The relevance of Marx’s theory of value and his ‘law of the tendency of the rate of profit to fall’ to the analysis of the financial crisis of 2007–8 and the ensuing global slump is affirmed. The hypertrophic growth of unproductive constant capital, including the wages of ‘socially necessary’ unproductive labour and tax revenues, is identified as an important manifestation of an historical-structural crisis of capitalism, alongside the increasing weight of fictitious capital and the proliferation of fictitious profits in the lead-up to the financial crisis. These phenomena have obscured the deepest roots of the global slump in the long-term profitability problems of productive capital – that is, in a crisis of surplus-value production. With these considerations taken into account, a better empirical assessment of trends in the composition of capital becomes possible, and with it a more accurate understanding of the impact of the ongoing displacement of living labour from production on the average rate of profit and the future of US and global capitalism.
KlimanAndrew‘Appearance and Essence: Neoliberalism, Financialization, and the Underlying Crisis of Capitalist Production’Marxist-Humanist Initiative2010a17 May available at: <http://www.marxisthumanistinitiative.org/economic-crisis/appearance-and-essence-neoliberalism-financialization-and-the-underlying-crisis-of-capitalist-production.html>.
LapavitsasCostasLevinaIren‘Financial Profit: Profit from Production and Profit upon Alienation’Research on Money and Finance2010available at: <http://researchonmoneyandfinance.org/media/papers/RMF-24-Lapavitsas-Levina.pdf>.
ReutenGeert‘On the Quantitative Homology between Circulating Capital and Capital Value – The Problem of Marx’s and the Marxian Notion of “Variable Capital” ’2006paper for the 2006 Historical Materialism annual conference ‘New Directions in Marxist Theory’ draft November 2006.
SmithMurray E.G.‘Author’s Reply to Reviews of “Global Capitalism in Crisis: Karl Marx and the Decay of the Profit System” ’Global Discourse2011available at: <http://globaldiscourse.files.wordpress.com/2011/05/smith-reply.pdf>.
See among others Smith2010Carchedi 2011 Freeman 2009 Shaikh 2010 and Harman 2009a.
Marx 1859; Smith2010.
Reuten and Williams1989p. 118 Addenda a.
Cf. Albo Gindin and Panitch2010p. 39.
See Leontieff1982Shaikh and Tonak 1994 and Webber and Rigby 1996.
Shaikh1978p. 244. For insightful critiques of the ‘choice of technique’ argument that are complementary but not identical to Shaikh’s see Freeman 1998 and Reuten and Williams 1989 p. 117 who argue that ‘Once the theory is cast in dynamic terms conditions of existence (or appropriate “microeconomic foundations”) for the TRPF can indeed be provided and the analysis of the Okishians reduced to a special case’. Reuten and Williams seek to provide such microfoundations inter alia by emphasising the issue of ‘capital stratification’ and centralisation as contributing to a rising composition of capital. They write: ‘. . . whilst the average rate of profit decreases profit is “redistributed” from the bottom to the top of the stratification’ (Reuten and Williams 1989 p. 134).
Smith2010p. x. The discussion on the next few pages borrows from Smith 2011.
See Smith199319942010 and Smith and Taylor 1996.
See for example Laibman1992.
See Moseley1991Shaikh and Tonak 1994 Shaikh 1999 and Mohun 1996. It should be noted that some Marxists view unproductive wage-labour as a phenomenon largely confined to the capitalist state. See for example Reuten and Williams who write: ‘The state . . . constitutes a drain on value produced since it employs labour the productivity of which cannot be regulated on mono-dimensional value criteria . . .’ (Reuten and Williams 1989 p. 272).
Smith2010p. 89; see also Smith 1984. It should be noted that massive amounts of constant capital understood as PEV are also stored up in physical assets whose value is not represented in annually measured gross output.
See Brenner1998Duménil and Lévy 2004 and Freeman 2009.
Smith and Taylor1996.
Shaikh2010p. 48. We note that Shaikh does not attempt to justify his implicit notion that the before-tax rate of profit rather than the after-tax rate ‘drives active investment’.