Important if you are into economic theory or the history of economics. It is chiefly an exploration comparing and contrasting Anwar Shaikh's Capitalism, Competition and Crises and Paul Baran and Paul Sweezy’s Monopoly Capital.
The third book is John Smith’s Imperialism in the Twenty-First Century. It is not reviewed in this post.
The post is longish but not wonkish. It is an easy read that is well worthwhile.
A Critique of Crisis Theory
Three Books on Marxist Political Economy
Sam Williams
The post is longish but not wonkish. It is an easy read that is well worthwhile.
A Critique of Crisis Theory
Three Books on Marxist Political Economy
Sam Williams
Here is an interesting tidbit. Walrus, who is the most single most influential economist historically as the founder of general equilibrium based on marginalism, is widely disparaged by heterodox economists for basing his theory on perfect competition theoretically and at least nearly so in practice.
Was Walrus really that naïve?
Well, it turns out that Walrus was no dummy. He understood what it would take practically — nationalization of land and zero income on wages, advocated for this as policy.
I have explained elsewhere in this blog that the term “socialism,” unlike “communism,” is imprecise. The Bolshevik Party of Lenin used the term “socialist,” but so did the bourgeois centrist Radical Socialist Party (7), which dominated the French Third Republic, which existed between 1871 and 1940. It was also used by Adolf Hitler and his extreme-right National Socialists—the Nazis. Could Leon Walras, the economist whose ideas more than any other form the basis of present-day neo-liberalism, also be a socialist? Yes! Indeed, Walras considered himself a “democratic socialist.”
Like certain radical followers of David Ricardo and Henry George and his followers in the United States, Walras believed that the land should be nationalized. The government would then depend on ground rent alone for its revenue. Walras was especially opposed to taxes on wages. If wages were not taxed and land was nationalized, Walras believed, wage workers would be able to transform themselves into self-employed individual businesspeople if they so desired. If the government followed these “democratic socialist policies,” Walras believed, the number of independent business people would explode, creating the conditions that would allow an approximation of perfect competition to be achieved in practice.
Today’s neo-liberal microeconomists, though their theoretical foundations are “Walrasian,” do not advocate the nationalization of the land nor do they oppose taxes on wages. On the contrary, they are both staunch supporters of private property in land just as they support private ownership of capital. And they support policies that attempt to shift the balance of taxation onto the shoulders of workers.
10 comments:
Interesting going to a talk by Shaikh tomorrow at Greenwich (London) Uni.
If Joan Robinson had had an "evil" twin sister, she might have disparaged the monopoly capital school as "bastard Marxism". I find the approach interesting in many respects, but it tends to mix elements of neoclassical, Keynesian and Marxist ideas.
I had issues with the linked post (for instance, its portrayal of the balanced budget multiplier and Keynesianism), but it does hit on a common misconception, which is that Marx's (and the classical) notion of "competition" is frequently mistaken for neoclassical "perfect competition".
Competition for Marx (and the classicals) meant free movement of investment flows in and out of sectors in search of the highest return. That's basically all it required. There are no assumptions of many small firms or price taking.
For Marx and the classicals, if investment is free to go wherever returns are highest, there is said to be "competition" and there will be a tendency (that would never be realized in actuality, even under competitive conditions) for rates of return to equalize across sectors.
The tendency toward equalized rates of return is inhibited to the extent that there is monopoly or rent. Competitive pressure may work to break down an instance of monopoly or rent over time, but in the meantime there will be above-normal profitability in some sectors. And new instances of monopoly or rent can emerge over time.
Monopoly and economic rent arise when investment flows are in some way inhibited. If, for some reason, there is a barrier to additional investment flowing to a high-return sector, above-normal profits will persist unless and until the barrier is removed.
There was never some early capitalism in which everything was completely competitive, whether in Marx's sense or in the neoclassical sense. Marx never argued this. He argued that total surplus value depends solely on the amount of surplus labor performed. Any above-normal profits enjoyed in some sectors due to monopoly or rent came at the expense of lower profits in other sectors. Total profit would remain unchanged. There would simply be a different distribution of total profit among industries.
It is not even a question of whether "capitalism has changed" such that Marx's notion of "competition" no longer exists, supposedly rendering his analysis no longer relevant. To the extent competition prevails, Marx's analysis of competition applies, and to the extent there are monopoly and rent, his analysis of monopoly and rent apply. That was the case in early capitalism, and it is the case today.
That doesn't necessarily mean Marx was right, of course. It just means the applicability of his analysis does not depend on the degree of competition that happens to prevail in a certain period in time.
Thanks for dropping in, Peter. I was hoping your would.
My read was that Sam Williams is saying that there is a difference in analysis in contemporary Marxism that shows up in the different between Baron and Sweezy's Monopoly Capital, which is calls the Monthly Review view, and Anwar Sheikh's Capitalism. After setting up the comparison and contrast, he then analyzes Sweezy's view. He says that an analysis of Sheikh's view will follow.
1. Do you agree with with his preliminary set up?
2. Does he get Sweezy right? In other words, Willams says he disagrees with Sweezy. Does he correctly understand and present Sweezy in your opinion?
3. The bridge between Marxism and PKE seems to be Sraffa. Any comment on that?
Hi Tom. My tentative take on each of your three questions:
1. Yes, I agree that there are two opposing perspectives on competition. One side, exemplified by the Monthly Review school, adopts neoclassical definitions of perfect competition, imperfect competition, oligopoly and monopoly, and suggests Marx is outdated, applying only to an earlier competitive capitalism. The other side, which includes so-called fundamentalist Marxists as well as proponents of the classical surplus approach (Sraffians), recognize that competition in Marx and classical political economy is not the same as "perfect competition" in neoclassical theory.
2. I would say he gets Sweezy's position passably correct (better than I could, anyway), although I think he gives short shrift to the stagnationist thesis that cannot be so easily dismissed IMO.
3. The connections between Marx and other heterodox approaches is, for me, an especially interesting question, but one that is difficult to answer. In one sense, yes, the view of competition, monopoly and rent in Sraffa and the surplus approach is more in keeping with Marx's notion of competition, monopoly and rent. This is because Marx inherited these concepts from Smith and Ricardo. In another sense, no, in that PKE and Marx both emphasize a monetary production economy, whereas money is less thoroughly integrated into the surplus approach and, apart from a brief note about the rate of interest, pretty much absent from Sraffa's Production of Commodities by Means of Commodities. The answer is further complicated by the fact that both PKE and the surplus approach eschew Marx's value theory. There is a question of how Marxist an analysis can be if Marx's theory of value is rejected, since this theory seems to be central and fundamental to Marx's analysis.
There is more I am tempted to add in relation to point 3. If I can come up with something coherent, I'll put it in a new comment.
Thanks for the input, Peter.
I think a bridge between Marx and PKE is available in MMT and, before that, Kalecki. I base this view partly on the following three observations:
1. Marx is arguably macro founded. That is, rather than his macro being built upon micro-foundations, it is his micro that is subject to macro constraints and built upon macro-foundations. I view MMT and Kalecki similarly.
2. Marx analyzes a monetary production economy. So does MMT (and Keynes and PKE).
3. Although Marx unfortunately appears to have been a metalist, his analysis of the (private) monetary circuit of capital is highly consistent with private-sector causation in MMT and PKE and readily amenable to endogeonous money within a state money system:
M – C … P … C’ … M’
At the beginning of the process, capitalists advance a sum of money (M) to purchase means of production and labor power, which are sold as commodities (C). Money used for the purpose of acquiring means of production and labor power is “capital”. So, capital begins as a sum of money and is then transformed into commodities to be used in production (P) to produce new commodities for sale (C’). Provided the amount of socially necessary labor performed exceeds the value of labor power, there is surplus value which, if realized, results in capitalists receiving a monetary amount (M’) which is in excess of the initial advance of money capital (i.e. M’ > M).
The source of the money initially advanced is unspecified. It could be created through private lending. Or it could be drawn from past savings (in which case we know it must be the result of previous money creation, whether through lending or government spending). This entry point seems amenable to integration with MMT and PKE.
The main difference between Marx and PKE when it comes to the monetary circuit is that PKE focuses only on money and physical quantities, whereas Marx considers not only these but also money as an equivalent for an amount of socially necessary labor time. So while in PKE there is a physical surplus (investment goods and capitalist consumption goods), and a corresponding monetary surplus, there is no presumption that the monetary amount of total profit is connected to surplus labor (in fact, usually a rejection of the idea).
But it seems clear to me that Marx’s theory of value provides a possible explanation of the real basis of profit. You only have to consider some of Kalecki’s macro ratios to get a sense of this compatibility:
Kalecki’s Narrow Markup = Nominal Income / Money Wage Bill
In Marx’s terms, nominal income is equal to new value added in monetary terms ($v + $s) and the money wage bill is $v. Therefore:
Kalecki’s Narrow Markup = ($v + $s)/$v = 1 + s/v
In other words, Kalecki’s narrow measure for the aggregate markup is 1 plus the rate of surplus value.
His broad measure of the markup takes account of the cost of raw materials:
Kalecki’s Broad Markup = Turnover/(Money Wage Bill + Materials Cost)
In Marx’s terms, turnover is total price and materials cost is constant capital (excluding depreciation). So, in the absence of fixed capital,
Kalecki’s Broad Markup = ($c + $v + $s)/($c + $v) = 1 + s/(c + v) = 1 + r
That is, 1 plus the rate of profit.
Kalecki eschews value theory, but there is no reason these ratios cannot be explained in Marx’s way.
Think also of Kalecki’s “degree of monopoly”, which he considered to reflect various institutional factors. As the above identities indicate, these can just as easily be regarded as institutional influences on the rate of surplus value.
(continuing)
(continued)
Having said all the above, there does appear to be a point at which we may have to side either with Marx or with MMT. It is on the question of what is ultimately determining? Is it the imperatives of (private) capital? Or is it the collective employment of state money?
A Marxist will tend to argue that capitalist imperatives will annihilate everything in their path. MMT, in contrast, suggests that the general public has ultimate control over the limits within which the profit motive and private capital are permitted to hold sway.
I side with MMT in the specific sense that I think the instrument of state money offers us a way forward that is neither reliant on private capital nor subservient to it. However, making meaningful progress in this direction requires mounting a grassroots challenge to capital and governments who seem intent (as Marxists would correctly point out) on singing to the tune of capitalists. As long as the state operates in this fashion, capital is probably determining, and I believe in that sense Marxists are correct. If we mount an effective challenge, capital can become less determining, and perhaps not at all determining. Of course, at this point we will have transcended capitalism, so perhaps there is no real disagreement between Marx and MMT on this point other than the latter’s implication that state money offers a means of getting from where we are now to where we want to be.
Tom, I think you wrote something more or less along the same lines, though much more succinctly, when I first encountered MMT; something about MMT showing that capital need not be determining if we make appropriate use of state money.
Scott Ferguson appears to think along similar lines, for instance here:
http://arcade.stanford.edu/content/unheard-center-critique-after-modern-monetary-theory
Note also Bill's recent posts on workers needing to recognize the progressive potential in modern money.
Having just come back from a talk by Shaikh he did mention that he didn't find the idea of Monopoly Capitalism useful IIRC, although can't find it in my notes...will have to pile into his book.
Peterc: there is no real disagreement between Marx and MMT on this point other than the latter’s implication that state money offers a means of getting from where we are now to where we want to be.
You're probably right about modern "Marxists" - so OK, if one replaces Marx" with "modern 'Marxists' " everywhere above. But the idea of the magical power of private capital over state power, over state money used for public purpose is something Marx and earlier generations of Marxists laughed at. So there is no difference between Marx & MMT here. And "the capitalists", as opposed to their propaganda, propagandists and dupes like those modern "Marxists" have of course always agreed with Marx & MMT.
The hardest thing in chess is to win a won game. (Alekhine, I think) The first thing you need to do to win is to recognize when you have a won game. But the "left" response these days when confronted with an obviously won game is usually - "I resign".
Hi Calgacus. Very interesting. Thanks.
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