Capitalism in the 21st Century: Through the Prism of Value (IIPPE)

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Fundamental. Roberts and Carchedi explains the characteristics of the current world through its most objective dimension - the theory of value - which, in an anti-dialectical way, has been forgotten by the left in recent decades'

However, when it comes to empirically validating their theory with data, Carchedi and Roberts calculate a “value rate of inflation” by combining the purchasing power in value terms with money quantities. Yet, it is unclear why the combined purchasing power can be used to measure the amount of new value created. In my opinion, the work on inflation needs to be presented with much greater clarity and transparency. The view of Carchedi and Roberts is that neither mainstream nor Marxist theories of inflation have adequately explained changes in price inflation in economies with fiat currencies. 12 Unfortunately, this still appears to be the case. 13 Crises, robots and knowledge The authors argue that there has been a long-term decline in the US inflation rate measured by the Consumer Price Index from 1960 to 2019. Within that 60-year period, there are 2 phases. In the first, between 1960 and 1979, inflation was rising; in the second, between 1980 and 2019, inflation fell. The relationships between total value, constant capital, and the combined purchasing power of wages and profits are then used to explain the two different periods as well as the overall fall in the rate of inflation in the long run. The monetarist theory of inflation, dominant in the 1980s, restricts its analysis solely to the supply of money; if there is too much money injected into the system (by governments or central banks), then inflation goes up, if there is too little, then there is deflation. However, ‘the empirical evidence for the monetarist view is weak’ (p.80), and has in effect been proven wrong by the behaviour of inflation over the last twenty years. Most recently, during the pandemic, credit injections did not stoke inflation, partly because there was ‘an unprecedented fall in the velocity of money’. The lines of causation drawn by monetarism between money supply and inflation can just as easily be reversed; for example, if inflation is slowing, or there is an economic downturn, the money supply is reduced (because these factors encourage hoarding), rather than the other way around. In essence, monetarism takes too narrow a focus to be able to explain anything successfully. The major factor influencing profitability is technology. New technologies replace workers with means of production. They produce less value and surplus value but realise more value at the cost of the technological laggards. The latter, in their turn, will shift to more efficient technologies. It is this continual process of modification driven by changes in technology and competition that tells you that Marx’s law of value is not a static equilibrium theory, instead, that the process of commodity production is in continual motion. When a production process (P1) terminates, another one (P2) begins, that is, the outputs of P1 become the inputs of P2. The value of the inputs of P2 is then their value contained as output of P1. This is the basis of the temporalist theory of the transformation of (1) labour into value and of (2) value contained into value realised, which is usually referred to as the transformation of value into price. A sweeping, authoritative and accessible overview of major issues in the global economy from a Marxist perspective

References

Choonara, Joseph, 2022a, “The Gathering Storm”, International Socialism 175 (summer), http://isj.org.uk/the-gathering-storm In the view of Carchedi and Roberts, transitional economies are a description of economies that are now in an intermediate stage between capitalism and socialism. They argue, however, that China is not moving towards socialism, but rather is in a “trapped transition”. This raises all sorts of questions. For Marx, the existence of a state is evidence for the domination of one class over another. If the Chinese state owns the bulk of the means of production, what class is in power in China? What is the nature of this state? What is the mode of production? The whole idea of a transitional economy outside a period of revolutionary transformation appears to make little sense within the context of Marx’s thought. The authors conduct a number of other tests to determine the value of human capital at high-income levels, including whether most top earners are simply children of 1-percenters living off an inheritance, and they find that more than three quarters of top-earning children are “self-made.”

However, Carchedi and Roberts have a different view of imperialism to the one outlined above. In their view, imperialism is defined in terms of the relationship between a technologically advanced country and a technologically undeveloped one: 24 Capitalism changes shape as it develops, and the economy develops a greater mass of constant capital (machinery, infrastructure and so on) over time, relative to what can circulate within the economy. That this deflationary tendency is a reality is borne out by the data over the period 1960-2018 which shows ‘a long-term secular decline in the US consumer price index (CPI) inflation’, even despite inflationary periods, such as that of the 1970s (p.76). A Marxist theory of inflation As capitalism develops, new labour-saving and productivity-increasing ­technologies replace the old ones, and the amount of constant capital rises in relation to variable capital (outlay on wages). Because labour power hired with variable capital is the only part of capital that produces value (and thus also surplus value), the amount of value (and thus, other things being equal, of surplus value) falls relative to total capital invested. This depresses the rate of profit—unless there is a faster increase in the rate of surplus value, among other counter-tendencies. However, Marx contends that the law will assert itself sooner or later, that is, when the counter-tendencies can no longer counter the tendency. 14

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Carchedi and Roberts argue that modern capitalism is increasingly no longer dominated by the production of things, but rather increasingly by the production of knowledge. 21 The product of mental labour is knowledge, which has to be commodified and sold. Knowledge commodities can include commodified data, computer software, chemical formulae, recorded music, films and patented information. Both tangible objects and mental objects require the expenditure of human energy and can be productive of value: Notes: This figure plots the share of total top income in the form of wages, business, and other capital income for each income bin. Note that “Other capital income,” beyond “Wages” and “Business,” does not play a significant role until roughly the top one-tenth of 1 percent income bin. Regular readers of Roberts’s excellent blog, “The Next Recession”, will be ­familiar with many of the arguments presented here about money. Marx developed his theory of money in the first three chapters of the first volume of Capital: Over time, the effect is for the quantity and capital cost of the means of production to increase relative to the labour required to produce goods. Marx calls this shift in the balance of machinery compared to labour, a rise in the organic composition of capital. The problem for capitalism is that machinery can only transfer the value already embedded in its own production. It cannot create surplus value; only labour can do that. This means that overall, capital becomes less profitable the higher the organic composition of capital. This is the tendency for the rate of profit to fall. Carchedi and Roberts discuss this law, and the various countervailing factors which act against it, in detail, but also refer to the increasing volume of evidence showing its empirical validity across economic history.

A better understanding of income at top levels is helpful as policymakers discuss the ramifications of, and responses to, income inequality Choonara, Joseph, 2022b, “Uncertain Future: Workers in the Pandemic”, International Socialism 173 (winter), https://isj.org.uk/uncertain-futures Where bourgeois economics takes its starting point from ‘common sense’ assumptions, that is, the immediate appearance of things, Marx, as always, delves beneath the surface to reveal the hidden workings of the system. In investigating the nature of value, he is therefore able to show the exploitative heart of capitalism. On the surface, a worker receives a fair wage according to the value of labour in the market, but in reality, that wage is less than the total value a worker produces. It is this difference, surplus value, which alone is the source of profit. Once these hidden realities of value are laid bare, the full dynamics and contradictions of the system follow. The puzzle of inflation

The association of planning, ownership and control by the state with a move towards socialism is very common across the entire political spectrum from left to right. Apparently, the greater state ownership and planning exists, the more progress towards socialism has been achieved. Nationalisation itself is seen as progressive. This is a conception of socialism that has been rejected by the political tradition associated with this journal, which has always argued that a transition towards a socialist society requires direct workers’ control over the economy. PDF / EPUB File Name: Capitalism_in_the_21st_Century_-_Guglielmo_Carchedi.pdf, Capitalism_in_the_21st_Century_-_Guglielmo_Carchedi.epub