[OPE-L:3456] Re: Gil's necessary conditions

From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Thu Jun 08 2000 - 19:03:04 EDT

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This is my amended response to Mike L.'s post 3378, the one that begins

> Gil really seems to gone off the deep end into neoclassical theory in 3369.

As I indicated before, amendment is called for because I think I didn't
fully appreciate Mike's [pen?]ultimate point. Now I think I do, but rather
than go point by point through his post again, I'll just make my response
directly and refer the interested reader to my earlier reply
[#3382] where expedient for relevant details.

1) The point at issue is the thought experiment I constructed in #3369 (a
response to Paul Z.) as an alternative way of illustrating the impact of my
Chapter 5 critique. Briefly put, I argued that contrary to Marx's
suggestion in Ch. 5, an exchange economy that systematically yielded
surplus value is *essentially* one in which price-value disparities arise.
The way I argued this was to posit two conditions that Marx explicitly took
to be *necessary* for systematic capitalist exploitation: complete
expropriation of the working class, and (tautologically) the absence of
excessive accumulation on the part of the capitalist class.

I then argued that these two conditions were analytically equivalent to a
setting of absolute scarcity in markets for physical or financial capital,
a condition that *necessitates* a divergence between price and value for
the relevant commodities acting as capital, even if prices equal values for
all other commodities. That is, translated into neoclassical terms, the
conditions invoked by Marx imply that the aggregate demand curve for
capital would cross the aggregate supply curve in its vertical component,
above the supply price. [This argument holds without reference to
capitalist risk-aversion or impatient time preferences; including these
would only strengthen the conclusion by eliminating the need to represent
surplus value as corresponding to pure economic rents.]

Note that in this analysis, surplus value requires the creation of new
value subsequent to the initiation of a given circuit of capital, just as
Marx's definition of surplus value as "valorization" requires. But Marx's
definition of surplus value also requires that capitalists *appropriate*
some portion of this newly created value, or surplus value doesn't exist
(thus, to anticipate a discussion with Rakesh, the "origin" of surplus
value, by Marx's own calculation, requires *both* value creation (VC) and
value appropriation by capitalists (VA)).

Thus, contrary to Marx's Ch. 5 suggestion that price-value disparities are
"incidental" to the existence of surplus value, this thought experiment
suggests that they are in a deep sense *integral* to the existence of
surplus value---according to Marx's definition of the term.

2) Mike's point, if I now understand it correctly, is that my thought
experiment is flawed because I stopped too soon in listing Marx's necessary
conditions for the systematic existence of surplus value, and he quoted in
support the well-known passage from the bottom part of p. 899 (Penguin ed.)
of Capital V. I , beginning "It is not enough..."(about 3.5 pages into Ch.
28, for those of you with another edition).

It is clearly true that this passage suggests a sense in which capitalist
production is *also*, a necessary condition for the systematic reaping of
surplus value. As such it constitutes a valid challenge to the conclusion
repeated in step 1 above, because *given* the universal dependence of
capitalist exploitation on capitalist production, it is of course logically
*possible* for surplus value to exist, even with price-value equivalence,
in this case.

The question is now therefore what impact Mike's critique has on my thought
experiment, and in particular what the impact of the logical *possibility*
noted just above has on my argument.

3) Before addressing that question though, I want to note that contrary to
Mike's the suggestion the issue has nothing to do with whether I've become
excessively "neoclassical" in my reference to conditions of absolute
scarcity as the basis for surplus value. Not at all.

On one hand, we all know that Marx identifies historical conditions in
which the *existence* of surplus value did not require capitalist control
of production--just conditions tantamount to what I've called absolute
capital scarcity (references to historical cases of usury and merchant
capital given in earlier posts). Moreover, I'll argue below that it's not
clear that capitalist control of production is necessary for the
*existence* (as opposed to the maximal realization) of surplus value, even
under the capitalist mode of production, even according to Marx's own

On the other hand, neoclassical theory does not categorically dismiss the
need for capitalist control of production in the appropriation of profit;
to the contrary, there is a very well articulated theory as to why direct
control may be generically necessary for the maximal realization of profit.

Conclusion: whatever error I might have made in constructing this thought
experiment, it has nothing to do with "going off the deep end into
neoclassical theory," contrary to Mike's suggestion.

4) There are three reasons why I think the point of my thought experiment
still stands, despite the relevance of Mike's comment.

A) Granting that capitalist control of production is in some sense
necessary for the systematic extraction of surplus value does not deny the
characterization I gave above of Marx's *other* two necessary conditions:
these dictate conditions of absolute capital scarcity, which in turn
dictate targeted price-value disparities as the *basis* for surplus value
to the extent that capitalists reap surplus value via circuits of usury or
merchant capital extended directly to value producers.

Circuits of industrial capital (based on capitalist control of production)
simply make it possible to hide this dependence of surplus value on
absolute capital scarcity by allowing capitalists to gain access to labor
power by buying the latter as a commodity rather than selling capital
directly. As a result the existence of surplus value is logically
*possible* even given price-value equivalence. *But the significance of
capitalist production for capitalist exploitation does not in any way lie
in the existence of this mere logical *possibility*--capitalists don't
consciously or unconsciously take direct control of production conditions
in order to be able to reap surplus value even under price-value
equivalence. Thus, insisting on the centrality of price-value equivalence
as the basis for understanding surplus value, as Marx does at the end of
Ch. 5 and elsewhere, essentially misrepresents the role of capitalist
production in capitalist exploitation--which is part of the point of my Ch.
5 critique.

B) But perhaps more importantly, I don't think the passage cited by Mike,
considered in its entirety, contradicts my thought experiment; to the
contrary, I think it reaffirms it, if possibly with a caveat about the
meaning of the *second* necessary condition I attribute to Marx.

After stating that capitalist control of production "breaks down all
resistance" by ensuring "[t]he constant generation of a relative surplus
population [that] keeps the law of the supply and demand of labour, and
therefore wages, within narrow limits which correspond to capital's
valorization requirements," {clearly Marx is referring here to the effects
of the *real* subsumption of labor under capital--GS}

Marx goes on

"It is otherwise during the historical genesis of capitalist production.
The rising bourgeoisie needs the power of the state, and uses it to
'regulate' wages, i.e. to force them into the limits suitable for making a
profit, to lengthen the working day, and to keep the worker himself at his
normal level of dependence. This is an essential aspect of so-called
primitive accumulation." (pp 899-900)

Now, for the moment let me grant the sense of this passage in its entirety.
 Does it contradict the point of my thought experiment? Not at all.
Rather, it suggests that state intervention is required, in the absence of
the real subsumption of labor, to preclude the condition I called
"excessive accumulation of capital", which is tantamount to eliminating
conditions of absolute capital scarcity, making it possible for workers to
demand higher wages and shorter hours. OK, so let me grant that reading of
what's required to avoid "excessive accumulation of capital" on a
systematic basis. My conclusion would still hold that capital scarcity is
a necessary basis for the existence of surplus value, and that this
condition generically corresponds to targeted price-value disparities,
*not* price-value equivalence as Marx's Ch. 5 conclusion suggests.

C) And perhaps still more importantly, there are strong grounds for
believing that Marx did not even insist on the necessity of state
intervention of the sort referred to above to ensure systematic surplus
value. In the first of his arguments for the persistence of positive rates
of surplus value in Ch. 25, Marx argued that the rate of accumulation will
*regulate itself* to assure that the profit rate (and thus the mass of
surplus value) never falls to zero. I quoted the relevant passage at
length in my first reply to Mike; let me here just reproduce Marx's conclusion:

"The rise of wages is therefore confined within limits that not only leave
intact the foundations of the capitalist system, but also secure its
reproduction on an increasing scale [NB!!--GS]. The law of capitalist
accumulation...in fact expresses the situation that the very nature of
accumulation excludes every diminution in the degree of exploitation of
labour, and every rise in the price of labour, which could seriously
imperil the continual reproduction, on an ever larger scale, of the capital

It should be clear that this self-regulating property of capital
accumulation, with the consequences noted above, depends in no way on
whether or not capitalists control the means of production. To argue
otherwise, you'd have to show that the absence of capitalist control of
production implies a *higher* rate of accumulation than would otherwise
obtain, and furthermore that this higher rate of accumulation would be
maintained even in the face of ever-declining rates of return. This is not
plausible. It is much more likely that without direct control of
production, the rate of accumulation would be lower, not higher, but that
implies an *additional* reason why the rate and mass of surplus value would
not be driven to zero.

Bottom line: despite the relevance of Mikes comment, the thought
experiment I suggested stands, along with its conclusion: contrary to
Marx's representation at the end of Ch. 5, price-value disparities are in
an important sense *central* to explaining the existence of surplus value,
not "incidental" to it.

Responses to Rakesh, Fred, Allin, and Ajit to follow soon, I hope (I'm
revising chapters under deadline pressure, and that's kept me away from the
OPE-L front lines).


>At 08:47 PM 5/28/2000 -0400, he wrote:
>>A) Marx identifies two necessary conditions for the capitalist mode of
>>production: first that workers are completely expropriated:
>>"...the capitalist mode of production and accumulation, and therefore
>>capitalist private property as well, have for their fundamental
>>condition...the expropriation of the worker." (p940, Penguin ed);
>>and second, that excessive capital accumulation by those who have the
>>wealth doesn't drive the profit rate to zero. Obviously Marx argues this
>>won't happen--he gives two mutually reinforcing arguments why it won't in
>>Ch. 25--but at least he recognizes the logical possibility of excessive
>>B) Granting both of these conditions is tantamount to ensuring that capital
>>is *absolutely* scarce in any given production period;.....
> Certainly we can all agree on the first condition that Gil identifies.
>However, the second condition for capitalist productive relations (which,
>rather than the capitalist mode of production--- the "specifically
>capitalist mode of production", at least--- are the premise for the
>beginning of CAPITAL) is that capital has "seized possession of production"
>(cf GRUNDRISSE,853,859); i.e., the option for now-propertyless producers of
>renting means of production from their owners is closed-- leaving only the
>option of selling labour-power, working under the direction, etc of capital
>and having no property rights in the product of labour-- thus, capitalist
>productive relations.
> Marx separates these two conditions clearly in Vol. I, Ch. 28 when he says:
>"It is not enough [A--ML] that the conditions of labour are concentrated at
>one pole of society in the shape of capital, while at the other pole are
>grouped masses of men who have nothing to sell but their labour-power. Nor
>is it enough [B--ML] that they are compelled to sell themselves
>voluntarily" (Vintage,899).
> (It is appropriate in passing to ask--- what are both the rupture in
>property rights and the seizure of possession of production by capital "not
>enough" *for*? The answer is the reproduction of capitalism as an organic
>system. Marx's 3rd condition is that the development of the capitalist mode
>of production has produced "a working class which by education, tradition
>and habit looks upon the requirements of that mode of production as
>self-evident natural laws. The organization of capitalist production, once
>it is fully developed, breaks down all resistance" (899). Ie., the premise
>for capitalism as an organic system is that it produces its premises in the
>necessary bourgeois economic form--- especially the working class; this
>last, of course, is a premise put into question whenever workers struggle
>for their own goals, as Marx well knew.)
> So, what is Gil doing when he keeps insisting that surplus value does not
>require production under capitalist relations of production? For one, he is
>underlining (quite correctly, in my view) the fact that Marx does not
>adequately specify condition B (ML) at the outset of chapter 6, and thus it
>appears that the rupture in property rights in itself is a sufficient
>condition (as opposed to being merely a necessary condition) for capitalist
>production. Had Marx specified this condition B-- just as he did A, then
>much of Gil's protest would have been precluded.
> The other thing Gil is doing is failing to distinguish between the "being"
>of capital and the "becoming" (anti-Hegelians cover your eyes!). Marx
>distinguishes very clearly between "historic presuppositions" (like
>accumulating capital by means of usury and merchant activity) which are
>part of the "becoming" of capital and those conditions and premises which
>are the product of "real capital" (Grundrisse, 459-60), ie. when capitalist
>production as such exists--- and it is the latter which is the subject of
> In contrast, Gil admits he is talking about production which is not
>occurring under capitalist relations; ie., it is production occurring under
>*other* relations of production which, however, are subject to the
>parasitic extraction of surplus. Merchants and usurers pump surpluses in
>the form of surplus value from, eg., independent peasant producers,
>craftsmen, feudal lords, slave-owners, and under some conditions this may
>lead to the non-reproduction of the latter relations--- but, then again, it
>may not because merchants and usurers are not the residual claimants. (Gil
>can find this described as "contested reproduction" in a paper I gave in
>Cuba in February.) In short, the surplus value that Gil is talking about
>has little to do with capitalist production or the subject matter of
>CAPITAL, and to confound it with the latter by talking about a common
>characteristic of scarcity of capital simply confuses what should be pretty
> cheers,
> mike
>Michael A. Lebowitz
>Economics Department
>Simon Fraser University
>Burnaby, B.C., Canada V5A 1S6
>Office: Phone (604) 291-4669
> Fax (604) 291-5944
>Home: Phone (604) 872-0494
> Fax (604) 872-0485
>Lasqueti Island: (250) 333-8810

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