Dr. Sweezy on Marx’s theories
When the late Lord Keynes wrote his General Theory of Employment Interest and Money it was hailed in certain quarters as a step towards Marx in its method of analysis in respect of the problems of present day society. His conclusions revealed, however, that so far as any realistic evaluation of the nature of contemporary Capitalism was concerned, he had taken two steps away from Marxism. Undoubtedly a renewed interest in Marx’s economic teachings has been stimulated by the recent development of Capitalism and certain economists going further than Keynes have attempted to reconcile their own academic teachings with the objective analysis of Capitalist Society carried out by Marx in the middle of the last century. The results we need hardly say have been barren and, at times, ludicrous. To students of Marx, therefore, any book which sets out to present his doctrines in the light of modern capitalist evolution is of interest. Dr. Sweezy, a Harvard economist, attempts this and in some respects succeeds in his book The Theory of Capitalist Development, although in others he overwhelmingly fails.
His opening chapter on the methodology of Marx is interesting; methodology being another name for scientific method or the mode of investigation by which systematised knowledge is acquired. This involves the great importance of the process of “abstraction” which is essential to scientific method. A process which, as Sweezy says, “constitutes the method of successive approximation, or moving from the more abstract to the more concrete in a step by step fashion.” To put it another way, it is a question of going from the simple to the complex. When analysing a complex situation one must at the outset eliminate anything that is extraneous and likely to complicate the issue. To use a scientific axiom: to understand is to omit. Thus to understand the essential it is necessary to exclude what is non-essential for the purpose of the immediate investigation. A single example will illustrate our meaning. By the process of abstraction we can recognise the identical elements denoted by the objects, man, horse, bird, fish, etc., and combine them into a general concept—”vertebrate.” Thus we have the perception of a common property or identity of structure, which exists independently of their differences. To use scientific terminology, in order to arrive at this underlying relationship which exists between these different forms of life, they must be treated as an isolated process. In passing to a more detailed account, however, of the actual physical structures peculiar to their kind, factors which were arbitrarily eliminated as non-essential for the purpose of the crucial investigation, must now enter into consideration. The broad classification, vertebrate, now comes to acquire a more qualified and limited connotation the more it is brought into conformity with the totality of the various species, concretely considered. The validity of the use of abstraction is then: does it assist in helping to discover the essential relationship connecting the phenomena under investigation? That is its ultimate justification.
The same scientific principle holds good in Marxism. Marx began his analysis of capitalism by treating it as an isolated process of simple commodity relationships between capitalist and worker in which complicating factors like differences in the organic composition of capital, foreign trade, export of capital, non-capitalist regions, were deliberately excluded. Volume I of Capital can then be said to be the first stage of abstraction. Of course in capitalist society, considered from its concrete totality, commodities do not sell at their value. That socially necessary labour —the basis of value—is not a constant but ever-changing quantity. That monopolistic practices and imperfect competition distort the pattern of exchange relations, and so on. All this might seem to imply that Marx was going away from the actual conditions prevailing in capitalism but as every scientific thinker knows, scientific analysis rigorously demands such a procedure if the set of events under analysis is to be provided with an efficient cause for their happening. When ignoramuses like Schumpeter and Alexander Gray, whose books on Marxism have been recently reviewed in these columns, scream with the rest of their academic brethren about the so-called contradictions between the various volumes of Marx, they fail to see that such apparent contradictions are an integral part of the scientific method. They imply no more than various stages of abstraction for the purpose of analysing more clearly the problems of the present social system and so arriving at a thorough and comprehensive knowledge of the social forces underlying it. This is our interpretation of the guts of Sweezy’s opening chapter. There is nothing original in this explanation of Marx’s economic methodology but the author elucidates it clearly and lucidly.
Chapter 2 on Value is also instructive, the author dealing with the more abstract side of Marx’s value principle the qualitative aspect. Undoubtedly the opening chapter of Marx’s Capital volume I, has been the least understood by his critics. It was here that Marx sought to demonstrate that any theory of value to be scientifically valid must discover a homogeneous quantity which although itself no? value was nevertheless able to provide the terms by which the exchange value of commodities could be expressed. It was here that Marx’s abstract undifferentiated labour or the expenditure under socially determined conditions of production provided the clue. Thus although labour is not value itself, it constitutes nevertheless the substance of value and so enables the different kinds of concrete labour—use values—to be reduced to this element common to them all. By being made qualitatively equal they can thus be rendered quantitatively comparable as exchange values. It was Marx’s separation of labour-power and labour—his major contribution to political economy—that enabled him to elucidate his theory of value much more cogently and comprehensively than his classical predecessors, Smith and Ricardo. Marx showed that labour-power was a commodity whose value was determined like all other commodities by the amount of social labour necessary for its production and reproduction. Labour, on the other hand, was a definite expenditure of human productive activity and thus capable of objective quantitative measurement and so as a value principle is independent of mere price fluctuations. The fact that abstract materialised labour takes a commodity form is the outcome of historically conditioned social relationship of commodity owners (including, of course, buyers and sellers of labour-power). Value itself is then a social quality, quantitatively expressed in exchange value. It can be seen then, the decisive and revolutionary break Marx made from the classical economists, Adam Smith and Ricardo, who merely treated value from its quantitative side—Exchange Value.
Sweezy also discusses Marx’s Law of the tendency of the falling rate of profit. The rate of profit must not be confused with the rate of surplus value. Thus if the organic composition of capital is £9,000 constant and £1,000 variable and the rate of exploitation of the workers employed by the variable capital is 100 per cent, then the surplus value produced by the workers will be £1,000. The capitalist, however, computes his profit on the total outlay of his capital, thus the rate of profit is “surplus” divided by “constant” plus “variable” which is 10 per cent. With every increase in the ratio of constant to variable capital the rate of profit falls even if the rate of exploitation remains the same. The author does not, it seems, accept the tendency of the rate of profit to fall due to the rising organic composition of capital but seeks to show that accumulation of capital with its increasing demand for labour-power tends to raise wages, and by so reducing the amount of surplus value bring about a fall in the rate of profit. Only when the capitalists strive through the introduction of labour-saving machinery to maintain the rate of profit or to raise its former level does the rising organic composition of capital come into the picture (page 105). It is true that as accumulation expands the supply of available labour power in the market will approach exhaustion point and the price of labour power will tend to rise, at least in certain industries and among certain workers. Fresh capital, meeting less and less reserves of cheap labour power will also tend to go increasingly into constant capital (labour saving machinery, etc.), and the organic composition of capital will be raised. Nevertheless this change is dictated by the relative scarcity of labour power and it does not follow that alteration in the organic composition of capital is necessarily offset by a proportional increase in the rate of exploitation. In this case a rising organic composition of capital is associated with a fall in the rate of profit. Moreover, as Marx points out,
“Two labourers, each working 12 hours daily, cannot produce the same mass of surplus-value as 24 labourers working only 2 hours even if they could live on air and did not have to work for themselves at all. In this respect the compensation of the reduction in the number of labourers by means of an intensification of exploitation has certain impassable limits. It may, for this reason, check the fall of the rate of profit but cannot prevent it entirely.” (Capital, Vol. 3, page 290, Kerr edition)
It is true that cheapening of the elements of constant capital, increase of relative surplus value and relative overpopulation are counteracting tendencies against the decline in the rate of profit. It has been often said that Marx’s analysis gives no clear indication of which set of tendencies would prevail (although Marx himself appeared inclined to the view that a fall in the rate of profit would be associated with continued capitalist expansion and increased technical changes.) Marx, however, was the last person to deduce a falling rate of profit in a vacuum. That would have been foreign to his own scientific and historical approach. For him the dynamics of capitalist society and the interaction of the totality of class relations and interests was the dominant feature in shaping economic trends. And there the matter must rest.
The author renders a good account of the general nature of capitalist crises although his own treatment on certain aspects of the matter must be read with circumspection. Sweezy enumerates two types of crises, one associated with the falling rate of profit and the other that he terms realisation crises, i.e., the inability of the capitalist to sell commodities at profitable prices. This last type of crisis emphasises what Sweezy calls the underconsumptionist tendencies inherent in capitalism. This “underconsumptionist ” approach seems, however, an unsatisfactory formulation of the treatment of crises. It is true that under the stimulus of capitalist accumulation the productive forces will expand and this will tend to higher wages. Nevertheless wage levels are always in the final analysis regulated by the desire of the capitalist class to maintain the customary rate of profit on their capital outlay. Moreover, as the result of the increased productivity of the worker arising out of the expansion of the productive forces, the ratio between the value of his labour power and the value of the wealth he produces is further increased, higher wages notwithstanding. His own share of the total product suffers then a relative decline. With a greater amount of surplus value in the hands of the capitalists there is a tendency for increasing investments in the means of production. Thus the expanding forces of production come into conflict with the limited consuming power based on the antagonistic character of class income distribution inherent in capitalism. To call this underconsumption is, however, to strain the meaning of the term in popular economic usage. Again this underconsumptionist aspect is merely an inevitable corollary of a more fundamental feature that is the basic conflict between the powers of production and the productive relations of capitalist society. As Marx points out,
“It is not a fact that too much wealth is produced. But it is true that there is periodical over-production of wealth in its capitalist and self-contradictory form. . . The capitalist mode of production, for this reason, meets with barriers at a certain scale of production which would be inadequate under different conditions. It comes to a standstill at a point determined by the production and realisation of profit not by the satisfaction of social needs.” (Capital, Vol. 3, page 303, Kerr edition).
Or, again, “the real barrier of capitalist production is capital itself.” (Page 293, same work).
Again Sweezy’s view that crises arise due to a shortage of labour-power which forces wages up and consequently causes the rate of profit to decline is hardly Marx’s view of the matter. In Vol. I of Capital on The General Law of Capitalist Accumulation Marx repeatedly stresses the fact that demand for labour-power does not keep step with the expansion of capital. In other words owing to the rising organic composition of capital the variable portion does not, as a means of the employment of wage-labour, keep pace with increases in the working population. Marx, of course, does not deny that the possibility of crises can arise from “labour shortage,” especially in early capitalism (page 700, Capital, Vol. I, Modern Library edition). Just as the present shortage of workers today carries distinct crisis implications. Nevertheless the appearance and growth of a surplus industrial army he held was the chief feature in the general law of capitalist accumulation. To sum up, Marx’s writings do not indicate two separate features of crises but rather that the possibilities of crises and crises themselves are indissolubly linked with the basic contradictions inherent in present day class society It is these contradictions which give to crisis under capitalism its familiar periodic character.
The chapter which criticises breakdown theories is excellent. The author shows that no such theory of final capitalist catastrophe can be logically deduced from Marx’s writings. Rosa Luxemburg, Otto Bauer and Grossman are all acutely criticised for their formulation of breakdown theories. Our own pamphlet, Why Capitalism Will Not Collapse (written during the last crisis) was a valuable contribution in showing why crises as such do not bring an end to capitalism, in answer to the spokesmen of various political parties, Communist Party included, who were noisily proclaiming the 1931 slump as the beginning of the end of the present economy.
For reasons of space we cannot adequately deal with Sweezy’s mathematical treatment of the transformation of value into prices of production for the purpose of maintaining equilibrium conditions between industries that produce means of production and those that produce means of consumption.
But surely the essence of the matter lies in the historical treatment of the development from simple commodity production to a developed capitalist economy. In simple commodity production constant capital plays little part and is, therefore, relatively unimportant. Here the law of value is directly controlling the exchange relationships. In modern capitalism different organic compositions of capitals bulk large. Seeing, however, that only the variable portion (the part employing wage labour) produces surplus value then different units of capital according to their organic composition will produce different quantities of surplus value and consequently different rates of profit. The capitalist, however, is indifferent to the ratio of means of production to variable capital and seeks the customary rate of profit on his total capital outlay. How this is brought about is due to the competition for spheres of investment in different industries, capital leaving those industries whose rate of profit is low and invading and expanding those industries where the rate of profit is high and where, as the result of this expansion, prices fall and with them the rate of profit. By this incessant competition for various spheres of profitable investment an equalisation of profit or an average rate of profit is brought about. Thus the price at which capitalists sell their goods oscillates not round their value but the price of production, i.e., the cost of production plus the average rate of profit. Nevertheless the sum of the prices of production at which commodities are produced equals their total values. Again this process does not alter the sum total of surplus value produced b the workers, the only point is its distribution according to the requirements of a profit motive economy which necessitates an equal share on a given expenditure of capital. Under developed capitalism the law of value is indirectly controlling exchange relationships, nevertheless, it must constitute the starting point of investigation for elucidating the phenomena of production prices peculiar to capitalism. This modification of value into production prices is then the result of a long drawn-out historical process and a mathematical treatment of it from the unhistorical point of view of equilibrium conditions has little significance, as Sweezy admits (page 128), “the law of value can he discovered and analysed in principle by the use of either value calculation or price calculation.”
His last chapter, “The Decline of World Capitalism” is unadulterated rubbish. He mistakenly holds the view that the world is split into two separate social systems, i.e., Socialism in Russia and Capitalism else¬ where whose fount is the U.S.A. He further holds that the social system of Russia coupled with its growth elsewhere will exercise a disintegrating effect on capitalism. Great Britain and Western Europe — presumably on the Soviet model—might go socialist at the end of the war (this book being first published in America in 1942). Bit by bit Socialism would undermine the stability and structure of Capitalism in perhaps a peaceful fashion. Thus the Fabian principle of peaceful permeation is elevated to international status. Apart from the theoretical falsification of the real issue Sweezy’s idea of “a peaceful era” following the war has been hopelessly falsified by the inter-imperialist rivalries of the great capitalist powers, U.S.A., Britain, France and Russia.
Nevertheless sections of the book provide a useful source for the better understanding of the theoretical foundations of Marxism and its application to the social problems of our time.
E.W.