The phony crisis debate between David Harvey and Michael Roberts

by Jehu

Have you ever watched a frustrating debate where you knew both sides were wrong? 2qixqxfYou have probably experienced this watching some neoliberal Democrat politician face off against some neoliberal Republican politician in a staged campaign ‘debate’. During these phony debates, you know both sides share the same assumptions about how to exit the crisis and only differ as to which party should be granted the control of the state machine to attack the working class. Their shared premises never enter into the debate and it inevitably circles around matters of style and smoke and mirrors. If so, you know how I feel watching the phony debate on the causes of the 2008 financial crisis now going on between David Harvey and Michael Roberts.


The first essay Sam Williams posted to his blog, Critique of Crisis Theory, made a rather interesting assertion carried in the title: “The Problem: Marx Didn’t Leave Us a Completed Crisis Theory”. Said Williams,

“These writings are built on the foundations of “Capital,” a work that at least in Germany is becoming a bestseller once again. But “Capital” itself, though it lays the foundation, is not a book about the periodic crises capitalist production goes through. Nor is there a section within “Capital” dealing with such crises, as is generally the case with works that popularize the theories of “Capital.” “Since Marx and Engels put so much emphasis on crises in the Communist Manifesto and other works, this omission at first seems surprising.”

Indeed it is. 140 years later, many Marxists have still not come to grips with the fact that Marx never produced a theory of crisis. Nor was this his intention; which Marx stated this way in the preface to the first German edition:

“In this work I have to examine the capitalist mode of production, and the conditions of production and exchange corresponding to that mode … Intrinsically, it is not a question of the higher or lower degree of development of the social antagonisms that result from the natural laws of capitalist production. It is a question of these laws themselves, of these tendencies working with iron necessity towards inevitable results.”

There is, in large part, a disconnect between what Marx was intending with his most important work and what Marxists today use that work for. Far from merely diagnosing the crises that periodically shook the capitalist world, Marx was interested in examining the mode itself. In the course of this examination, Marx seems to have distinguished and diagnosed a number of forms of crisis inherent in the mode of production. To give an example: Marx discussed early on in Capital what happen when the state counterfeits (over-issues) its token currency:

“If the quantity of paper money issued be double what it ought to be, then, as a matter of fact, £1 would be the money-name not of 1/4 of an ounce, but of 1/8 of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as a standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2.”

This sort of currency crisis we today call “inflation” and it is characterized by the depreciation of the purchasing power of state-issued tokens. A crisis of this sort is purely monetary, but it can have devastating impact on the entire mode of production as shown by Weimar Germany. The crisis is made possible by the fact that currency is not money and the magnitude of currency in circulation and the magnitude of money it actually represents can be altered by state counterfeiting. Here, only the possibility of crisis is present, in the latent form of a distinction between money and its representative in actual circulation, and requires some external event to trigger it.

Other sorts of crises arise not from latent causes but from the operation of the mode of production itself. The most important crisis of this sort is the crisis of the falling rate of profit, which Marx examined in chapter 15 of volume 3. This latter crisis is the subject of a dispute between David Harvey and Michael Roberts. The question is this: to what extent was the crisis of 2008 a crisis of the falling rate of profit versus a financial (or credit) crisis.

The larger group of Marxists theorists in this debate, whose side Harvey takes, have asserted the events of 2008 was a financial crisis;  while a smaller but more tenacious group of Marxists have argued the financial collapse was one brought on by the falling rate of profit. The debate has so far been carried on in several videos and papers that can be found here.

Although the debate centers on the causes of the 2008 meltdown, it will be seen from the material gathered so far that Harvey actually is skeptical that a law of the tendency of the rate of profit to fall exists. For instance, at the outset of his argument, Harvey wonders, “whether there are mechanisms other than the one Roberts describes that can result in falling profits.” In fact, Harvey is being disingenuous: he actually questions, not whether Roberts is correct, but whether Marx’s original work on this question was right and, whether Engels, his lifelong colleague, faithfully reproduced that original work.

On Harvey’s side, this is not about Roberts and other advocates of the law of the tendency of the rate of profit to fall, but about the original work of Marx and Engels. On Roberts’ side, things are just as murky, because it turns out he also has major disagreements with Marx, which he is reluctant to broach.

Basically, Roberts thinks the fascist state disproved Marx theory of money in 1971 when it left the gold standard and replaced commodity money with inconvertible fiat currency in international trade. Marx’s argument was that money — a fundamental category of labor theory — had to be a commodity. Yet, no one in Roberts’ school nor in Harvey’s school employ commodity money in their analysis of the mode of production.

As with Harvey and his school, they accept the dogma that Marx somehow overlooked the role of credit money and fiat in his analysis of the mode of production and, therefore, presented a false picture of the role played in the mode by commodity money. Although much of the debate focuses on the interpretation of labor theory advanced by the two schools of Marxism, the real debate is not about Marx’s theory at all, but, rather, which side’s revision of Marx’s theory is valid.

Similarly, at some points in this debate, it really gets confusing because, although it appears Roberts is questioning the current orthodoxy while Harvey is defending it, both sides are essentially arguing Marx was wrong for different reasons.

What both sides agree on is that Marx was wrong; what they disagree on is why he was wrong.

Now, if Sam Williams is correct, Marx did not leave behind any particular theory of capitalist crisis. And, as Williams has shown, Marx offers a number of different sources of crises within the mode of production: There is, for instance, a theory of underconsumption, a theory of disproportionality, a theory of the falling rate of profit, etc. Basically, anywhere money and commodities change hands, anywhere in the circulation of capital, the potential for capitalist crises emerge.

Moreover, as Harvey rightly argues, Marx never thought of crises as anything more than forcible adjustments of economic relations within the mode of production, none of them fatal to capitalism in their own right:

“A reading of his original notebooks suggests that Marx increasingly viewed crises not as a sign of the impending dissolution of capitalism but as phases of capitalist reconstruction and renewal. Thus, he writes: “Crises are never more than momentary, violent solutions for the existing contradictions, violent eruptions that re-establish the disturbed balance for the time being.”’

Still, as Roberts argues, Marx considered the law of the tendency of the rate of profit to fall (“the tendency) “as the most important law of political economy.” Indeed, in chapter 15 of volume 3, we find Marx describing the significance of the law this way. (Please pardon the length of the quote, but I think, it is significant enough to be stated in its entirety):

“The rate of profit, i.e., the relative increment of capital, is above all important to all new offshoots of capital seeking to find an independent place for themselves. And as soon as formation of capital were to fall into the hands of a few established big capitals, for which the mass of profit compensates for the falling rate of profit, the vital flame of production would be altogether extinguished. It would die out. The rate of profit is the motive power of capitalist production. Things are produced only so long as they can be produced with a profit. Hence the concern of the English economists over the decline of the rate of profit. The fact that the bare possibility of this happening should worry Ricardo, shows his profound understanding of the conditions of capitalist production. It is that which is held against him, it is his unconcern about “human beings,” and his having an eye solely for the development of the productive forces, whatever the cost in human beings and capital-values — it is precisely that which is the important thing about him. Development of the productive forces of social labour is the historical task and justification of capital. This is just the way in which it unconsciously creates the material requirements of a higher mode of production. What worries Ricardo is the fact that the rate of profit, the stimulating principle of capitalist production, the fundamental premise and driving force of accumulation, should be endangered by the development of production itself. And here the quantitative proportion means everything. There is, indeed, something deeper behind it, of which he is only vaguely aware. It comes to the surface here in a purely economic way — i.e., from the bourgeois point of view, within the limitations of capitalist understanding, from the standpoint of capitalist production itself — that it has its barrier, that it is relative, that it is not an absolute, but only a historical mode of production corresponding to a definite limited epoch in the development of the material requirements of production.”

In Marx’s opinion, “the tendency” struck terror in the hearts of economists like Ricardo, because it arose from nothing more than improvement in the productivity of labor. The improvement in the productivity of labor would inevitably lead to all capital falling into the hands of a few established big capitals. Because nothing would be produced within the mode of production unless it could be produced at a profit, once all capital fell into the hands of the very biggest capital, the impetus for production would be disappear. If I understand Marx correctly on this, it would appear that the improvement of labor productivity itself eventually brings down capitalism.

Perhaps I have this wrong. Perhaps I am misreading him here. But I don’t think so. Now, it is possible to disagree with Marx on this, of course. But it not possible to pretend to agree with him and still think capitalism lasts forever. This, however, is just what both Harvey and Roberts think.

In their arguments both Harvey and Roberts, assume capitalism does not have a definite historical limit. In Marx’s view, the collapse of capitalism arises from the same laws of motion as “the tendency”; and it can be seen in that passage from volume 3 that the tendency has a terminal point.

Neither side in this debate is faithful to either the letter or spirit of Marx’s analytical approach — which is what makes the debate phony.