Yes. Yanis Varoufakis is a poor student of Marx, but so is Michael Roberts

by Jehu


Michael Roberts doesn’t think Yanis Varoufakis is a very good Marxist.

1200x-1What makes the finance minister so unacceptable to Roberts is his proposal for resolving the European crisis with a program Varoufakis admits “does not have a whiff of Marxism in it.” Which means, as Marxists go, Varoufakis is indistinguishable from the typical heterodox economist in all but his insistence on calling himself a Marxist.

In his “confession”, Varoufakis admits he considers it urgent to find a way to save capitalism from itself. This ‘urgent task’ extends even to the idea of an alliance with Washington, the IMF and the ECB.

It is an odd Marxist indeed who sees Washington as an ally in his fight against the Golden Dawn, but no more than the average antifa supporter. For years now, antifa has directed its attention at the Golden Dawns of Europe as if they were a threat in this crisis. Yet, somehow, when this ridiculous view of Golden Dawn is given theoretical expression in a practical anti-austerity program, people crap themselves.

No matter Roberts wondering aloud whether this “erratic Marxist” is actually a Marxist at all, he does admit that when Varoufakis tries to describe Marx’s core ideas, Varoufakis,

“correctly captures the key law of contradiction under capitalism: the accumulation of capital through the exploitation of labour has a tendency to lower profitability and engender regular and recurrent crises in production.”

Which means, whatever else might be said of this “erratic Marxist”, he does grasp as much of Marx as the highly skeptical Michael Roberts.

If Varoufakis is to be criticized on his economic program, it is likely not to be on grounds he is a pure and simple bourgeois simpleton, because, as Roberts makes clear, Varoufakis understands Marx to this extent: “If the whole class of the wage-labourer were to be annihilated. by machinery how terrible that would be for capital, which, without wage-labour, ceases to be capital!” Roberts admits, “All this would seem to make YV a Marxist by most definitions.”

Where then does Varoufakis veer off without ever quite making the cut in Roberts opinion? First, according to Roberts,

“YV agrees with the superficial view of the populist right-wing papers and conservative thinkers that there is a straight line from Marx to Stalin and Pol Pot.”

But this error matters only because of a bigger error. Roberts quotes Varoufakis:

“It was his assumption that truth about capitalism could be discovered in the mathematics of his models…”

Yep. Once again the transformation problem — the great and terrible dragon of the Marxist village — darkens the sky. Roberts is clearly upset with this idea that the transformation dragon still exists. Everyone knows this beast has been dispatched by none other than Andrew Kliman, the dragon slayer.

But there is this problem: Varoufakis not only seems to understand Marx as well as Roberts understands Marx, he has spent decades steeped n the sort of mathematical netherworld where, if a way existed to resolve the transformation problem as Kliman thinks it can be solved, Varoufakis would have found it. In Varoufakis we likely have the guy who would have won the Nobel Prize for economics for solving the great transformation problem.

Only, the transformation problem cannot be solved because there is no way you can get v to equal v+s for any non-zero s. And if this is true, you cannot get the prices of capitalistically produced commodities to equal their values.

And that was always Marx’s argument.

Varoufakis knows you can’t get v to equal v+s, no matter how many hoops you jump through, because he likely has spent years on the problem. Some of the best economic minds in the 20th century tried to solve it, but could not. Likewise, Varoufakis has simply said, Listen, folks. I have spent several decades trying to solve this equation and it can’t be solved.

To Roberts, this “argument smacks of empiricism and opposition to theory.” This is not unlike Einstein’s confused reaction to the quantum math that resulted from his own theory of relativity:

“As I have said so many times, God doesn’t play dice with the world.”

As evidence to the contrary of Varoufakis’s conclusion, Roberts offers Andrew Kliman’s ‘seminal book’, Reclaiming Marx’s Capital. Where Varoufakis should be criticized for taking as his starting point the standing dogma that the values of commodities can be reconciled with their capitalistic prices, Roberts criticizes Varoufakis for arriving at a conclusion that should have been obvious from the first; namely what the simple math already has shown.

If the prices of capitalistically produced commodities cannot be reconciled with their actual values, the entire mode of production founded on exchange value is inherently prone to crises as the system periodically attempts to forcibly resolve the contradiction between commodity values and capitalistic prices of production.

Marx had shown the implications of a contradiction Smith and Ricardo had tried to expunge from their theoretical arguments. While the simpletons, both bourgeois and Marxist, were looking to Marx’s theory for the secret of how values are transformed into prices, Marx was showing why a system of production for profit is inherently prone to crisis and ultimately collapse. The argument is a really simple one requiring little in the way of the highly advanced mathematical brute force that has been employed on it.


We saw that the path followed by Varoufakis and that followed by Roberts appears to split over the aggravating problem of the transformation of simple commodity values into capitalistic prices of production. The split between the two Marxists is only apparent, however: in fact both stumble over the transformation problem and lose the thread of Marx’s argument never to pick it up again. Both writers proceed with the assumption that Marx was trying to reconcile the prices and values of capitalistically produced commodities, when Marx was showing why these prices and values could never be reconciled.

Historically, the split occurs at the Great Depression, where both writers overlook the one argument made by Marx that could unravel the mystery of that crisis. That argument is taken from the Grundrisse, where Marx predicts the breakdown of production on the basis of exchange value.

What does the term, “production on the basis of exchange value mean”? It means the production of commodities, of use values produced and intended to be exchanged rather than consumed by the producer. These commodities are social use values, i.e., products of labor having no use for producers, who must, after producing them, find buyers. The values of the commodities thus produced are expressed in the ratio by which they are exchanged for other commodities. To be a commodity, therefore, a product of labor must have a use for someone other than the producer and must become the property of this other person through an exchange of another product of labor in return for it.

It is this mode of production and exchange that Marx predicted would break down — and which indeed broke down with the Great Depression.

Mind you, Marx describes this mode of production and exchange before he even takes up discussion of capitalism proper. The problem is that most people conflate the production and exchange of commodities with capitalism itself. However, capitalism is a system of production on the basis of exchange value that has the aim, not of producing value (commodities), but of producing surplus value (capital).

I say all of this only to warn that Marx predicted the break down or collapse of production on the basis of exchange value, not the breakdown of capitalism itself.

But what does this mean?

How can a mode of production fundamentally based on commodity production not collapse with the breakdown of commodity production? The key is the transformation problem, which argues capitalistically produced commodities >>already have prices that are incompatible with their labor values<<. Marx’s prediction of a break down in production on the basis of exchange value was based on his view that, sooner or later, no crisis would be able to forcibly bring capitalistic prices of production into line with the labor values of the commodities.

This is precisely what happened in the Great Depression, although neither Roberts nor Varoufakis seem to realize it.

Now here is the thing: if capitalistic prices of production and labor value cannot be reconciled, which one is money supposed to express? Remember: Money is exchange value, i.e., the physical expression of the labor value of commodities. Thus, it is supposed to serve to reconcile the prices of commodities with the labor values of commodities. But here we have reached a point in the development of the mode of production where the prices of commodities can no longer be reconciled with their values.

The simultaneous collapse of the gold standard in all of the major industrial nations during the Great Depression most likely marked the breakdown of production on the basis of exchange value. What I mean by this is that when production on the basis of exchange value broke down commodity money itself became incompatible with production for profit. Further evidence for this claim will be found in the fact that only when countries removed their fiat currencies from the gold standard did production for profits resume. As Ben Bernanke wrote 50 years later, with the Great Depression, real money, commodity money had become “massively non-neutral”, i.e., gold could no longer serve as the standard of capitalistic prices of production.


What has to be emphasized at this point is that when production on the basis of exchange value broke down and money fragmented into fiat currency, on the one hand, and commodity money, on the other hand, almost no one realized what had happened. A single exception to this seem to be Henryk Grossman, who, in his essay, Law of the Accumulation and Breakdown, argued, following Marx, that, at a certain point in the development of the mode of production, the commodity, labor power, would have to be forcibly devalued, continuously, if production for profit would survive. Since profit is simply the difference between the price of labor power (i.e., the wages of the worker), and the prices of the sum product of labor. buying labor below its value has the effect of increasing profits.

The interesting thing about his prediction is that Grossman made it on the eve of the Great Depression, which, as I already explained, was resolved only after the major industrialized countries left the gold standard. But this is not the only odd coincidence: at least in the US, as FDR forced gold from circulation in the country, he just also devalued the currency — and, therefore, wages paid in currency — by 40% against gold — from $20.67 to $35 per troy ounce.

And, not surprising, as Grossman predicted, the contraction period of the Great Depression ended almost immediately. Going off the gold standard made it possible for the capitalists to devalue the wages of the entire working class of the United States all at once and together — just as Grossman argued. Seven years later, when Keynes finally publishes his General Theory, he essentially made the same argument Grossman made.

So here is the very oddest fucking thing: Roberts criticizes Varoufakis for following Keynes, not Grossman, when Keynes himself was only making the same argument as Grossman from the bourgeois point of view: If production for profit is to be restarted, the real wages must be cut relative to nominal wages. Grossman not only predicted the imminent break down of production on the basis of exchange value, he predicts exactly how the capitalist would try to address it: by continuously devaluing the wages of the working class. All Keynes did was come behind him and figure out how to do it. Inflation, or continuous currency devaluation, is nothing more than a weapon of class warfare employed by the capitalists through their state against the subsistence of the working class.


As I mentioned above, according to Roberts, Varoufakis correctly argues “the accumulation of capital through the exploitation of labour has a tendency to lower profitability and engender regular and recurrent crises in production.” Roberts and Varoufakis also agree that capitalism has now entered a stage of its development that Marx labels the breakdown of production on the basis of exchange value.

Although neither writer explicitly recognizes this stage as a breakdown of production on the basis of exchange value, both do recognize, they do both agree that, since the Great Depression, capitalism has been subject to slumps, as Roberts puts it,

“that behaved very much like a static equilibrium – a state of the economy that seemed perfectly capable of perpetuating itself, with the anticipated recovery stubbornly refusing to appear over the horizon even after the rate of profit recovered in response to the collapse of wages and interest rates.”

That neither writer calls this the breakdown of production on the basis of exchange value is of no concern to me. What is significant is that, despite their differences, they both recognize the alteration in how the mode of production functions. It also matter that both writers take as their starting point in analysis of this tendency toward “slumps” two writers who basically agree on how “slumps” can be cured within the limits of the capitalist mode of production: Grossman and Keynes. Both Grossman and Keynes agreed that, for production for profit to continue, a way must be found to continuously devalue the wages of the working class.

The distinction to be made here is that Grossman explicitly made this argument, while Keynes only referred to reducing the purchasing power of currency — nevertheless Keynes is in complete agreement with Grossman. Since wages are always denominated in some currency, depreciating the purchasing power of the currency is identical with devaluing the wages. Here the distinction between the two might be thought of as finished — since Varoufakis follows Keynes, while Roberts follows Grossman.

But this assumption would be wrong: neither writer recognizes that Keynes’ prescription for slumps is the one predicted by Grossman. Which is to say, while Varoufakis is a Keynesian in his solution to slumps, neither he nor Roberts realize that this solution is essentially the one proposed by Grossman: continuous devaluation of wages.

What is extremely odd about Roberts’ critique of Varoufakis is he never even once raises the charge against Varoufakis that the latter is only proposing a solution aimed at cutting wages. If in fact this is all Varoufakis is proposing, why doesn’t Roberts’ explain this? The reason is simple: Roberts has no clue this is all Varoufakis is proposing. Roberts does suspect there is something in Varoufakis’s argument that does not quite make sense, but what it is, Roberts hasn’t a clue. Roberts spends all of his time complaining that Varoufakis is not being a very good Marxist, yet completely ignores that Varoufakis’s solutions are only designed to cut wages.

Thus, in place of a the clear and unambiguous charge that Varoufakis proposal only implies slashing working class wages, we get the complaint that Varoufakis hangs out with simpleton economists, capitalists and bourgeois reporters.


And this raises a disturbing suggestion that Roberts himself has no real alternative to Varoufakis’s proposals except calls for “socialism”. Indeed, in response to Varoufakis’s complaint that the Marxists have been impotent in the face of neoliberalism, Roberts writes:

“Apparently, it was a waste of time advocating socialist policies (assuming we did) in the 1980s because the people of Britain just swallowed Thatcherism hook, line and sinker”.

The caveat inserted, “assuming we did”, is only meant to distance Roberts from the real history of the last 35 years. Even today, Roberts and the rest of the Marxist academy have offered no solution to the crisis that is not drawn from the Keynesian playbook. Saying “capitalism cannot solve the crisis, only socialism can” is not a proposal, but an admission of complete theoretical incompetence.

And here is the thing: A socialist answer does not even require a non-Keynesian solution! In his notes titled, “The Long Term Problem of Full Employment”, Keynes explained that the only permanent long term means to maintain full employment was a reduction of hours of labor:

“10. As the third phase comes into sight; the problem stressed by Sir H. Henderson begins to be pressing. It becomes necessary to encourage wise consumption and discourage saving,-and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours.”

According to Keynes, then, in the long run, full employment could only be ensured if hours of labor were reduced. Everyone who talks about Keynes, whether bourgeois simpleton or radical Marxist, never references this quote from Keynes. Even if Roberts wants to criticize Varoufakis for being a Keynesian, a silly charge if ever there was one, the real problem is that Varoufakis’s Keynesian solutions are not a very good Keynesianism.

Whether you look at this from the perspective of the strictest labor theory (i.e., from the point of view of Marx’s explanation of the law of the tendency of the rate of profit to fall in voume 3 of Capital) or from the strictest Keynesian argument, hours of labor have to be reduced if full employment is to be maintained.