Invisible Leviathan: Marx's Law of Value in the Twilight
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Invisible Leviathan Historical Materialism Book Series Editorial Board Sébastien Budgen (Paris) David Broder (Rome) Steve Edwards (London) Juan Grigera (London) Marcel van der Linden (Amsterdam) Peter Thomas (London) volume 177 The titles published in this series are listed at brill.com/hm Invisible Leviathan Marx’s Law of Value in the Twilight of Capitalism By Murray E.G. Smith LEIDEN | BOSTON First printed in 1994 as Invisible Leviathan: The Marxist Critique of Market Despotism Beyond Postmodernism by University of Toronto Press. This second and revised edition includes a new Foreword by Michael Roberts, and a Preface to the Second Edition. The Library of Congress Cataloging-in-Publication Data is available online at http://catalog.loc.gov LC record available at http://lccn.loc.gov/2018043940 Typeface for the Latin, Greek, and Cyrillic scripts: “Brill”. See and download: brill.com/brill‑typeface. ISSN 1570-1522 ISBN 978-90-04-31219-7 (hardback) ISBN 978-90-04-31220-3 (e-book) Copyright 2019 by Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Brill Hes & De Graaf, Brill Nijhoff, Brill Rodopi, Brill Sense, Hotei Publishing, mentis Verlag, Verlag Ferdinand Schöningh and Wilhelm Fink Verlag. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill NV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA. Fees are subject to change. This book is printed on acid-free paper and produced in a sustainable manner. Contents Foreword ix Michael Roberts Preface to the Second Edition xiv Preface to the First (1994) Edition (Excerpts) xix Acknowledgements xxii Figures, Charts and Tables xxiv 1 Invisible Leviathan: Marx’s Law of Value in the Twilight of Capitalism 1 1 Reflections on Wealth, Human Development and the ‘Triumph’ of Capitalism 2 2 The Triple Crisis of the Twenty-First Century 6 3 The Necessity of Marx’s Value Theory in the Twilight of Capitalism 9 2 The Value Abstraction and the Dialectic of Social Development 19 1 The Value Abstraction in Pre-capitalist History: Cognitive Faculties as Forces of Production 23 2 Cohen, Sayer and Söhn-Rethel on Historical Materialism 30 3 Value Relations and Social Progress 39 4 An Unresolved Issue 43 3 Science, Ideology and ‘Economic Value’ 45 1 The Labour Theory of Value in Classical Political Economy 46 2 The Economics Profession Repudiates the Labour Theory of Value 49 3 Labour Value: From ‘Ricardian Socialism’ to Marx 50 4 Marginalism versus Marx 53 5 Science, Ideology and the Theory of Value 55 4 Marx’s Capital and the Early Critiques 58 1 Elements of Marx’s Theory of Value 58 2 Value, Capital, and Exploitation 75 3 Value, Capitalist Competition, and the General Rate of Profit 81 4 Traditional Criticisms and Orthodox Responses 83 5 The Controversy Surrounding the ‘Transformation Problem’ 91 vi contents 5 Currents within the Value Controversy 97 1 The Second Phase of the Value Controversy 98 2 The Neo-Ricardian Challenge 101 3 Neo-orthodoxy and the Rediscovery of the Value-Form 110 4 Fundamentalist Value Theory 120 5 Trends in the Value Controversy since the 1990s 137 6 An Assessment of the Value Controversy 163 1 Preliminary Thoughts on the Road Just Travelled 163 2 Some Philosophical and Methodological Considerations 165 3 Theoretical Considerations 182 4 Value Theory and Programme 189 7 Value, Economy and Crisis 195 1 Capitalist Development and Its Cyclical Crises 198 2 The Falling Rate of Profit and the Dimensions of Capitalist Crisis 202 3 Tendencies Counteracting the Fall in the Rate of Profit 207 4 Theoretical Arguments Surrounding the Law of the Falling Rate of Profit 210 5 Dimensions of Capitalist Crisis 215 6 Crises of Valorisation and Crises of Realisation 217 7 The Historical-Structural Crisis of Capitalism 220 8 Socially Necessary Unproductive Labour, Valorisation and Crisis 223 1 Marx and the Problem of Unproductive Labour 223 2 SNUL and Marx’s Value Categories 229 3 Constant Capital and Capital Fetishism 235 4 Theoretical Advantages of Treating SNUL as Constant Capital 238 9 Imperialism, Unequal Development and the Law of Value 241 1 Unequal Capitalist Development on a World Scale 241 2 Emmanuel’s Theory of Unequal Exchange 243 3 Critiques of Emmanuel 246 4 Shaikh’s Critique of Emmanuel and the Ricardian Theory of Trade 249 contents vii 10 ‘Testing Marx’ in the Twilight of Capitalism: Marxian Value Categories, National Income Accounts, and the Crisis of Valorisation 253 1 Part I: the Profitability Crisis of the 1970s and 1980s: Contradictory Testimonies of Empirical Marxian Research 256 2 Part II: the LTRPF and the Rise of ‘Fictitious Capital’: the Case of the US Economy, 1950–2013 272 3 Profitability Trends in the US Economy: Some Recent Findings and Debates 284 4 Appendix 1: Data Sources and Methods for Smith (1991b) Study of Canadian Economy, 1947–80 304 5 Appendix 2: Data Sources and Methods Used in Smith-Taylor (1996) Study of the Canadian Economy, 1947–91 305 6 Appendix 3: Data Sources and Methods Used in Smith-Butovsky (2018) Study of the US Economy, 1950–2013 306 11 Beyond the Law of Value: Class Struggle and Socialist Transformation 307 1 The Working Class, Value, and Anti-capitalist Struggle 311 2 Value Theory and Socialist Construction 334 Bibliography 341 Index 360 Foreword The message of Murray Smith’s book is aptly portrayed by its title, Invisible Leviathan. The book sets out to explain why Marx’s law of value lurks invis- ibly behind the movement of markets in modern capitalism and yet ulti- mately explains the disruptive and regular recurrence of crises in production and investment that so damage the livelihoods (and lives) of the many glob- ally. This book is a profound defence (both theoretically and empirically) of Marx’s law of value and its corollary, Marx’s law of the tendency of the rate of profit to fall, against the criticisms of bourgeois, ‘mainstream’ economics, the sophistry of ‘academic’ Marxists, and the epigones of the classical school of David Ricardo and Adam Smith. As the author points out, even the great majority of ‘left’ commentators concur that the causes of the ‘Great Recession’ of 2007–09 and the ensuing global slump are not to be found in Marx’s theories, but rather in the excessive greed of corporate and financial elites, in Keynes’s theory of deficient effective demand, or in Minksy’s theory of financial fragility. When acknowledged at all, Marx’s value theory and his law of profitability are attacked, marginalised or dismissed as irrelevant. None of this should be surprising given the main political implication of Marx’s laws: namely, that there can be no permanent policy solutions to eco- nomic crises that involve preserving the capitalist mode of production. I am reminded of the debate at the 2016 annual meeting of the American Economics Association between some Marxists (including myself) and leading Keynesian Brad DeLong, who seemed to characterise us as ‘waiting for Godot’ – that is to say, as passive utopians, waiting for collapse and revolution – while he stood for ‘doing something now’ about the deplorable state of capitalism. But as Smith explains so well, it is the ‘practical’ Keynesians who are the real utopians in ima- gining that actually existing, twenty-first-century capitalism – characterised by crises, war and ‘the avarice and irresponsibility of the rich’ – can still be given a more human and progressive face. Against the many variants of ‘practical’ economics, Smith’s book sets out to: uphold Marx’s original analysis of capitalism, not only as the most fruit- fully scientific framework for understanding contemporary economic problems and trends, but also as the indispensable basis for sustaining a revolutionary socialist political project in our time. It does so by examin- ing the crisis-inducing dynamics and deepening irrationality of the cap- italist system through the lens of Marx’s ‘value theory’ – which, despite x foreword the many unfounded claims of its detractors, has never been effectively ‘refuted’ and which continues to generate insights into the pathologies of capitalism unmatched by any other critical theory. Marxian value theory has been subject to ridicule, distortion and incessant rebuttal ever since it was first expounded by Marx 150 years ago. And the simple reason for this is that value theory is necessarily at the core of any truly effective indictment of capitalism – and essential to refuting its apologists. What truly motivates the ‘Marx critique’ of the bourgeois mainstream is graphically con- firmed by the (in)famous argument of Paul Samuelson (the leading exponent of the ‘neoclassical synthesis’ in mainstream economics after World War II) according to which Marx’s value theory is ‘redundant’ as an explanation of the movement of prices in markets. The market, you see, reveals prices, and that is really all we need to know. It is instructive to note that, shortly after Samuelson’s 1971 broadside against Marx, the (recently deceased) neoclassical economist William Baumol offered a trenchant response to Samuelson’s ‘crude propaganda’. In a paper from 1974, Baumol pointed out quite correctly that Samuelson had entirely misunder- stood Marx’s purpose in his discussion of the so-called transformation of values into prices. Marx did not want to show that market prices were related directly to values measured in labour time. Quite the contrary: The aim was to show that capitalism was a mode of production for profit and profits came from the exploitation of labour; but this fact was obscured by the market where things seemed to be exchanged on the basis of an equality of supply and demand.