July 21, 2009

Vol II, Part Three via Secondary Literature

Since I had a hard time trying to tease out the main points from these last two sections, I’ve decided to turn to secondary literature in order to assist in contextualizing or highlighting what is at stake in Part Three. As Andy’s post below does an excellent job of working through both chapters, I will focus more on the secondary literature here – pointing to themes that intersect with issues raised by Andy. Now, the main point of contention in the secondary literature can be reduced to, I believe, a debate over if the principle of “equilibrium” drives Marx’s division of the total social capital in to two departments. At a superficial level it appears that Marx is developing his own specific reproduction schema from which to counter the fallacies of political economy - in other words, we are looking at one level (though not comprehensive) of how the capitalist economy reproduces itself and what necessary conditions need to be met for accumulation/expansion to occur – i.e., a balance between the use-values AND exchange-values between one sector that produces means of production and another sector that produces consumption goods (Dept I and II). The schema, embedded with what Harvey calls ‘restrictive assumptions’, does indicate a balance, and thus the question becomes how we situate this within the larger conceptual apparatus and analytical dynamic of Capital? Some will extrapolate and extend the modular form of these chapters into quantifiable, algebraic formulas, and temporarily side step the question of contradiction or crises (or even a dialectic) by displacing these outside of the operations of the balance between departments. In other words, these two chapters are taken up as providing a schematic model upon which to develop a fuller economic model of the capitalist economy.

Now, on one level, I think this is in fact what is going on here: that Marx had to necessarily deal with circulation and exchange at the level of social capital, and that within capitalism’s dynamic an internal basis of reproduction (equilibrium) had to be necessarily presumed within the total social capital in order to theorize accumulation/expansion. But if we fetishize these last two chapters, we are led into the realm of pure economic theory (of circulation only) – endlessly trying to quantify reproduction and locate the co-efficient that indicates a systemic crisis at the level of exchange. Harvey provides a corrective to this tendency, as he both (1) notes the ‘restrictive assumptions’ in order for balance to be posited within the moment of circulation, and; (2) how these chapters sit within Marx’s larger project. I will finish this post with a discussion of some of the points Harvey raises, but first, let me start with Moseley, since his discussion of money capital is important (tying this to Andy’s discussion below of hoards) – and more importantly it opens into a larger question of where one locates crisis in regards to the Dept. I/II schema.

Fred Moseley – Schemes of the reproduction of Money Capital
In his chapter “Marx’s Reproduction Schemes and Smith’s Dogma” in The Circulation of Capital: Essays on Volume Two of Marx’s Capital, (New York:1998) Moseley argues that Part III of Vol. II is specifically targeted to debunking the fallacy that Smith posits – that the “ price of the total social product is entirely resolved into revenue” – i.e., wages plus profit and rent. Moseley works through this by arguing that Marx’s schema between Dept. I and II is not of physical quantities of inputs and outputs (resources, means of production, etc) but rather are concerned with the “reproduction of quantities of money capital. (Moseley, p. 160)” This moves beyond any material or technological conditions of production and returns the total operation of multiple industrial cycles to the question of the accumulation (augmentation) of capital itself (and the money form of capital – Vol. I). The historically specific concept of money (i.e., within the categorical matrix and dynamics of capitalism) – as M-C-M’ – is contrasted to revenue which is used to purchase commodities for individual consumption; i.e., ‘revenue’ – categorically – does not entail a specific function (prior, operative, anticipated) of augmentation that is specific to capitalist accumulation.

At first I thought Moseley was pushing the money emphasis too far, but upon reflection this section – more than any other – emphasizes the necessary function of money; as potential capital in a hoard, of capital advanced (indicating capital ‘set-free’ into credit and other financial services), consolidated (joint-stock), as well as the continual lubrication of the process as variations in turnover times do not all converge on one reflux point (think Part II, Vol. II). In essence, the difficulty of reproduction, a collective process of multiple turnover rates internal and between a wide-variety of capitals, is assisted by the function of money and its fluid forms. Moseley highlights that one of the main assumptions of this section – one that is fundamental for this schema to operate – is that the difficulties in the discontinuous reinvestment in the replacement of means of production (Dept I) is answered by hoards built up by capitals in other sectors. Following Andy’s emphasis below, for Moseley, Marx is not emphasizing equilibrium per se, but rather is locating the methods through which the system overcomes its own inherent tendencies towards disequilibria.

One aspect that Moseley does not cover in this chapter (though one that necessarily under-girds his analysis of the magnitude of money) is the functions specific to the money form (emphasis on form – returning to Vol. I). In this regard I want to point to one section from Part III that makes the distinction clear and what it then allows to be understood. Marx argues that:

“the variable capital functions as capital in the hands of the capitalist and as revenue in the hands of the wage-labourer…The variable capital first exists in the hands of the capitalist as money capital; it functions as money capital in so far as he buys labour-power with it. As long as it persists in his hands in the money form, it is nothing more than given value existing in that form….(Vol. II, p. 514)”

Further down on the same page Marx argues that:

the money that functions firstly as the money form of variable capital for the capitalist now functions in the hands of the worker as the money form of his wage which he converts into means of subsistence; i.e. as the money form of the revenue that he receives from the ever repeated sale of his labour-power….We have here the simple fact that the money of the buyer, here the capitalist, passes from his hands into those of the seller, in this case the seller of labour-power, the worker. It is not the variable capital that functions twice over, as capital for the capitalist and as revenue for the worker, but simply the same money, which exists first in the hands of the capitalist as the money form of his variable capital, hence as potential variable capital, and which, once the capitalist has converted it into labour-power, serves in the hands of the worker as the equivalent for the labour-power he has sold. However, the fact that the same money serves one purpose in the hands of the seller and another in the hands of the buyer is simply a phenomenon inherent in all purchases and sales of commodities. (Vol II, p. 515)”

Returning to Moseley’s main theme – that Marx’s intention is a critique of Smith – Moseley argues that to Marx, “if Smith’s dogma were true and the total price of the total commodity product were resolved entirely into revenue, then the constant-capital consumed could not be recovered, from which it follows that the physical means of production could not be repurchased and production could not continue on the same scale. (Moseley, p. 172)” In other words, each cycle would be starting from scratch – non-accumulation (remember Marx’s critique of Smith wherein Smith had to sneak in the ‘fourth’ category of ‘capital’ in order to set his three-forms of revenue into motion). Thus, as Moseley argues, Marx’s model provides a standpoint (a counter-economic model) to flesh out the inconsistencies of the-then contemporary political economy. But has this schema proven useful in locating a more general systemic or social contradiction?

This all hinges on whether this is a schema of equilibrium – since taken in isolation, it does appear to be so (even in the chapter of accumulation). All secondary literature that I read were in unison, arguing that this is most definitely not positing equilibrium (such as how the later Neo-Keynesians would see these models as indicating equilibrium – via effective or aggregate demand). However, with the exception of Harvey, most did not try to think through social contradiction into, or along with, the Dept I/II model. Duncan Foley (1986), in his chapter on these schema, excuses social reproduction and focuses solely on the intricacies of Marx’s Dept I/II model, wherein the mathematical equations he produces seems to suggest that capitalism, though faced with crises of aggregate demand, appears to be able to sustain itself and expand. In other words, crisis needs to be found elsewhere. Fine and Saad-Filho (1988) mark a division between social reproduction and capitalist reproduction – noting contradictions in both. In the latter, they note that there are “uncertainties” that seem to point to disequilibrium in capitalist reproduction/accumulation – (1) uncertainty about the ability to extract surplus value from labour (this uncertainty obviously falls outside of the scope of Part III as we are concerned here with circulation/exchange between departments), (2) how much surplus value can be realized (actualized in the market), (3) competition leads to ever-increasing technical changes of production, (4) finance/credit allows for the overexpansion of accumulation, and (5) trading in money leading to speculation, etc. But we don’t find a direct engagement with what the balance between Dept I/II tells us about a more general crisis, one that ostensibly would be visible primarily in social contradictions.

David Harvey, Limits to Capital:
Harvey (1982), however, is much more sensitive to the how the Dept I/II schema sits within Marx’s overall project as well as the necessary assumptions that automatically foreclose a much more complicated approach to the overall social capital. In regards to the latter, the main assumption is that commodities are exchanged at their values, which entails ignoring the effects of capitalist competition (leading to innovation, higher rate of exploitation, technological innovation, etc) and that commodities are sold at prices of production and not their value (this also includes labour-power). Additionally, fluctuations in the money/credit market are also set aside. More importantly however, is that Harvey emphasizes that this schema points to crises that obtain from the SOCIAL relations of capitalism:

[Marx] wants to disentangle the contradictions embodied in such a process [of aggregate social capital]. So he fashions a device that allows him to identify the proportionate growth rates in the different departments, in production quantities, in value exchanges and in employment which, if they are not fulfilled, will result in crises. The reason for taking so much trouble to define equilibrium is, as always, to be better able to understand why departures from that condition are inevitable under the social relations of capitalism. (Harvey, p.169-170)”

Thus the necessary assumptions (what Harvey calls ‘restrictive’) in the economic models displaces the contradictions that appear in the social – in other words, Harvey emphasizes the social relations of production in relation (or delimitation) to this schema. He notes multiple discrepancies between what this schema indicates and Marx’s more general project:

1) The necessary balances (reproduction) of inputs/outputs run counter to seeing capital as a continuous process in motion. Harvey argues:
By modeling accumulation in highly simplified stock terms, Marx gains greatly in analytical tractability. But the price he pays is a departure from the very basic but much more difficult flow conception which he sought to hammer out in preceding chapters, particularly those dealing with circulation of variable capital and surplus value. (Harvey, p. 170)”

2) That Marx failed to stay true to his purpose of understanding circulation between departments as an inseparable dynamic-dialectic of use value and exchange value. In other words, exchange values (circulation) have to be balanced out with use values (the basis of the disaggregation of social capital into two sectors of production). This lines up with both Moseley, who wanted to emphasize this was not a balance of material inputs/outputs but rather one of magnitudes of money, as well as Andy’s discomfort with the seeming arbitrariness of the two department distinction (see below). This then opens into a more extended discussion of the important concept of “viable technology” and a contradiction that emerges between its function (to balance use and value exchanges between departments) and technologies role in accumulation in general (see p. 170-171).
This is where Harvey’s work really answers a lacunae in most of the economic literature that I read on Part III of Vol II. Here Harvey emphasizes that this model of reproduction has to be read along with the model of social reproduction from Vol I., wherein the capitalist production process produces the capitalist social relations (wages laborers need to sell their labour power and purchase commodities on the market; capitalists require others’ labour power, accrue more potential capital for reinvestment and are driven by competition into innovation and higher rates of exploitation). Thus we should not isolate this model of economic reproduction (a tendency that many Marxian economists have followed to a greater or lesser degree) but try to see how it intersects with the process of social reproduction and the reproduction of social classes. Thus we can examine class relationships through these exchange-schema:

Capital circulates, as it were, through the body of the labourer as variable capital and thereby turns the labourer into a mere appendage of the circulation of capital itself. The capitalist is likewise imprisoned within the rules of circulation of capital, because it is only through the observance of these rules that the reproduction and expansion of constant capital and the production of further surplus value is ensured. We are, in short, looking at the rules that govern the reproduction on a progressive scale of whole social classes. (175)”

Obviously this is not some type of circulation-centered emphasis (where the contradictions and thus political possibility is located merely in the realm of exchange and distribution); I think that Harvey is merely showing that though one can locate and analyze class dynamics at the level of exchange, that exchange is inseparable from (though as we will see below, in contradiction with) production – the primary site within which the social relations are reproduced. One interesting issue that Harvey points to in this regard is that the reproduction of classes glossed at the level of circulation (here through the schema) seems to posit a balance much like the economic-models of many Marxian economists. But Harvey, after pointing to Rosa Luxemburg’s critical departure from the incompleteness of the Dept I/II schema, notes that what Marx forces us to do is:

“to consider the stark contrast between the rules regulating accumulation in the realm of production and those that regulate balanced accumulation in the realm of exchange. Read in the context of Marx’s overall project, the reproduction schemas yield most of the theoretical insights we need. Balanced accumulation through exchange is indeed possible in perpetuity, provided that technological change is confined within strict limits, provided that there is an infinite surplus of labour power which always trades at its value….[etc.] Put simply, the conditions that permit equilibrium to be achieved in the realm of production contradict the conditions that permit equilibrium to be achieved in the realm of exchange….(Harvey, p. 176)”

And this contradiction between the twin-equilibrium required within the realm of production and exchange opens into a much more complex social dimension - one that is foreclosed when a circulation balance between departments is reified into algebraic equations. With his attempt to read social relations, social crisis, relations of production, within and through the level of circulation (accumulation schema), Harvey, I think, provides the most fruitful way to situate these last chapters into a larger Marxian framework, one that does not reproduce the fetishistic quality of some of the Marxian economic models glossed from the Dept I/II model.

Other points that emerge from this section:

1) Logic at the individual circuit is generalized and/or contrasted at the general societal level:
“The product of an individual capital, i.e. each independently functioning fraction of the social capital endowed with its own life, may have any natural form whatsoever. The only condition is that it really should have a use form, a use-value, that stamps it as a member of the commodity world capable of circulation.” “It is different with the product of the total social capital. All material elements of the reproduction must be parts of this product in their natural form…On the assumption of simple reproduction, therefore, the value of the portion of the product that consists of means of production must be equal to the [consumed] constant portion of the value of the social capital. (Marx, 508)”

2) Notes on Crises and their relation to a Rise in Wages (Andy also notes this):
“It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption. The capitalist system does not recognize any forms of consumer other than those who can pay, if we exclude the consumption of paupers and swindlers. The fact that commodities are un-sellable means no more than that no effective buyers have been found for them, i.e. no consumers (no matter whether the commodities are ultimately sold to meet the needs of productive or individual consumption). If the attempt is made to give this tautology the semblance of greater profundity, by the statement that the working class receives too small a portion of its own product, and that the evil would be remedied if it received a bigger share, i.e., if its wages rose, we need only note that crisis are always prepared by a period in which wages generally rise, and the working class actually does receive a greater share in the part of the annual product destined for consumption. From the standpoint of these advocates of sound and ‘simple’ (!) common sense, such periods should rather avert the crisis. It thus appears that capitalist production involves certain conditions independent of people’s good or bad intentions, which permit the relative prosperity of the working class only temporarily, and moreover always as a harbinger of crisis. (p. 487)”

3) Overproduction and the possibility of Planning:
“Once we dispense with the capitalist form of reproduction, then the whole problem boils down to the fact that the magnitude of the part of fixed capital that becomes defunct and has therefore to be replaced in kind varies in successive years (here we are dealing simply with the fixed capital functioning in the production of means of consumption). If it is a very large one year (if the mortality is above the average, just as with human beings), then in the following years it will certainly be so much the less. The mass of raw materials, work in process, and ancillaries needed for the annual production of means of consumption – assuming that other circumstances remain the same – does not diminish on this account; and so the total production of the means of production would have to increase in one case, and decrease in the other. This can only be remedied by perpetual relative over-production; on the one hand a greater quantity of fixed capital is produced than is directly needed; on the other hand, and this is particularly important, a stock of raw materials etc. is produced that surpasses the immediate annual need….Over-production of this kind is equivalent to control by the society over the objective means of its own reproduction. Within capitalist society, however, it is an anarchic element. (544-545)”

Ok, onto Volume III……..

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