not “predominantly criticizing the conclusions of political economy, but rather the manner in which it poses questions” (p 34). Criticising the manner in which questions are posed means attempting to bring to light the axioms that were accepted by political economy as self-evident; for instance, the assumption of Smith (which is still with us today) that human beings are endowed with a seemingly natural and eternal “propensity to truck, barter, and exchange.” Hence, the “critique” in the critique of political economy “aims to break down the theoretical field (meaning self-evident views and spontaneously arising notions) to which the categories of political economy owe their apparent plausibility” (p 35). Without such an intellectual exercise, it would not have been possible for Marx to understand that the source of naturalisation and reification of social relationships— naturalisation means that social relationships are understood as quasi-natural conditions, and reification means that social relationships are perceived as characteristics of things—in capitalism lies not in the errors of individual economists, but in “an image of reality that develops independently as a result of the everyday practice of the members of bourgeois society” (p 34). This is a very interesting and important point, but to my mind, it does not nullify the conclusion that Marx’s critique of political economy had also developed an alternative political economy. For, as Heinrich himself emphasises, Marx’s “intent with Capital was not simply to write a critique of bourgeois science and bourgeois consciousness, but also to formulate a critique of bourgeois social relations” (p 35). Of course, Marx’s critique of bourgeois social relations was not a moral critique. Rather, it rested on demonstrating the immanent destructive potential of capitalism, in particular, the destructive potential in relation to the original sources of all wealth, labour and nature. But, such a critique could not be advanced merely by assertion; it had to be demonstrated using logic and evidence. Such a demonstration was only possible within the framework of an alternative political economy. Economic & Political Weekly
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And, Marx had developed this alternative political economy precisely through his critique of “bourgeois science and bourgeois consciousness.” The Three Volumes of Capital To my mind, the most important and interesting parts of the book run from Chapters 3 to 10, where Heinrich presents his interpretation of Marx’s critique of political economy by elaborating a systematic presentation of the three volumes of Capital. Volumes I and II of Capital deal, respectively, with the processes of production and circulation of capital. The analyses in both are located at a high level of abstraction—at the level R Rosdolsky (1968) terms “capital in general”—because they abstract from two important features of really-existing capitalism: competition between capitals, and credit. Volume III deals with these two features (in addition to analysing the distribution of surplus value into profit, interest and rent, and the phenomenon of capitalist crises), and thus brings Marx’s analysis closer to empirically observed capitalism. Heinrich follows Marx’s scheme of presentation and offers a detailed and careful presentation of Marx’s ideas. In Chapters 3–5, he covers Volume I of Capital and develops, in turn, the labour theory of value (what he calls the monetary theory of value), the theory of capital and surplus value (with a nice discussion of the exploitation of labour power), and the theory of capitalist production (with illuminating discussions of absolute and relative surplus value, technical change, the reserve army of labour, and the destructive potential of capitalist production). In Chapter 6, he discusses Volume II of Capital by analysing the circulation of capital (with very useful discussions, of fixed and circulating capital, and the reproduction schemes). In Chapters 7–10, he turns to Volume III, and discusses, in turn, competition and the average rage of profit, credit and fictitious capital (with a very nice discussion of credit money), capitalist crisis, and the fetishism of social relations. In the short space allowed for a book review, it is impossible to go over all the interesting details that have been worked out with such care and rigour in these chapters. vol l no 39
So, I will just try to highlight some of the interesting points in his interpretation. Abstract Labour and Value The first interesting point in Heinrich’s interpretation relates to the labour theory of value. To appreciate this point, let me briefly recapitulate some basic ideas of political economy. A commodity is a good or service that is produced for exchange. It has two aspects: it is a use value in that it is useful, and it has exchange value in that it can be exchanged for other commodities in a definite ratio. The aspect of exchangeability of commodities can be referred to as value. The two aspects of commodities have corresponding aspects in the labour that produces them. Concrete labour corresponds to the use value aspect, and abstract labour corresponds to the aspect of value. Abstract labour is human labour in general, that is, human labour when we have abstracted from its concrete form. Abstract labour is the substance of value (of commodities) and the (quantitative) measure of the value of a commodity is the amount of socially necessary abstract labour required for its production (and reproduction). Thus, value (of a commodity) can be measured in units of labour time as long as the “socially necessary” part of the definition is estimated properly, that is, by taking account of two facts: (a) the given level of technology and average intensity of labour involved in the production of any commodity; and (b) reduction of skilled labour to a certain multiple of unskilled labour. Heinrich disagrees with this standard understanding because it is a quasiphysical, “substantialist” interpretation of value. For him, value should not be understood as a substance contained in individual commodities. Value only emerges in the process of exchange when individual concrete labours are socially validated. For him, abstract labour is the relation of social validation that occurs in the process of exchange, when privately expended concrete labour is reckoned as valueconstituting abstract labour. And, this reckoning takes place through three “reductions:” the reduction of individual labour time to socially necessary labour time by relating it to the average 27
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conditions of production, that is, technology, intensity of labour, etc; the reduction of labour time that was in excess of the existing level of monetary social demand; and, the reduction of skilled to multiples of unskilled labour. Heinrich highlights this key role of exchange (and social validation) in the conception of abstract labour and value by calling his theory a “monetary” theory of value. The emphasis on exchange in the definition of abstract labour and value is not novel. Such an interpretation of Marx’s value theory goes back at least to the work of the Russian political economist, I I Rubin (1928/1973). The fact that the process of exchange is the mechanism through which the “real abstraction” of concrete labour takes place in capitalism has also been emphasised by P M Sweezy (1942), D K Foley (1986), and many others. What is perhaps novel in Heinrich—but common with Rubin—is the insistence that value is not contained within individual commodities prior to exchange. This seems to go against Marx’s idea that value is created by the expenditure of labour. Of course, Heinrich is well aware of this issue. He tries to resolve it by insisting
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that the “magnitude of value of a commodity is not simply a relationship between the individual labour of the producer and the product (which is what the ‘substantialist’ conception of value amounts to), but rather a relationship between the individual labour of producers and the total labour of society” (p 55). This is clearly an echo of Rubin, who had also tried to address this issue by offering a convoluted, and unconvincing, argument about how circulation was merely a moment of production (1928/1973). Moreover, if viewed quantitatively, the “relationship between the individual labour of producers and the total labour of society” (p 55) is a ratio. Thus, if we take this assertion seriously, we would be left with a theory of the magnitude of value only as a relative quantity. That seems unsatisfactory not only on its own terms, but also because it does not clarify the issue of whether value is created in production. In many places in the text, Heinrich also displays ambiguity on this issue. He often notes that one can “estimate” the value of a commodity prior to exchange, coming close to a “substantialist” interpretation.
While discussing the capitalist production process (Chapter 5), he uses examples where the value of a mass of commodities is expressed as the sum of the value of constant capital, variable capital and surplus value (pp 101, 106). Note that this is a discussion of the process of “production;” there is no assumption of whether the product has been sold. How is one justified, then, in defining the value of a commodity even before it has been sold? Another problematic implication of according too much weight to the process of exchange in the determination of the magnitude of value (of commodities) seems to be the inability to distinguish between the production and realisation of value (and surplus value). If the process of exchange is the crucial process of social validation that determined the magnitude of value-constituting abstract labour, how do we account for situations where value (and surplus value) is produced but not realised because the commodity in question could not be sold (perhaps due to insufficient aggregate demand)? If the possibility of the gap between production and realisation of value (and surplus value) is ruled out a
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priori, it might also rule out crises of realisation. This is clearly a major problem. One can be a “substantialist” and yet avoid a naturalistic, physiological interpretation of value. This can be achieved by insisting that value is a “social substance” contained by commodities in a commodity production system. This means that the notion of abstract labour and value are only applicable to a commodity producing system, that is, a system where production is carried out by private, independent producers, and mediated through exchange (of which capitalism is a special case). This delimitation of the domain of applicability of the concepts ensures the “social” part of the social substance. The “substance” part can then be identified with the magnitude of socially necessary labour time, with the latter defined as “concrete labour accounting for technology, skill and intensity” (the reductions that Heinrich refers to, other than the role of demand). Such an approach would avoid many of the awkward points indicated above. Values into Prices of Production The second interesting point is his discussion of the average rate of profit and the so-called transformation problem. In Volume I, Marx analysed capital in general by abstracting from the empirical reality of many and competing capitals. That is why it was valid in Volume I to work with the assumption that commodities exchanged according to their values, that is, prices were proportional to values. In Volume III, the analysis moves to a lower level of abstraction, and Marx analyses a setting marked by competition between capitals. In such a setting, capitals will move between sectors in search of higher profit, leading to the emergence of an average rate of profit. In the long run, prices of commodities will gravitate to levels that ensure the same average rate of profit to capitals engaged in every sector. These long-run prices of commodities, known as “prices of production” or “production prices,” are in general not proportional to their values (other than in the extremely improbable case of all commodities being produced my methods that involve the exact same ratios of labour and non-labour inputs). Economic & Political Weekly
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Thus, when analysing “many capitals,” we are confronted with the question of the relationship of prices of production to values. A large amount of literature, starting with Marx himself (in Chapter 9, Volume III of Capital) and running for more than a century, has attempted to address this issue under the label of the “transformation problem,” that is, the problem of the transformation (relationship) of values into (to) prices of production. Heinrich does not deal with this important issue in the book, but, instead, refers the reader to his 1999 work, The Science of Value: The Critique of Political Economy between Scientific Revolution and Classical Tradition. Since this book is not yet unavailable in English, I could not read the details of his argument, but was nonetheless intrigued by his conclusion: But within the framework of a monetary theory of value, there can be no point to any sort of procedure for calculating production prices from values. Rather, the ‘transformation of values into prices of production’ represents a conceptual advancement of the formdetermination of the commodity (p 148).
One hopes Heinrich would have elaborated on this in the book. Falling Rate of Profit and Crisis There are many other interesting points that I shall only be able to point towards. His discussion of the law of the tendency for the average rate of profit to fall is very enlightening. For many Marxists, this “law” took enormous importance because of its role in the explanation of capitalist crises. But, as Heinrich argues, quite rightly in my opinion, neither Marx nor any other later theorist has ever demonstrated the necessity of this law. His discussion of capitalist crisis is equally illuminating. He argues convincingly that neither the falling rate of profit, nor underconsumptionism provide adequate theories of crisis. The former cannot be a theory of crisis because there is no “law” for the average rate of profit to always fall. Moreover, not all instances of capitalist crisis have been preceded by pronounced profit rate declines, the crisis of the 1930 and the current crisis being important non-profitability crises. On the other hand, theories of vol l no 39
underconsumptionism rest on a simple conceptual fallacy. Marx’s analysis does suggest that the source of capitalist crisis lies in the contradiction between the unlimited extension of production and the limited ability to consume. Here the “ability to consume” refers to social consumption, which is composed of workers’ consumption, capitalist consumption and gross investment. Underconsumptionism makes the error of reducing social consumption to workers’ consumption, and then arguing that restricted purchasing power of workers leads to realisation crises. But, one can see that once we take the other components of social consumption into account, the underconsumptionist argument falls flat. Conclusions I would like to end by pointing out that one of the greatest strengths of Heinrich’s book is its non-dogmatic orientation. Reading the book, one realises that Heinrich is not out to “prove” that Marx was right, a pointless exercise from many angles. He is trying to introduce Marx’s critique of political economy to interested readers in an intelligent and critical manner. At many points in the book, he highlights his disagreement with Marx, elaborates what he thinks are gaps in Marx’s arguments, and provides alternative formulations. This highlights the living Marxist tradition and places Heinrich’s book alongside the classics of Marxist political economy like Rubin (1928/1973), Sweezy (1942), Rosdolsky (1968) and Foley (1986). Thus, despite my disagreements, I would recommend the book most enthusiastically to activists, scholars and the general public. Deepankar Basu (
[email protected]) teaches at the Department of Economics, University of Massachusetts Amherst, United States.
References Foley, D K (1986): Understanding Capital: Marx’s Economic Theory, Cambridge, MA: Harvard University Press. Rosdolsky, R (1968): The Making of Marx’s ‘Capital,’ London: Pluto Press. Rubin, I I (1928/1973): Essays on Marx’s Theory of Value, New York: Black-Rose Books. Sweezy, P M (1942): The Theory of Capitalist Development: Principles of Marxian Political Economy, New York: Monthly Review Press.
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