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Marx's Economic Theory and Contemporary Capitalism

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Marx's Economic Theory and Contemporary Capitalism MARX’S ECONOMIC THEORY AND CONTEMPORARY CAPITALISM FRED MOSELEY 1 INDICE I. MARX’S THEORY OF PROFIT ...................................................................................................................... 1 II. MARX’S THEORY OF THE FALLING RATE OF PROFIT ............................................................................ 3 III. POSTWAR UNITED STATES ECONOMY................................................................................................... 5 1. FALLING RATE OF PROFIT .................................................................................................................... 5 2. ATTEMPTS TO INCREASE THE RATE OF PROFIT .............................................................................. 6 3. UNPRECEDENTED DEBT ....................................................................................................................... 7 IV. CONCLUSION.............................................................................................................................................. 9 V. REFERENCES ............................................................................................................................................ 10 1. It is often said these days (especially by the rate of profit. The third section applies economists) that Marx’s theory is “dead” or Marx’s theory to the postwar US economy. The “obsolete”. It is argued in this paper that this paper concludes with an assessment of the assertion is blatantly false. The dominant likelihood of another Great Depression in the purpose of capitalist production is profit, and US economy in the years ahead, based on therefore the explanation of profit should be the Marx’s theory. main goal of a theory of capitalism. Marx’s theory provides a logically coherent theory of I. MARX’S THEORY OF PROFIT profit, which has considerable explanatory power (to be discussed below). Marx’s theory 3. Marx’s theory provides the best theory by far also provides a logically coherent and of profit, the all—important dominant purpose empirically strong theory of the trend in the rate of capitalist production, and the main question of profit over time. In striking contrast, in a theory of capitalism. Mainstream economic mainstream economic theories provide no theories provide almost no theory of profit at coherent theory of profit, and no theory at all of all, and certainly no theory with comparable the trend in the rate of profit over time. explanatory power to Marx’s. Mainstream Therefore, far from being “dead”, if we want to macroeconomic theory has not theory of profit understand profit and the rate of profit, Marx’s at all; in other words mainstream theory is absolutely essential. There is simply macroeconomics attempts to provide a theory no other credible theory of profit and the rate of of capitalism without a theory of profit! It is profit available, besides Marx’s theory. like trying to have a theory of the Catholic 2. The first two sections of this paper briefly church without the Pope. Mainstream review Marx’s theory of profit and the trend in 1 Mount Holyoke College USA MARX’S ECONOMIC THEORY AND CONTEMPORARY CAPITALISM 1 microeconomics has attempted to provide a capitalists will continually attempt to increase theory of profit (or what it calls interest), the the length of the working day in order to “marginal productivity” theory, according to increase surplus labor, or will resist attempts of which interest is determined by the marginal workers to reduce the length of the working productivity of capital. However, this theory day. Thus a conflict over the length of the has been shown to be logically contradictory (as working day is inevitable in capitalism. This a result of the “capital controversy”), and has conclusion is obviously supported by the little or not explanatory power. This theory is empirical evidence of actual conflict over the now in general disrepute and is being quietly length of the working day throughout the dropped (in hopes that no one will notice) from history of capitalism. microeconomics textbooks at both the graduate 7. A conflict over the working day cannot be and undergraduate levels. deduced from the neoclassical marginal 4. Marx’s theory, by striking contrast, provides productivity theory of interest. According to a logically robust theory of profit with very this theory, interest depends on the marginal impressive explanatory power. Marx’s theory productivity of capital and does not depend in of profit is of course that profit is produced by any way on the length of the working day. the surplus labor of workers. That is, it only 8. Furthermore, according to the neoclassical takes a part of the working day for workers to theory of the supply of labor, the working day produce value equal to their wages (the is determined by the workers own preferences; “necessary labor” portion of the working day). i.e. workers choose by themselves the length of In the remainder of the working day, the value their working day! Thus, according to this produced by workers becomes the profit of theory, there should be no conflict between capitalists. Therefore, Marx’s theory concludes capitalists and workers over the length of the that the profit of capitalists is the result of the working day. This theory simply does not fit exploitation of workers, because the value the facts of a persistent conflict over the produced by workers is greater than the wages working day, whereas Marx’s theory of profit they are paid. provides a clear and coherent explanation of 5. It follows from this theory that capitalist is this pervasive conflict. inherently and unavoidably an unjust and 9. A related conclusion of Marx's theory of exploitative economic system. Capitalism profit is the inherent conflict over the intensity cannot exist without profit, and profit cannot of labor effort. This prediction also follows exist without the exploitation of workers. No directly from Marx's surplus labor theory of amount of reforms within capitalism can alter profit, in the same way as the conflict over the this basic fundamental truth. If we want a just length of the working day just discussed. An and equitable economic system without increase in the intensity of labor is an exploitation, then Marx’s theory suggests that alternative way, besides an increase of the we must change the economic system from working day, of increasing the total labor and capitalism to socialism. thus of increasing the surplus labor (an 6. Marx’s theory of profit has considerable “intensive” increase of labor rather than an explanatory power (see Moseley 1995 for a “extensive” increase). This conclusion is also comprehensive appraisal of the explanatory strongly supported by the empirical evidence of power of Marx’s theory). One important the pervasive, ever—present conflict over the conclusion that follows form Marx’s theory of intensity of labor within capitalist workplaces, profit is an inherent conflict over the length of as every worker knows. the working day. Since the amount of profit is 10. By contrast, the neoclassical marginal determined by the amount of surplus labor, productivity theories of interest provides no MARX’S ECONOMIC THEORY AND CONTEMPORARY CAPITALISM 2 explanation of the conflict between capitalists hence the rate of profit, is not a variable at all. and workers over the intensity of labor. Instead, The microeconomic marginal productivity according to this theory, interest is independent theory of profit (or interest) is entirely static, of the intensity of labor. Therefore, these which means that the theory is limited to one theories cannot explain why there should be a period of analysis, in which there is no conflict over the intensity of labor. technological change. Therefore, aside from its 11. Another very important conclusion derived internal logical contradictions, marginal from Marx’s theory of profit is the inherent productivity theory does not even attempt a tendency toward technological change in theory of the trend in the rate of profit. capitalist economies. Marx’ theory of profit 15. I assume that participants in this conference argues that, since the amount of profit depends are familiar with Marx’s theory of the falling on the amount of surplus labor, the rate of profit. I will just review the highlights to development capitalism will be characterized remind us of the most important points. I will by continual attempts to increase the surplus express Marx’s theory in non—technical terms, labor portion of the working day. Once legal with occasional translation into technical terms limits to the length of the working day are (see Moseley 1991, Chapter 1, for a further established, the primary means by which discussion of Marx’s theory of the falling rate surplus labor can be increased is through of profit). technological change which increases the 16. Marx’s theory of the falling rate of profit productivity of labor and which thereby reduces focuses on the effects of technological change necessary labor. —an inherent, ever—present feature of 12. The historical evidence obviously strongly capitalist economies (although entirely ignored supports this definite prediction of Marx's by mainstream economics), as we have seen. theory. Continual technological change which Marx’s theory argues that technological change increases the productivity of labor is one of the tends to replace workers with machines (i.e. is most prominent characteristics of capitalist “labor—saving”), and thus tends to reduce the economies.
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