>
> This was written in May-June of this year, immediately after
> Heinrich's article was published. Because of the long, long delay
> in his responding, MR felt unable to publish the critiques of his
> article for six months. Now that his "response" has been published--
> in my case not responding to any of the argument presented here and
> merely demonstrating his ignorance of such elementary concepts as
> the difference between a stock variable and a flow variable, while
> repeating a nonsensical formula for the rate of profit that he in
> his original article admitted was to be found nowhere in Marx but in
> his reply to this critique he declares to be "Marx's formula")! I
> will soon on these lists publish (undoubtedly at a tad greater
> length than he merits) a brief examination of Heinrich's response to
> my critique. I leave Roberts, Cachedi. and Moseley to do their own
> decisive answers--which they surely will--to Heinrich's response to
> their critiques.
>
>
>
>
> IN DEFENSE OF MARX'S LAW
>
> It was Marx's ultimate purpose, as stated in the preface to the
> first edition of Das Kapital, "to lay bare the economic law of
> motion of modern society." It is clear that Marx regarded as his
> central achievement in this regard the "Law of the Falling Tendency
> of the Rate of Profit." In vol.3, (p.303) he declares that: "The
> barrier of the capitalist mode of production becomes apparent:
>
> 1. In the fact that the development of the productive power
> of labor creates in the falling rate of profit a law, which
> turns into an antagonism of this mode of production at a
> certain point and requires, for its defeat, periodic crises.
>
> 2. In the fact that the expansion or contraction of production
> is determined...by profit and by the proportion of this
> profit to the employed capital--thus by a definite rate of
> profit--rather than the relation of production to social
> requirements, i.e., to the requirements of socially developed
> human beings. It is for this reason that the capitalist mode
> of
> production meets with barriers at a certain expanded stage
> of production which, from the human point of view, would
> be utterly inadequate. It comes to a standstill at a point
> determined by the production and realization of profit, not
> by the realization of human needs..."
>
>
> In the April 2013 issue of Monthly Review, Professor Michael
> Heinrich--in an article entitled "Failure of the Falling Rate of
> Profit Theory"--attacks Marx's Law not on empirical but on very
> familiar [cf. Joan Robinson, Essay on Marxian Economics] theoretical
> grounds. Prof. Heinrich's rejection of the "Law of the Falling
> Tendency of the Rate of Profit" enunciates two lines of criticism:
> that the Law does not follow from the concepts and definitions of
> the Marxian theoretical system; and that even if such a tendency
> existed Marx would still be wrong to allege that it is important to
> "crisis theory," ie., our understanding of the economic cycle.
>
> Any "Crisis Theory" is an attempt to explain not only how but why
> the capitalist mode of production, throughout its history, exhibits--
> alongside its tendency toward secular expansion of the means of
> social production and of its output of material goods and services
> as commodities--recurrent interruptions of that process in which
> substantial amounts of productive capacity (productive workers and
> machines) find themselves, after a period in which they had been
> fully employed, excluded from full participation in the process of
> social production. Thus a "Crisis Theory" is a theory of the
> cyclical movement of the capitalist economy.
>
> It is elementary (and Marx was first to point out) that the key
> force in capitalist development is the accumulation of capital and
> that the key variable in the capitalist economic cycle is the rate
> of investment in the means and conditions of production. It is
> equally clear that the central purpose of investment for any
> capitalist firm is the enhancement, or at least maintenance, of its
> profitability. Thus far all economists, Marxian or not, should
> agree. Where Marxians and non-Marxians part company is the "Theory
> of Value." For Marx, aggregate "profit" (comprising the categories
> of profit-of-enterprise, interest, rent, and executive compensation)
> consists of aggregate surplus value, the determinate (and, for each
> "ideally average" [footnote one] capitalist firm, "aliquot") share
> of the total number of hours of socially-necessary labor time
> performed by the productively employed working class as alienated to
> and appropriated by the capitalist class. Net capital investment
> consists of the share of surplus value accumulated, rather than
> consumed, by the capitalist class: and so capital, as the stock of
> accumulated (capitalized) economic wealth of the capitalist class,
> consists of all the surviving (ie., not used up in the course of
> subsequent production) hours of surplus-labor time accumulated by
> the capitalist class as property embodied in the means and
> conditions of the productive system as a whole (including the
> necessary but nonproductive objects required for sales,
> administration, etc.).
>
> What then is required of an adequate "crisis theory?" In essence,
> such a theory has to present a model of the cycle in which the
> conditions promoting a rate and amount of investment sufficient to
> assure expanding output, profits, and employment are transformed *by
> that very process of capital accumulation* into conditions promoting
> a generalized decline in output, profits, and employment (and,
> subsequently, the resumption of expansion into a renewed cycle).
> Every cycle is the concrete experience of a definite capitalist
> economic system in the real historical context of capitalist
> evolution on a world scale. As Marx points out, the "the real
> crisis can only be educed from the real movement of capitalist
> production, competition, and credit--in so far as crisis arises out
> of the special aspects of capital which are peculiar to it as
> capital, and not merely comprised in its existence as commodity and
> money." (Theories of Surplus Value, ch. 14)
>
> The dependence of capital investment on profitability, and the
> effect of periodic shortfalls in the profitability of expanded
> investment, are certainly among the foremost aspects peculiar to
> capital. But it is impossible to understand how Marx's "Law" would
> work in determining capital's real cyclical movement if one cannot
> properly formulate the "Law." Since Heinrich shows himself
> completely unwilling (or unable?) to do that, we here have to start
> by doing it for him.
>
> For Marx, the rate of profit tends to fall as an inevitable result
> of the increasing "organic composition of capital." Marx defines
> Organic Composition as the ratio between "dead labor" and "living
> labor.": "A definite number of laborers corresponds to a definite
> quantity of means of production, [ie., the 'technical composition'
> of capital] so that a definite quantity of living labor corresponds
> to a definite quantity of labor already objectified in means of
> production." (v.3, p.171) This crucial category is thus defined as
> the ratio between a stock and a flow, both denominated in hours of
> socially necessary average labor time, over the natural accounting
> period of one year. Accordingly, the "technical" and "organic"
> compositions, alike, represent as opposite (physical vs. value)
> sides the degree of development of productive forces accomplished,
> in its characteristic forms, by the capitalist mode of production at
> any given time. "The progressively higher organic composition of
> the social capital is, in another way, but an expression of the
> progressive development of the social productive power of
> labor)." (v.3, p. 248) [footnote two]
>
> The (capital) stock is the total number of hours of socially
> necessary labor time ("dead labor") accumulated over the past as
> surplus-value, objectified (capitalized) in the material forms of
> machines and structures ("fixed capital"), and inventories
> ("circulating capital"). The ("living labor") flow is the total
> number of hours of productive labor performed by the working class
> over the year ("productive labor" for Marx is that commodity-
> producing labor --whether the commodity is material in form or an
> immaterial service consumed as a final product in the course of its
> production--alienated to capital and thereby productive of the
> surplus-value contained in the value represented by capital's net
> output of goods and services). This flow comprises two, and only
> two, fundamental parts: the value received as aggregate income by
> the class of productive workers; and that received as aggregate
> income by the class of capitalist exploiters. The ratio "s/v"
> between these two value-segments ("variable capital," represented by
> the lower-case symbol v, and "surplus-value," represented by the
> lower-case symbol s) of the social productive-labor year is the rate
> of exploitation (rate of surplus value), represented by the symbol s'.
>
> How then is the Organic Composition (henceforward symbolized as Q)
> to be represented? Its formula is C/(v+s) or its algebraic
> equivalent, C/v(1+s'). The total capital stock which is to serve as
> the denominator for the average rate of profit comprises not only
> the amount of value invested in long- lived ("fixed") means and
> conditions of production ("constant capital," represented by the
> upper-case symbol "C") but also the value embodied in the stock of
> circulating capital. One part of that stock consists of the
> inventory of finished and unfinished commodities destined for
> consumption by the class of productive laborers ("variable capital,"
> represented by the upper-case symbol "V "). The remainder of the
> inventory stock (intermediate products like unfinished goods or raw
> materials, etc., short-lived tools, or consumer goods destined for
> the consumption of unproductive workers and members of the ruling
> class) counts as constant capital and so is a constituent part of
> "C." However "V," the stock of circulating capital represented by
> the portion of consumer-goods inventories destined for productive
> workers, constitutes historically (because of both the increasing
> fixed-capital/labor ratio and the increase in the ratio of
> unproductive to productive laborers) a small and constantly
> diminishing portion of the social capital stock. Accordingly it
> distorts virtually nothing to simplify the definition of the overall
> rate of profit by abstracting from "V." The rate of profit is thus
> best represented as s'v/C rather than as s'v/(C+V).
>
> By substitution, [ Q=C/v(1+s'), C=Qv(1+s'), and p'=s'v/C. So
> p'=s'/Q(1+s') ] the rate of profit, s'v/C, to be symbolized as p',
> can thus be represented algebraically as p'=s'/Q(1+s')...
> Shane Mage
>
> This cosmos did none of gods or men make, but it
> always was and is and shall be: an everlasting fire,
> kindling in measures and going out in measures.
>
> Herakleitos of Ephesos
>
>
>
>
>