An Introduction to the Three Volumes of Karl Marx’s Capital

Michael Heinrich’s book, An Introduction to the Three Volumes of Karl Marx’s Capital, (Monthly Review Press 2012) is a lucid and refreshing theoretical interpretation of Marxist political economy.

Apparently, it has gone through nine editions in Germany and is used widely in German universities. Heinrich takes inspiration from the “neue Marx Lektüre” (new Marx reading) of Capital. The result is one of best introductions to Capital for the new reader, but also many sophisticated clarifications for those who who’ve already read some Marx.

The book has many virtues, both in terms of clarifying Marx’s meaning and rebutting Marx’s critics. One advantage of Heinrich’s approach is his emphasis on the tentative, unfinished nature of Marx’s grand project. He argues that Marx was undertaking a scientific revolution - not just writing a critique of classical political economy but establishing a new field of science. Marx opened up and entered this new field but was not at every step completely free from the old ideas and concepts. In Capital there is sometimes a mixture, which leads to what Heinrich calls “ambivalences”—notions and arguments that are oscillating between old and new concepts.

Heinrich distinguishes between two different projects in Marx. Originally, he had the six-book plan with the Grundrisse as first draft and the manuscript of 1861–63 as the second draft. However he then developed a new project: the four-book plan of Capital. This had the manuscript of 1863–65 as the first draft of the first three books (the fourth book never was written). A second draft is constituted by the first edition of volume I of Capital (1867), by manuscript 2 of volume II which was written by Marx in 1868–69 and some small manuscripts regarding the beginning of volume III. A third draft is constituted by the “Reworking manuscript” in French (1871/72), the second edition of volume I, the mathematical manuscript on profit-rate and rate of surplus value, and the manuscript for volume II, which were written in the 1870s. These are two distinguishable projects: the first project with two drafts and the second project with three drafts (partly published), but without a final design.

These matters have really only come to light in recent decades with the publication of the MEGA, a gargantuan plan for 120 volumes (only half so far published), which started in 1975. Heinrich puts a strong emphasis on the philological aspects of Marx in order to draw out what Marx actually meant, something obscured both by earlier interpretations (particularly Engels’ rendering of Capital Volume III) as well as some translations into English. However Heinrich avoids treating Marx as a quarry from which to extract quotations, or passing off certain texts as “the” position of Marx. The results are a theoretical intervention that brings to light new interpretations and solutions to previous shibboleths, including the transformation problem, crisis theory and imperialism.

Heinrich (2012: 9) argues that under no circumstances should anyone be satisfied with reading only the first volume of Capital, because what someone “believes to be understood after reading only the first volume is not only incomplete, but in fact distorted”. For example he denies that Marx begins with capital in general or advances “from the abstract to the concrete”, as he suggested in the Grundrisse. The object of the Capital is the capitalist mode of production, not particular capitalist social formations (such as nineteenth century England), or worse, a notional pre-capitalist “simple commodity production”. However Heinrich (2012: 13) warns that “one should not succumb to the illusion that with an analysis of the fundamentals of the capitalist mode of production that everything decisive has already been said about capitalist societies”.

Heinrich (2012: 44-45) argue that for many Marxists and most of Marx’s critics, the core of Marx’s value theory consists of the following ideas: “the commodity is use value and value, value is the objectification of human labour, the magnitude of value depends on the ‘socially necessary labour time’ required for the production of a commodity (the last point is frequently referred to as the ‘law of value’).” But the central value-theoretical insights of Marx are not limited to these simple propositions.

In chapter three, Heinrich reconstructs the panorama of value theory found throughout the three volumes of Capital. With value theory, Marx seeks to uncover a specific social structure that individuals must conform to, regardless of what they think. So value theory doesn’t “prove” that an individual act of exchange is determined by the productively necessary quantity of labour. Rather it should explain the specific social character of commodity-producing labour. Value is not at all a property that an individual thing possesses in and of itself. The substance of value is not inherent to individual commodities, but is bestowed mutually in the act of exchange. Only with the act of exchange does value obtain an objective value form, thus the importance of the “value form analysis” for Marx’s theory of value. Value is “something purely social; it expresses the equal social validity of two completely different acts of labour, and it is therefore a specific social relationship”.

One theoretical insight concerns the role of money in this reconstruction. Money is in no way merely a helpful means of simplifying exchange on the practical level and an appendage of value theory on the theoretical level. Heinrich (2012: 63-4) argues that “Marx’s value theory is rather a monetary theory of value: without the value form, commodities cannot be related to one another as values, and only with the money form does an adequate form of value exist”. Both the labour theory of value of classical political economy and the theory of marginal utility of neoclassical economics are pre-monetary theories of value. The usual “substantialist Marxist” value theory that alleges that value is already completely determined by “socially necessary labour time” is also a pre-monetary value theory. The magnitude of value of a commodity is expressed in its price – and this is the only possibility for the magnitude of value to be expressed.

Heinrich 92012: 69-70) deals with one obvious objection to Marx’s value theory, namely his assumption in Capital that money always has to be linked to a particular commodity. During Marx’s time, gold played the role of this “money commodity”. However at the beginning of the 1970s, the gold standard was formally abolished, as were fixed currency exchange rates. Since then, there is no longer any commodity that functions as a national and international level of a money commodity. Although “Marx could not image a capitalist money system existing without a money commodity”, Heinrich argues that “the existence of such a commodity is in no way a necessary consequence of his analysis of the commodity and money”.

Heinrich argues that for Marx, value is means of understanding fetishised social relations, not price theory. In the Communist Manifesto, Marx and Engels still held that with the establishment of capitalism, social relations would become increasingly transparent: domination and exploitation are no longer mystified or disguised, but openly visible. The notion that the exploitation of the working class in capitalism was readily transparent and that only the manipulation of the rulers disguised it – with the help of the press, church, schools, etc. The critique of ideology was understood as an act of exposure: one merely had to uncover the “real interests” behind a notion.

In Capital, Marx did not use the term “commodity fetish” to describe how people in capitalism place undue importance upon the consumption of commodities, or that they make a fetish out of particular commodities that serve as status symbols. In contrast to the idea that social relations in capitalism are regarded as transparent, central passages of the work deal with the “mystification” of these social relations. What Marx describes in Capital as fetishism and mystification are “inversions that do not arise from the manipulation of the ruling class, but rather from the structure of bourgeois society and the activity that constantly reproduces this structure”. Marx therefore speaks of the “reification of the relations of production” (Capital 3: 969).

Heinrich (2012: 184-5) argues convincingly that people in bourgeois society therefore live in an “enchanted world”, in which a “personification of things” occurs: the subjects of the social process are not people, but commodity, money and capital. This is not merely a case of “false consciousness”. It is the social practice of capitalist society that constantly enacts a process whereby the “factors of production” take on a life of their own and social cohesion is constituted as an objective necessity that individuals can only escape on pain of ruin. All members of bourgeois society are subordinate to “the fetishism of social relations”. Neither capitalists nor workers have a privileged position that allows them to evade this fetishism. However, this fetishism is “not a completely closed universal context of deception from which there is no escape. Rather, it constitutes a structural background that is always present”.

One audacious digression in the book is the discussion of anti-Semitism as “the personalisation of fetishistic relations”. Heinrich (2012: 189) argues that anti-Semitism in bourgeois society is fundamentally distinct from all other forms of discrimination, prejudice and attribution: “Only in modern anti-Semitism are central constitutive principles of society projected ‘outward’ onto a ‘foreign’ group.” He argues that many anti-Semitic tropes and stereotypes, such as the all-powerfulness of Jews, their rootlessness and the “global Jewish conspiracy” are in fact perverse projections of elements of bourgeois society concentrated on (and scapegoating) Jewish people with it. Heinrich is seeking to understand how particularly forms of racist oppression are rooted in capitalist political economy. I don’t think this captures entirely the nature of modern anti-Semitism. However he deserves credit for the insight.

The book contains a fairly orthodox exposition on the nature of exploitation. Capital reveals how exploitation takes place under capitalism, under the veneer of apparent equality. Heinrich (2012: 96-7, 120) argues that the term exploitation is “not meant to allude to especially low wages or especially bad working conditions”. Exploitation refers “solely and exclusively” to the fact that the producer only receives a portion of the newly produced value that he or she creates – regardless of whether wages are high or low or working conditions good or bad. As an effect of the increase in productivity, a rise in the standard of living of the working class has accompanied an increase of the surplus value appropriated by the capitalists. Increased exploitation (meaning that a greater portion of the workday consists of surplus labour) and an increased standard of living for the working class are therefore not mutually exclusive. “Exploitation” and the existence of “unpaid labour” are not the result of an infringement of the laws of commodity exchange, but are rather in compliance with them. If one wishes to abolish exploitation, then this cannot be accomplished through a reform of the relations of exchange within capitalism, but only through the abolition of capitalism.

Armed with this interpretation of Marx’s value theory, Heinrich seeks to clarify important debates within the history of Marxism. The first theoretical gain is the way in which he dissolves the knotty “transformation problem”. In the third volume of Capital, Marx sketched out a simple quantitative method of calculation to arrive from a system of value to a system of production process. This method of calculation, however, has proven to be wrong. The fact that it contains an error was also noted by Marx (Capital 3: 265) but he underestimated the effects of this error. Heinrich (2012: 148) argues that within the framework of the 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 form determination of the commodity. He argues that “the transition from value and surplus value to production price and average profit is not an historical or even a temporal sequence, but rather a transition between different levels of description”.

An even more substantial clarification concerns theories of crisis. The possibility of interruption and therefore crisis as Marx explained in Capital volume 1 is inherent to the mediation of the social circulation of matter through money. But for the mere possibility of crisis to become an actual crisis, a series of further circumstances must come into play. Heinrich (2012: 171) rightly argues that Marx attempted to prove that crises results from the capitalist mode of production itself and that a crisis-free capitalism is impossible. And he is right that “one cannot find a comprehensive theory of crisis in Marxist work, but rather scattered, more-or-less elaborated observations that have been worked up by Marxists into quite distinct theories of crisis”.

Heinrich (2012: 150-3) takes particularly delight in pulling to pieces what is sometimes called the fundamentalist Marxist theory of crisis (held for example by the SWP), that crises result from the law of the tendency for the rate of profit to fall. For Marx, the tendency for the rate of profit to fall and capitalist development of the forces of production are two sides of the same coin. If Marx had been able to conclusively prove the connection, then he would have shown that a falling rate of profit belongs to the “essence” of capitalism.

However here lies the fundamental difficulty for every proof of the “law of the tendency of the rate of profit to fall”: a general statement about the degree of increase for the organic composition of capital (c/v) is not possible. In one case, a specific increase in productivity can be achieved through a small quantity of additional constant capital; c/v thus increases only a little bit, which can lead to the rate of profit rising, not falling, as a result of the increasing rate of surplus value. In another case, the same proportional increase in productivity may require a large amount of additional constant capital; c/v thus increases strongly, and the rate of profit eventually declines. He also states that if the number of employees declines beyond a certain critical mass, then at some point the amount of surplus value produced also declines, regardless of how strong the rate of surplus value increases.

In Heinrich’s (2012: 153) view, Marx thought he had sufficiently proven the law of the tendency of the rate of profit to fall using this consideration. But that was not the case. A declining mass of surplus value only indicates a fall in the rate of profit with certainty when the total capital c + v required for the production of this surplus value has not also fallen, but has at least remained constant. And Marx implicitly assumes this precondition in his example. But this assumption is not unproblematic. For the total capital to remain the same it is not sufficient for the constant capital c to increase, rather it must increase by a certain amount; namely it must increase by the same amount that the variable capital has been reduced. Whether or not this is the profit fall cannot be answered at such a general level: we don’t know whether the productivity increase has been implemented with a lot or a little additional constant capital.

He concludes: “In contrast to Marx, we cannot assume a “law of the tendency of the rate of profit to fall”. This doesn’t mean that the rate of profit can’t fall, which may very well be the case. However, the rate of profit can also rise. A long-lasting tendency for the rate of profit to fall cannot be substantiated at the general level of argumentation by Marx in Capital.” It cannot therefore serve as the basis for explanations of all crises.

Heinrich (2012: 140, 172, 177) also gives short shrift to other Marxian theories of crisis, including those based on a disproportion between different departments in the reproduction schemes, underconsumption theories focused on the lack of consumption demand, and with theories that purport to show the collapse of capitalism. In the history of Marxist debates, the reproduction schemes were “burdened” with too much explanatory power. Though they offer a broad overview of capitalist production and circulation, “they are a long way from being an exact depiction of capitalist reproduction as it exists in empirical reality”. Similarly, “underconsumption” theories of crisis are based upon this constricted power of consumption of the working class. As an explanation for the existence of crises, “the argument of excessively low wages and the resulting “demand gap” is insufficient”. And theories of collapse are “confronted with the fundamental problem that they claim an inevitable developmental tendency that capitalism is so unable to deal with that its further existence necessarily becomes impossible – regardless of whatever happens in the actual course of history”.

Heinrich does not set out a comprehensive alternative explanation for crises; in fact he goes some way to denying this is even possible. He describes (2012: 173-4) “a tendency toward the overproduction of commodities” (overproduction relative to buying power) and the over-accumulation of capital (accumulated capital that either cannot be valorised at all, or only very poorly), which ultimately leads to crisis: “reproduction stagnates, invested capital is devalued or even completely wiped out, the lest profitable production facilities are closed down, the least profitable capitals go bankrupt, workers are laid off and wages decline with the rise in unemployment. Crises are also enormous processes of destruction: social wealth is annihilated”. But crises are not just destructive. Rather, in crises the unity between spheres (such as production and consumption) that belong together but become independent of one another is “violently restored”. New branches emerge, old ones disappear or lose their importance, machines and raw materials that were previously important are no longer so, old enterprises are devalued, new ones emerge without certainty as to whether they will yield profits at the expected level. The only thing certain in this economic turmoil is uncertainty.

However Heinrich (2012: 174-5) concludes that “at the general level of depiction intended by Marx in Capital, nothing further can be said concerning the concrete development of specific crises”. The progression of specific crises is dependent upon the respective concrete circumstances, such as “technical and operational developments, the structure of the credit system, the position of a country on the world market (a priority for capital particularly in times of crisis), the organisation of the working class and its struggles, and the manner of state intervention in the business cycle”.

If Marx’s value theory is a monetary theory of value, then the commodity and value cannot exist and also cannot be conceptualised without reference to money. The same can be said concerning the relationship between capital and credit. Heinrich (2012: 165) argues that within traditional Marxism, a non-monetary theory of value was dominant, as was a conception of credit that reduced it to a mere appendage that was unnecessary for the existence of capital, and unnecessary for the understanding of capital. Therefore one advantage of Heinrich’s approach is that it can be brought to bear more readily on the current crisis, where the financial aspects have been to the fore.

In chapter 11, Heinrich (2012: 200-3) provides important clarity on the relationships between the state and capital. Marx emphasises that “the state and law cannot be grasped by themselves, but must always be examined against the background of economic relations”. However his criticises a trend within some Marxist thinking, which defines the state primarily an instrument in the hands of the ruling class. Heinrich accepts as “indisputable” that particular fractions of capital attempt to use the state as an instrument, and sometimes succeed in doing so. But in political practice “the instrumentalist conception of the state usually leads to the demand for alternative use of the state”, which effectively a reformist perspective.

Heinrich (2012: 203-5) says that a fundamental problem with the “instrumentalist” conception of the state is that it “obscures the qualitative differences between pre-bourgeois and bourgeois social relations and only emphasises the division of social into social classes”. In capitalist society, economic exploitation and political rule diverge. He states that the state “does in fact conduct itself as a neutral instance with regard to its citizens; this neutrality is in no way merely an illusion. Rather it is precisely by means of this neutrality that the state secures the foundations of capitalist relations of domination and exploitation”. The formulation is somewhat misleading. He is not seeking to allow reformism back in, but rather to stress that the appearance of the state as an arbiter “above” classes is real.

The state has to continuously and directly intervene to encourage and enable capitalist production. The state, following Engels in Anti-Dühring (MECW 25: 266) thus acts as an “ideal personification of the total national capital” This general interest is not always identical with the particular interests of individual fractions of capital. The essential pre-condition of capitalist accumulation is the existence of waged-labourers, yet there is “a tendency towards the destruction of labour-power is thus intrinsic to capitalism”. The state does not only prevent the destruction of labour-power; in the form of the welfare state, it also guarantees its reproduction insofar as that is not possible solely as a result of the wage compensation negotiated between workers and capitalists.

Heinrich (2012: 207-8) argues that state social welfare measures “originate in the capital accumulation process, regardless of whether these measures are financed by social insurance contributions or taxes”. A portion of total social capital is used, so that the mass of surplus value is reduced. It is frequently the case that state social welfare measures come about as a result of struggles by the labour movement. The welfare state is therefore frequently understood as an “achievement” of the labour movement, a concession to the working class (in order to pacify it). However for Heinrich, “it is not the case that such measures are one-sided benefits for the forces of labour that – as is occasionally asserted – already constitute the first step in transcending capitalism. Rather, they safeguard the existence of workers in a manner consistent with capitalism, namely as wage-labourers”.

The interests that determine the state’s activity are not just sitting around waiting to be implemented, as is assumed by the instrumentalist conception. Rather these interests must first be constituted. Alternative strategies are possible, so that state policies cannot be reduced to the simple implementation of necessities of the capitalist economy. The reference to the economic purpose behind a state measure, popular in Marxist circles, is insufficient as an explanation. In the bourgeois public sphere, a political system counts as democratic when it offers the effective possibility for voting out a government.

Another significant virtue of the book is to highlight the disconnection between Marx’s political economy and later theories of imperialism. Heinrich (2012: 213) argues that in attempting to achieve the highest possible level of valorisation, “capital has a tendency to transcend national borders, both in the purchasing of elements of constant capital (most notably raw materials) as well as in the sale of its finished products”. Marx thus wrote (Capital 3: 205) of the world market that it is “the basis and living atmosphere of the capitalist mode of production”.

Heinrich (2012: 215-16) argues that in Lenin’s theory of imperialism, there are a number of extremely problematic points. First of all, the alleged transition from competitive to monopoly capitalism led Lenin to conclude a change in the capitalist mode of socialisation: it was no longer value, but rather the will of the monopolists that was supposedly dominating the economy the state is reduced to a mere instrument of these monopolists. Finally, the characterisation of imperialism as “parasitic” is problematic. Overall, “what Lenin intended as a continuation of Marx’s analysis ultimately has almost nothing to do with Marx’s critique of political economy”.

Not only theoretically, but also empirically, Lenin’s theory of imperialism stands on shaky ground: “the export of capital supposedly necessitated by imperialist policies did in fact occur, but the greater portion of this capital export went not to colonies and dependent territories but to other developed capitalist countries that also pursued imperialist policies”. That means that the cause of capital export could not solely lie in the absence of profitability in the capitalist centres, since that would mean there couldn’t have been any capital exported to other centres. Further, for the United States – regarded as the most important imperialist power – the import of capital, rather than the export of capital, is the decisive factor.

Heinrich (2012: 216) identifies the slippage between the early uses of imperialism and its subsequent application after Lenin’s time. He states: “If one describes the state assertion of the capitalist general interest at an international level by means of economic, political, or military pressure against other countries as imperialism, then imperialism is no longer a particular stage in the development of capitalism; rather every bourgeois state is imperialist within the limits of possibility, but then the term ‘imperialism’ really doesn’t say very much. At the international level, “a multiplicity of states of widely varying economic, political and military strength and with completely different interests face one another. Between them, there exist disparate constellations of dependence and alliance, as well as antagonisms”. An independent terrain of conflicts for power and influence between states is constituted. Upon this terrain, “the primary concern is the organisation of an international ‘order’ in the trade, currency, legal and military-political sectors”.

Heinrich (2012: 217-18) rightly says that the relations between states are not static; “they exist against a background of a developing capitalism that constantly restructures the technical conditions of the production process, the organisation of enterprises, and the international linkages between them”. The world market is not just a precondition, but the constantly re-created result of the capitalist mode of production. Periodisation like ‘imperialism’ thus applies to a more concrete analysis than Marx’s Capital. However such a periodisation should not be mistaken (as with some Marxist readings) for an inevitable development toward a final end – whether a “highest” stage of capitalism or even a “necessary” transition to socialism or communism.

Heinrich’s book is well worth reading. Alongside Ben Fine and Alfredo Saad-Filho’s Marx’s Capital (2003), which also covers the three volumes, it is the best introduction to Marxist political economy. It is comparable to Duncan Foley’s Understanding Capital (1986), such is the clear exposition of basic concepts. However there are at least three concerns which deserve to be aired: with Heinrich’s theoretical stance, his view of method and most importantly, his conception of class.

Heinrich (2012: 26) appears sympathetic to the leftist, Western Marxist stance pioneered by Korsch, Lukacs, Pannekoek and the Frankfurt school. This covers a wide range of thinkers, who veered from ultra-leftism (putschism, theory of the offensive, rejection of transitional demands, united fronts and the workers’ government slogan) to political passivity. Worse, he creates a pastiche of ‘traditional Marxism’ or ‘worldview Marxism’ as a straw opponent within Marxist history. This is an amalgam of Second International social democratic Marxism, Stalinism, and post-Trotsky Trotskyism.

Whilst there certainly are elements of crude economism and historical determinism within these strands, lumping them together actually narrows the importance of debate and disagreement at every stage of Marxist history. Thus on theories of crisis, on the state and on imperialism there are wide differences between the likes of Kautsky, Luxemburg, Lenin and Trotsky – and differences within their own works. Just as Heinrich finds a mixture of pre-scientific and revolutionary conceptions in Marx, we should apply the same standard to later Marxist debates, including contemporary discussions.

A second concern is with his treatment of dialectics. Heinrich (2012: 36-7) states that “more often than not, the grandiose rhetoric about dialectics is reducible to the simple fact that everything is dependent on everything else and is in a state of interaction and that’s all rather complicated – which is true in most cases, but doesn’t really say anything”. ‘Dialectics’ understood as the general science of development, was often viewed as a sort of Rosetta Stone with which everything could be explained. Instead he argues that dialectics is between understood as a “form of depiction in the critique of political economy”. The structure of the depiction is therefore “not a didactic question for Marx, but has a decisive substantive meaning”.

Heinrich concedes that the precondition of a dialectical portrayal is not the application of a method (a widespread conception in worldview Marxism) but rather the categorical critique. But that means dialectics is not simply a matter of presentation. Categories such as form, essence, necessity and ontology of structured intransitive (as in critical realism) are important philosophical assumptions that underlabour Marxism. The cod-dialectics of Stalinism should rightly be junked; but methodological kernel of Marxist dialectics still have enormous value.

The most substantial criticism of Heinrich’s approach concerns his treatment of classes. Some matters are probably presentational, but others suggest a failure to think through the critique of political economy into the realm of social theory. In a striking metaphor, Heinrich (2012: 185-6) argues that “capitalism turns out to be an anonymous machine, without any foreman who steers the machine or can be made responsible for the destruction wrought by the machine”. If one wishes to put an end to such destruction, it is not sufficient to criticise capitalists. Rather, capitalist structures in their entirety must be abolished. The political conclusion is right. However the idea of a driverless machine takes away a certain edge of naming the enemy – identifying actual capitalists and their backers has the actual agency to be overcome.

Heinrich (2012: 192) is right that in Capital, Marx writes repeatedly of classes, but there is no attempt at a systematic treatment or even a definition. Only at the end of the third volume does Marx begin a discussion on classes, and it is precisely here that the manuscript breaks off after a few sentences. From this arrangement, he says that “a systematic treatment of classes is not the precondition of Marx’s depiction, but rather should come at the end as its result”. One can speak of social classes in two distinct senses. In a “structural sense”, classes are determined by their position in the social process of production. To that extent, someone can belong to a particular social class without necessarily being aware of it. Distinct from this are classes in a “historical sense”. These are social groups that in a particular historical situation understand themselves to be classes as distinct from other classes; the members of the class distinguish themselves by means of a common “class consciousness”. In Capital, Marx uses the concept of class predominantly in the structural sense.

Heinrich (2012: 194) is keen to point out that “class conflict is not the only important social cleavage in capitalist society”. Conflicts concerning gender roles, racial oppression, and the handling of immigration are also of considerable importance for social development. However he states that “traditional Marxism often considered class conflicts to be the only truly important social struggles”. Here Heinrich goes from the self-evidently true proposition that struggles around sex, race and sexuality are not reducible to class, to an assertion about Marxist history that does not hold. Only if one ignores Engels and Bebel on women, Marx on the US civil war, or Lenin on nationalism, or countless other subtle analyses of the relations between different forms of exploitation and oppression, would such a caveat apply.

Heinrich (2012: 196-8) argues that in the history of Marxism, two false conclusions were often made concerning class and class struggle. First, “it was inferred that class consciousness arises sooner or later as a direct result of the situation of the working class”. Second, “it was assumed that this class consciousness must have a more or less ‘revolutionary’ content”. He accepts that “the proletariat experiences a numerical increase as a result of the imposition of the capitalist mode of production and in a certain sense is “unified” and “schooled” by large industry (to the extent that the proletariat has to organise politically and in trade unions to continue to exist as a proletariat)”.

However, “the idea that this inevitably leads to the constitution of a revolutionary class is in no way a consequence of Marx’s analysis”. A revolutionary development can arise; “it is not impossible, but it is anything but inevitable”. Thus “it is anything but certain that a common class position necessarily generates a common consciousness and practice... it can happen, but then again it might not”. Again the problem is that a valuable insight is jumbled with a straw argument that few Marxists today would have any truck with. The caricature does not raise the level of argument around the difficulties for workers developing class consciousness – the earlier discussion of political economy and of ideology (especially fetishism) is a much more useful insight.

The problem with Heinrich’s approach is perhaps most clearly drawn out in his treatment of workers and the labour movement. He states (2012: 78-9) the popular argument of worldview Marxism: “namely that there exists a social subject (the working class), which, on the basis of its particular position in bourgeois society, possesses a special ability to see through social relationships. Many representatives of traditional Marxism expressed the need to “take the standpoint of the working class” in order to understand capitalism. But in doing so, they overlooked the fact that workers (just like capitalists) in their spontaneous consciousness are also subject to the delusions of the commodity fetish. “One cannot therefore speak of a privileged position of perception occupied by the working class – but one also cannot make the claim that fetishism is in principle impenetrable.”

The caricature is a long way from Marxist thinking. The argument about the privileged position of the working class does not primarily relate to the matter of special perception, although in order to break through the mask of fetishism, shared experience of collective struggle is necessary. However the argument relates the material interests of workers, arising from exploitation, that provide good reasons to engage in class struggle; and secondly the power of the working class conferred by its strategic position in the social relations of production, so brilliantly depicted by Marx in Capital and his other works. This is an argument about how the social structure, far from being simply oppressive, also enables workers to break their chains and struggle as strategic agents for their own emancipation.

These criticisms should not detract from the importance of this book. Heinrich (2012: 223-24) argues that there are still many valid reasons to fight for socialism: the social devastation wrought by global capitalism while their exists at the same time a historically unprecedented level of material wealth; the destruction of the natural foundations of life caused by capitalist production, no longer occurring locally but affecting the planet as a whole (clearly visible in climate change); and constant wars that also emanate from or are promoted by “democratic” bourgeois states.

This is real value of Marx’s Capital. It is a foundation stone for the critique of the entire social science of bourgeois society, but it is also the basis for working class self-liberation as a viable and increasingly necessary alternative to the world as it is.

Issues and Campaigns: 

Marxist Theory and History: 

Culture and Reviews: 


The problem with Heinrich

Heinrich proceeds at length to deny the validity of the falling rate of profit as the specific underlying premise of Marx’s crisis theory, going so far to deny that Marx actually had an internally consistent crisis theory. Heinrich’s counterarguments, themselves tired old chestnuts, are curiously incompatible with that conclusion. What occurs during a crisis according to Heinrich (and anyone else who has given the matter an iota of consideration)? “( C )apital is devalued or even completely wiped out…workers are laid off and wages decline with the rise of unemployment” until the unity between spheres is “violently restored.” Now, one might ask, if a declining rate of profit is not the underlying cause of crises, why then should crises be overcome and accumulation restored by eliminating excess claims on surplus value and forcibly redistributing the division of the working day towards capital? That is, why should raising the rate of profit be the specifically appropriate cure for the crisis if the falling rate of profit was not its underlying cause?

What exactly is the meaning of the “over-accumulation of capital” that Heinrich blithely trots out as a description of the crisis precipitant? Over-accumulation of capital relative to what, if not profits? And what are we to make of the “over-production of commodities” “relative to buying power”? Commodities are the form that capital takes in the process of circulation; “buying power” is the rate of capital formation out of surplus-value. Buying power (the market) expands to the extent that capitalists add to their stock of means of production (constant capital) and hire additional workers (variable capital). So when Marx speaks of the over-accumulation of commodities relative to purchasing power, he simply means that the motivation to accumulate has dissipated owing to dismal profit expectations. Ordinarily, the crisis tendencies of the falling rate of profit can remain latent insofar as capital compensates for a fall in the rate of profit by increasing the mass of profits. When this is no longer seen as feasible because the expected rate of return is too feeble, capital fails to expand purchasing power (accumulate) sufficiently to clear the markets. Inventories build up. The relative “overproduction of commodities” becomes an absolute over production; the relative overproduction of capital becomes an absolute over production. Surplus value cannot be realized and the circuits of capital cannot be completed.

The problem with Heinrich is that he cannot convince himself that the argument for a falling rate of profit is internally consistent and logically compelling. At the same time he does not or cannot situate a framework for crises that can be constructed in any other context.

Are we talking past one another?

Paul, this is not a question of “orthodoxy” and my misgivings with Heinrich’s take on crisis theory are a matter of logic and method, not religion. I think Heinrich makes many valuable ad worthwhile contributions and your review did the book real justice. For what it’s worth, I think his monetary theory of value is spot on. (I published a piece on the transformation problem in Critique three years ago, with a similar theme and can send a reprint to any interested reader. Unfortunately the URL is hidden under a paywall.)

Moreover, I realize that AWL’s understanding of the relationship between values and prices, and profit rates are derived from the physical structure of production. This originates in the work of Geoff Hodgson, who was an early associate of one of AWL’s predecessor organizations. But Hodgson and Martin built their critical departures on the work of Pierro Sraffa, a school that, fairly or not, has been characterized as neo-Ricardian. The Heinrich critique does not critically engage with the neo-Ricardian influenced marxists, and circumvents (or transcends, if one is to be generous) the entire controversy that this entails. The fact that AWLers reach similar conclusions based on different premises and assumptions does not validate Heinrich’s treatment or the conclusions he draws from it. That has to stand on its own merits. And that's the problem

And it’s on this basis that I question him. I find his dismissal of the falling rate of profit all the more curious since it actually is little different from that which can be found in the decades old writings of Paul Sweezy or Joan Robinson and which in either case was hardly novel when Natalie Moszkowska questioned the theory back in 1929. But that type of criticism (i.e, that there is no reason that the rise in the value composition of capital should exceed that of the increase in the rate of exploitation) along with the specific and entirely different criticism associated with neo-Ricardinanism--the Okishio theorem (that any economically feasible innovation that raises the organic composition of capital, also, of necessity raises the general rate of profit provided the real wage is held constant)—were both subject to some very sharp rebuttals.

Some of those rebuttals, not so coincidentally, appeared in PROKLA, the magazine that Heinrich edits. Georg Stamatis, most notably, summarized his work “Die ‘spezifisch kapitalistischen’ Produktionsmethoden und der tendenzielle Fall der allgemeine Profitrate bei Karl Marx”in PROKLA 25 (available on line). Moreover the entire Sweezy /Robinson approach was dismantled, in my opinion, by Shane Mage, whose PHD thesis – The “Law of the Falling Tendency of the rate of Profit”: It’s Place in the Marxian Theoretical System and Relevance to the US Economy—is also downloadable from an open source site.

I hope I’m reading Paul wrongly, but it seems that his eagerness to see the falling rate of profit “demolished” rests on the fact that he holds David Yaffe and Chris Harmon’s politics, and their claims to “orthodoxy”, in disdain. I do too. But isn’t that besides the point?

Again, the problem with Heinrich, as I tried to point out is that he formulates a framework for understanding crises which is most compatible with the very theory he distances himself from. It is also a framework that is incompatible with any other approach, considering the only approaches he is specific about are "underconsumptionism" or "disproportionality". Doesn’t that require some elaboration?

Some past, some overlap but maybe some differences too

Hi Barry,

I think there probably is a bit of talking past – but also perhaps some differences of assessment too.

1) I think we agree the Monthly Review approach pioneered by Paul Sweezy is not adequate on crises, because of its underconsumptionism, view on transition from feudalism to capitalism, later material on potential surplus, stagnation and dependency theory etc. I think Heinrich’s approach is a long way from Sweezy or the current Monthly Review approach.

2) Your Critique article makes some very good points against the neo-Ricardian approach. I don’t personally agree with that approach and in his book, Heinrich does criticise Ricardo’s (non-monetary) theory of value. Martin can say whether he is a neo-Ricardian or not, but I haven’t heard him advocate that approach either.

3) I think my opposition to the fundamentalist reading on the TRPF is more than just political disagreement with Yaffe and Harman. I’m not convinced they explained the post-war boom, the 1970s slump, the neoliberal period of growth or the current crisis using the theory. I’m not persuaded by other attempts such as Andrew Kliman or Michael Roberts either, though I thought
McNally’s book was a step forward.

4) I don’t think TRPF, underconsumptionism or disproportionality exhaust the possible Marxist explanations of crisis. All these theories have their flaws – I think Clarke’s book shows that very clearly. The possibility of crisis is implicit in the circuit of capital, so capitalism will always be crisis-prone. But perhaps a general theory of capitalist crises i.e. one that explains every concrete instance, is just not possible.

I think that is what Heinrich is getting at. Perhaps he’s right. If so, the job of Marxists is to understand the causes and forms of particular crises – especially the current one. Clearing the ground of obstacles to doing that seems like a worthwhile endeavour, which is why I’ve welcomed Heinrich’s intervention.

So is elaboration required? Yes, it is. And that’s an ambitious task to set ourselves.


A misapprehension and two questions

Hi Barry,

I think you are labouring under a misapprehension here. I don't know where you got the idea that Martin Thomas has ever had a neo-Ricardian position, still less one inherited from Geoff Hodgson, who, as far as I know, never pronounced on questions of economics while he was a member of our tendency (leaving before, at the time of, or shortly after we were expelled from IS in 1971). I fortuitously found today while tidying my study (a Herculean task!) a copy of a document entitled 'Notes on Value and Crisis' written by Martin in around 1980 commenting on the positions taken by supporters and critics of the neo-Ricardians in the controversies following the publication of Ian Steedman's 'Marx after Sraffa' in 1977.

In the introduction Martin writes: “Many Marxists have dissented [from the Sraffian view] and argued *(I think correctly)* that the Sraffian revision of Marxist theory is invalid and would blot out crucial aspects of that theory.” I haven't reread the document closely but cannot find anything to suggest that “the relationship between values and prices, and profit rates are derived from the physical structure of production.” Here are a few rather different quotes:

“The value is expressed through the commodity being priced. It is not necessarily priced *accurately*. Exchange cannot be completely independent of production but it has a relative independence...”

“Prices vary from values and yet are the only socially recognised expressions of values. This does not mean that value is a theoretical fiction. Crisis proves otherwise...”

“It is possible (but practically difficult) to estimate values in terms of socially necessary labour time... In that sense value is determined prior to exchange, although it is not socially recognised...”

Now my question to you and other advocates of a “monetary theory of value” (and it is a genuine question from ignorance as I haven't read Heinrich or your article) is which of these statements, if any, would you disagree with? How does value act as the regulator of the capitalist system if there can be no measure other than price?


PS: I don't know if Martin still agrees with his 1980 position. Hopefully we'll hear from him.

Value, price and money

Hi Bruce,

Let me sidestep your invitation to answer specific statements of Martin's, with some generalizations which, I think, offer a suggestive framework of why what you call the "monetary theory of value" is crucial. I hope you don't take this as an evasion. I offer this approach because Martin's points as they are listed are decontextualized. I can't tell whether I agree with them or not, devoid of the broader arguments they were meant to uphold.

I would suggest that neo-Ricardianism is an approach that examines critical issues of political economy from conclusions that are thought to be derived from the physical structure of capitalist production. Most neo-Ricardian Marxists do not believe that their approach is in contrast to Marx’s for one simple reason. And that is that they believe that a formal proof, if you will, of the labor theory of value can be established – and only established – by the examination of a predetermined set of material conditions of production and real wages. From these it can be mathematically demonstrated that the rate of profit is positive if and only if the rate of exploitation is positive.

But this formal proof of the validity of the labor theory of value, a proof incidentally that Marx – in a familiar letter to Kugelmann – persuasively argued is unnecessary, comes at a theoretical cost. Money in this neo-Ricardian theoretical system is simply a means of exchange normalization: of transforming trading ratios into absolute magnitudes. Money in this system is a numeraire, but it is not a measure of abstract labor.

Let me give you an example from the first prominent neo-Ricardian, Borkiewicz. Transformed “exchange ratios” are normalized by his method in terms of the labor time units “embodied” in the gold producing sector (department III), whose value/price ratio is set by assumption to 1. Under these circumstances the output prices of department I and II are normalized in terms of the average concrete labor time embodied in the physical units of gold against which the products of the other departments are exchanged. For very good reasons, Marx held that the value/price ratio of any commodity could only equal 1 if its organic composition of capital is equal to the social composition of capital. If Bortkiewicz had fashioned the gold sector in his illustration along this basis, then the most important of Marx’s consistency identities (total values = total prices, total profits = total surplus value) would have held. But there is no theoretical reason for gold production to conform to this and therefore Bortkiewicz was well within reason not to do so.

So what we are left with is a monetary unit in the neo-Ricardian system that standardizes price, but which, in the general case, cannot perform the function of measuring value. What is critical, at least for what you – Bruce – I think are asking of me, is this. In the neo-Ricardian system, price cannot be established as value in the form of money, because money is no longer a measure of abstract labor time. It is only a measure of the average labor time concretized in a particular use-value against which all other commodities are exchanged. (As are all such efforts, even those efforts, such as Alfredo Medio’s which affects similar changes within a stylized Sraffan framework.) Marx, on the other hand, sees any particular commodity as a given sum of values – and therefore of capital in the form of money – in any state of its continuous metamorphoses through the various phases of production, exchange and realization.

How so? An hour of simple, average labor – labor of average skill and intensity -- is the basic unit of measure of abstract labor in the Marxian system. Marx captures this relationship by equating the sum total of annual productive labor time expended to the yearly value product expressed in money in which that labor is “embodied”. He therefore establishes an implicit link between the monetary unit and its labor-time content. It is the capitalistically generated exchange process that necessarily forges this link. Through this identity any economic activity evaluated in price terms is theoretically convertible into labor-time units. It is the comparability of this simple, average – undifferentiated – labor in terms of the price form of value that permits qualitatively different use-values to be marketed in set proportions at any moment within an ever changing production-structure.

Of course, Bruce, you are right to insist that price is a regulator of economic activity. But price in its neo-Ricardian form, disembodied from any connection to social labor (and therefore to value), plays no such parametric function. Or to put it specifically, neo Ricardians see a static economic structure and ask how trading ratios and profits would fluctuate in response to changes in distributional norms. Money, remember, plays no role other than the normalization of exchange ratios and this entire exercise so-conceived can be affected without the slightest reference to it.

One of the principle consequences of this is that the general rate of profit is determinable within the neo-Ricardian framework without any reference to labor time, value or price. (I believe that this method cannot determine a general rate of profit and that the entire method is riddled with internal contradictions in logic, but that discussion is far beyond what I can develop here.)

Marx, I think, correctly approached this from a more acute perspective, asking how the system of allocated labor is regulated under capitalism by means of prices; or alternatively, how the division of labor among the various spheres of production is assigned, disturbed and reshaped in response to changes in technique/productivity, investment and inter and intra class distributions of output through changes in the pricing structure. Exchange value is intimately connected to how the totality of social labor is addressed. It is the incessant adjustment of the social division of labor in response to demand, and therefore profitability, that both modifies prices and redistributes surplus-values. Value in the Marxian system first exists in monetary form as exchange value. What Marx did was to demystify that form by establishing the relationship between the labor process which is the bedrock of any given society, with the exchange process typical of capitalism, wherein the accumulation of capital is the means for the appropriation of surplus labor. It is the monetary unit that crystallizes value, profit and capital as socially derived expressions of homogeneous quantities of abstract labor time.

Heinrich’s article now available

Michael Heinrich’s article on Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s is now available on the Monthly Review website. Worth reading for his account of the evolution of Marx's political economy project, the texts and on the critique of crisis theory.

A further comment on Heinrichs MR essay

Does Heinrich’s article clarify anything? Let’s look at this old chestnut that Heinrich chews over. (A form of this also appears in Clarke’s article.)

Take his formulation:

p = s/ (c+v) ; which he rewrites as

p = s/v /
(c/v)+ 1

where p stands for the rate of profit, s for surplus value, c represents constant capital and v is variable capital. (In the Clarke formulation, c is the value of the fixed and circulating capital expended in production, v is the annual wage bill and s the total annual surplus value.) But in Heinrich’s formulation, which is the more general one, c is the stock of constant capital invested in the production process. But what then is v ? Heinrich unreflectively believes that v is simply variable capital, so that s/v stands for the rate of exploitation and c/v stands for the value composition of capital (or, perhaps in his formulation, the organic composition of capital). From this the argument is made that there is no reason for s/v to grow less rapidly than c/v. Therefore there is no basis to deduce a tendency for a falling rate of profit. This does not rule out the possibility of a falling rate of profit, but – per Heinrich – this is an empirical issue, not theoretically developed tendency.

What he misses is this. The v in the numerator (s/v) cannot stand for the same thing as the v in the denominator (c/v). The v in s/v is the annual wage bill. But the annual wage bill is a flow concept, whereas the v in c/v is, for lack of a better expression, a stock variable. It is the amount of wages capitalists must have on hand at any given time to meet their obligations. The stock of variable capital is related to the annual wage bill by the number of turnovers that take place during a year. For instance if a sector of production takes one month to produce and sell its output, the capitalist only needs 1/12 of the annual wage bill on hand as a stock of variable capital. The rest is repeatedly returned as sales are realized. Any additional tie up capital would be unnecessary.

Except for the case in which there is one annual turnover, Heinrich’s math is as pointless as the conclusions that he derives from it. If on the other hand c/v is to represent the division of the capital into that invested in machinery, plant, buildings, raw materials etc compared to that invested in wages no conclusions can be drawn from this exercise, without introducing one more variable, turnover time. But turnover time varies over the course of a business cycle, decreasing when sales are brisk and lengthening when sales are sluggish and inventories begin to build up.

The main thrust of Marx’s argument is that the process of productivity enhancement (extracting relative surplus value) is tied to the process of capital accumulation. If that is the case, a far better means of expressing this relationship can be derived. It would compare the growth of surplus value extracted per worker (assuming the working year to be fixed) to the amount of constant capital that has to be invested per worker to realize that result. This can be represented by:

P = s/(v + s) /
C/(v+ s) + V/( v+ s)

Here (v + s) is the annual value product per worker, C is the stock of constant capital invested in the production process and V is the stock of variable capital invested in the production process. s/ (v+ s) is the amount of surplus value extracted per worker; C/(v+s) is the stock of constant capital invested per worker (the organic compostion of capital) and V/(v +s) is the stock of variable capital invested per worker.

Now s/ (v + s) reaches a maximum of 1 as the rate of exploitation increases to the point that v, the wage bill, approaches zero. Conversely, V/(v+s) approaches 0. (Remember V x n turnovers = v ((the stock of variable capital x the annual amount of turnovers equals the wage bill)), so as v approaches 0, so too does V.)

The upshot is this. As long as C/(v+s) increases, there must eventually come a point in which the rate of profit falls, despite any temporarily offsetting increases in the rate of exploitation. It is for that reason that Marx, in my opinion, properly considers this law a tendency.

Is this enough of an insight for a full blown theory of crises? Clearly not. And Marx’s notes on this subject indicates that he believed additional and successive approximations to the empirical reality of crises needed to be studied.

To bring together how this law operates in reality involves, in my opinion, a more robust understanding of the concept of a profit rate, as a rate in which mobilized capital expands. The problem with leaving the theory where Marx left it is that it omits the entire banking and financial (and other nonproductive) sectors of the economy. How, for instance, is the rate of profit on banking or insurance to be measured? Against the stock of capital invested in brick and mortar and computers or against the stock of fictitious capital (securities, debt instruments, derivatives, etc) that comprise additional claims on surplus value?

If we, in fact, include these forms of capital into the denominator of the rate of profit, a clear tendency for the rate of profit to fall can be seen. I tried to do this in Solidarity and in the current issue of Critique by using the so-called Shift Index. This index derived by business for business demonstrates that the rate of return on balance sheets across the American economy has been in persistent decline since the 1960s. See also Alan Freeman’s essay, The Profit Rate in the Presence of Financial Markets, that reveals similar results for the economies of the US and UK:

I think these are the directions that we need to go if we are to develop the tendency of the falling rate of profit into more complete theory of accumulation and breakdown.