[OPE-L:1227] Re: A weakness of capitalism

Alan Freeman (100042.617@compuserve.com)
Mon, 26 Feb 1996 10:21:46 -0800

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...the embodied labour-time commanded in exchange by an ounce of gold
is greater than the labour-time required to produce an ounce of gold.
This would be a temporary, disequilibrium phenomenon, on the strict LTV.


I don't want to drag the discussion back into purely abstract questions
when there is a clear desire for a change of emphasis but this may relate
to the 'weaknesses and vulnerabilities' of capitalism.

I am happy with the expression "embodied labour-time commanded in exchange
by an ounce of gold is greater than the labour-time required to produce an
ounce of gold." It identifies the two distinct concepts, each of which can
be theorised (and, I believe, measured) separately. As long as I (and Marx)
are allowed this conceptual distinction, I claim we can say 990f what we
need to say.

To avoid loaded terminology let us call these Value-E and Value-P respectively.

Then there is a discussion to be had about how much it *matters* that
value-E can differ from value-P. Allin seems to think (this could be a
misreading) that it doesn't matter much, I think it is absolutely central.

But at least if we agree on the *possibility* they can diverge and that
therefore we must theorise Value-E and Value-P independently, then we are
talking a common language. So I take this as an important step.

What is its practical relevance? Well, can I suggest the following:

Generally speaking I am 99ertain the evidence will show that as Marx
suggests, Value-E falls below Value-P in booms and rises above it in slumps.

So we are dealing with a periodic phenomenon governed by the business cycle.

Thus, the cyclic movement of the price level is an integral and very important
component of the crash-and-boom, chaotic character of capitalist accumulation.
I don't think it is in itself the underlying mechanism but it is an unavoidable
part of it, and in particular I think it can be shown that it is part of the
mechanism that turns cyclical downturns into 'crashes'. So it is a quite practical

It is an important policy issue: Keynesian economics is premised on a
certain sense on the idea that this cyclic movement of the price level can at
the very least be 'tamed' and compensated by government intervention.

Monetarism is premised on the reverse idea that it is a product of 'exogenous
forces' and that there is a natural restorative force which can be set free to
act if disturbing influences are eliminated.

I think Marx says that these dynamic effects are not only non-restorative,
but cannot be eliminated. And I think this view stems from his economic analysis.
His polemics with Darimon and also with the Banking school turned on these precise

>From this point of view I think the word 'temporary' is ill-advised, as indeed
is the word 'disequilibrium'.

When a pendulum is swinging, I don't view its deviations from the centre
as either a temporary, or a disequilibrium phenomenon. This would only
be a valid way to describe it if we knew of a mechanism that would result
in the pendulum eventually coming to rest.

This is the centre of our differences with the standard view of Marx, which
assimilates him to neo-Classical General Equilibrium (NCGE) for which the image
is that of a self-restoring pendulum. This reading reproduces all the weaknesses
of NCGE and saddles Marx with them. In particular, the idea that prices of
production and values are not just a centre of gravity (a perfectly acceptable
*non*-equilibrium concept) but a sort of *resting-point* for actually observed
prices and values (an unacceptable *equilibrium* concept): to which they would
settle, if left 'undisturbed'.

This whole way of looking at it, in my view, has produced all the problems.
These movements are inherently dynamic. We need concepts to describe them which
neither depend on nor make use of any equilibrium assumptions at all.

The very term 'disequilibrium' suggests that there is an equilibrium to be
dissed from. I prefer 'non-equilibrium' or just plain 'dynamic'.

The term 'temporary' suggests that it is only for a very short time. But
if the motion is periodic, then actually the two only coincide for a very
short time: like the Mad Hatter's watch which is right twice a day - because
it has stopped. I am against the economics of the Mad Hatter, which is where
I think the language of equilibrium springs from.

These issues feed into the language of practical politics. If the deviation of
prices from a 'natural' norm is a 'disequilibrium, why then, is not the
task of government to intervene to restore this equilibrium? Or, perhaps,
to remove the 'disturbing forces' (such as trade unions, regulatory practices,
state intervention...) which prevent this equilibrium occurring naturally?

And if the disturbance is 'temporary', why not leave nature to take its

But if the deviations of Value-P from Value-E are not only intrinsic
to capitalism but self-sustaining, uncontrollable and wild, then some very
different conclusions arise, since neither banking reform, nor laissez-faire,
can eliminate their effects; in short, socialism is necessary.